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TMI Blog2023 (11) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO to delete the addition made on account of unutilised MODVAT credit. Club entrance/subscription fee is an expenditure was incurred on account of subscription to clubs for the purpose of promoting and fostering its business relationship and objective of the assessee was to enable its directors to meet various kinds of people in the clubs so that by such meeting they would develop business relationship. See Otis Elevator Co [ 1991 (4) TMI 53 - BOMBAY HIGH COURT] Addition on account sales tax subsidy under the normal provisions and u/s 115JB - We uphold the plea of the assessee and direct the AO to exclude the sales tax incentive subsidy for computing book profit u/s 115 JB of the Act Additional gratuity while computing income under normal provision of the Act. - A.O. was not justified in making this disallowance. Thus, this ground of appeal is allowed. TDS u/s 194A - interest payment made to SBI Bank- Bahrain Branch - disallowance u/s.40(a) - HELD THAT:- As decided in own case AY 2005-06 [ 2023 (2) TMI 1210 - ITAT MUMBAI] CIT(A) in his order has given finding that Bahrain Branch of State Bank of India (SBI) is part of SBI which is governed by the Banking Regulation Act and this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eason that there will not be allowed the benefit granted under the statute but withdrawn by way of retrospective amendment. Thus, the impugned amendment will create disharmony among different taxpayers. In view of the above and after considering the facts in totality, we are of the view that the assessee cannot be deprived for the benefit granted to it under the statute by way of retrospective amendment in the given facts and circumstances. Hence, the ground of appeal of the assessee is allowed. Amount withdrawn from share premium account while computing book profit u/s 115JB - We confirm the order of Ld. CIT(A) holding that amount transferred from Share Premium Account to the profit loss account was correctly reduced from Book Profits by the Assessee while computing book profit as per the provisions of Clause (i) of Explanation to Section 115JB(2) of the Act. This ground of appeal in Departmental Appeal is dismissed. Addition of VRS expenditure pertaining to earlier years, capital expenditure debited and write down of value of assets while computing the book profit u/s.115JB - HELD THAT:- CIT(A) has allowed the claim of the assessee on the basis of decision of the case titled as A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atistical purpose. X X X X Extracts X X X X X X X X Extracts X X X X ..... 145A, which required adjustment in the value of opening stock, purchases, sales and closing stock. Further my attention was drawn to the relevant annexure forming part of the Tax Audit Report where the tax auditors have, in their report issued u/s 44AB, certified the adjustments on all counts u/s 145A. The net effect of the said adjustments is Nil. Further, the A/R of the appellant submitted that the AO has not given any adverse finding on the tax audit report and particularly, on the adjustments made u/s 145A. It was submitted that, in the tax audit report, the tax auditors have duly adjusted the opening as well as closing inventory. However, they did not stop there. They have also incorporated other adjustments required u/s 145 A in purchases and sales and the net effect is Nil. Thus, the recasted Profit & Loss a/c as per provisions of Sec. 145A did not result in any modification in net profit. The AR of the appellant also relied on the judicial pronouncements -vs.- Berger Paints (India) Ltd. (No. 2) (2002) 254 ITR 503 (Cal), S. Kumars Ltd. -vs.- IGT I.T.A. no.2547/M/02, CIT vs. Indo Nippon Chemicals Ltd. (2003) 261 ITR 275 (SC) and Hawkins Cookers Ltd. -vs.- ITO (2008-TIOL-480- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra) while affirming the order of High Court, has observed that the income was not generated to the extent of Modvat credit or unconsumed raw material. Merely because the Modvat credit was irreversible credit offered to manufacturers upon purchase of duty paid raw materials, that would not amount to income which was liable to be taxed under the Act. It is also held that whichever method of accounting is adopted, the net result would be the same. 6. Considering the above, the amount of the unutilized Cenvat credit could not have been directly added to the closing stock. The Tribunal has not committed any error." (underlined for emphasis by us) It is evident from the above that irrespective of the method of accounting followed by the assessee, i.e. 'Inclusive method', wherein the taxes are included in the opening stock, purchases, etc. or the 'Exclusive method', the MODVAT credit does not have any impact on the profit of the assessee. Thus, following the ratio laid down by the Hon'ble Supreme Court in the case of Indo Nippon Chemicals Co. Ltd. (supra) and followed by the Hon'ble Bombay High Court in the case of Diamond Dye Chem Ltd. (supra), we set-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making this addition, According the addition so made by the AO is deleted. This ground is thus allowed." 13. Against the observation of Ld.CIT(A), Revenue has filed further appeal. During the course of appellate hearing, Ld. AR of the assessee has relied upon finding of CIT(A) and contended that identical issue is also decided in its favour in A.Y. 1987-88 to 1991-92 and also in A.Y. 2004-05 whereas DR has relied upon finding of Assessing Officer and contended that observation of Assessing Officer may be restored. 14. Similar issue was considered by us in Department Appeal in Ground No 3 in AY 2005-06 and held as under: "24.Considered the rival contentions and material placed on record. It is observed that identical issue has been decided in favour of assessee by Coordinate bench assessee's own case for A.Y. 2004-05 in ITA No 5259/Mum/2027 dated 27/05/2022 wherein it is held as under: "3. We have heard the rival contentions and perused the material on record. We note that the Tribunal has decided identical issue in the favour of the Assessee in Assessee's own case in ITA No. 647/Mum/1997 (AY 1991-92), ITA No. 2361/Mum/1995 (AY 1990- 91), ITA No. 288/Mum/1993 (AY 1989-90), I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. Respectfully following the above decision, we dismiss the ground raised by the Revenue. 16. In the Ground No 3 & 16, Department has raised the following grievance: "3. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition made of Rs. 1,51,85,22,523/ - by the Assessing Officer on account sales tax subsidy under the normal provisions and u/S.115JB of the Act, relying on the order of his predecessor without appreciating the new facts brought out by the A. O in the impugned assessment order. 16. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in allowing the assessee's claim of sales tax subsidy amounting to Rs.1,51,85,22,523/- treating the same as capital receipt while computing the book profit u/s.115JB of the I. T. Act." 17. The Assessing Officer has dealt with the issue at Para No. 7 to 7.12 of Assessment Order. The Assessing Officer has observed that assessee has claimed sales tax incentives for various units such as Tikaria (UP), Chanda (Maharashtra), New Wadi (Karnataka), Gagal (HP) and DSCL(WB) for Rs 1,51,85,22,523/-. The Assessing Officer has examined different schemes under wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital receipts. On the other hand, Ld. DR has mainly relied upon finding of Assessing Officer and contended that order of Assessing Officer may be restored. 20. Similar issues were considered by us in the AY 2005-06 in Ground No 5 of Department appeal and held as under: "32.Considered the rival submissions and material placed on record. On this issue, coordinate bench in the case of Ambuja Cement Limited in ITA No 5883/Mum/2012 & 5927/Mum/2012 (A.Y.2005-06) dated 31/10/2022 has held as under: "….. The relevant material facts, so far as necessary for adjudication of these grievances, are as follows. The assessee before us is a company engaged in the business of manufacturing of cement and generation of electricity. The assessee has set up its plants in different parts of the country, and as the location of some of these plants was in backward areas, the assessee had received certain sales tax concessions from the respective State Governments. These concessions were in the nature of exemptions and remissions etc, and were granted under specific schemes announced, under the industrial policies, from time to time. During the relevant previous year, the assessee received amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the learned CIT(A) has, in his elaborate analysis, primarily followed the Special Bench decision in the case of DCIT Vs Reliance Industries Ltd [(2004) 88 ITD SB 273 (Mum)]. Upon analysis of this decision, he has noted that 'for deciding the nature of subsidy, whether capital or revenue, what should be seen and examined is the purpose for which the subsidy has been given, and not the timing of the subsidy or the manner in which it has been given to the industry', as is also held by Hon'ble Supreme Court in the case of CIT Vs Ponni Sugar and Chemicals Ltd [(2008) 306 ITR 392 (SC)]. A large number of judicial precedents have been cited in this context. Learned CIT(A) has then held that so far as the object and purpose for which the subsidy is given, only the subsidy schemes of the Maharashtra and Punjab State specifically state that the subsidies in question are for achieving dispersal of industries outside Mumbai, to attract them to the underdeveloped and developing areas of the State, and to promote the growth of the industry in the State, in the preamble to the scheme. It is on this basis that he has held that so far as the subsidies given by the Maharashtra and Punjab Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund of sales-tax received after commencement of production cannot be treated as capital receipt. 8. On the other hand, Mr. Soparkar, learned counsel appearing for the respondent contended that so far as Tax Appeal No.226 of 2010 is concerned, after discussing the evidence on record, the Tribunal has followed earlier decision and discussed the issue in detail in para 54 and 55 of its decision, which reads as under:- "54. Per contra, the learned D.R. Supported the orders passed by the Assessing Officer and the learned CIT (A). Referring to the judgment in Sahney Steel and Press Works Limited v. CIT 228 ITR 253 (SC), he submitted that the impugned sales tax exemption increased the profits of the assessee by eliminating the expenses which the assessee would have had to incur later and therefore the impugned receipts were in the revenue field. He also referred to Explanation (10) to Section 43 (1) of the Income Tax Act inserted in with effect from 01/04/99 to emphasise that the action of the assessee in not reducing the cost of assets by the amount of subsidy for working out the Written Down Value was indicative of the fact that the impugned receipts were not in the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals, we had an occasion to examine the nature of incentives received by the assessee from the State Government in the form of entertaining tax waiver for setting up multiplexes. In such context, we had in wake of the revenues contention that the receipt was revenue in nature, held and observed as under : "From the provisions of the said scheme, it clearly emerges that the subsidy though computed in terms of sales tax deferment or waiver, in essence it was meant for capital outlay expended by the assessee for set up of the unit in case of a new industrial unit and for expansion and diversification of an existing unit. As noted, such subsidy was available only to a new industrial unit or a unit undertaking expansion or diversification. Fixed capital investment has been defined as to include various investments in land under use, new construction, plant and machinery etc. The entitlement was related to percentage of fixed capital investment. It is undoubtedly true that such subsidy was computed in terms of sales tax deferment and necessarily therefore, would accrue to an industry only once the commercial production commences. However, this by itself would not be either a so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts business or complete a project the monies must be treated as having been received for capital purposes. Such But if monies are given to the assessee for assisting him in carrying out the business operations and given after the satisfaction of the conditions of commencement of production, such subsidy must be treated as assistance for the purpose of the trade." 11. He also submitted that in view of above decisions, these appeals may not be entertained. 12. We have heard both the learned counsel and perused the record. We have also gone through the decisions cited before us. After considering the material on record, we are of the view that the issues involved in these appeals are squarely covered by the decisions of this Court in Birla VXL Ltd. (supra) and in Munjal Auto Industries Ltd. (supra). Therefore, the questions of law posed for our consideration in these appeals are answered in favour of the assessee and against the department. Accordingly, all these appeals are dismissed. 8. In the case of JCIT Vs Grasim Industries Limited ( ITA Nos 2155/Mum/2016 and Ors; order date 29th April 2022), a coordinate bench has dealt with these legal issues in considerable detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly considered its earlier decision in the case of Sahney Steel and Press Works Ltd., reported in 228 ITR 253 and had absolutely no quarrel with that judgement. Rather, it concurred with the decision rendered in Sahney Steel and Press Works Ltd., case. In this regard, it would be relevant to reproduce the operative portion of the decision of Hon'ble Supreme Court in the case of Ponni Sugars and Chemicals Ltd., as under:- 14. The second case is Lincolnshire Sugar Co. Ltd. v. Smart 20 TC 643. In that case it was found that Lincolnshire Sugar Co. Ltd carried on the business of manufacturing sugar from home grown beet. The company was paid various sums under British Sugar Industry (Assistance) Act, 1931, out of monies provided by the Parliament. The question was whether these monies were to be taken into account as trade receipts or not. The object of the grant was that in the year 1981, in view of heavy fall in prices of sugar, sugar industries were in difficulty. The Government decided to give financial assistance to certain industries in respect of sugar manufactured by them from home-grown beet during the relevant period. Lord Macmillan held that- "What to my mind is de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reported in 400 ITR 279 which held that where the object of respective subsidy schemes of State Government was to encourage development of multiple theatre complexes, incentives would be held to be capital in nature and not revenue receipts. The relevant operative portion of the judgment is reproduced hereunder:- 18. After discussing the judgment in Sahney Steel & Press Works Ltd.'s case (supra) this Court then held: "The importance of the judgment of this Court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to the applied in judging the character of a subsidy. The test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the Scheme with which we are concerned in this case is that the incentive must be utilised for repayment of loans taken by the assessee to set up new un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct is clear and unequivocal. The object of the grant of the subsidy was in order that persons come forward to construct Multiplex Theatre Complexes, the idea being that exemption from entertainment duty for a period of three years and partial remission for a period of two years should go towards helping the industry to set up such highly capital intensive entertainment centers. This being the case, it is difficult to accept Mr. Narasimha's argument that it is only the immediate object and not the larger object which must be kept in mind in that the subsidy scheme kicks in only post construction, that is when cinema tickets are actually sold. We hasten to add that the object of the scheme is only one -there is no larger or immediate object. That the object is carried out in a particular manner is irrelevant, as has been held in both Ponni Sugar and Sahney Steel. 23. Mr. Ganesh, learned Senior Counsel, also sought to rely upon a judgment of the Jammu and Kashmir High Court in Shree Balaji Alloys v. CIT [2011] 9 taxmann.com 255/198 Taxman 122/ 333 ITR 335. While considering the scheme of refund of excise duty and interest subsidy in that case, it was held that the scheme was ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y expended by the assessee for set up of the unit in case of a new industrial unit and for expansion and diversification of an existing unit. As noted, such subsidy was available only to a new industrial unit or a unit undertaking expansion or diversification. Fixed capital investment has been defined as to include various investments in land under use, new construction, plant and machinery etc. The entitlement was related to percentage of fixed capital investment. 8. It is undoubtedly true that such subsidy was computed in terms of sales tax deferment and necessarily therefore, would accrue to an industry only once the commercial production commences. However, this by itself would not be either a sole or concluding factor. In case of Sahney Steel and Press Works Ltd. and others v. Commissioner of Income-tax reported in 228 ITR 253, the Apex Court held and observed that the character of the subsidy in the hands of the recipient whether revenue or capital will have to be determined, having regard to the purpose for which the subsidy is given. The source of find is quite immaterial. If the purpose is to help the assessee to set up its business or complete a project the monies must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urring expenses. It was not for acquiring the capital asset. It was not to meet part of the cost. It was not granted for production of or bringing into existence any new asset. The subsidies in that case were granted year after year only after setting up of the new industry and only after commencement of production and, therefore, such a subsidy could only be treated as assistance given for the purpose of carrying on the business of the assessee. Consequently, the contentions raised on behalf of the assessee on the facts of that case stood rejected and it was held that the subsidy received by Sahney Steel could not be regarded as anything but a revenue receipt. Accordingly the matter was decided against the assessee. The importance of the judgment of this Court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning for 5 to 10 years during which such exemption could be availed depending on the category of the unit, such exemption would cease the moment the total incentives touched 100% of the eligible capital investments. In other words, the upper limit of total incentive which the unit could receive from the State Government in the form of tax waiver would not exist 100% of the eligible capital investment regardless of the residue of the period of its exemption eligibility as per the scheme. From the combined reading of salient features of the scheme, we have no doubt in our mind that the incentive was being offered for recouping or covering a capital investment or outlay already made by the assessee." 11. In the result we find no error in view of the Tribunal. Tax Appeals are dismissed. 5.3.7.1. It is pertinent to note that against this judgement, civil appeals were dismissed by the Hon'ble Supreme Court vide its order dated 08/05/2018 on the ground that the issue is already covered in the decision of Chapalkar Brothers referred to supra. 5.3.8. Before us, the ld. Special Counsel for the Revenue referred to various decisions of Hon'ble High Courts. But, all those decisions wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be contrary to the established norms of judicial system in the country. ii) Even on merits it cannot be said that the Tribunal has laid out more stress on the form of the scheme and not their substance as held in Bajaj Auto as the Tribunal in the order for AY 1985-86 has explained the difference between exemption schemes of Maharashtra and Andhra Pradesh in detail. iii) Reliance placed by Tribunal in Asst Year 1985-86 on the decision of Hon'ble Supreme Court in the case of Sahney Steel & Press Works Ltd. v. CIT (228 ITR 253) cannot be said to be erroneous. The Tribunal did recognise that the object with which subsidy is given is decisive as laid down by Hon'ble Supreme Court. If the scheme is for setting up or expansion of industry in a backward area, it will be capital, irrespective of the modality or source of fund. If the scheme is for assisting of carrying out of business operations, it is revenue. Hon'ble Supreme Court demonstrated the principle that the object of the subsidy must be given primary importance over the source of fund. 5.4.1. Ultimately the Special Bench after placing reliance on the decision of Hon'ble Supreme Court in Sahney Steel and Hon'ble Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the Special Bench of the ITAT in the case of DCIT V. Reliance Industries Ltd., 88 ITD 273, which has not been accepted by the Revenue? (d) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in entertaining the additional ground without appreciating that the assessee had treated the amount of sales tax exemption benefit of Rs.58 crores as revenue receipt and had included this amount in the returned income and it had been taxed accordingly and the assessee did not raise this issue before the CIT(A) and the issue had attained finality?" 5.4.3. While disposing of the questions Nos. c & d, the Hon'ble Jurisdictional High Court categorically held that the decision of the Special Bench of Tribunal had not been reversed or stayed by any higher judicial forum and it holds good as on date. The relevant operative portion of the judgement of Hon'ble Jurisdictional High Court in this regard is reproduced as under:- "3. We will first address the questions no. (c) and (d), which are different elements of the same issue. The respondent assessee had received a subsidy. It is undisputed that up to the level of Income Tax Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents of various Courts including of this Court in case of CIT Vs. Pruthvi Brokers and Shareholders P. Ltd. (2012) 349 ITR 336. It is not the case of the Revenue that the assessee in the context of its contention on the nature of the subsidy, desired to produce additional evidence. It is true that the judgment of this Court confirming the order of the Tribunal in case of Reliance Industries Ltd. has been partially reversed by the Supreme Court. A question of law has been framed and placed for consideration of the 4 of High Court. However, this does not mean that the judgment of the Tribunal as on today stands reversed or stayed. In any case, quite apart from the judgment in the case of Reliance Industries Ltd. of the Special Bench of the Tribunal, it is always been for the assessee to contend before the Assessing Officer by pointing out the relevant clauses of the subsidy that in law the subsidy cannot be treated to be towards revenue account. It would be equally open for the Revenue to oppose such a contention if so advised. The Assessing Officer and the Revenue authorities would have to take a decision in accordance with law. These questions, therefore, are not considered." (em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and at least not yet, even been examined by Hon'ble Bombay High Court. Mere admission of appeal against a decision, as is elementary, does not affect the biding nature of a judicial precedent. The Special Bench decision, in the case of Reliance Industries Ltd. (supra), was not reversed by Hon'ble Supreme Court, but was directed to be examined, on merits, by Hon'ble Bombay High Court. That is quite different from disapproving the special bench decision, but it appears that the coordinate bench was led to believe, and there could not have been any other reason for ignoring the special bench decision, that this Special Bench decision is reversed. That is patently incorrect, and when we pointed it out to the learned Commissioner (DR), he did not have much to say except to rely upon the coordinate bench decision which seems to have followed that approach. The coordinate bench, in the case of Jindal Steel & Power Ltd. (supra), did indeed travel much beyond its limited mandate in ignoring a binding judicial precedent simply because appeal against that special bench decision is now pending before Hon'ble Bombay High Court. When posed with a special bench decision and a div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of the Tribunal and granting relief to the assessee in the instant case. 9. In the Special Bench decision in the case of Reliance Industries Ltd (supra), what came up for consideration was specifically the sales tax subsidy, and that decision, as we seen in the elaborate analysis of the coordinate bench- as extracted above still holds good in law. In the case of CIT Vs Chaphalkar Brothers [(2018) 400 ITR 279 (SC)], Hon'ble Supreme Court has held that where the object of respective subsidy schemes of State Governments was to encourage the development of Multiple Theatre Complexes, incentives would be held to be capital in nature and not revenue receipts, and, following the same logic, the sales tax subsidy schemes, which are admittedly to encourage industrial growth in the specific areas and the overall scheme in all the sales tax subsidy and exemption schemes unambiguously indicate so, are capital receipts in nature. 10. In view of these discussions, as also bearing in mind the entirety of the case, we uphold the plea of the assessee that the amount of Rs 39,36,21,956 added to the income of the assessee must stand deleted, and reject the grievance of the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable, but was exempt under a specific provision of the Act, and as such it was to be included as a part of book profit, but where the receipt is not in the nature of income at all, it cannot be included in book profit for the purpose of computation u/s 115JB of the I.T. Act, 1961. 48. We further noted that the ITAT special bench of Kolkata Tribunal, in the case of Sutlej Cotton mills Ltd. v. Asstt. CIT [1993] 45 ITD 22 (Cal.) (SB), held that a particular receipt, which is admittedly not an income cannot be brought to tax under the deeming provisions of section 115J of the Act, as it defies the basic intention behind introduction of provisions of section 115JB of the Act. The ITAT Jaipur bench, in case of Shree Cement Ltd. (supra) had considered an identical issue and held that incentives granted to the assessee is capital receipt and hence, cannot be part of book profit computed u/s 115JB of the Act. Similarly, the ITAT Kolkata Bench, in the case of Sipca India (P.) Ltd. v. Dy. CIT [2017] 80 taxmann.com 87 (Trib.) had considered an identical issue and held that when, subsidy in question is not in the nature of income, it cannot be regarded as income even for the purpose of bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provision for additional gratuity amounting to Rs.3,20,98,901/- while computing income under normal provision of the Act." 23. The Assessing Officer has dealt with the issue at Para No. 11.1 of Assessment Order. The Assessing Officer has observed that in original return of income, appellant has disallowed additional gratuity. However, in revised return of income, appellant has claimed such amount as deduction on the ground that Hon'ble ITAT in A.Y. 1990-91 has allowed such claim as deduction. However, this contention of appellant was not found acceptable to Assessing Officer on the ground that relief has been granted by ITAT on this issue is sub-judice hence such claim is not allowed. He made net disallowance of Rs 3,20,98,901/- while computing total income of appellant. 24. This issue is dealt by CIT(A) at Para No. 12.3 of his order as under: 12.3 I have considered the A.O.'s order as well as the appellant's A/R submission. Having considered both, I find merits in the arguments of the appellant. I find that similar issue has been decided in favour of the appellant by the-Hon'ble ITAT as well as the by my predecessor in the appellant's own case. Thus, in view of the same, I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer has dealt with the issue at Para No. 13 to 13.3 of Assessment Order. The Assessing Officer has observed that Assessee Company has not made any disallowance u/s 40(a)(i) for interest on ECB Loan from State Bank of India, Bahrain on the ground that State Bank of India being a Banking Company under the Banking Regulation Act, 1990, provision of Section 194A is not applicable. This contention of assessee is not found acceptable to Assessing Officer on the ground that SBI offshore banking unit Bahrain is agent for loan borrowed from SBI International(Mauritius) limited and if interest is paid to NRI, provisions of Section 195 is applicable. As assessee company has not deducted TDS on such payment, Assessing Officer made disallowance u/s 40(a) of the Act. 30. This issue is dealt by CIT(A) at Para No. 14.4 of his order as under: "14.4 I have considered the A.O.'s order as well as the appellant's A/R submission. Having considered both, I find that similar issue has been decided in favour of the appellant by my predecessor in A.Y.-05-06 in the appellant's own case. Hence considering the rule of consistency, I consider it proper and appropriate not to deviate from the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing within the provision of section 195 of the Act. The primary dispute is with regard to the residential status of payee in Singapore and the lender of external commercial borrowings. As per the letter of Jt. CIT(OSD)-3(1), Mumbai, the residential status of the ICICI Bank Ltd., has been clarified…….." 46. It is observed that Ld.CIT(A) in his order has given finding that Bahrain Branch of State Bank of India (SBI) is part of SBI which is governed by the Banking Regulation Act and this fact is not disputed by LD DR. Further it is also a settled position that a branch office is part of the entire SBI and not a separate legal entity. Payment to foreign branch of Indian entity tantamount to payment made to Indian company only. Accordingly, provisions of Section 195 are not applicable in respect of payments made to foreign branch of Indian Bank. Considering such fact and relying upon decision of Coordinate bench referred supra, we are inclined to accept the findings of Ld.CIT(A) for deleting the addition made by Assessing Officer. This ground of appeal in Departmental appeal is dismissed. 33. Respectfully following the above decision, we dismiss the ground raised by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and DR have relied upon arguments as were made in appellate hearing for A.Y. 2005-06 in assessee's own case. 39. Similar issue was considered by us in the Department Appeal in Ground no 9 and held as under: "60.Considered the rival submissions and material placed on record. The Assessee has claimed deduction u/s 80IA on two units purchased from Tata Power Limited and such deduction is denied on the ground that assessee has not set up any undertaking and same has been formed by transfer of previously used plant & machinery. It is relevant to refer to provisions of Section 80IA which reads as under: "3) This section applies to an undertaking referred to in [clause (ii) or] clause (iv) of sub-section (4)] which fulfils all the following conditions, namely: (i) it is not formed by splitting up, or the reconstruction, of a business already in existence : Provided that this condition shall not apply in respect of an 52[undertaking] which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such 52[undertaking] as is referred to in section 33B, in the circumstances and within the period specified in that section; (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctober 1994 itself, IOCL transferred entire software division as a going concern on slump sale basis to assessee - It was apparent from records that ownership of business or undertaking changed hands and, thus, it could not be regarded as a case of reconstruction - It was also undisputed that entire business of software was transferred to assessee, and, thus, assessee-undertaking could not be said to be one formed by splitting up of business - Whether on facts, assessee had fulfilled conditions mentioned in section 10A(2) and, thus, its claim for exemption under section 10A was to be allowed - Held, yes [In favour of assessee] 62. Further, in CIT v. Silical Metallurgic Ltd (324 ITR 29), the facts before Hon'ble Madras High Court were as follows: there were three units at different places being new industrial undertakings eligible for deduction under the applicable provisions. They belonged to different companies assessed separately. The companies were amalgamated into one and the amalgamated company continued to carry on the business of the undertakings. It claimed the deduction of tax holiday for all the eligible undertakings. The Assessing Officer disallowed the deduction on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad also accepted the above legal position with regard to deduction under section 84 of Income Tax Act, 1922 (Section 80J of Income-tax Act, 1961), way back in 1963 and clarified the matter vide Letter: F No 15/5/63-IT (A-I), dated 13 December 1963, which reads as under:- "The Board agree the benefit of section 84 attaches to the undertaking and not to the owner, thereof. The successor will be entitled to the benefit for the unexpired period of five years provided the undertaking is taken over as a running concern". The Board set out two principles (prima facie, independent of one another or the later dependent on the primary and the first principle): i. The deduction attaches to the undertaking and not to the owner; and ii. A successor would be entitled to the deduction, for the residual period, if the undertaking is transferred as a running concern 64. The aforesaid Board Circular have been relied upon by various Courts and its applicability have been upheld. The Hon'ble Allahabad High Court in the case of Prisma Electronics [2015] 377 ITR 207 was concerned with deduction under section 80-IB on conversion of proprietorship concern into partnership firm. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs. Subsequently, such unit was transferred to Tata Power Company and was again re-purchased by assessee in current year and assessee has claimed deduction u/s 80IA. So far as observation of Ld.CIT(A) that assessee is not entitled for such deduction as 80IA was not claimed by undertaking during the period A.Y.2000-2001 to AY 2004-05, it is observed that Ld.CIT(A) himself has accepted that assessee can claim deduction u/s 80IA for consecutive 10 years out of block of 15 years from commencement of business which does not mean that if in block of 10 years, deduction u/s 80IA was not claimed for one or more reasons, such claim is lapsed for subsequent years. Further it is also a settled position that the deduction u/s 80IA is qua undertaking and not qua entity. Every undertaking will be entitled to avail deduction u/s 80IA for a period of 10 consecutive years from 15 years from the commencement of business. There is substance in the argument of Ld. AR of the assessee that Tata Power Company Limited might not have claimed for deduction u/s 80IA for various reasons and there is nothing on record to prove that said company was not entitled for deduction in respect of 80IA on such power pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not have any direct nexus with such units. However, such explanation was not accepted by Assessing Officer and allocated such expenses on the basis of turnover of assessee company and turnover of respective power units. 44. This issue is dealt by CIT(A) at Para No. 16.3 of his order as under: "16.3 I have considered the A.O.'s order as well as appellant AR*s submission. Having considered both, I find that similar issue was again decided by my predecessor in A.Yr.2005-06 vide his Appellate Order No.CIT(A)-I/IT/232/07-08 dated 13.03.2009 wherein he directed the A.O. to exclude the Cost Audit Fee and Subscription to CMA allocating the expenditure in relation to units for deduction u/s.80-IA of the Act. If that my predecessor CIT(A) has dealt with this issue in Ground No. 13 of the order from para 16.1 to 16.4 of the appellate order. Following the said decision of my predecessor and also in respect of rule of consistency, I direct the A.O. to accordingly exclude the Cost Audit Fee and Subscription to CMA in respect of cement manufacturing unit. Accordingly, the A.O. is directed to exclude this item out of expenditure as mentioned on page 41 of the assessment order at Serial No.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 223; the eligible undertakings, and, for this reasons, these expenses cannot be allocated to the eligible undertaking. We see no reasons to decline allocation of head office expenses to ensure that the profits of the eligible units are correctly worked out, on the basis of hypothetical independence embedded in the eligible units being treated on a standalone basis. To this extent, we reject the plea of the assessee. However, the basis of allocation as turnover is not really correct and reasonable, nor the relationship between the turnover and expenses always linear; the allocation would be more appropriate based on expenditure incurred by the units vis-à-vis overall expenditure. To this extent, we uphold the plea of the assessee. 109. In view of the above discussions, as also bearing in mind the entirety of the case, we reject the grievance of the assessee against allocation of HO expenses, but we permit the assessee's plea to the limited extent that the allocation of HO expenses should be done on the basis of expenditure incurred by the units vis-àvis overall expenditure" 78. Respectfully following decisions of coordinate bench referred supra, Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentative of the Assessee reiterated the submissions made before the lower authorities and relied upon the decision of the Tribunal in Assessee's own case for the Assessment Year 2002-03 and 2003-04 wherein the Tribunal had granted relief to the Assessee. 14.2.4. We note that the Hon'ble Bombay High Court has, in the case of CIT vs. Echjay Forgings (P) Ltd. (2001) 251 ITR 15 has held as under: "4. The short point which arises for consideration in this appeal is, whether the Assessing Officer was right in disallowing claims for deduction in respect of the five items and ordering addition thereof to the net profit for the purposes of section 115J. 5. The addition of the five items to the net profit is, accordingly, discussed hereinbelow: (I) Addition of wealth-tax paid by the assessee to the net profit 6. Mr. Desai, the learned senior counsel for the department, fairly concedes that the net profit, as shown in the profit and loss account, will not be increased by the amount of wealth-tax paid because under clause (a) of the Explanation to section 115J(1A), what is contemplated is the amount of income-tax paid. Under the said clause, payment of wealth-tax is not conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respectfully following the decision of coordinate bench referred supra, addition of provision for wealth tax made while computing book profit u/s 115JB is deleted. Accordingly, this ground of appeal in Departmental Appeal is dismissed. 52. Respectfully following the above decision, we dismiss the ground raised by the revenue. 53. In the Ground No 9, Department has raised the following grievance: "1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of provision for normal and additional gratuity amounting to Rs.8,28,97,873/- while computing the book profit u/s. 115JB of the I. T. Act." 54. The Assessing Officer has dealt with this issue at Para No. 22.1 of his order and observed that as assessee has not established that Gratuity provisions are made towards ascertained liabilities, same are added back while computing total income. This issue is dealt by CIT(A) at Para No. 20.1 of his order as under: "20.1 I have considered the A.O.'s order as well as the appellant's A/R submission. Having considered both, I find that the issue raised through this ground of appeal has been already decided in favour of the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A)- I/IT/232/04-05 the addition made by the Assessing Officer is deleted and the ground stands allowed in favour of the appellant." 47. On appraisal of the said finding, we noticed that this issue has been covered by decision of Hon'ble ITAT in the assessee's own case for the A.Y. 1990-91 in ITA. No.2361/M/1995 & in the A.Y. 2002-03 in ITA. No.4987/M/2007. There is nothing on record to which it can be assumed that the order has been varied or changed in appellate proceeding. Since this issue has been duly adjudicated in favour of the assessee by above mentioned decision of the Hon'ble ITAT, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is being decided in favour of the assessee against the revenue." 14.3.5. Respectfully following the decision of the co-ordinate Bench of the Tribunal in the case of the Assessee for the Assessment Year 1990- 91 (ITA No. 2361/Mum/1995), Assessment Year 2002-03 (ITA No. 4987/Mum/2007 & others) and Assessment Year 2003-04 (ITA No. ITA. No. 5259 & 4895/Mum/2007 Assessment Year: 2004-05 4242/Mum/2007) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nate bench in assessee's own case for A.Y. 2004-05 in ITA No 5259/MUM/2007 dated 27/05/2022 has decided this issue in its favour. The relevant finding is reproduced herein below: "14.4.4. We have considered the rival contentions and perused the material on record. We note that the CIT(A) has granted relief to the Assessee by following the judgment of the Hon'ble Supreme Court in the case of Bharat Earth Movers (245 ITR 528), and the Hon'ble Bombay High Court in the case of CIT v. EchjayForgins (P) Ltd. (2001) 251 ITR 15. We do not find any infirmity in the order passed by the CIT(A) to the extent it holds that provision for Leave Encashment of INR 3,26,00,238/- is in the nature of provision for ascertained liability created on the basis of actuarial valuation and is, therefore, not required to be added back while computing Book Profits in terms of Clause (c) of Explanation 1 to Section 115JB(2) of the Act. Accordingly, order of CIT(A) on this issue is confirmed and Ground No. 10 raised by the Revenue is dismissed." 90. Respectfully following decision of coordinate bench referred supra, addition of provision for leave encashment made while computing book profit u/s 115JB is de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er: 118. Considered the rival submissions and material placed on record. It is relevant to refer to provisions of Section 115JB on statue for year under consideration. "(iv) the amount of profits eligible for deduction under section 80HHC, computed under clause (a) or clause (b) or clause (c) of sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or (v) the amount of profits eligible for deduction under section 80HHE computed under sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or (vi) the amount of profits eligible for deduction under section 80HHF computed under sub-section (3) of that section, and subject to the conditions specified in that section; or" 119. During the course of hearing the Ld. AR referred to identical decision of Ahmedabad ITAT in the case of Torrent Pharmaceuticals Limited for AY 2009-10. Relevant portion of the finding vide ITA NO 1285/Ahd/2017 is reproduced hereunder for ready reference: "95. Ground No. 5: The grievances raised by the assessee in this ground is that the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee while calculating the amount of profit under section 115JB of the Act. 97. Aggrieved assessee preferred an appeal to the learned CIT-A, who confirmed the order of the AO by observing as under: I have considered the assessment order, facts on the case and the submissions made by the appellant. The AO made the impugned addition since assessee has subtracted the profit eligible u/s.80HHC of ₹.79,58,97,799/- from its book profit. In view of the amendment brought into section 80HHC by the Finance Act, 2011 with effect from 1.4.2005, the said profit u/s.80HHC is not eligible for deduction from the book profit. In view of the same the AO's action is disallowing the same was correct and the same is upheld. Ground of appeal no.11 is dismissed. 98. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 99. The learned AR before us contended that the amendment brought under the statute with retrospective effect, denying the benefit to the assessee is unconstitutional, particularly, in the circumstances when such amendment was brought to nullify the judgment of the Hon'ble Supreme Court in the case of Ajanta Pharma reported in 32 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... established that while it is permissible for the Legislature to retrospectively legislate, such retrospectivity is normally not permissible to create an offence retrospectively. There were clear judgments, decrees or order of courts and Tribunals or other authorities which were required to be neutralized by the validation clause. It could only be assumed that the judgments, decrees or orders, etc., had, in fact, held that persons situate like the appellants were not liable as service providers. This is also clear from the Explanation to the validation section which says that no act or acts on the part of any person shall be punishable as an offence which would not have been so punishable if the section had not come into force. [Para 7] The liability to pay interest would only arise on default and is really in the nature of a quasi-punishment. Such liability although created retrospectively could not entail the punishment of payment of interest with retrospective effect. [Para 8] 101.2. Undeniably, the Parliament is empowered to bring amendments under the statute that too retrospectively provided it is not detrimental to the assessee. In other words any amendment denying the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 I have considered the A.O.'s order as well as the appellant's A/R submissions. Further I have also taken note of earlier orders in the appellant's own case of Hon'ble ITAT as well as of my predecessor. Considering the same, I find that the issue has been decided in appellant's favour by the Hon'ble ITAT in AY 1990-91 and also by my predecessor in AYs 1998-99, 1999-00, 2003-04 to 2005- 06, Respectfully following of the said orders, I consider it proper and appropriate not to deviate from the aforesaid orders referred above. Thus, this ground of appeal is accordingly adjudicated. 71. Against the observation of CIT(A), department has filed appeal. Before us, Ld. AR relied upon finding of CIT(A) and argued that issue is in favour of assessee by decision of ITAT for A.Y. 2003-04 and 2004-05. The Ld. DR has relied upon finding given by Assessing Officer and argued that order of Assessing Officer may be restored. 72. Similar issue was considered by us in the Department Appeal in Ground No 19 in AY 2005-06 and held as under: "124. Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee's own case for A.Y. 2004-05 in ITA No 5259/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Supplied) 21.4. In view of the above, we do not find any infirmity in the order passed by CIT(A). Accordingly, we confirm the order of CIT(A) holding that amount of INR 9,66,64,158/-, transferred from Share Premium Account to the profit & loss account was correctly reduced from Book Profits by the Assessee while computing book profit as per the provisions of Clause (i) of Explanation to Section 115JB(2) of the Act. Accordingly, Ground No. 20 raised by the Revenue is dismissed." 125. Respectfully following decision of coordinate bench referred supra, we confirm the order of Ld. CIT(A) holding that amount transferred from Share Premium Account to the profit & loss account was correctly reduced from Book Profits by the Assessee while computing book profit as per the provisions of Clause (i) of Explanation to Section 115JB(2) of the Act. This ground of appeal in Departmental Appeal is dismissed. 73. Respectfully following the above decision, we dismiss the ground raised by the Revenue. 74. In the Ground No 13, Department has raised the following grievance: "13. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VRS expenses, no further adjustment is called for on this account. In the immediately preceding assessment year (AY 2003-04), identical issue has been decided in favour of the Assessee wherein the Tribunal has, vide common order, dated 13.03.2019, passed in ITA No. 4242/MUM/2007 & ITA No. 4988/MUM/2007 has held as under: "34. Under this issue the revenue has challenged the deletion of addition made in respect of VRS expenditure pertaining to earlier years in computing Book Profit u/s 115JB of the Act in sum of ₹.18,69,64,996/-. The relevant finding has been given in CIT(A) in Para No. no. 27.4. On appraisal of the above said finding, we are of the view that the CIT(A) has allowed the claim of the assessee on the basis of decision of the case titled as Apollo Tyres Ltd. CIT (2002) 255 ITR 273 (SC). We also noticed that the issue has already been covered in favour of the assessee in the assessee's own case for the A.Y. 2002-03 in ITA. No.4987/M/2007. The facts are not distinguishable at this stage also. Taking into account all the facts and circumstances of the case, we are of the view that the CIT(A) has allowed the claim of the assessee rightly, hence, the finding of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The relevant finding is reproduced herein below: "17. Ground No. 16: On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition in respect of capital expenditure debited to P & L account of INR 14,16,56,815/- in computation of book profit u/s 115JB of the Act. 17.1. During the relevant previous year, the Assessee had debited INR 14,16,56,815/- to the Profit & loss account being capital expenditure. The Assessing Officer added back the aforesaid capital expenditure to Book Profits for the reason that the same has been added back while computing profits under normal provisions of the Act. ………. 17.4. We have heard the rival contentions and perused the record. We note that the in the immediately preceding assessment year (AY 2003-04), identical issue has been decided in favour of the Assessee. The relevant extract of the order, dated 13.03.2019, passed by the Tribunal in the case of the Assessee for the Assessment Year 2003-04 (ITA No. 4242 & 4988/MUM/2007 reads as under: "35. Under this issue the revenue has challenged the deletion of the addition made in respect of Capital expenditure debite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) for deleting addition being capital expenditure debited to Profit & Loss account comprising of WDV of assets and on account of cost not owned by company in computing book profit. This ground of appeal in departmental appeal is thus, dismissed. 84. In the Ground No 15 Department has raised the following grievance: "15. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.8,80,00,000/-being expenditure incurred to earn dividend income while computing the book profit u/s.115JB of the I. T. Act." 85. The Assessing Office has dealt with this issue at Para No. 4.3 of his order. The Assessing Officer has observed that assessee has earned exempt dividend income in year under consideration and computed proportionate interest disallowance at ₹.8,80,00,000/- under Section 14A and similar amount is added back while computing total income as well as book profit u/s 115JB of the Act. This issue is dealt by CIT(A) at Para No. 28.3 of his order as under: "28.3 I have considered the AO's order as well as the appellant's A/R submissions. Having considered the same, I find that similar issue has been decided erstwhile CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bombay High court in the case of Raymond Limited [2012] 21 taxmann.com 60 has held that Amount set apart as a Debenture Redemption Reserve (DRR) is not a reserve within the meaning of Explanation (b) to section 115JA. Respectfully following decision of coordinate bench referred supra, we confirm the order of Ld.CIT(A) holding that amount transferred to Debenture Redemption Reserve cannot be added back while computing Book Profits. This ground of appeal in Departmental Appeal is dismissed. 89. Respectfully following the above decision, we dismiss the ground raised by the Revenue. 90. Ground no. 17 and 18 is general in nature and is thus dismissed. 91. In the result, the appeal of the department is dismissed in the terms indicated above. ITA NO. 5655/MUM/2011 (ASSESSEE APPEAL) 92. We now take up the appeal filed by the assessee in ITA No 5655/Mum/2011. 93. In the Ground No 1 & 13 Assessee has raised the following grievance: "1. That on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) [here-in-after referred to as Ld. CIT(Appeals)] was not justified and grossly erred in confirming the action of the A.O. in denying the claim of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid memorandum dated 07/01/2003. Further to that this expansion of the existing unit must generate potential for local employment and use of local resources. Even the activities of the production of undertaking must be environment friendly. Hence in my considered view such receipts germinate to the appellant only after commercial production. Hence, it has direct relation to production of the undertaking. Thus, the same is revenue oriented. 9.6 Further to that, a close perusal of the Notification No.50/2003 Central Excise dated 10th June,2003 were taken, which stipulates the excise duty exemption as notified by sub-section 1 of section 5(a) of Central Excise Act, 1944 read with sub-section 3 of Additional Duties of Excise(Goods of Special Importance) Act, 1957. In Notification, it is categorically mentioned that ""being satisfied that it is necessary in the public interest so to dot hereby exempts the goods Specified in the First Schedule and the Second Schedule to the Central Tariff Act, 1985 (5 of 986), other than the goods specified in Annexure-I appended hereto, and cleared from a unit located in the Industrial Growth Centre or Industrial Infrastructure Development C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odernisation of Gagal Unit 1 including upgradation of pollution control equipment at a cost of Rs.49.46 crores". 9.9 This note in Annual report of the appellant company, which is for the shareholders/stakeholders of the appellant company clearly suggest that modernization of Gagal Unit I has completed as on 31/03/04 itself. Further in the Annual report for the year ending 31/03/05 at page-15 at Serial No.6 of Annual report mentions that "6.2 The project for augmentation of capacity of Gagal Unit I & Unit II are expected to commissioned during the course of the financial year 2005-06", In view of the aforesaid contrary Annual report of the appellant company a note was taken from Annual report of 2005-06, wherein serial no.5 of the report on page-29, it is mentioned as under "5.1 The project of augmentation of clinkering and cement grinding at Gagal Unit II was commissioned during the year under review. With this, the capacity of Gagal works stands increased to 4.4 MTPA. 9.10 The appellant also argued the Assistant Commissioner Central Excise has also allowed exemption to the appellant company but the perusal of the order of Assistant Commissioner Central Excise, which is appeari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the spirit of said notification. 9.11 In view of the aforesaid facts, I find that there was no targeted expansion of Gagal Unit I for increase in capacity of production of the appellant company was undertaken in compliance to office memorandum No.l(10)/2001/NER dated 07/01/2003 or in notification no,50/2003 central excise dated 10/06/03. The appellant company merely intended to enjoy the benefit of exemption declared by the Government of India without any specific carried out plan of such enhancement/expansion of production in accordance with such notification. This observation is made based on following observation recorded from the appellant's own submission made during appellate proceedings. * None of Annual report of the appellant company anywhere stated that the appellant company is intending to expand the capacity of production just to * double than the existing capacity i.e.9.84 LTPA of install capacity of cement to 20 LTPA after expansion. * Investment in plant and machinery claimed by the appellant prior to expansion was 161.90 crores and subsequently 261.09 crores but it is no where submitted that whether this investment is towards the targeted expansion in comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same. * On the basis of submission made by the appellant company, I find that civil work was assigned to a company namely M/s Gannon Dunkerley co. Ltd. by letter dated 11/05/04 by the appellant company, wherein the letter of intent no.355/04 dated 10/05/04 was allotted by the appellant company. The work stated therein clearly suggest that the same is for augmentation of grinding and packing capacity for line 1 (Group I) and for augmentation of raw and finish grinding capacity for line group 2 (Group II). The details of the work executed was called for by this * office and the submission made by Gannon Dunkerley Co. Ltd. suggest that work was carried out from F.Y.-04-05 to F. Y.-07- 08, which is appearing from summary of R.A bills, which is total of Rs.54,60,66,49/-. This also established the fact that the appellant civil work was carried out up to F.Y.-07-08, * Further to that, it is also taken on record that the appellant is claiming that the director of Industries of Himachal Pradesh, Shimla has approved the expansion plan vide letter dated 05/07/04 placed on page 148 of part A of the appellant submission. But the said letter merely mention of proposal of exemption, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant's own submission that the total number of employees on 07/12/05 were 568 and in F.Y.-05-06 to 07-08, the total employees gone down to 540 as per form I issued by General Manager Distt, Bilaspur appearing on page 139 of part A. 9.12 Taking note of all the above facts and observations noted on the basis of appellant's submission during the appellate proceedings, I find that the appellant company tried to have benefit of incentive declared by the Government of India by office memorandum dated 07/01/04 by F.No.l(10)/04 NER and also of notification No.50/2003 Central Excise dated 10/06/2003. On the basis of detailed discussion made in foregoing paras based on appellant's own submission, it is evident that the appellant company intends to have benefit of this notification in respect of Gagal Unit I of the appellant, which was taken on hand prior to Notification issued by the Government of India. Further to that, even for upgradation of the unit the basic purpose of generation of local employment was not attained and increase of expansion of capacity of existing unit was not environment friendly as it includes the so called claimed expansion of clinker also, which is appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that the receipt which has been claimed by appellant company as capital receipt is completely unfounded and untenable, even, on the basis of applicability of fundamental rules of purpose test also as laid down by the Hon'ble Apex Court in the aforesaid judicial pronouncements. The fact that the proposal expansion for enhancement of installed capacity did not generate further employment as it is evident from appellant's own submission as discussed above. Further the entire project was not environmental friendly. Moreover, the subsidy is apparently for revenue purposes i.e. generation of employment and utilization of local resources and not for capital creation the receipt thereof has to be treated as revenue following the decision of the Hon'ble Supreme Court in the case of Sahney Steels (supra). Further the appellant has also failed to adduce evidence of commencement of production and rather the evidence adduced are contradictory in nature. Hence, in my considered view, I consider it proper and appropriate to hold that the AO was justified in holding that such exemption and receipt in the appellant's hand is revenue in nature. Accordingly, the AO's action is confirmed. Thus this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finds no difference in sales tax and excise exemption claimed". Following the stand taken for sales tax exemption etc, he held that the excise exemption receipts are also revenue in nature. Aggrieved, assessee carried the matter in appeal before the CIT(A). Learned CIT(A) also confirmed the stand of the Assessing Officer on the short ground that the exemption notification does not specifically state the object and purpose of the concession to be promotion of industry in the specified areas etc. The assessee is aggrieved, and is in appeal before us. 18. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 19. We have noted that the Assessing Officer himself states that he "finds no difference in sales tax and excise exemption claimed", and in the immediately preceding paragraphs in this order, we have held that sales tax exemption receipt is a capital receipt in nature. There cannot be any good reasons to take a different view of the matter in respect to excise exemptions. For this short reason alone, the impugned additions must stand deleted as the related receipts are required t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the purpose for granting such subsidy. We may refer to the decision of the Supreme Court in case of CIT v. Chaphalkar Bro. [2017] 88 taxmann.com 178/[2018] 252 Taxman 360/400 ITR 279. It was a case arising out of judgment of this Court in which, the dispute between assessee and the Revenue was with respect to subsidy granted to the multiplex cinema operators in the form of entertainment tax waiver. The subsidy was granted in view of the fact that, industry was highly capital intensive. The Revenue argued that, the subsidy was revenue in nature. This Court after referring to several decisions of the Supreme Court including the case of CIT v. Ponni Sugars and Chemicals Ltd. [2008] 306 ITR 392/174 Taxman 87 and Sahney Steel and Press Works Ltd. v. CIT [1997] 94 Taxman 368/228 ITR 253 (SC) held that, subsidy had not been granted for construction but only after setting up of a new industry which was in the nature of assistance given for the purpose of carrying on business. 7. On further appeal by the Revenue, Supreme Court confirmed the decision of this Court. It was noted that, Maharashtra Government's subsidy was not in form of an exemption from payment of entertainment duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich would in turn, provide fresh employment opportunity in the district which had suffered due to devastating earthquake. The computation of subsidy may be on the basis of sales tax or excise duty. Nevertheless, the purpose test would ensure that, the subsidy was capital in nature. 9. The second question raised by the Revenue is consequent of the first question, in which, the Revenue argues that, if the subsidy is treated as a capital in nature, the same must bring down assessee's costs of acquisition of plant and machinery. The assessee's claim of depreciation to that extent must shrink. Assessee argues that, the Tribunal correctly held that, the subsidy had not been given in relation to acquisition of plant or machinery and that, therefore, same cannot be adjusted towards cost of acquisition. 10. It is undoubted that, the subsidy had no relation to the assessee's acquisition of plant or machinery. It was to be granted to an industry which had set up the new industrial unit in the District of Kutch. In such back- ground, question - arises whether such subsidy would be adjustable towards assessee's costs of acquisition of capital assets. We may notice that, a sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of the amount invested by an entrepreneurs in acquiring capital assets as cash subsidy. The scheme does not say as to in what manner the subsidy was granted is to be utilized. In other words, the entrepreneur to whom the subsidy was granted was free to utilize it in any manner he liked. It would, therefore, appear that quantification of subsidy on the basis of investment was a measure adopted by the Government for convenience to work out the subsidy. If subsidy could be utilized by the entrepreneur in any manner he liked, could it be said that it was granted for meeting the cost of the capital assets? In our opinion, taking an overall view of the various provisions of the scheme, it is difficult to hold that cash subsidy was granted to entrepreneur to meet the cost of the fixed assets or part thereof The cost of the fixed assets was merely adopted as a measure for working out subsidy. In fact, a careful examination of the scheme reveals that it is the value of the fixed assets and not its cost which is adopted as the basis for computing the amount of the subsidy. Emphasis on value and not the cost is evident from the fact that land and building already owned by an industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determining the subsidy, being only a measure adopted under the scheme to quantify the financial aid, is not a payment, directly or indirectly, to meet any portion of the 'actual cost The expression 'actual cost' in section 43(1) of the Income Tax Act, 1961, needs to be interpreted liberally. Such a subsidy does not partake of the incidents which attract the conditions for its deductibility from 'actual cost'. The amount of subsidy is not to be deducted from the 'actual cost' under section 43(1) for the purpose of calculation of depreciation etc." 20. In view of these discussions, as also bearing in mind the entirety of the case, we uphold the plea of the assessee. The Assessing Office is, accordingly, directed to delete the impugned addition…. 43. In view of the above discussions, as also bearing in mind the entirety of the case, we see no legally sustainable merits in the grievance of the Assessing Officer. The views expressed by the learned CIT(A), being in conformity with our decisions for the preceding assessment years, meet our approval. We, therefore, confirm and approve the relief granted by the CIT(A) and decline to interfere in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 8D is applicable only for A. Y.- 08-09 onwards. In view of the same, the application of rule 8D cannot be upheld, in view of the jurisdictional High Court decision. However I find that in the same decision jurisdictional High court has also held that the A.O. should provide reasonable opportunity to the assessee while working out the disallowance on account of expenditure i.e, direct/indirect both incurred on account of exempt income, which are not forming part of total income. In view of the jurisdictional High Court decision, I consider it proper and appropriate to direct the A.O. to provide reasonable opportunity to the appellant and work out the total expenditure i.e. direct or indirect both in relation to exempt income and make the disallowance in accordance to the decision of jurisdictional High Court in the case of M/s Godrej & Boyce Mfg. Co. Ltd. With this observation, the appeal of the appellant is partly allowed." 101. The Assessee has filed appeal against the observation of Ld.CIT(A) referred supra. During the course of appellate hearing, Ld. AR of the Assessee has stated that Rule 8D is not applicable in current year hence disallowance u/s.14A cannot be made. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o funds invested to earn tax free income under section 14A on grounds that separate accounts were not maintained for investment in tax-free securities - Whether since interest free own funds available with assessee exceeded their investments; investments would be presumed to be made out of assessee's own funds and proportionate disallowance was not warranted under section 14A on ground that separate accounts were not maintained by assessee for investments and other expenditure incurred for earning tax-free income - Held, yes [Para 27] [In favour of assessee] 106. Hon'ble jurisdictional High Court has, in the case of PCIT v. Shapoorji Pallonji& Co Ltd [(2020) 117 taxmann.com 625(Mum)]has, inter alia, observed as follows: "6. On thorough consideration we find that the principle of apportionment does not arise in this case as the jurisdictional facts have not been pleaded by the Revenue. In fact Tribunal while affirming the order of the first appellate authority noted that the first appellate authority had deleted the addition made by the assessing officer under section 14-A of the Act by observing that the interest-free fund available with the respondent - assessee was far in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax-exempt income. The assessee gets the relief accordingly." 109. Considering the finding given by Coordinate Bench, we direct the assessing officer to restrict the disallowance to 1% of the exempt income. The assessee gets the relief accordingly. This ground of appeal is partly allowed. 110. In the Ground No 3, Assessee has raised the following grievance: "3. That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in treating the ground taken for modification of depreciation following the order of earlier assessment years as infructuous." 111. During the course of appellate hearing, Ld.AR has not pressed this ground of appeal hence same is dismissed. 112. In the Ground No 4, Assessee has raised the following grievance: "4. That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in confirming the action of the A.O.in treating the sale of Refractory Business as slump sale by invoking the provision of sec. 50B instead of item-wise sale." 113. The Assessing Officer has dealt with this issue at Para No. 12 of his order. The operative part of assessment order is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose behind getting the valuation done was entirely with the sole intention to get out of the taxability of the sale consideration as per relevant provision of the Act i.e. section 50B specifically brought on statute for taxing the capital gain arising in case of slump sale introduced by Finance Act, 1999 with effect from 01.04.2000. The appellant has taken the argument in its submission that section 50B is a beneficial provision but I find that the said provision was brought on statute to set right the litigation arising on account of taxability of sale of entire business undertaking prior to introduction of the said provision. Taking note of different judicial pronouncements of the Apex Court as well as different High Courts, considering judicial developments through different judicial pronouncements and taking note of actions of such transactions wherein the entire Parliament also defined the concept of slump sale in the provisions of section 2(42C) of the Act which is as under:- "Slump sale 'means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of which the whole of the expenditure has been allowed or is allowable as a deduction under section 35AD, nil; and (c) in the case of other assets, the book value of such assets." Hence, the Parliament considered it proper to define even the meaning of slump sale u/s.2(42C) and also introduce section 50B of the Act. I find that the AO has taken the meaning of the transaction of the appellant i.e. sale of business undertaking of refractory business in the right perspective as slump sale. 13.6 I find that the underlying philosophy has all along been that in a slump sale, the seller cannot withdraw any asset from the business sold, and the purchaser cannot reject any asset or liability comprised in the business. The slump sale envisages sale of entire business as a going concern at its realizable value without allocation of slump price to individual items of business and not as a part of a going concern. It is the essence of slump sale. Further, to cover in the purview of Section 50B of the Act, the sale of business undertaking as a whole, must satisfy the following tests: (i). The business has been sold as a whole and as a going concern at its realizable valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. This shows that it has always been the law that profits and gains from slump sale are taxable. In the face of the aforesaid decision of the Hon'ble Jurisdictional High Court, the natural corollary is that the provisions of section 50B(1) declaring that any profit and gain arising from the slump sale would be chargeable to tax as capital gains, is merely declaratory of the law as it then existed The obvious question then is as to what was the necessity of enacting section 50B when it was merely declaratory of the existing law. The answer to this question lies in the provisions of subsection (2) and (3) of section 50B, which provide for the mechanism for the computation of cost of acquisition and the cost of improvement. In the absence of any statutory mode of computation of cost of acquisition/improvement, difficulties were being experienced in the computation of capital gains arising from the slump sale. At this stage, we may fruitfully refer to the heading of section 50B Which reads: "Special provision for computation of capital gains in case of slump sale" It is therefore quite evident that section 50B deals with computation of capital gain in cases of slump sale. While s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to take note of the Business Transfer Agreement of such slump sale which appears on Page 1075 to 1125 of the Paper Book. Taking note of this said agreement, I find that as per Article 2 of the said agreement sale and transfer of the refractory business has been defined and in that Para 2.1 is clearly defining the transaction wherein the sale of entire business undertaking has been taken note as transfer. Relevant portion of the same is extracted herein below as under: "2.1 Upon the terms and subject to the conditions set forth herein, as of the Effective Date, the Vendor agrees to sell, convey, assign and transfer the Refractor Business as a going concern on a slump sale basis to the Purchaser and the Purchaser agrees to purchase, acquire and accept from the Vendor as of the Date in the ordinary course of business) unto and to the use of Purchaser together with all deeds, documents, writings, vouchers and other evidence of Vendor's title exclusively relating to the Refractory Business and every part thereof for a lump sum consideration as set out in Article 3.1 hereto payable in the manner set out hereunder" Thereafter, as per Article 3 of the said Business Transfer A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act accordingly. Even if I find in Agenda item No.1 it was slump sale. i find that the subsequent version in para 2 i.e. "ACC Business will be item-wised/ category break up (i.e. land, plant & machinery, copyright, technical know-how etc.) in a manner, which minimizes transaction costs and provides maximum tax and other structural benefits to both AC and ICICI Venture." was intended to interpolate or putting appellant's own version for defining the transaction to ensure lesser tax liability when it was nowhere warranted at all. Any such act is to put own definition of the transaction when it is not necessitated in view of the amply explicit clear provision of section SOB r.w.s. 2(42C) of the Act which in my considered view is against the spirit of the provisions of the Income-tax Act. In my considered view when the provisions are amply clear then, there is no necessity to define otherwise than what has been stated by the legislation. I find that the Apex Court has clearly stated such version of defining the provision of law in the following case laws : (1) The Hon'ble Supreme Court in the case of CIT vs N.C. Budhiraj& Co. reported in 204 ITR 412 held that the principle of ado ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the whole stature. This would be more so if literal construction of a particular clause leads to manifestly absurd or anomalous results which could not have been intended by the legislature. Further the Supreme Court in the case of CIT Vs. Sodra Devi reported in 23 ITR 615 held that the normal rule of construction is that the intention of the legislature should be primarily gathered form the words which are used - It is only when the words used are ambiguous that they would stand to be examined and construed in the light of surrounding circumstances and constitutional principal and practice. Similar observations were made by the Supreme Court in the case of KeshavjiRavji& Others etc. Vs. CIT reported in 183 ITR 1 (Supreme Court). Further Supreme Court in the case of Smt. Tarulata Shyam& Ors Vs. CIT reported in 108 ITR 345 wherein it was observed that while interpreting the taxing statutes there is no scope for importing into the statue words which are not there. The intention of the legislature is primarily to be gathered horn the words used in the statute. Once the assessee comes within the letter of law, he must be taxed, however, great the hardship may appear to the judicia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B(3) of the Act. Virtually, the appellant should have furnished the net worth value, while filing its return of income as it was warranted under the provisions of law. Thus, non-compliance of the provisions of the Act will in no way help the appellant but it will be intended to hold that the appellant company has clearly violated the provisions of the law. Thus, non-compliance of such statutory provision will not at all help the appellant company in view of the explicit provision available on the statute in the form of Section 50B read with section 2(42C) of the Act. 13.18 Further to that, i would also like to take support from the following judicial pronouncements which support my view wherein it has been held that the rational construction to achieve the intention of the legislature is must:- 1. C.W.S. (India) Ltd. vs. CIT (194) 118 CTR (SC) 118: (194) 208ITR 649 (SC). 2. K. Govindan & Sons vs. CIT(200) 164 CTR (SC) 490 : (2001) 247 ITR 192 (SC). 3. Dy. CIT vs. Shaw Wallace & Co. Ltd. (2001) 165 CTR (Cal) 489: (2001) 248 ITR 81 (Cal). 13.19 In view of the aforesaid discussion of the appellant's submission as well as AO's order and also taking note of the various ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred by Assessing Officer at Para No. 12.1 of assessment order. Thus, assessee has offered capital gain of ₹ 19.20 crore in return of income. 117. While passing the assessment order, Assessing Officer has referred to Business Transfer Agreement(BTA) and observed that sale and transfer of the refractory business has been effected as going concern on slump sale basis. The purchaser too acquired and accepted the business as a going concern on slump sale basis. Considering such fact, Assessing Officer has referred to provisions of Section 50B of the Act and observed that as per BTA, sale was slump sale within the meaning of Section 2(42C) of the Act. While passing the assessment order, Assessing Officer has computed Capital gain u/s 50B of the Act as under: Particulars Amount Amount Full value of consideration 2,57,47,60,956 Less: Net worth of the undertaking Net Fixed Assets 24,31,64,634 Capital work in progress 2,78,56,147 Working Capital 55,58,29,633 Long term liability (1,96,13,710) Capital gain u/s 50B 1,76,75,24,251 118. As assessee has reduced block of asset by sale value attributable to depreciable assets and claimed lower depreciation, Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny capital asset being one or more undertakings owned and held by an assessee for not more than thirty-six months immediately preceding the date of its transfer shall be deemed to be the capital gains arising from the transfer of short-term capital assets. (2) In relation to capital assets being an undertaking or division transferred by way of such sale, the "net worth" of the undertaking or the division, as the case may be, shall be deemed to be the cost of acquisition and the cost of improvement for the purposes of sections 48 and 49 and no regard shall be given to the provisions contained in the second proviso to section 48. (3) Every assessee, in the case of slump sale, shall furnish in the prescribed form along with the return of income, a report of an accountant as defined in the Explanation below sub- section (2) of section 288, indicating the computation of the net worth of the undertaking or division, as the case may be, and certifying that the net worth of the undertaking or division, as the case may be, has been correctly arrived at in accordance with the provisions of this section. Explanation 1.--For the purposes of this section, "net worth" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were taxable under the provisions of the Act. The principal ground for excluding capital gains on a slump sale from the charge of tax was the absence of any machinery provisions for computing the cost of acquisition of the undertaking as in a slump sale only the lump sum consideration is fixed without assigning any values to separate assets constituting the undertaking. 123. The provisions of section 50B are in consonance with the two decisions of the Hon'ble Supreme Court in the cases of CIT v. Artex Mfg. Co. [1997] 227 ITR 260/93 Taxman 357 and CIT v. Electric Control Gear Mfg. Co. [1997] 227 ITR 278/93 Taxman 384. In both these cases, one of the issues for consideration before the Supreme Court was whether the surplus received by the assessee on sale of the entire business as a going concern was taxable under section 41(2). In the first case, the Supreme Court held that since the price attributable to plant and machinery and dead stock which were transferred had been disclosed by the assessee during the course of assessment proceedings before the ITO, section 41(2) was applicable, but under this section the liability was limited to the amount of surplus to the extent of differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the plant, machinery and dead-stock. But on the basis of the information that was furnished by the assessee before the ITO it became evident that the amount of ₹.11,50,400 had been arrived at by taking into consideration the value of the plant, machinery and dead-stock as assessed by the valuer at ₹.15,87,296. This is not a case in which it cannot be said that the price attributed to the items transferred is not indicated and, hence, section 41(2) cannot be applied. We are, therefore, unable to agree with the view of the High Court that section 41(2) is not applicable. Question No. 2 referred to the High Court is, therefore, answered in the affirmative, i.e., in favour of the revenue and against the assessee." 126. With this back ground and considering provisions of Section 50B and Section 2(42C) as discussed herein above, it is observed that lower authorities have treated sale of refractory business as "slump sale" based upon BTA agreement executed with purchaser wherein total sale consideration is mentioned at ₹257 crore in lieu of transfer of business of refractories undertaking. It is observed that assessee got the valuation of all its assets and liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aluation report already on record. Even Hon'ble Supreme court in the case of CIT v. Artex Mfg. Co(supra) has observed that even though agreement does not indicate the value attributable to the said items, it does not mean that sale of undertaking was on "Slump Sale basis" 127. During the course of appellate hearing, Ld.DR has relied upon following terms & conditions of BTA : img 128. It is observed that above referred clause was inserted for the purpose to avoid confusion between agreed consideration between two parties and value assigned at the time of execution of Separate conveyance deed/deed of assignments for immovable proprieties. The Ld.DR has only referred partial terms & conditions of such BTA as highlighted in above referred para but has completely ignored the later para wherein it is clarified that "Such indication of the value of the property in the respective deeds of conveyance, deeds of assignment and other Related Agreement shall not be deemed or constructed as allocation of slump sale consideration amount referred to in Article 3.1…." which means that when stamp duty is paid on various immovable property considering its value, such aggregate value cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly provided that "the vendor shall even after the effect date continue to retain and be responsible for various liabilities relating to the refractory business in the said articles" and in the definitions of "liabilities" as per BTA agreement, it has been specifically stated that few liabilities specifically mentioned in the agreement is excluded. Further in Part D of Schedule 1 of the BTA Agreement, list of the properties owned by the company which would be given to purchaser on leave and license basis is given. Thus, on holistic consideration of entire agreement, all the assets and liabilities of undertaking is not transferred entirely to purchaser which also make present sale transaction out of ambit of provisions of Section 50B of the Act. Hon'ble Kolkata ITAT in the case of DCIT v. Tongani Tea Co. Ltd [2015] 63 taxmann.com 149 has observed that "the assessee had listed out every item of movable property transferred to the buyer and value had been assigned to those movable assets. The assessee had not transferred the estate with all the assets and liabilities. All the financial assets available to the assessee up to the date of the transaction were not transferred as per the ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slump sale within the meaning of section 2(42C) assessable under section 50B and the assessee also rightly styled the transaction as 'slump sale' in the sale documents and even got the auditor's report prepared and filed along with return in terms of section 50B(3). However, in present case, as discussed herein above, sufficient evidences are placed on record to prove that transaction was item wise sale and valuation was obtained prior to date of sale of undertaking and both buyer and seller was very well aware that transfer was not slump sale but item wise sale as discussed supra. Considering such facts, ratio of decision relied upon by Ld. DR cannot be made applicable in present case. 132. Considering the facts discussed herein above, it is found that Assessing Officer has wrongly invoked provisions of Section 50B of the Act for computing Income from Capital gain on sale of undertaking in the year under consideration. The assessee has correctly treated transaction of sale as item wise sale in return of income and computed Income from capital gain as applicable to sale of Individual item of assets. Thus, addition made by Assessing Officer and sustained by Ld.CIT(A) cannot be uph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reasoning given thereon, I consider it proper and appropriate not to deviate from the orders of erstwhile CIT(A) and accordingly this ground of appeal is dismissed." 139. Against the above observation of Ld.CIT(A), both assessee and Revenue has filed cross appeals. The Ld. AR has fairly conceded that similar issue is decided against assessee in A.Y. 2002-03 to 2004-05 by the Coordinate Bench. However, Ld. AR has relied upon following decisions in support of the claim. (i). DCIT v. Gloster Jute Mills Ltd. [(2017) 185 TTJ 339 (Kolkata Tribunal)] (ii). Shivalik Ventures (P.) Ltd. v. DCIT [(2015) 70 SOT 92 (Mumbai Tribunal)] (iii). JSW Steel Ltd. v. ACIT [ITA No.923 of 2009 dated January 13, 2017 (Mumbai Tribunal)] (iv). Ambuja Cements Ltd [ITA No. 2384/Mum/2019 and ors.] (AY 2010-11) (Para 18-20; internal page 4-5) 140. The Ld. DR has relied upon finding given by Assessing Officer as well as finding of ITAT in earlier years and argued that order of Assessing Officer may be upheld. 141. Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee's own case for A.Y. 2004-05 in ITA No 5259/MUM/2007 dated 27/05/2022 has de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of the hearing the Ld. AR also referred to the decision of Hon'ble Karnataka HC in the case of Best Trading and Agencies Limited v. DCIT [119 Taxmann.com 129]. The finding of the said decision at Para No. 13 is reproduced hereunder for ready reference: "………………. 13. section 115JB(5) of the Act reads as under: "(5) Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee being a company, mentioned in this Section." Thus, by virtue of sub-section (5) of section 115JB, the application of other provisions of the Act are open, except if specifically barred by the section itself. The indexed cost of acquisition is a claim allowed by section 48 of the Act to arrive at the income taxable under the income from capital gains. The difference between the sale consideration and indexed cost of acquisition represents the actual cost of the assessee, which is taxable as per section 45 of the Act at the rates provided under section 112 of the Act. There is no provision in the Act to prevent the assessee from claiming indexed cost of acquisition on the sale of asset in case, where th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t at Yanabu Saudi Arabia. Such amount was not increased while computing book profit u/s 115JB of the Act. Thus, Assessing Officer has referred provisions of Section 115JB of the Act and held that book profit is required to be increased by the income tax paid or payable, whether it is paid in India or Saudi Arabia and on this ground, he has increased book profit u/s 115JB of the Act. In appeal Ld.CIT (A) has discussed the above issue at Para No. 27.2 of his order and held as under: "27.2 I have considered the AO's order as well as appellant AR's submission. Having considered both, I find that the issue raised in this-ground of appeal by the appeal is consistently decided against the appellant by my predecessor in the appellate order for A.Yr.2005-06. Taking note of the same and the reasons as given by my predecessor in the appellate order for A.Yr.2003-04 to 2005-06, I also hold that the appellant's claim raised through this ground of appeal is not justified relying on the decision of my predecessors and also role of consistency, I consider it proper and appropriate to dismiss this ground of appeal of the appellant." 146. Against the above observation of Ld.CIT (A), assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April, 1965, and any subsequent assessment year means income tax chargeable under the provisions of this Act, and in relation to any other assessment year incometax and super-tax chargeable under the provisions of this Act prior to the aforesaid date [and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit tax payable under Section 115WA] "Amounts not deductible 40. Notwithstanding anything to the contrary in Section 30 to the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession". (a) In the case of any assessee - (i), (ia), (ib), (ic)** ** ** (ii) Any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits and gains. [Explanation 1. - For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, any sum paid on account of any rate or tax levied includes and shall be deemed always to have included any sum eligible for relief of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be reduced by the tax paid to the Uganda Government in respect of such income? The Court while answering the question in the negative observed that it is not aware of any commercial principle/practice which lays down that the tax paid by one on one's income is allowed as a deduction in determining the income for the purposes of taxation. (k) It is axiomatic that income tax is a charge on the profits/ income. The payment of income tax is not a payment made/incurred to earn profits and gains of business. Therefore, it cannot be allowed an as expenditure to determine the profits of the business. Taxes such as Excise Duty, Customs Duty, Octroi etc., are incurred for the purpose of doing business and earning profits and/or gains from business or profession. Therefore, such expenditure is allowable as a deduction to determine the profits of the business. It is only after deducting all expenses incurred for the purpose of business from the total receipts that profits and/or gains of business/ profession are determined. It is this determined profits or gains of business/profession which are subject to tax as income tax under the Act. The main part of Section 40(a)(ii) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;tax' as found in Section 2(43) of the Act would apply wherever it occurs in the Act. It is not even urged by the Revenue that the context of Section 40(a)(ii) of the Act would require it to mean tax paid anywhere in the world and not only tax payable/ paid under the Act. (n) However, to the extent tax is paid abroad, the Explanation to Section 40(a)(ii) of the Act provides/clarifies that whenever an Assessee is otherwise entitled to the benefit of double income tax relief under Sections 90 or 91 of the Act, then the tax paid abroad would be governed by Section 40(a)(ii) of the Act. The occasion to insert the Explanation to Section 40(a)(ii) of the Act arose as Assessee was claiming to be entitled to obtain necessary credit to the extent of the tax paid abroad under Sections 90 or 91 of the Act and also claim the benefit of tax paid abroad as expenditure on account of not being covered by Section 40(a)(ii) of the Act. This is evident from the Explanatory notes to the Finance Act, 2006 as recorded in Circular No.14 of 2006 dated 28th December, 2006 issued by the CBDT. The above circular inter alia, records the fact that some of the assessee who are eligible for credit agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lared "...." in the Explanation inserted in Section 40(a)(ii) of the Act, makes it clear that it is declaratory in nature and would have retrospective effect. This is not even disputed by the Revenue before us as the issue of the nature of such declaratory statutes stands considered by the decision of the Supreme Court in CIT v. Vatika Township (P) Ltd. [2014] 367 ITR 466/227 Taxman 121/49 taxmann.com 249 and CIT v. Gold Coin Health Foods (P.) Ltd. [2008] 304 ITR 308/172 Taxman 386 (SC). (r) In the above facts and circumstances, question (iii)(a) is answered in the negative i.e. against the Revenue and in favour of the applicant assessee. Question (iii)(b) is answered in the negative i.e. against the Revenue and in favour of the applicant assessee." 149. Hon'ble Karnataka High court in the case of WIPRO Limited [382 ITR 179] has also decided the similar issue in favour of assessee. The Ld.AR has also referred decision of coordinate bench in the case of Bank of India v. ACIT (supra) dated 04.03.2021 has also held that Assessee having earned profits/dividend on its operations in several countries, it will be allowed deductions in respect of taxes paid abroad, in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtly allowed. Order pronounced in the open court on 28th February, 2023. CORRIGENDUM ITA NO.5655/MUM/2011, 3135/MUM/2019, 3137/MUM/2019 A.Y: 2006-07, 2009-10 2010-11 CORRIGENDUM TO ORDER DATED 28.02.2023 PER S. RIFAUR RAHMAN (AM) 1. The above appeals were pronounced vide separate orders for each assessment year i.e. A.Y. 2006-07, 2009-10 & 2010-11 on 28.02.2023 and upon forwarding files and orders to the order section by the Senior Private Secretary on 08.03.2023, we observe certain mistake apparent on record, we are rectifying those mistake by passing this corrigendum suo motto as under: - AY Page No. Remarks 2006-07 Additional ground on 43B liability not adjudicated. 2009-10 103 Para. No 94 - Provision for leave encashment allowed based on 115JB reference. Wrongly quoted order for AY 2004-05 instead of A.Y.2008- 09 order and it's relevant reference. 2010-11 106-108 Para No. 95 & 96 - Ground no. 7 of Assessee's appeal related to education cess which was not pressed by Assessee, however wrongly adjudicated and partly allowed. 119 Para. No 113 - Ground no 12 of Assessee's appeal related disallowance u/s 14A adjudicated by giving reference of excl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal validity of provision of section 43B(f) for provision for leave encashment liability and considering binding decision of Hon'ble Supreme Court claim cannot be allowed. However, if payment of such provision towards leave encashment is made in subsequent year, deduction may be allowed to assessee in such years if not allowed till date. Therefore, Assessing Officer is directed to verify and the same and allow the same as per our above directions. This ground of appeal is partly allowed. 95. Respectfully following the above decision, we partly allow the ground raised by the assessee." ITA NO.3137/MUM/2019 (A.Y: 2010-11) 5. At Para Nos. 94, 95 & 96 we have adjudicated the ground raised by the assessee with regard to disallowance of education cess in Ground No.7 and partly allowed the ground raised by the assessee. However, on a perusal of the note sheet and chart submitted by the assessee, we observed that this ground was not pressed by the assessee. The same deserves to be dismissed. Accordingly, we are modifying the decision in the Para No. 96 in fact we are modifying the Para 95 and 96 as under: "95 & 96. During the course of appellate proceedings, Ld.AR has not pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer under section 14-A of the Act by observing that the interest-free fund available with the respondent - assessee was far in excess of the advance given. Tribunal further noted that the Revenue does not dispute the said finding and relying on the decision of this Court in CIT v. Reliance Utilities & Power Ltd. [2009] 178 Taxman 135/313 ITR 340, affirmed the deletion made by the first appellate authority. 7. We have perused the decision of this Court in Reliance Utilities & Power Ltd. (supra) wherein it has been held that if there are funds available with the assessee, both, interest-free and overdraft and/ or loans taken, then a presumption would arise that investments would be out of the interestfree funds generated or available with the assessee if the interest-free funds were sufficient to meet the investments. In the facts of that case, it was noted that the said presumption was established considering the finding of fact returned by the first appellate authority as affirmed by the Tribunal which is identical in the present case. 7.1 We also note that the said decision of this Court has been affirmed by the Supreme Court in CIT v. Reliance Industries Ltd. [2019] 102 tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax Rules. The suo moto disallowance of the assessee does not disentitle the A.O. from invoking the said provision. In this regard, we find justification in the order of the ld. CIT(A) in upholding the A.O.'s action in invoking the provision of Rule 8D(2)(ii) by rejecting the assessee's contention that suo moto disallowance by the assessee warrants no further disallowances. The assessee's alternate claim is that the disallowance u/s. 14A read with Rule 8D(2)(iii) should be restricted only to those investments on which exempt income was earned by the assessee during the impugned year, by placing reliance on the decision of Vireet Investments Pvt. Ltd. (supra). We also find justification in the order of the ld. CIT(A) in holding that the disallowance u/s. 14A read with Rule 8D(2)(iii) of the Act should be invoked for calculation of disallowance pertaining to only investment from which exempt income is earned by the assessee by placing reliance on the decision of the Special Bench of the Tribunal in the case of Vireet Investments Pvt. Ltd. (supra). We find no infirmity in the order of the ld. CIT(A). 12. By respectfully following the above mentioned decisions, we upho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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