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TMI Blog2022 (5) TMI 1608X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon ble Jurisdictional High Court in the case of CIT vs. Hindustan Construction Company Ltd.[ 2015 (4) TMI 881 - BOMBAY HIGH COURT] - Decided against revenue. Disallowance of expenditure on account of contribution to local organisations - assessee had made contributions to various local organisations located in and around the areas where plant offices of the assessee company are situated - Addition made on the ground that the expenditure was not wholly and exclusively incurred for the purpose of business - HELD THAT:- We find that this issue is no longer res integra in view of the Co-ordinate Bench decision of this Tribunal in [ 2014 (10) TMI 994 - ITAT MUMBAI] - Decided against revenue. Disallowance towards rural development activities by the assessee company - HELD THAT:- We find that this issue is no longer res integra in view of the issue in view of the Co-ordinate Bench decision of this Tribunal in [ 2014 (10) TMI 994 - ITAT MUMBAI] Nature of expenses - treat the production cost of advertisement film as revenue expenditure - HELD THAT:- We find that assessee is not in the business of production of feature films rather the films have been used for advertisem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court on this issue. Since, the issue is already settled by the order of this Tribunal, we do not find any infirmity in ld. CIT(A) granting relief to the assessee. Accordingly, ground raised by the Revenue is dismissed. - Shri M.Balaganesh, Accountant Member And Ms. Kavitha Rajagopal, Judicial Member For the Revenue : Shri Jasbir Chauhan For the Assessee : Shri Madhur Agrawal ORDER PER M. BALAGANESH (A.M): These appeals in ITA No.4835/Mum/2017 5318/Mum/2017 for A.Yrs.2010-11 2011-12 respectively arise out of the order by the ld. Commissioner of Income Tax (Appeals)-12, Mumbai in appeal No.CIT(A)-12/ACIT-6(1)(1)/293/15-16 CIT(A)-12/DCIT-6(1)(1)/139/13-14 respectively dated 21/04/2017 19/05/2017 respectively (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 26/03/2013 10/03/2014 respectively by the ld. Dy. Commissioner of Income Tax 6(3), Mumbai (hereinafter referred to as ld. AO). 1.1. Identical issues are involved in both the appeals and hence, they are taken up together and disposed of by this common order for the sake of convenience. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement with this argument advanced by the ld. AR and hold that leave encashment payable for employees who had retired during the year alone would fall within the ambit of Section 43B(f) of the Act and if the same is not paid within the due date of filing of return of income u/s.139(1) of the Act, the said expenditure shall not be allowed as deduction. However, in respect of provision made as stated supra for leave encashment in respect of non-retiring employees, the same does not become payable at all to those employees. In other words, the provision is made for expenses accrued but not due for payment during the year. Hence, the provisions of Section 43B(f) of the Act could not be put into operation in respect of the said provision. In any case, we find that the issue in dispute is already addressed by the Co-ordinate Bench of the Tribunal and also by the decision of the Hon ble Jurisdictional High Court in the case of CIT vs. Hindustan Construction Company Ltd., reported in 374 ITR 101. The relevant portion of the said judgment is reproduced hereunder:- 8. In relation to question 6.2, the Tribunal found that there was no question of section 43B being invoked and at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1995-96, the same has been decided in favour of the assessee. The order of the Tribunal for 2000-01 was not challenged by the Department before the Hon ble High Court on this issue. Respectfully following the order of the Tribunal and Hon ble High Court in assessee s own case, we do not find any reason to interfere with the order of the ld. CIT(A). 3.2. We further find that the Hon ble Jurisdictional High Court in assessee s own case for A.Yrs. 1994-95 and 1995-96 in Income Tax Appeal No.417 of 2010 dated 05/09/2011 had also addressed the very same issue in favour of the assessee. Respectfully following the same, the ground No.2 raised by the Revenue is dismissed. 4. The ground No.3 raised by the Revenue is challenging the deletion of disallowance of Rs.1,33,54,176/- incurred towards rural development activities by the assessee company. The details of the said expenditure are addressed by the ld. AO in page 6 7 of his order vide para 6. We find that assessee company had incurred rural development expenditure of Rs.1,33,54,176/- and the said expenditure was incurred towards bringing water supply, women empowerment programme, medical camps, eye camps, blood camps, agri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that assessee is not in the business of production of feature films rather the films have been used for advertisement. It was pleaded that the air time of T.V. or radio is allowed as expenditure in the year in which such advertisement is telecasted / broadcasted. The ld. AO observed that advertisement film produced could be used again and again and therefore, the assessee derives enduring benefit out of the same. We find that this issue is no longer res-integra in view of the decision of the Co-ordinate Bench of this Tribunal in assessee s own case in ITA No.4083/Mum/2003 and 7027/Mum/2003 dated 22/10/2014 wherein it was held as under:- 47. The issue in ground No. 13 with regard to deleting the disallowance of expenses incurred for making advertisement films has been dealt with by the A.O. at page 15-16, para 26. The ld. CIT(A) deleted the same after having observed at page 12-13, para 21 of his order. We found that the issue has already been settled by the Tribunal in assessee s own case in A.Y. 1976-77 and no ground was taken by the Department before the Hon ble High Court. Similar issue has been decided by the Hon ble Supreme Court in the case of Empire Jute Co. Ltd., 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 37(1) of the Act, it is evident that the aforesaid provision permits deduction for the expenditure laid out or expended and does not contain a requirement that there has to be a pay out. If an expenditure has been incurred, provision of section 37(1) of the Act would be attracted. It is also pertinent to note that section 37 does not envisage incurrence of expenditure in cash. 8. Section 2(15A) of the Companies Act, 1956 defines 'employees stock option' to mean option given to the whole time directors, officers or the employees of the company, which gives such directors, officers or employees, the benefit or right to purchase or subscribe at a future rate the securities offered by a company at a free determined price. In an ESOP a company undertakes to issue shares to its employees at a future date at a price lower than the current market price. The employees are given stock options at discount and the same amount of discount represents the difference between market price of shares at the time of grant of option and the offer price. In order to be eligible for acquiring shares under the scheme, the employees are under an obligation to render their services to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... echnologies Ltd.(supra) is concerned, it is noteworthy that in the aforesaid decision, the Supreme Court was dealing with a proceeding under section 201 of the Act for non-deduction of tax at source and it was held that there was no cash inflow to the employees. The aforesaid decision is of no assistance to decide the issue of allowability of expenses in the hands of the employer. It is also pertinent to mention here that in the decision rendered by the Supreme Court in the aforesaid case, the Assessment Years in question was 1997-98 to 1999-2000 and at that time, the Act did not contain any specific provisions to tax the benefits on ESOPs. Section 17(2)(iiia) was inserted by Finance Act, 1999 with effect from 1-4-2000. Therefore, it is evident that law recognizes a real benefit in the hands of the employees. For the aforementioned reasons, the decision rendered in the case of Infosys Technologies is of no assistance to the revenue. The decisions relied upon by the revenue in A. Gajapathy Naidu,Morvi Industries Ltd. and Keshav Mills Ltd.(supra) support the case of assessee as the assessee has incurred a definite legal liability and on following the mercantile system of accounting, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cement Ltd.,(in short UTCL) filed its return on 29.09.2009. AO made addition on account of sales tax exemption, deduction claimed u/s 801A and expenses claimed u/s.14A. 9. During the course of assessment AO disallowed assessee's claim of deduction u/s.80IA in respect of profit of rail systems. The assessee made this claim on the ground that it had earned profit by operating its rail systems at Hirmi [Chattisgarh], Tadipatri [AP], Arakkonam [Tamilnadu] and Durgapur [West Bengal]. In the context, during the assessment proceedings it was explained that the assessee had inherited those rail systems [along with cement plants-Hirmi Cement Works, A P Cement Works, Arakkonam Cement Works West Bengal Cement Works] out of demerger from L T Ltd at all those locations; that the rail systems were set-up by L T Ltd [and that way by the assessee company as it had inherited the cement plants from L T Ltd by way of demerger] to enable the transportation of raw material [coal etc] and finished goods [i.e. cements] at their cement plants through railway wagons, at all the said; four locations. It was explained that prior to putting up those rail systems, the assessee used to transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... railway authorities had posted its staff for weighing raw material/ cement bags loaded/unloaded by the assessee; and that all activities were directly or indirectly being carried out by the railway authorities and the assessee only reimbursed the expenses or charges levied by the railways in r/o siding maintenance etc as per the agreement. The AO inferred that the so called rail system [of the assessee company] is not a self reliant, independent unit; and that it is providing services to the cement plants of the assessee company only. The AO also stated that railway department do not allow operation of the railways by any private enterprise and for that reason it [railway department] had formulated a Build-own-lease-transfer (BOLT) scheme whereby the private enterprises could set-up the necessary and crucial components of a railway system and provide that on lease to Indian Railways for maintenance and operation; and in the context referred to the CBDT circular no 733 dated 03.01.1996 whereby the benefit of Sec. 80IA was also extended to such rail system constructed / developed by the private enterprises as per the said BOLT scheme. By that circular, the Board had also clarified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim pertains to all the four units. 13. The CIT(A) further noted that in AY 2004-05 2005-06, the Hon'ble ITAT vide its order dated 20.08.2009 in ITA No 7735 7736/Mum/2007 had decided this issue in the favour of assessee. Later that decision of the tribunal was followed by the ITAT in its [assessee] case in AY 2006-07 [ ITA No 2604/M/09 order dated 31.5.2010] and in AY 2007-08 2008-09 [ITA nos 8143/mum/2010 and 1813/Mum12012, order dated 28.02.2014]. The relevant part of the Tribunal's decision in AY 2004-05 is reproduced hereunder: 13. Regarding the issue in r/o deduction u/s 80lA on profit of Rail system at Hirmi, the AO rejected the claim on the ground that the rail system is not a profit centre but it is a cost centre and that the rail system is not an independent unit but it is 100% depending on the cement unit. Detailed submissions filed by the assessee which are reproduced in the assessment order was not found satisfactorily to the AO. Detailed submissions were again filed before the CIT(A). It was explained that the company had established a cement plant in Hirmi, The nearest available railway siding was at a distance of around 15 km from the pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isages situation of captive consumption. Reliance was placed on the decision reported in 59 ITR 514 (Guj) and 254 ITR 17 (Bom). 13.3. Further reliance was also placed on the decision of the Supreme Court in the case of Tata Iron Steel Company Ltd in 48 ITR 123 and stated that in that case, the assessee was engaged in the business of extraction of iron ore and manufacturing of iron and steel therefrom. The final product sold by the company was the finished iron and steel. Under some statute, a cess was leviable on the annual net profits derived from the mines. It was contended that since no iron ore extracted is sold to an outsider, no profits could be said to have been derived from the extracting activities. This argument was advanced based on the principle that a person cannot make profits out of himself, The Supreme Court negative this argument and held that despite captive consumption of iron ore certain profits can be regarded as having derived from the extraction activities. The Supreme Court ruled in favour of bifurcating the total profits into two activities viz. the extraction activity and the manufacturing activity. It was therefore submitted that in view of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the present case. The rail system is owned by the assessee company which is a company registered in India. The assessee has entered into an agreement with the Railways for operating and maintaining the new infrastructure facility. It has started operating and maintenance the infrastructure facility after 01.04.1995. 14. After considering the submission and perusing the material on record, the CIT(A) was satisfied with the explanation of the assessee and taking into consideration the various case laws held that the assessee is eligible for deduction us BOIA in rlo profits from rail system. Accordingly, the AO was directed to allow deduction u/s 80IA. Now the department is in appeal here before the Tribunal. 15. The Id DR on the other hand placed reliance on the order of the AO and on the other hand the Id counsel of the assessee placed reliance on the order of the CIT(A). Attention of the Bench was drawn on para 5.2 of the order of the AO and then on the provision of Sec 8OIA clause 2 and sub clause 3 4. It was further explained that the assessee can avail benefit of deduction u/s 80IA in 10 years of his choice out of 15 years period. The provisions are very clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eloped the rail system and is operating and maintaining the same. After perusal of the facts as well as the judicial pronouncements quoted above it is therefore held that the appellant is eligible for deduction u/s 80IA in r/o profits from rail system. In view of the same, the AO is directed to allow deduction u/s 80IA of Rs 15,64,33,576/- 17. As stated above neither the findings of the Id CIT(A) could 'be controverted by the Id DR nor any other material was brought on record to establish otherwise. Therefore in view of the uncontroverted reasoning given by the Id CIT(A) we confirm his order on this issue also. 14. After having all the above observation, the CIT(A) noted that the issue of the allowability of the assessee's claim u/s 80IA(4) in respect of ' Rail Systems' as referred to by the assessee has been examined by him afresh from the point of view of the relevant provisions of the Act and the facts as to whether the 'Rail System' as referred to by the assessee could indeed be treated as the infrastructure facility for which deduction u/s 80lA is intended to by the legislature; and whether the assessee operated that rail system. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivate sidings and as such the assessee did not run any rail system onto those private sidings. Therefore, it cannot be said that the assessee company had operated any rail systems at all. Therefore the deduction u/s 80lA would not be available to it onto the profit, if any, from such rail systems. 22. The CIT(A) also observed that there is very limited profit on operation of such rail system and the claim made by assessee u/s.80IA is exorbitant. 23. In view of the above discussion, the CIT(A) concluded that assessee's claim of deduction u/s.80IA is not allowable. However, by observing that the Tribunal has allowed the claim of assessee in the AY 2004-05, 2006-07 to 2008-09, to follow the judicial discipline, he followed the order of Tribunal and allowed assessee's claim in the A.Y.2009-10. However, by stating that new facts have been brought on record in the A.Y.2010-11, he declined claim of deduction u/s. 80IB(4). 24. With regard to the disallowance, deduction u/s. 80IA(4), Revenue is in appeal before us in the A.Y.2009-10, whereas assessee is in appeal for the A.Y.2010-11. 25. It was vehemently argued by learned AR that Revenue authorities have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfaction of railway administration.' 26. Learned AR also argued that all the conditions of Section 80IA(4) was complied with for claiming deductions. Learned AR also invited our attention to the observation of CIT(A) with respect to the freight rate in so far as CIT(A) has wrongly considered the rate for quintals as against per Metric Ton adopted by assessee while computing eligible amount of deduction u/s.80IA (4). It was also contended by learned AR that assessee has started claiming deduction for rail system u/s.80IA only from A.Y.2004-05 since it has satisfied all the conditions as prescribed u/s.80IA (4). 27. With regard to disallowance u/s.14A on account of interest, our attention was invited to the profit earned by the undertaking during the year as well as interest free funds available with the assessee for making investment in tax free securities and it was contended that since investment was out of assessee's own interest free funds, in terms of decision of Jurisdictional High Court in case of Reliance Utilities and Power Ltd., 313 ITR 340 and HDFC Bank Ltd., 366 ITR 505, no disallowance of interest is warranted. With regard to the disallowance made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rastructure facility of public utility, therefore, revenue authorities have correctly declined claim of deduction u/s.80IA(4). She further contended that the agreement entered between assessee company and railway department contained the terms and conditions for construction of private siding which cannot be treated as any agreement for development operation and maintenance of any rail system. She further vehemently argued that assessee has not complied with various conditions given in Section 80IA to arrive at eligibility for deduction. She further invited our attention to the observation made by CIT(A) to the effect that the actual operation of rail system on to the private sidings between the serving railway station and plant premises was being done by the Indian Railways and not by the assessee Company, therefore, assessee was not entitled for 80 IA(4). She further alleged that profit computed by assessee for the rail system was very exorbitant and method adopted for computation was also not correct. Our attention was invited to the computation of profit as per table 'F'of CIT(A)'s order. She further contended that when L T Ltd., itself was not eligible for deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Maintain the Rail systems which infact the company has done from initial day. This agreement with the Railway Authorities was not under the BOLT Scheme but infact the assessee was permitted to setup and even operate and maintain the rail system so developed in accordance with terms and conditions of the agreements under the supervision and as per guidelines of Indian Railways. Prior to putting up the rail systems, the assessee used to transfer the material from its plant to the nearest Indian Railways station and vice versa through Road and used to incur road freight and loading unloading charges at multiple stages. To save these costs and other incidental costs, the assessee decided to develop the rail infrastructure from its manufacturing setup till the nearest Indian Railway station. It is Indian Railways who either have the power to develop any railways in India or it can enter into any arrangement with any person for developing and for operating rail systems subject to prior approvals and conditions. Therefore, the assessee accordingly entered into agreement with the Rail authorities to develop, operate and maintain its rail systems. The agreement lays down various condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in no case it can be inferred that they are not the required agreements under section 80-IA. 37. The Govt can also enter into any arrangement with any person for developing and for operating rail systems subject to prior approvals and conditions of the Indian Railways. M/s L T has accordingly entered into agreement with the appropriate rail authorities to Develop, Operate and Maintain its rail systems. M/s. L T had awarded contract to the private parties for construction of rail sidings (including upto the nearest rail head) under the supervision of Indian Railways approved agency, and the entire cost for construction / development paid to the aforesaid agency and supervision charges paid to Indian Railways approved agency have been borne by the assessee, apart from all costs incurred for all the materials and incidental expenses. It was further explained in terms of clause 14, Wagons are hauled by the Railway Administration from the point marked 'X' or such other points as may be fixed upon by mutual consent of the applicants and railway administration in such manner as shall be determined in each case by the Railway administration. The assessee undertakes to shu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g orders made by the railway administration from time to time for the working of sidings and for all accidents, loss or damage that may be ensured or be caused by reasons of negligence or non-observance of such rules, regulations and orders. e) Clause No. 8(b) - Wherein it is mentioned that, \\ Maintenance and other Charges for the portion of the sidings - The applicant will at their own cost and expenses in all things and to the satisfaction of the railway administration and if required by the railway administration under its supervision maintains in good order and repair the said portion of the siding. Such charges as may be fixed by the railway for the supervision rendered shall be paid by the applicant. 39. These are other various clauses wherein it is evident that the Development, Operation and Maintenance is done by the assessee and the entire cost for the same is borne by the assessee. 40. From the record we also found that the assessee has duly submitted for all the rail systems, Form 10CCB, duly certified and audited by M/s. G.P Kapadia Co., Chartered Accountants along with Balance Sheet, P L account, Schedules forming part of Balance sheet and P L A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts, under the supervision and as per guidelines of Indian Railways only. The copies of agreements between M/s L T and Indian Railways for other rail systems i.e. at Tadipatri, Arakkonam and Durgapur are placed on record and we have carefully perused the relevant terms and conditions. The Indian Railways plays role in operations and maintenance of the Rail systems, traffic Management, etc. as mentioned under the various clauses of the Agreements entered into, and the entire cost of such operation and maintenance is borne by the assessee including for the Railway staff being deputed for the purpose. 44. From the record we found that M/s. L T had entered into agreements with the Railway authorities to develop, Operate and Maintain the Rail systems which infact the company has done from initial day. This agreement with the Railway Authorities was not under the BOLT Scheme but infact the assessee was permitted to setup and even operate and maintain the rail system so developed in accordance with terms and conditions of the agreements under the supervision and as per guidelines of Indian Railways. As per the relevant provisions of law during relevant period there is no requireme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, and the entire cost for construction/ development paid to the aforesaid agency and supervision charges paid to Indian Railways approved agency have been borne by the assessee, apart from all costs incurred for all the materials and incidental expenses. 49. From the record we found that the rail systems were developed under the agreements entered into with Indian Railways and assessee operates and maintains the same in accordance with terms and conditions of the Agreements, under the supervision and as per guidelines of Indian Railways. We have carefully gone through the relevant clauses of the agreements substantiating the same which reads as under: a) Clause No. 2, Agreement to Construct Siding - Wherein it is mentioned that the Railway administration will at the cost and the expenses of the applicant, in all respect, construct the railway sidings Further kindly be informed that, for construction of the siding under the supervision of the Railways, the contract for construction and supervision has been awarded by the applicant and the entire cost has been borne by the applicant. b) Clause no. 6 - Payment by Applicant against the total estimated cost - wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . e) Clause No. 8(b) - Wherein it is mentioned that, Maintenance and other Charges for the portion of the sidings - The applicant will at their own cost and expenses in all things and to the satisfaction of the railway administration and if required by the railway administration under its supervision maintains in good order and repair the said portion of the siding. Such charges as may be fixed by the railway for the supervision rendered shall be paid by the applicant. There are other various clauses wherein it is evident that the Development, Operation and Maintenance is done by the appellant and the entire cost for the same is borne by the appellant. 50. The question of allowability of the deduction u/s. 80IA in respect of rail systems has been settled in earlier years by the Hon'ble ITAT in assessee's own case. The facts and the agreements were also placed before authorities in those years. Therefore, the claim based on same facts needs to be allowed following the principle of Consistency in assessment proceedings. Even though the 'principles of res judicata' do not apply to income tax proceedings and each assessment year being a separate uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 07-08 AY 08-09 AY 09-10 Hirmi 15.63 16.13 20.95 21.09 24.33 28.26 Tadipatri - - - 25.56 25.22 31.03 Arakkonam - - - 5.73 6.30 7.11 Durgapur - - - - 5.71 6.72 54. We have also verified the calculation of revenue from rail system, filed before the lower authorities and found that the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till AY 2001-02. The assessee company began its claim of deduction from AY 2004-05 when the definition was simplified with no indication about 'public facility'. Thus CIT(A) was not correct while declining claim of deduction u/s.80IA(4) on this reasoning. 57. As per our considered view, even assuming that the requirement of public facility is to be fulfilled, it is worth noting that a section of public is also considered to be public. This principle has been laid down by the Hon'ble Supreme Court in the context of a Chamber of Commerce [CIT vs. Andhra Chamber of Commerce (1965)] (55 ITR 722) wherein it was ruled that even though the Andhra Chamber of Commerce was established only to serve the traders and businessmen in the State of Andhra Pradesh, such traders and businessmen constituted a section of public and therefore the Chamber existed for a public charitable purpose. In the ultimate analysis of the facts in the case of assessee Company, the benefits of such siding does ensure to the public in general - to the consumers of cement. Any benefit to the business even though it is first enjoyed by the particular trade or establishment eventually is for the genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment or a Local Authority or any other statutory body for (i) developing or (ii) Operating and Maintaining or (iii) Developing, Operating and Maintaining the infrastructure facility. The Indian Railways, with whom the assessee has entered into an agreement, is the statutory body designated under the Indian Railways with whom the assessee has entered into an agreement, is the statutory body designated under the Indian Railways Act. We found that the agreement does not merely contain the terms and conditions of the construction of railway siding i.e. development of siding (laying of tracks, signal system and all the essential components of Rail Systems) but it also contains the terms and conditions relating to its operation and maintenance as well. 60. Our attention was also invited to letter No. 99/TC(FM)26/1/Pt-II (Sub Liberalisation of siding 'Rules) of the Railway Boar clarifying that the capital cost of new siding, maintenance cost, cost of Railway staff etc. will be borne by the enterprise only, which also supports our view. 61. As far as operations is concerned, we found that the assessee carries out all the following operations for smooth movement of its go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulfills the requirement in clause (b). 66. The last requirement as per clause (c) is regarding commencement of operation and maintenance of facility on or after 1st April 1995. All the railway sidings were developed after April 1995 as can be verified from the date of agreements entered into by the assessee with the Railway authorities; which are as under:- Location Authority with which Date of agreement Agreement is entered Hirmi South Eastern Railway March 2000 Tadipatri South central Railway 03-05-1999 Arakkonam Southern Railway 08-01-2001 Durqapur Eastern Railway 18-10-2002 67. This also is an undisputed fact and there is no adverse remark by the AO or CIT(A) in this regard. In view of above all the conditions specified in section 80IA(4) has been complied with by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivities all of which is carried on by the assessee Company. 74. With regard to CIT(A)'s observation that all the four cement plants [having private sidings] were notified as independent booking station and the freight was charged by the railway department for the entire distance including the portion of private sidings [upto interchange point / exchange yard], we observe that this is a fact which is undisputed by the assessee and nothing turns out of it. 75. CIT(A) also alleged that the notional profit computed for so called rail system has been very exorbitant and the method is also not correct. It need to be computed in the manner as explained in para 3.2.14 [with reference to table F] above. If that is done, there would hardly be any profit to those rail systems. 76. In this regard, we found that prior to setting up of railway siding, the assessee used to transport its goods through road to the nearest railway station. Only the few components of the cost of road transportation, which the cement division of the assessee was hitherto incurring for transportation of materials to and from the factory premises, is adopted as the basis of calculating the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loading and unloading cost which the cement division was hitherto incurring during transportation through roadways. The question of reducing the freight payments to the Railways does not arise since this cost is incurred by the cement division and not by the railway undertaking. 81. In view of the above discussion, the explanation given by the CIT(A) and the tabular representation of the computation of revenue of rail system in Table F, has no relevance since it is merely based on his incorrect assumption. 82. Further, we found that observation of CIT(A) with respect to the freight rate is also not correct in so far as for comparison, he has considered the rate per quintal as against per Metric Ton adopted by the assessee which can be observed from the calculation submitted by assessee before the lower authorities. Without any evidence in hands, the CIT(A) has merely stated that crucial facts were not disclosed by the assessee without referring to any specific facts which were not disclosed. Perhaps he is indicating about the operations of railway siding being carried out by the railways and not by the assessee. However, as aforesaid, he is comparing the operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructure facility to the concerned government authorities with prescribed time. 85. In this regard reliance can be placed on the decision of Gujarat High Court in case of Katira Construction Limited v. UOI (352 ITR 513), wherein Court held as under:- 32. It is true that with effect from 1-4-2002 some significant changes were made in the said provisions. Three of these changes which are material were: (i) that sub-section (4) of section 80-IA now required the enterprise to carry on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility. This was in contrast to the previous requirement of all three conditions being cumulatively satisfied; (ii) that the explanation of the term 'infrastructure facility' was changed to besides others, a road including toll road instead of hitherto existing expression 'road', and (iii) that the requirement of transferring the infrastructural facilities developed by the enterprise to the Central or the State Government or the local authority within the time stipulated in the agreement was done away with. 33. These changes, however, would not alter the situa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions for availing such benefit are fulfilled, the assessee would be entitled to avail the tax holiday benefit in respect of such subsequent assessment year(s). For this purpose reliance is placed on the decision of the Hon'ble ITAT of Jaipur in the case of ACIT v. Shiv Agrevo Limited (34 SOT 1). In this case, the assessee- company, whose main object was extraction of seeds for obtaining edible oils and refining thereof, set up a new industrial undertaking for the extraction and refining of edible oil. It claimed to have temporarily commenced the activity on and from 1-1-1997 on a trial run; however, the systematic activity of refining commenced only in the previous year relating to the assessment year 1998-99. After the final completion of the project, the assessee-company applied directly for a permanent registration certificate of its status as a small scale industry (SSI) under section 11-B of the Industrial Development Regulation Act, 1951 (IRDA) to the prescribed authority, who granted the certificate dated 30-3-1998, which was a conclusive and final proof of such a status under the provisions of IRDA. The return of income filed earlier by the assessee for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided that the year of commencement of business will be the initial year for the purpose of claiming the deduction, the year of option has to be treated as initial assessment year for the purpose of Section 80IA. 92. It is pertinent to mention here that once the deduction for the very first is allowed then in subsequent year the deduction cannot be disallowed on the same ground. Hon'ble High Court decision in the case of Saurashtra Cement Chemical Industries Ltd. v. CIT [1980] 123 ITR 669 (Guj), has pointed out that once deduction is allowed in the first year, revenue has no power to deny the deduction in subsequent assessment years as provided under the Act. 93. Even the Supreme Court in case of Bajaj Tempo's case (196 ITR 188) held that a provision in the taxing statute for promoting growth and development is to be construed liberally and hence, even the restriction contained in such a provision has to be construed so as to advance the objective of the provision and not to frustrate it. 94. The CIT(A) has also raised an objection to the effect that since L T was not eligible for deduction u/s.80IA on operation of those rail system, then whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by this Tribunal in the case of Ultratech Cement Ltd., vs. DCIT for A.Y.2011-12, 2012-13, 2013-14 and 2014-15 dated 14/12/2021, this issue has been decided in favour of that assessee. In view of the aforesaid judicial precedents, we do not find any infirmity in the order of ld. CIT(A) granting deduction u/s.80IA of the Act in respect of Raipur and Hotgi Unit. 8. The ground No.6 raised by the Revenue is challenging the action of the ld. CIT(A) directing the ld AO not to reduce the claim of deduction of Rs.10,25,627/- u/s.80IA of the Act towards apportionment of head office expenses. The ld. AO in pages 16 17 of his order in respect of apportionment of head office expenses observed as under:- The assessee has claimed deduction u/s.80IA in respect of its seven units, viz., Rail System, Raipur (Rs.15,36,71,837/-, AC Thermal Power (Rs.18,66,57,139/-), Grasim Cement Thermal Power (Rs.7,21,02,501), Rail System, Hotgi (Rs.12,62,47,956), Rajashree Cement Power-III (Rs.12,17,15,646/-), Grasim South Terhmal Power (Rs.6,14,19,461/-) and Birla White Power (Rs.2,20,44,674/-). Since, Head Office is a controlling unit, which manages affairs of all the units, proportionate expen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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