TaxTMI 
TaxTMI 
2022 (7) TMI 389
X X X X Extracts X X X X
X X X X Extracts X X X X
...., we have elaborately mentioned only the facts for the first assessment year (i.e. 2004-05) before us for the sake of brevity. However, if any particular issue is arising in other year for the first time, facts pertaining to the same are discussed accordingly. ITA No. 2440/Mum./2011 Assessee's appeal - AY 2004-05 3. In this appeal, the assessee has raised the following grounds: "1. The learned Commissioner of Income Tax erred upholding the disallowance of provision for bad and doubtful debts for computing the book profit u/s 115JB. 2. The learned Commissioner of Income Tax erred in upholding the disallowance of Rs.3,89,81,600 paid to Tata Sons Ltd., towards the subscription paid for The Brand Equity and Business Promotion (BEPB) Agreement. 3. The learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance u/s 80M/section 14A with a direction to rework the same in respect of indirect expenses. 4. The learned Commissioner of Income Tax (Appeals) erred in limiting the claim of deduction in respect of Early Separation Scheme / Voluntary Retirement Scheme (VRS) to Rs.12,08,80,000, against the claim of Rs. 53,74,96,642. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,89,81,600 as subscription for brand equity, however, the same has not been treated as capital expenditure. Accordingly, following the approach adopted in earlier years, the Assessing Officer vide order dated 07/12/2006 passed under section 143(3) of the Act disallowed the aforesaid amount treating the same as non-business expenditure. 7. In appeal, before the learned CIT(A) assessee submitted that the said payment was made vide agreement dated 01/01/1999 titled 'Tata Brand Equity and Business Promotion Agreement' vide which the assessee had to pay 0.25% of its annual profits to M/s Tata Sons Ltd for using the Tata logo etc. The assessee further submitted that such payment was made annually on recurring basis. The learned CIT(A) vide impugned order dated 21/01/2011 dismissed the appeal filed by the assessee on this issue, by observing as under: "10.3 I have considered the facts of the issue and the submissions made by the AR. There is merit in AO's finding that the company is well known as a Tata Group Company since 1939 having its own reputation as a household name. Further, the AO is right in noting that the appellant had its own well established logo which clearl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....und of appeal is allowed." 11. The learned DR could not show any reason to deviate from the aforesaid order and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present appeal is recurring in nature and has been decided in favour of the assessee by the decisions of the coordinate bench of the Tribunal in preceding assessment years. Thus, respectfully following the order passed by the coordinate bench of Tribunal in assessee's own case cited supra, we direct the Assessing Officer to delete the disallowance made on account of subscription paid to Tata Sons Ltd. As a result, ground no. 2 raised in assessee's appeal is allowed. 12. The issue arising on ground no. 3, raised in assessee's appeal is pertaining to allocation of expenses towards earning dividend income and disallowance under section 14A of the Act. 13. The brief facts of the case pertaining to this issue, as emanating from the record, are: For the year under consideration, the assessee had received dividend income on shares and income from units of mutual funds amounting to Rs. 36,88,68,929, which was claimed as exempt under section 10 of the Act. During the course of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n view the findings of Hon'ble jurisdictional High Court in Godrej and Boyce Manufacturing Co. Ltd. v/s DCIT, ITA No. 626/2010 and W.P. No.785 / 2010), without resorting to the provisions of Rule 8D. Being aggrieved, assessee is in appeal before us. 15. During the course of hearing, learned counsel submitted that subsequent to the impugned order, the Assessing Officer passed order dated 03/08/2011 giving effect to the directions of the learned CIT(A), whereby, disallowance under section 14A of the Act was estimated at 5% of the exempt income and accordingly, Rs. 1,84,43,450 was disallowed under section 14A of the Act. Learned counsel submitted that while computing the disallowance, the Assessing Officer disregarded the suo moto disallowance of Rs. 4,80,000 offered by the assessee, considering 1% of salary of CFO, Deputy CFO, Head Treasury and 5% salary of staff and Treasury Department +10% of overheads thereon. Learned counsel further submitted that suo moto disallowance on similar basis has been accepted in preceding as well as subsequent assessment years. 16. On the other hand, learned DR vehemently relied upon the order passed by the lower authorities. 17. We have consi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d no. 3 raised in assessee's appeal is allowed for statistical purpose. 19. The issue arising in ground no. 6, raised in assessee's appeal, is pertaining to disallowance of claim of deduction under section 80 IB of the Act in respect of fertiliser unit at Haldia. 20. The brief facts of the case pertaining to this issue, as emanating from record, are: The assessee, while filing the revised return of income, claimed deduction of 2,87,39,000 at 30% of the profits (being 5th year of claim) under section 80IB of the Act, in respect of erstwhile Hind Lever Chemicals Ltd. As in assessment year 2003-04, sales tax remission and price concession (subsidy) forming part of section 80IB claim was rejected, the Assessing Officer vide order passed under section 143(3) of the Act disallowed the above 2 items included in computation of deduction claimed under section 80IB of the Act. The learned CIT(A) vide impugned order dismissed the appeal filed by the assessee on this issue. Being aggrieved, the assessee is in appeal before us. 21. During the course of hearing, learned counsel submitted that the coordinate bench of the Tribunal in assessee's own case has granted relief in respect of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ccordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. (2) This section applies to any industrial undertaking 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 industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iii) it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India: Provided that the condition in this clause....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsecutive assessment years where the assessee is a co-operative society) subject to fulfilment of the condition that it begins to manufacture or produce articles or things or to operate its cold storage plant or plants during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2004: Provided further that in the case of such industries in the North-Eastern Region, as may be notified by the Central Government, the amount of deduction shall be hundred per cent of profits and gains for a period of ten assessment years, and the total period of deduction shall in such a case not exceed ten assessment years. Provided also that no deduction under this sub-section shall be allowed for the assessment year beginning on the 1st day of April, 2004 or any subsequent year to any undertaking or enterprise referred to in sub-section (2) of section 80-IC. Provided also that in the case of an industrial undertaking in the State of Jammu and Kashmir, the provisions of the first proviso shall have effect as if for the figures, letters and words 31st day of March, 2004, the figures, letters and words 31st day of March, 2012 had been substitu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the Minister's mind when he sought to introduce the said provision. As an external aid to construction, this Court has, in K.P. Varghese v. ITO [1981] 7 Taxman 13 (SC), referring to a Minister's speech piloting a Finance Bill, stated as under:- "Now it is true that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the Mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation is enacted. This is in accord with the recent trend in juristic thought not only in Western countries but also in India that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible. In fact there are at least three decisions of this Court, one in Loka Shikshana Trust v. Commissioner of Income-Tax [1975] 101 ITR 234 (SC) the other in Indian Chambe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f decisions have made a distinction between "profit attributable to" and "profit derived from" a business. In one of the early judgments, namely, Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC), this Court had to construe Section 80-E of the Income Tax Act, which referred to profits and gains attributable to the business of generation or distribution of electricity. This Court held: "As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to the business of" the specified industry (here generation and distribution of electricity) on which the learned Solicitor General relied, it will be pertinent to observe that the Legislature has deliberately used the expression "attributable to" and not the expression "derived from". It cannot be disputed that the expression "attributable to" is certainly wider in import than the expression "derived from". Had the expression "derived from" been used it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the busi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ether interest earned on a deposit made with the Electricity Board for the supply of electricity to the appellant's industrial undertaking should be treated as income derived from the industrial undertaking under Section 80HH. This Court held that although electricity may be required for the purposes of the industrial undertaking, the deposit required for its supply is a step removed from the business of the industrial undertaking. The derivation of profits on the deposit made with the Electricity Board could not be said to flow directly from the industrial undertaking itself. On this basis, the appeal was decided in favour of Revenue. 16. The sheet anchor of Shri Radhakrishnan's submissions is the judgment of this Court in Liberty India's case (supra). This was a case referring directly to Section 80-IB in which the question was whether DEPB credit or Duty drawback receipt could be said to be in respect of profits and gains derived from an eligible business. This Court first made the distinction between "attributable to" and "derived from" stating that the latter expression is narrower in connotation as compared to the former. This court further went ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....moved from the business of the industrial undertaking would also be subsumed within the meaning of the expression "attributable to". Since we are directly concerned with the expression "derived from", this judgment is relevant only insofar as it makes a distinction between the expression "derived from", as being something directly from, as opposed to "attributable to", which can be said to include something which is indirect as well. 18. The judgment in Sterling Foods case (supra) lays down a very important test in order to determine whether profits and gains are derived from business or an industrial undertaking. This Court has stated that there should be a direct nexus between such profits and gains and the industrial undertaking or business. Such nexus cannot be only incidental. It therefore found, on the facts before it, that by reason of an export promotion scheme, an assessee was entitled to import entitlements which it could thereafter sell. Obviously, the sale consideration therefrom could not be said to be directly from profits and gains by the industrial undertaking but only attributable to such industrial undertaking inasmuch as such import entitlements did not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment of actual costs of manufacture and sale of the products of the business of the assessee. 20. Liberty India's case (supra) being the fourth judgment in this line also does not help Revenue. What this Court was concerned with was an export incentive, which is very far removed from reimbursement of an element of cost. A DEPB drawback scheme is not related to the business of an industrial undertaking for manufacturing or selling its products. DEPB entitlement arises only when the undertaking goes on to export the said product, that is after it manufactures or produces the same. Pithily put, if there is no export, there is no DEPB entitlement, and therefore its relation to manufacture of a product and/or sale within India is not proximate or direct but is one step removed. Also, the object behind DEPB entitlement, as has been held by this Court, is to neutralize the incidence of customs duty payment on the import content of the export product which is provided for by credit to customs duty against the export product. In such a scenario, it cannot be said that such duty exemption scheme is derived from profits and gains made by the industrial undertaking or bus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rived from the undertaking. The benefit under section 80IC could not therefore have been granted. He also relied on a judgment of the Supreme Court in the case of Liberty India v. Commissioner of Income Tax, reported in (2009) 317 ITR 218 (SC) wherein it was held that subsidy by way of customs duty draw back could not be treated as a profit derived from the industrial undertaking. We have not been impressed by the submissions advanced by Mr. Bandhyopadhyay. The judgment of the Apex Court in the case of Liberty India (supra) was in relation to the subsidy arising out of customs draw back and duty Entitlement Pass-book Scheme (DEPB). Both the incentives considered by the Apex Court in the case of Liberty India could be availed after the manufacturing activity was over and exports were made. But, we are concerned in this case with the transport and interest subsidy which has a direct nexus with the manufacturing activity inasmuch as these subsidies go to reduce the cost of production. Therefore, the judgment in the case of Liberty India v. Commissioner of Income Tax has no manner of application. The Supreme Court in the case of Sahney Steel and Press Works Ltd. & Oth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ea (Siliguri in West Bengal) and the actual location of the industrial unit in the remote area, so that the industry could become competitive and economically viable." 25. The decision in Sahney Steel and Press Works Ltd.'s case (supra) dealt with subsidy received from the State Government in the form of refund of sales tax paid on raw materials, machinery, and finished goods; subsidy on power consumed by the industry; and exemption from water rate. It was held that such subsidies were treated as assistance given for the purpose of carrying on the business of the assessee. 26. We do not find it necessary to further encumber this judgment with the judgments which Shri Ganesh cited on the netting principle. We find it unnecessary to further substantiate the reasoning in our judgment based on the said principle. 27. A Delhi High Court judgment was also cited before us being Dharam Pal Prem Chand Ltd.'s case (supra) from which an SLP preferred in the Supreme Court was dismissed. This judgment also concerned itself with Section 80-IB of the Act, in which it was held that refund of excise duty should not be excluded in arriving at the profit derived fro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t which are relied upon by the learned CIT - A. Therefore, based on the ratio laid down by the honourable Supreme Court, assessee is eligible for deduction u/s 80 IB of the Income Tax Act on fertilizer subsidy received by it. Accordingly, we hold that the fertilizer subsidy income received by the assessee is income derived from the business of the industrial undertaking and is eligible for deduction u/s 80 IB of the income tax act. Accordingly, ground number 5 of the appeal is allowed to that extent." 23. The learned DR could not show any reason to deviate from the aforesaid order and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following the order passed by the coordinate bench of Tribunal in assessee's own case cited supra, we direct the Assessing Officer to allow the deduction claimed by the assessee under section 80 IB of the Act. As a result, ground no. 6 raised in assessee's appeal is allowed. 24. The issue arising on ground no. 7, raised in assessee's appeal, is pertaining to denial of deduction in respect of amortisation of lease rental deposits. 25. The brief facts of the case pertaining to this issue, as emanating fro....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... vide order dated 22/04/2019, dismissed the appeal filed by the assessee on similar issue, by observing as under: "8.5 We have heard the rival submissions and perused the relevant materials on record. The reasons for our decision are given below. We refer here to the case laws cited by the assessee before the Ld. CIT(A). In the case of CIT v. Ishar Dass Tilak Chand (1979) 120 ITR 440 (P&H), the assessee-firm derived income from selling country liquor as licensed contractor. Annual license fee was payable in specified equal installments. Prescribed percentage was payable in lump sum as security deposit adjustable against license fee arrear or penalty levied for breach of conditions for license. The Government forfeited security deposit against arrears of license fee. The AO added the forfeited amount in assessable income. The Tribunal allowed security deposit adjusted as revenue expenditure in same manner as payment of license fee. The Tribunal also held that forfeiture was not by way of penalty for breach of any term of license. The Hon'ble High Court held that (i) There is no Tata Chemicals Ltd. 21 ITA Nos. 2965 & 3383/Mum/2015 material on record to show that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....evenue loss." In CIT v. Textool Co. Ltd. (1982) 135 ITR 200 (Mad), the assessee imported certain items necessary for its manufacturing business under licensing scheme, requiring the assessee to deposit advance premium representing full amount of value of licensed imports with Indian Cotton Mills Federation, with stipulation that if assessee did not utilize full import entitlement, Federation would forfeit premium to the extent of resultant short fall. Owing to business exigencies, the assessee could not fully utilize import entitlements and Federation forfeited part of premium which it wrote off as revenue loss. On appeal by the revenue, the Hon'ble High Court held that: "when the assessee claims a business loss, the main question to be considered is whether the loss is incidental to the business. Having regard to the facts and findings recorded by it, the Tribunal was correct in coming to the conclusion that the deduction claimed by the assessee in writing off the forfeited amounts was in the course and incidental to the assessee's business. Accordingly, the impugned amounts were deductible from the total income of the assessee". In the instant c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aring of the appeal." 33. As the issue raised by the assessee, by way of additional ground of appeal, is purely legal issues which can be decided on the basis of material available on record, we are of the view that same can be admitted for consideration and adjudication in view of the ratio laid down by Hon'ble Supreme Court in NTPC Ltd vs CIT: 229 ITR 338. 34. We find that, while deciding similar issue in favour of the assessee, the coordinate bench of the Tribunal in assessee's own case in Tata Chemicals Limited vs DCIT, in ITA No. 2439/Mum/2011, for the assessment year 2003-04, vide order dated 16/02/2022, observed as under: "016. In the additional ground number 3 by the assessee it is challenged that the sales tax remission benefit derived by the assessee is not chargeable to income tax as it is a capital receipt. We have carefully perused the West Bengal incentive scheme 1999, which is notified on 22/6/1999 to extend incentive for promotion of industries in the state. The assessee has setup unit in Midnapore district and therefore according to clause number [7] this area was covered under the scheme> According to scheme, assessee has option either to defer the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted, none of the exceptions provided in CBDT Circular no.3 of 2018, dated 11th July 2018 r/w circular F. no.279/Misc./142/2007-ITJ-(Pt) dated 20th August 2018, would apply to Revenue's appeal. Thus, the learned A.R. submitted that Revenue's appeal being covered under the aforesaid Circulars is not maintainable. 38. The learned DR could not produce any material before us to controvert the submission so made on behalf of the assessee. 39. Having considered the submissions and perused the material available on record, we are of the view that the tax effect on the amount disputed by the Revenue in the present appeal is below the revised monetary limit of Rs. 50 lakh as per CBDT Circular no.17/2019, dated 8th August 2019, r/w CBDT Circular no.3/2018, dated 11th July 2018, r/w circular F. no.279/Misc./142/2007-ITJ-(Pt) dated 20th August 2018. In view of the aforesaid, Revenue's appeal deserves to be dismissed. However, the Revenue is given liberty to seek recall of this order if, at a later point of time, it is found that the appeal falls under any of the exceptions provided in the Circulars referred to above. 40. In the result, appeal by the Revenue appeal is dismissed. ITA ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pugned order dated 31/01/2012 directed the Assessing Officer to compute disallowance under section 14A in the manner computed for the assessment year 2006-07. Being aggrieved, the assessee is in appeal before us. 47. During the course of hearing, learned counsel submitted that following the learned CIT(A)'s direction, the Assessing Officer vide order dated 23/02/2012 restricted the disallowance under section 14A to Rs. 4,80,000. Learned counsel further submitted that with a view to avoid litigation assessee is agreeable to methodology adopted by the Assessing Officer for assessment year 2006-07 and methodology upheld by the DRP for assessment year 2007-08. 48. In view of the fact that the suo moto disallowance offered by the assessee has been accepted by the Assessing Officer, while giving effect to the directions of the learned CIT(A), and assessee is agreeable to the methodology adopted by the Assessing Officer, ground no. 4 raised in assessee's appeal is dismissed. Further, as regards ground no. 3, in any case, as per the decision of Special Bench of Tribunal in ACIT vs Vireet Investment (P) Ltd.: [2017] 58 ITR(T) 313 (Delhi - Trib.) (SB), while computing book profit under....
X X X X Extracts X X X X
X X X X Extracts X X X X
....been decided in favour of the assessee by the coordinate bench of Tribunal in preceding assessment year. 55. We have considered the rival submissions and perused the material available on record. From the perusal of the impugned order passed by the learned CIT(A), we find that this issue is recurring nature. We further find that the coordinate bench of Tribunal in DCIT vs Tata Chemicals Limited, in ITA Nos. 3383/Mum/2015, for assessment year 2002-03, vide order dated 22/04/2019, while deciding similar issue, observed as under: "11.3 We have heard the rival submissions and perused the relevant materials on record. As per the decisions filed by the Ld. counsel, we find that the above issues have been decided by the ITAT in favour of the assessee in assessee's own case for earlier assessment year. In the case of Tata Sports Club, similar issue has been decided by the Tribunal in favour of the assessee in AY 1995-96 (ITA No. 3082/M/02, dated 26.07.2006) and AY 1996-97 (ITA No. 6496/M/04, dated 17.08.2007). In case of Nutan Bal Sikshan Sangh and Kindergarten Primary School and Mithapur/Kamgar Club, Mithapur, in AY 1992-93 (ITA No. 4442/M/96, dated 04.02....