TaxTMI 
TaxTMI 
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2022 (11) TMI 1309
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.... [hereinafter referred to as Ld. CIT (A)] was not justified and grossly erred in confirming the action of the Additional Commissioner of Income-tax (Large tax payer Unit) [hereinafter referred to as 'AO] in adding back Rs. 53,64,316/- as notional expenses incurred towards earning exempt dividend income u/s 14A of the Income-tax Act, 1961 (the Act) r.w.r 8D of the Income-tax Rules, 1962 ('the Rules')." 4. Having heard the parties, and having perused the material on record, we are of the considered view that the assessee deserves to succeed on this issue on a very foundational aspect regarding there being no tax-exempt dividend income earned by the assessee in this assessment year. So far as this assessment year is concerned, it is an admitted position, as evident from the observations made by the Assessing Officer, is paragraph 6.1 of the assessment order that "during the year, the assessee has not received any dividend income" and yet a disallowance under section 14A is made. This is also an assessment year prior to the insertion of Explanation to section 14A, by the Finance Act 2022. Dealing with such a situation, a coordinate bench of this Tribunal in the case ....
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....bts" cannot be presumed to be retrospective even where such language is used, if it alters or changes the law as it earlier stood." 6. In the light of this legal position, the disallowance under section 14A is not sustainable in law. We, therefore, delete the impugned disallowance of Rs 53,64,316. The assessee gets the relief accordingly. 7. Ground no. 1 is thus dismissed. 8. In ground no. 2, the assessee has raised the following grievance: "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in confirming the action of AO in not allowing the deduction for Education Cess levied on Income Tax, Dividend Distribution Tax and Fringe Benefit Tax aggregating to Rs. 15,76,96,788/- as allowable expenditure in computing the total income under the normal provisions of the Act." 9. Learned counsel, however, submits that the assessee does not wish to press these grievance, and this ground of appeal, therefore, may be dismissed as not pressed. The prayer is accepted. The ground of appeal is dismissed as not pressed. 10. Ground no 2 is thus dismissed in the terms indicated above. 11. In ground no. 3, the assessee has raised th....
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....an be said to accrue only on completion of further pending proceeding." 16. This grievance, though raised before the CIT(A) for the first time, was not pressed by the assessee. Yet, the assessee is in appeal on the same issue, but has not advanced any arguments in support of the same. It appears that the assessee does not wish to pursue the grievance. 17. Ground no. 4 is thus treated as not pressed 18. In ground no. 5, the assessee has raised the following grievance: "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in confirming the action of AO in not allowing exclusion of profit on sale of investment amounting to Rs. 87,51,71,262/- being capital profits in computing Book Profit us 115JB of the Act." 19. Having heard the rival contentions and having perused the material on record, we are of the considered view that the assessee also deserves to succeed on this ground of appeal on a foundational issue. The reason is this. There is no dispute that the amount in question was in the capital field, and that it does not, therefore, is not required to be routed through the profit and loss account. On such facts, and ....
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....eserves to succeed in this plea for the reason that, eventually, there is no disallowance under section 14A on the facts of this case, and, in any event, the issue is covered, as regards the question of adjustment of book profits under section 15JB for the 14A disallowance, in favour of the assessee, by a special bench decision in the case of ACIT Vs Vireet Investments Pvt Ltd [(2017) 82 taxmann.com 415 (Del SB)]. The assessee gets relief on this point as well. 26. Ground no. 7 is thus allowed. 27. In ground no. 8, the assessee has raised the following grievance: "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in confirming the action of AO in not granting the benefit of tax rate of 5% as per Article 10 of India-Mauritius treaty for determining the tax rate on dividend declared." 28. No specific arguments are advanced in support of this plea, and, this plea is, accordingly, dismissed as not pressed. 29. Ground no. 8 is thus dismissed. 30. In the result, the appeal of the assessee is partly allowed in the terms indicated above. 31. We now take up the appeal filed by the Assessing Officer. 32. In ground no. 1....
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....e fact that these amounts pertained to five different units under four schemes- namely Maharshtra‟s Dispersal of Industries Package Scheme of Incentives 1993 (Maratha Unit), Punjab‟s Industrial Incentives Code under the Industrial Policy, 1996 (Ropar and Bhatinda Units), Rajasthan‟s Sales Tax New Incentives Scheme for Industries, 1989 (Rabriyawas Unit), and Exemptions/ Concessions to Industries Excise & Taxation Department Notification No EXN C(9)2/9- dated 31-1-2-1994 (Himachal Unit). He discussed these schemes in quite a bit of detail-to the extent wordings of the preamble of the schemes are concerned, and concluded that while the amounts aggregating to Rs 130,57,12,796, in respect of Punjab and Maharashtra Schemes, are indeed capital receipts in nature, and exempt from tax as such, the amounts aggregating to Rs 39,36,21,956 are revenue in nature, and to that extent the Assessing Officer was justified in including the same in taxable income. None of the parties is satisfied. While the assessee is aggrieved of the amount of Rs 39,36,21,956 being included in his taxable income, the Assessing Officer is aggrieved of the learned CIT(A)‟s granting relief of Rs ....
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.... there are, by now, a number of decisions of the coordinate benches, as also Hon'ble Courts above, dealing with these schemes. It is also important to bear in mind the fact that the subsidies received by the assessee are in the nature of sales tax subsidies, and dealing with sales tax subsidies, Hon'ble Gujarat High Court, in the case of CIT Vs Nirma Ltd [(2017) 397 ITR 49 (Guj)], has observed as follows: 7. So far as second issued as to Whether the Appellate Tribunal was right in law and on facts in upholding the decision of the CIT (A) and in directing the Assessing Officer to consider the Sales-tax exemption benefit of Rs. 5,45,81,171/- as capital receipts is concerned, Mr.Mehta contended that in view of the decision of the Calcutta and Punjab High Court, the Tribunal has committed an error in reversing the view taken by CIT (Appeals) so far as Tax Appeal No.226 of 2010 is concerned, wherein the CIT (A), after discussing the evidence has held in favour of the department. In this regard, he has relied upon the decision of High Court of Bombay in the case of CIT v. Reliance Industries Ltd. [2010] 8 taxmann.com 218/[2011] 339 ITR 632, wherein it is held that object of su....
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....r generating the employment. Perusal of both the schemes shows that the incentives extended to the eligible units were, inter alia, through exemption from payment of Sales Tax. Thus, the object of both the schemes was to attract capital investment to ensure development of backward areas and the modality or mechanism chosen to attract such investment was, inter alia, through exemption from payment of sales tax." 9. He further contended that in view of decisions of this Court in CIT v. Birla VXL Ltd. [2013] 32 taxmann.com 330/215 Taxman 117 (Guj.) and in Dy. CIT v. Munjal Auto Industries Ltd. [2013] 37 taxmann.com 115/218 taxman 135 (Guj.) the issue is squarely covered and the decisions which are sought to be relied upon by learned advocate for the appellant are not applicable in the facts of the present case. In the case of Birla VXL Ltd. (supra), this Court has observed as under:- ' 12. It can thus be straightaway seen that the benefit, though computed in terms of the Sales Tax liability in the hands of the recipient, the same was not mean to give any benefit on day-to-day functioning of the business, or for making the industry more profitable. The principle aim of the sche....
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....f Munjal Auto Industries Ltd. (supra), this Court has observed as under:- "7. 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. 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 recipien....
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....the subsidy has been made post commencement of business, the measurement of subsidy is immaterial. In our considered opinion, none of the schemes contemplated to finance the assessee in the form of subsidy / incentive for meeting the working capital requirements of the assessee company post commencement of business. Hence, by applying the purpose test, apparently, the subsidy / incentive received in the instant case would only have to be construed as capital receipts not chargeable to income tax. In this regard, we find that ld. AR placed reliance on the decision of Hon'ble Supreme Court in the case of Ponni Sugars and Chemicals Ltd., reported in 306 ITR 392, wherein the incentive conferred under that scheme were two fold. First, in the nature of higher free sale sugar quota and second, in allowing the manufacturer to collect Excise duty on sale price on the free sale sugar in excess of the normal quota, but to pay to the Government only the Excise duty payable on the price of levy sugar. The Hon'ble Supreme Court in para 14 of its decision had held that "character of receipt of subsidy has to be determined with respect to the purpose for which the subsidy is given. The poi....
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....Revenue 4 DLR 1, which has close similarity to the case of Seaham Harbour Dock Co. 's case (supra). In that case it was held that where subsidies were given under statutory authority, the statutory purpose for which they are authorised is relevant and may even be decisive in determining whether it is taxable income in the hands of the recipient. In that case, it was pointed out after discussing the Seaham Harbour Dock Co. 's case (supra)as well as that of Lincolnshire Sugar Co. Ltd. 5 case (supra)that subsidy given by the Canadian Government to encourage construction of dry docks was 'an aid to the construction of dry dock and not an operational subsidy'. ] 17. This precisely is the question raised in this case. By no stretch of imagination can the subsidies whether by way of refund of sales tax or relief of electricity charges or water charges can be treated as an aid to setting up of the industry of the assessee. As we have seen earlier, the payments were to be made only if and when the assessee commenced its production. The said payments were trade for a period of five years calculated from the date of commencement of production in the assessee's factory. T....
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....n nature. 21. What is important from the ratio of this judgment is the fact that Sahney Steel was followed and the test laid down was the "purpose test". It was specifically held that the point of time at which the subsidy is paid is not relevant; the source of the subsidy is immaterial; the form of subsidy is equally immaterial. 22. Applying the aforesaid test contained in both Sahney Steel as well as Ponni Sugar, we are of the view that the object, as stated in the statement of objects and reasons, of the amendment ordinance was that since the average occupancy in cinema theatres has fallen considerably and hardly any new theatres have been started in the recent past, the concept of a Complete Family Entertainment Centre, more popularly known as Multiplex Theatre Complex, has emerged. These complexes offer various entertainment facilities for the entire family as a whole. It was noticed that these complexes are highly capital intensive and their gestation period is quite long and therefore, they need Government support in the form of incentives qua entertainment duty. It was also added that government with a view to commemorate the birth centenary of late Shri V. Shantaram ....
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....finding of the Jammu and Kashmir High Court on the facts of the incentive subsidy contained in that case is absolutely correct. In that once the object of the subsidy was to industrialize the State and to generate employment in the State, the fact that the subsidy took a particular form and the fact that it was granted only after commencement of production would make no difference. 5.3.7. We further find that the Hon'ble Gujarat High Court in CIT vs. Munjal Auto Industries Ltd., in Tax Appeal No.450 with 451-453 of 2012 dated 28/01/2013 also had an occasion to consider the very same issue in dispute before us. In this case also, the Revenue had taken a specific argument that since subsidy would be received only once unit goes for production, subsidy would be revenue nature. The Hon'ble Gujarat High Court referred to the relevant subsidy scheme noted that concession was capped @125% of fixed capital investment and could be availed within 9 years. The Hon'ble Gujarat High Court after considering the decision of Hon'ble Supreme Court both in the case of Sahney Steel and Press Works Ltd., and Ponni Sugars and Chemicals referred to supra had held as under:- "7. From....
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.... other hand, according to the assessee, what was relevant to decide the character of the incentive is the purpose test and not the mechanism of payment. 14. In our view, the controversy in hand can be resolved if we apply the test laid down in the judgment of this Court in the case of Sahney Steel and Press Works Ltd. (supra). In that case, on behalf of the assessee, it was contended that the subsidy given was up to 10% of the capital investment calculated on the basis of the quantum of investment in capital and, therefore, receipt of such subsidy was on capital account and not on revenue account. It was also urged in that case that subsidy granted on the basis of refund of sales tax on raw materials, machinery and finished goods were also of capital nature as the object of granting refund of sales tax was that the assessee could set up new business or expand his existing business. The contention of the assessee in that case was dismissed by the Tribunal and, therefore, the assessee had come to this Court by way of a special leave petition. It was held by this Court on the facts of that case and on the basis of the analyses of the Scheme therein that the subsidy given was on reve....
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....had an occasion to consider somewhat similar question in the backdrop of entertainment tax waiver scheme of State of Gujarat as well as State of Maharashtra. Even in such a case, the entertainment tax waiver which was granted in terms of sale of tickets was treated as capital in nature when it was found that same was relatable to the capital investment made by the assessee. It was held as under : "10. From the above noted provisions of thescheme it can be clearly seen that the entire purpose of granting tax exemption was for giving the boost to the terrorism sector. This was to be achieved by attracting higher investment in areas with tourism potential. In order to achieve such purpose, exemption from various taxes as may be applicable was granted. It is true that the exemption was to be computed in terms of tax otherwise payable by the industry. However, the purpose of such exemption was to meet with the capital outlay already undertaken by the assessee. This clearly comes out from various provisions of the scheme. For example, the scheme was applicable only to the new project or to a existing project provided investment in fixed capital or capacity was increased atleast by ....
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....e case of Reliance Industries Ltd. In case of Special Bench decision of Reliance Industries Ltd, the scheme dealt with sales tax exemption under the scheme of Government of Maharashtra, 1979. Further the said scheme was implemented by SICOM. The following question was referred by the Hon'ble President, Tribunal to the Special Bench: "Whether, on the facts and in the circumstances of the case and in law the assessee company is justified in its claim that the sales-tax incentive allowed to it during the previous year in terms of the relevant Government order constitutes capital receipt and is not to be taken into account in the computation of total income?" The Hon'ble Tribunal for Asst Years 1984-85 and 1985-86 had held the sales tax exemption to be capital in nature as the same was given for industrial development of the backward districts as well as generation of employment. However, the matter was referred to the Special Bench as it was alleged that the decision for AY 1985-86 was virtually overruled by subsequent decision of the Mumbai Tribunal in the case of Bajaj Auto Ltd (ITA No. 49 and 1101 of 1991). The Special Bench held that the decision of Bajaj Auto has ....
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....urt. However, he fairly stated that there was a subsequent decision of the Division Bench of this Tribunal which followed the Special Bench and that Division Bench order was challenged by the Revenue before the Hon'ble Bombay High Court. The Hon'ble Bombay High Court while disposing of the said appeal did not reverse the decision of the Special Bench and accepted the same. When that appeal was further challenged by the Revenue before the Hon'ble Supreme Court, the Hon'ble Supreme Court remitted the matter back to the Hon'ble Bombay High Court. Accordingly, he argued that the decision of Special Bench was never reversed by the Hon'ble Supreme Court as stated by the ld. Special Counsel for the Revenue and accordingly still is a good law and therefore a binding precedent on this Division Bench. In fact, in assessee‟s own case for A.Y.2001-02 in ITA No.778 of 2015 dated 18/12/2018 before the Hon'ble Jurisdictional High Court, wherein the question Nos. c & d was exactly on this point. For the sake of convenience, the question Nos. c & d raised by the Revenue before the Hon'ble Jurisdictional High Court is reproduced hereunder:- "(c) Whether on the....
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....same should not have been permitted. Secondly, the view of the Tribunal in case of Reliance Industries Ltd. was challenged before the High Court. The High Court in a judgment dated 15.04.2009 in Income Tax Appeal No. 1299 of 2008 had held that no question of law in this respect arises and thereby confirmed the judgment of the Tribunal. It was pointed out that against this judgment of the High Court, the Department had approached the Supreme Court and the Supreme Court had held that a question of law did arise. The Supreme Court framed a question and placed the matter back before the High Court. We are informed that this appeal is still pending. 4. On the other hand, learned Counsel for the assessee firstly contended that the Tribunal had merely remanded the issue back to the Assessing Officer. In earlier orders, the Revenue had approached the Court against the similar orders of the Tribunal. The High Court on two occasions, in the order dated 27.09.2016 and 22.11.2016 passed in Income Tax Appeal Nos. 475 of 2014 and 102 of 2014 respectively had not entertained the challenge of the Revenue. In any case, it was contended that the facts on record are available and the Tribunal has ....
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....ecial Bench decision in the case of Reliance Industries Ltd., this Bench deems it fit to place reliance on the said decision also of the Hon'ble Jurisdictional High Court. Accordingly, we categorically hold that the decision of the Special Bench still holds the field and is a good law. The entire contentions raised by the ld. Special Counsel for the Revenue in this regard are hereby dismissed. 5.4.5. Further, we find that the Co-ordinate Bench of Ahmedabad Tribunal in the case of ACIT vs. Genus Electrotech Ltd., reported in 72 taxmann.com 101 had an occasion to consider the fact of Special Bench decision in a more elaborate manner. The relevant operative portion is reproduced hereunder:- "11. We find that so far as the Special Bench decision of this Tribunal in the case of Reliance Industries Ltd. (supra) is concerned, it still holds the field. All that has happened, as a result of Hon'ble Supreme Court's decision dated 9th September 2011, is that Hon'ble Bombay High Court has now admitted the question "whether, on the facts and circumstances of the case, the Hon'ble Tribunal was right in holding that sales tax exemption was a capital receipt" and will, in ....
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....(supra), we find that Their Lordships, in this case, were dealing with an entirely different type of subsidy which was clearly dealing with an expansion situation. However, we would rather refrain from making any further detailed observations on this issue, as we are alive to the fact that Hon'ble jurisdictional High Court, in Tax Appeal No 358 of 2012, has admitted appeal against the decision of this Tribunal in Ajanta's Manufacturing Ltd. case (supra) and all these issues will now come up for consideration of Their Lordships. The fact that appeal is admitted does not, as we have stated earlier as well, does not affect the binding nature of the judicial precedents. There is no dispute before us that the scheme under which the sales tax and excise duty subsidy are given to this assessee are the same as in the case of Ajanta Manufacturing Ltd. (supra). All the material facts being the same, there is no reason to take any other view of the matter than the view so taken by the coordinate bench. We must, therefore, uphold the conclusions arrived at by the Commissioner (Appeals), which are in consonance with the Special Bench decision in the case of Reliance Industries Ltd. (sup....
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.... approved by Hon'ble Supreme Court in the case of CIT Vs Balkrishna Industries Ltd [(2017) 88 taxmann.com 273 (SC)]. In fact, in some of the assessment years, even the ground of appeal of the Assessing Officer admits this position and challenges the relief granted only on the ground that the matter has not reached finality as appeal is pending before the Hon'ble Supreme CourtVide our order of even date dealing with the assessment year 2008-09, we have, inter-alia, observed as follows: 23. A plain reading of the above ground of appeal clearly shows that, even going by the stand of the Assessing Officer, the issue is covered in favour of the assessee, by Hon'ble jurisdictional High Court judgment in the case of CIT Vs Sulzer India Ltd [(2014) 369 ITR 717 (Bom)] but yet the appeal has been filed because the revenue has challenged the correctness of the said judgment. That very approach is simply erroneous because it is only elementary in law that the mere pendency of the appeal, against a binding judicial precedent, in a higher judicial forum does not dilute, curtail or otherwise narrow down its binding nature. As long as the binding judicial precedent holds good in law,....
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....ns would be taken as discharge of the liability of Sales Tax and, therefore, the deferral amount was in the form of a loan and not a trading receipt. On this basis, the Assessee contended that the remission of a loan cannot be treated as a revenue receipt and taxed as its income. The Assessing Officer rejected this claim and by holding that the Board's Circular is in the context of section 43B of the Income Tax Act and therefore not relevant for the present issue. 6. Against the aforesaid Assessment Order passed by the Assessing Officer, M/s. Sulzer India Ltd. (hereinafter referred to as 'assessee') preferred the appeal before the Commissioner of Income Tax (Appeals) who dismissed the same by sustaining the assessment. This was challenged by the assessee before the Tribunal. In view of the difference of opinion of the two coordinate Benches on this issue, a special Bench was constituted. The special Bench decided the case in favour of the assessee and allowed the appeal. As mentioned above, it is this judgment, which has been upheld by the High Court as well and in these circumstances, the Revenue is in appeal before us. 7. A glimpse of the facts taken note of, sh....
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....red by this provision else the subsections and particularly section 43B(1) would have been worded accordingly. Therefore Section 43B has no application. Insofar as applicability of section 41(1)(a), there also the applicability is to be considered in the light of the liability. It is a loss, expenditure or trading liability. In this case, the scheme under which the Sales Tax liability was deferred enables the Assessee to remit the Sales Tax collected from the customers or consumers to the Government not immediately but as agreed after 7 to 12 years. If the amount is not to be immediately paid to the Government upon collection but can be remitted later on in terms of the Scheme, then, we are of the opinion that the exercise undertaken by the Government of Maharashtra in terms of the amendment made to the Bombay Sales Tax Act and noted above, may relieve the Assessee of his obligation, but that is not by way of obtaining remission. The worth of the amount which has to be remitted after 7 to 12 years has been determined prematurely. That has been done by find out its NPV. If that is the value of the money that the State Government would be entitled to receive after the end of 7 to 12 ....
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....section 38, 4th proviso does not amount to remission or cessation of the Assessee's liability assuming the same to be a trading one. Rather that obtains a payment to the State prematurely and in terms of the correct value of the debt due to it. There is no evidence to show that there has been any remission or cessation of the liability by the State Government. We agree with the Tribunal that one of the requirement of section 41(1)(a) has not been fulfilled in the facts of the present case." 10. After hearing the counsel for the parties at length, we are of the view that the aforesaid approach of the High Court is without any blemish, inasmuch as all the requirements of Section 41(1) of the Act could not be fulfilled in this case. 24. In view of these discusssions, as also bearing in mind the entirety of the case, we approve the conclusions arrived at by the learned CIT(A), and decline to interfere in the matter. 39. In view of these discussions, as also bearing in mind the entirety of the case as also our decisions in assessee‟s own cases for the immediately preceding assessment years, we approve and confirm the conclusions arrived at by the learned CIT(A) and decl....
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....ion 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 to be treated as capital receipts in nature. The observations in the context of the first ground of appeal will apply mutatis mutandis here as well. That apart, once the Assessing Officer himself also accepts that the object and purpose of the excise exemption scheme are to promote the industry is set up, or being subjected to substantial expansion, in the backward are....
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.... 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 to multiplex theater complex. The scheme was introduced to start new cinema houses in the State. The Supreme Court observed that, in such circumstance, the purpose tests for grant of subsidy should be applied. It was concluded as under:- "Applying the aforesaid test contained in both Sahney Steel as well as Ponni Sugars, we are of the view that the object, a....
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....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 similar question was considered by Division Bench of Gujarat High Court in case of CIT v. Grace Paper Industries (P.) Ltd. [1990] 183 ITR 591/52 Taxman 18. The Court noted that, the subsidy was granted by the Government for development of industries in back-ward areas. It was not part of the actual cost of plant or machinery. The Court, therefore, held that it could not ....
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....stment 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 unit, cost of tools, jigs, dies and moulds, transport charges, insurance premium, erection cost, value of second-hand machinery purchased by an industrial unit etc. were to be taken into account while computing the value of fixed assets for the purposes of subsidy. In other words, it was the value of the fixed assets which formed the basis for computation of subsidy to b....
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....itions 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 the matter. 44. Ground no. 3 is thus dismissed. 45. In ground no.4, the Assessing Officer has raised the following grievance: "Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in deleting the disallowance of Community Welfare Expenses?" 46. This is a legacy issue and pertains to the expenditure incurred for community welfare as the....
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....ies Act also show these expenses as capital expenses, which in an indicative, even if not conclusive, evidence of the expenses being in the nature of capital expenses. The judicial precedents relied upon by the assessee in support of the claim were noted, and left at that, and it was observed that "the assessee is a big company assisted by a battery of lawyers and chartered accountants, but in its original return of income no deduction on account of these expenses uis claimed which amounts to an admission that these expenses are not revenue expenses in nature" and that "this shows that lodging this claim is only an afterthought of the assessee, with no substantial basis". The Assessing Officer also observed that "some of the above expenses are for setting up the business, and not the expansion of the existing ones" though he did not specifically point out any such expenses. The Assessing Office thus proceeded to disallow the entire amount of pre-operative expenses. Aggrieved, assessee carried the matter in appeal before the CIT(A) who, after taking note of the detailed submissions, held that the expenses, being in the nature of expenses incurred for the expansion of existing busine....
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.... the Assessing Officer. In the case of DCIT Vs Gloster Jute Mills Limited [(2017) 88 taxmann.com 738 (Kol)], which has been subsequently followed by the other benches- including Mumbai benches, the coordinate bench has, inter-alia, observed as follows: 24. Ground No. 3 raised by the revenue reads as follows :- "3. That on the facts and in the circumstances of the case, Ld. CIT(A) has erred in law by allowing assessee's claim of additional depreciation of plant and machinery on original cost in the year subsequent to the year of acquisition and installation and thereby has erred in deleting the addition of Rs.54,21,617/- without appreciating the fact that such additional depreciation is allowable on plant and machinery only in the year of acquisition and installation." 25. This ground of appeal relates to the claim of the Assessee for additional depreciation u/s.32(1)(iia) of the Act. The undisputed facts are that the original cost of the new machinery purchased and installed by the Assessee after 31-3-2005 but before 1-4-2006 in the 100% EOU and DTA unit Rs.29,77,470 and Rs.2,41,30,615. The WDV of these machineries as on 1-4-2006 was Rs.24,51,920/- and Rs.1,81,50,266/- r....
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.... issue, it would be worthwhile to examine the history of scheme of allowance by way of additional depreciation in the Act. ' Sec.32 Depreciation. (1) In respect of depreciation of- (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed- (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed; (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed: Section 32(1)(iia) of the Act was originally introduced by the finance (no.2) Act, 1980 w.e.f. 1-4-1981 reads thus (the sub-section existed upto 31-3-1988 and was deleted thereafter): "(iia) in the case of any new machinery or plant (other than ships and aircraft) which has been i....
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....substituted by the finance Act, 2005 w.e.f. 1-4-2006, the benefit for claiming additional depreciation was not so restricted to only to the intital assessment year. From AY 1981-82 to 87-88, the claim for additional depreciation was restricted to previous year in which such machinery or plant is installed or, if the machinery or plant is first put to use in the immediately succeeding previous year. From AY 2003-04 till 2005-06, the claim for additional depreciation was restricted to previous year in which such undertaking begins to manufacture or produce any article or thing on or after the 1st day of April, 2002; or if any industrial undertaking existed before the 1st day of April, 2002, during any previous year in which it achieves the substantial expansion by way of increase in installed capacity by not less than ten per cent. From AY 2006-07, there is no restriction with regard to the year in which such additional depreciation should be allowed and also there is no restriction with regard to the additional depreciation being allowed only on the written down value and therefore the additional depreciation even in the second and subsequent years have to be allowed on the origi....
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....the assets should be new in the year of claim of additional depreciation. For the reasons aforesaid I am of the view that in terms of provisions of Section 32(1)(iia), additional depreciation is available in AY 2006-07 and subsequent years in respect of all new plant & machinery acquired and installed after 31-03-2005 subject to overall criteria that total depreciation does not exceed the actual cost. Hence Ground No. 4 is decided in favour of the Appellant." 31. Aggrieved by the order of CIT(A) the revenue has raised ground no.3 before the Tribunal. The ld. DR placed reliance on the order of the AO. The ld. Counsel for the assessee submitted that fiscal statute shall be interpreted on the basis of the language used therein and not de hors the same. It was argued that Clause (iia) to Sec. 32(1) was first introduced vide Finance (No. 2) Act, 1980 w.e.f. 01-04-81 and was applicable till AY 1987-88. The clause was subsequently re-introduced vide Finance Act, 2002 w.e.f. 01-04-03. On perusal of clause (iia) to Sec. 32(1) as existed during the aforesaid period, it could be seen that the legislature conferred the benefit of additional depreciation only in the first AY when the asset w....
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....e or the year in which the concerned undertaking begins to manufacture or produce any article or thing or achieves substantial expansion by way of increase in installed capacity by 25%. The only objection of the AO is that the provisions refer to "new machinery or plant" and therefore the machinery will cease to be a new machinery after the end of the first year in which it is installed or put to use. In our view this stand taken by the revenue is not supported by the language of statutory provision. The condition imposed by the relevant provisions is that Plant and Machinery must be new at the time of installation to be eligible for additional depreciation u/ s 32(1)(iia) and not new in subsequent years. The expression "new machinery" is therefore to be construed as referring to the condition that at the time of acquisition or installation the machinery or plant should be new. Going by the legislative history of the relevant provision, we are of the view that the condition for allowing additional depreciation only in the initial assessment year ceased to exist as and from 01-04-2006. The plain language of the section warrants such an interpretation. We therefore uphold the order o....
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.... 115-O of the Act?" 64. So far as this grievance of the Assessing Officer is concerned, we have noted that it is an undisputed position that, in terms of the provisions of Finance Act 2010 the applicable surcharge was 7.5%, that the related Finance Bill was introduced in the Parliament on 26th February 2010, and that, in terms of the provisions of Section 294 of the Income Tax Act, "If on the 1st day of April in any assessment year provision has not yet been made by a Central Act for the charging of income-tax for that assessment year, this Act shall nevertheless have effect until such provision is so made as if the provision in force in the preceding assessment year or the provision proposed in the Bill then before Parliament, whichever is more favourable to the assessee, were actually in force". It was on this basis of this factual and legal position, and following Hon'ble Supreme Court‟s judgment in the case of Kesoram Industries & Cotton Mills Ltd Vs CWT [(1966) 59 ITR 767 (SC)], that the learned CIT(A) has granted the impugned relief. No material has been brought before us to dislodge these findings and contrary to the legal position set out above. In this view of t....
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.... claim of the assessee was thus declined as premature. He also relied upon a decision of the coordinate bench of this Tribunal, in the case of Ranbaxy Laboratories Ltd Vs ACIT [(2009) 124 TTJ 771 (Del)]. Aggrieved, the assessee carried the matter in appeal before the CIT(A) without success. The assessee is not satisfied and is in further appeal before us. 72. We have heard the rival contentions, perused the material on record and duly considered the facts of the case in the light of the applicable legal position. 73. We find that in assessee‟s own case, in the matter of revision proceedings for the assessment year 2013-14 and in the judgment reported as Ambuja Cements Ltd Vs CIT [(2022) 140 taxmann.com 347 (Mum)] a coordinate bench has, following the Special Bench decision in the case of Bicon Ltd Vs DCIT, rejected revenue‟s reliance on the decision of Ranbaxy Laboratories (supra). While doing so, the coordinate bench has observed that, "We find that the decision of the Hon'ble Special Bench of Bangalore Tribunal in the case of Biocon Ltd. (supra) says that the discount premium should be claimed evenly over the vesting period. In the instant case, from the aforesa....
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....ugh one of us (i.e. the Vice President), observed that "The principle is thus unambiguous. The principles of conservatism, and considerations of prudence, in the accounting treatment require that no anticipated profits be treated as income until the profits are realized, and, at the same time, an anticipated loss to be deducted from commercial profits, at the first sign of its reasonable possibility". Viewed thus, as long as a loss, even though it may not actually have crystallized, can be reasonably estimated, as indeed has been done in this case, it has to be taken into account in the computation of business income. In view of these discussions, as also following the views of the coordinate bench in the assessee‟s own case, we uphold the plea of the assessee. The Assessing Officer is, accordingly, directed to delete the impugned disallowance of Rs 1,83,76,076. The assessee gets the relief accordingly. 74. Ground no. 1 is thus allowed. 75. In ground no. 2, the assessee has raised the following grievances: a) On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO in adding back Rs. 1,79,533/- as notional expenses ....
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....er 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 interest-free 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 taxmann.com 52/261 Taxman 165/410 ITR 466. 6. Accordingly, while disallowance of the assessee is upheld in principle, the quantum shall stand reduced, upon verification ....
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....er grid to its cement manufacturing units. Its on this basis that the deduction under section 80IA is computed, and an independent auditor, in form 10CCB, certified the same. The Assessing Officer, however, was of the view that as the data about "the actual market value‟ of the electricity actually traded across India, between the electricity supply companies, is available in the public domain, the same should be adopted. Accordingly, he adopted the simple average of the state wise average annual purchase price of power by Tata Power Trading Co Ltd, National Thermal Power Corporation Ltd and Power Trading Corporation Ltd, as available on the respective website, for computation of deduction under section 80IA. An addition of Rs 78,84,57,823/- was accordingly made. Aggrieved, assessee carried the matter in appeal but without success. The assessee is not satisfied and is in further appeal before us. 82. We have heard the rival contentions, perused the material on record and duly considered the facts of the case in the light of the applicable legal position. 83. The issue as to which market value of the power is to be taken into account in the computation of profit for deductio....
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....al in case of Reliance Infrastructure limited. In such judgment an identical issue came up for consideration. The Tribunal by detailed judgment had held and observed as under:- "44. In the given facts and circumstances of the case, we are of the view that the profits of the business of generation of power worked out by the Assessee on the basis of the price that it paid to TPC for purchase of power continues to be the best basis even after the order of MERC and therefore the same has to be accepted as was done in the past and as approved by the ITAT in Assesssee's case. We therefore dismiss ground No.4 of the revenue. " 7. Counsel for the assessee pointed out that the judgment of the Tribunal in case of Reliance Infrastructure Ltd. (supra) was carried in appeal by the revenue before the High Court in Income Tax Appeal No.2180 of 2011, such appeal was dismissed making following observations:- "6. As far as question (d), namely, the claim relating to purchase price from Tata Power Company is concerned and that was for the deduction under Section 80IA, the ITAT in paragraph 21 onwards has noted the factual findings and also referred to the order of the Maharashtra Electrici....
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....P.) Ltd. [Tax Appeal No. 1646 of 2010, dated 30-1-2012] in which following observations were made:- "7. To our mind, Tribunal has committed no error. Assessing Officer and CIT (Appeals) while adopting Rs. 4.51 per unit as the value of electricity generated by eligible unit of assessee and supplied through its non eligible unit only worked out cost of such electricity generation. In fact CIT (Appeals) in terms recorded that Rs. 4.51 was computed as the reasonable value of the electricity generated by eligible unit of assessee. This amount included Rs. 4.17 per unit which was the cost of electricity generation and Rs. 0.34 per unit which was duty paid by the assessee to GEB for such power generation. Thus the sum of Rs. 4.51 per unit only represented the cost of electricity generation to the assessee. In Section 80IA(8) of the Act what is required to be ascertained is the market value of the goods transferred by the eligible business, when such transfer is by eligible business to another non eligible business of the same assessee and the consideration recorded in the accounts of the eligible business does not correspond to market value of such goods. Term "Market Value" is further ....
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....and in law, the CIT(A) erred in confirming the action of the AO in denying the deduction claimed by the Appellant u/s. 801A of the Act in respect of Rail System b) The Appellant prays that the AO be directed to allow the deduction u/s. 801A towards rail system to the Appellant as claimed. 87. So far as this grievance of the assessee is concerned, only a few material facts need to be taken note of. During the course of assessment proceedings, the Assessing Officer took note of the fact that the assessee has claimed deduction under section 80IA on rail system comprising of railway sidings, railway tracks, loading and unloading systems, at Ropar, Maratha, Sankrail, Farraka and Bhatapara units. He also the assessee‟s contention that these rail systems alongside the cement plants are to enable the transportation of raw material (i.e. coal etc) and finished goods (i.e. cement) to and from the cement plants of the assessee. The assesse‟s claim that the rail system meets all the requirements of Section 80IA(4) was also noted. The method adopted for computing the income was being excess of road freight and handling charges payable for transportation of goods by road to the ....
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....sessment 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 [Chhattisgarh], Tadipatri [AP], Arakkonam [Tamil Nadu] 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 the material from the cement plants [at all the four locations] to the nearest railway station and vice versa on road through trucks. Before the AO the claim of deduction was justified by assessee by ....
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....ies 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 that such concession would be available only to an infrastructure facility meant for development of rail systems and not to any other infrastructural facility including rolling stocks. The AO also observ....
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....d 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 AYs 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 plant. To facilitate inward and outward movement of goods, the assessee developed infrastructure facility of rail system which was made operating in 1999. The assessee company duly entered into an ....
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.... 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 above, it is not correct to say that the assessee does not earn any profits from its rail system merely because the rail system is used for the captive purposes of the cement plant. 13.4. It was furthe....
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....ntaining 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-clauses 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. Attention of the Bench was also drawn on the copy of the agreement placed at page .93 of the paper book. It was further submitted that all the conditions of Sec. 80IA have been fulfilled. Reliance wa....
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....tion 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. 15. Replies and justification filed by assessee was not accepted by CIT(A) and he held that the rail system of the assessee do not fall within the definition of the infrastructure facility, as the same could not be treated....
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.... 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 Ays. 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 not considered the eligibility requirement u/s.80IA as brought by the Finance Act 2001 wherein Finance Act, 2001 has deleted the requirement of the assessee to transfer the infrastructure facility to the concern Government authorities within prescribed t....
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....te insofar 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 CIT v. Reliance Utilities & Power Ltd. [2009] 178 Taxman 135/313 ITR 340 (Bom.) and CIT v. HDFC Bank Ltd., [2014] 49 taxmann.com 335/226 Taxman 132 (Mag.)/366 ITR 505 (Bom.), no disallowance of interest is warranted. With regard to the disallowance made under Rule 8D(2)(iii) he contended that assessee itself has offered the amount attributable for earning the exempt income, therefore, further disallowance made by Revenu....
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....hich 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 deduction u/s.80IA, how assessee company became eligible for the same after demerger and inherited the cement business i.e., cement plants together with the rail systems of the L&T Ltd., She placed reliance on the Circular No.733 dated 03/01/1996 which provided that BOLT scheme of Indian Railway shall ....
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....ce 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 conditions to be complied with, before and during the development, maintaining and operating the rail systems. Such rail system can also be made available to any third party with the permission of the Indian Railway. For this purpose, the assessee approached to the Indian Railways for development of Rail systems which Indian railways has agreed to provide permission for laying down the railway sidings (including the rail line upto the nearest rail head) and accordingly the assessee had awarded the contract to the private par....
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....an 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 shunt the wagons from such point to his premises and back with his own labour. However", no siding charges are charged by Indian Railways, since it is a private siding. The Clause 16 reads to mean that, charges such as Siding Charges are to be paid 'wherever leviable'. In assessee's case siding charges are not leviable. 38. The rail systems were developed by assessee 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 ....
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....id 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 Account. 41. However, the AO did not agree with assessee's contention and held that Rail systems developed by assessee is not eligible for claim of deduction u/s.80IA (4). Now, we deal precisely with the observation made by CIT(A) for declining Assessee's claim of deduction u/s.80IA. 42. With regard to CIT(A)'s observation as to whether rail systems developed by M/s. L&T were in accordance with the Build-Own-Lease-& Transfer (BOLT) scheme of the Indian Railways, we observe that L&T had entered into agreements with the railway authorities to develop, operate & maintain the rail s....
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....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 requirement for Rail Infrastructure to be In BOLT scheme, to be eligible for claiming deduction under Section SO-lA (4)(i). Section 80-lA (4)(i) provides the following conditions to be complied with for claiming deductions; (i) ...... (a) it is owned by a company registered in India (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure....
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....ement 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 -wherein it is mentioned that, "The applicant will pay in advance to the railway administration the total estimated cost of the work consisting of the estimated costs of work done by the party and those by the railway administration .... " (c) Clause No. 7(a) - Permanent way materials - "The applicant will provide and deliver at site the permanent way and other materials (which includes Girders, Rails, Sleepers, fastenings, points, crossings, fencings, signals and overhead structures and any other things connected therewith for electric tractions and other machinery and equipments necessary for working of the sidings) in accordance with the Railway administration's standards and specificat....
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....duction 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 unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be appropriate to allow the position to be changed in a subsequent year. The above principles have been accepted in the undernoted case: ♦ H.A. Shah & Co v. CIT [1956] (30 ITR 618) (Bom.) ♦ Amalgamated Coalfields Ltd. v. Janapada Sabha AIR 1964 SC 1013 ♦ Cruch of South India Trust Association v. Telugu Church Council [1996] 2 SCC 520 ♦ Radhasoami Satsang (supra) 51. From the record we also fo....
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.... also found that the loading and unloading of goods is being done by the integrated Rail system set up by the assessee and expenses which were incurred earlier for loading and unloading of materials at the plant as well as the nearest Indian Railway station have been avoided and saved and are considered as income of the rail system arising due to setting up of such integrated rail system. The assessee has already submitted for all the Rail Systems form 10CCB duly certified and audited by M/s. GP Kapadia & Co. Chartered Accountants, alongwith Balance Sheet, P&L Account, Schedules forming part of Balance sheet and P&L Account. We have also checked the amount eligible for deduction as furnished in form 10 CCB and found the same as correct. 56. With regard to CIT(A)'s observation in the A.Y.2010-11 at page 42 to the effect that the so called 'Rail System' of the assessee company are simply a private siding and not any infrastructure facility of Public Utility therefore the infrastructure of such private sidings should be treated as "Private Facility", we observe that Section 801A(4) of the Income-tax Act, 1961 does not require the infrastructure facility to be a public f....
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....nner to make it redundant, when the legislature in all its wisdom intended to give benefit of tax holiday for construction of infrastructure facility in the form of railway which is meant for captive consumption. 58. We have carefully gone through the terms and conditions of the agreement entered by the assessee with the railway authority, a perusal of clause 19 of the Railway Siding agreement entered into by the assessee with the Railway authorities, clarifies that construction and operation of the railway siding was not merely for the purpose of the business of the assessee, but was with a long term perspective to create an infrastructure facility which could, at a future point of time and in case a need arise, potentially confer benefit to the public at large. The agreement with the Railway authorities, provided that the facility so created could be made available to others with the discretion and prior permission of the railway authorities thereby rendering the facility open for general public at large. Hence, such a facility is in fact a public utility. 59. With regard to CIT(A)s conclusion for the A.Y. 2010-11 at page 42, to the effect that the agreements entered between ....
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....developing, (ii) maintaining and operating or (iii) developing, maintaining and operating any infrastructure facility which fulfils all the following conditions, namely :- (a) it is owned by a company registered in India (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995: 63. As per materials placed on record, all the railway systems are established and owned by the assessee which is a Company as defined under the Income-tax Act. This is an undisputed fact and there is no adverse remark by the AO or CIT(A) in this regard. 64. As per clause (b)of Section 80IA (4)(i) an agreement has to be entered with the Central Government or a State Government 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, ....
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....the cost of above operations is borne by assessee. 71. With regard to allegation of the CIT(A) that the assessee has never claimed that it is hauling the wagons on the entire siding, we found that hauling of wagons is only one of the activity in the entire operation of the rail system. Under the Railways Act, 1989 nobody other than railway administration is allowed to haul wagons of the railway tracks. As per materials placed on record, all the activities relating to the operation of rail system except hauling of wagons till the interchange point, is done by the assessee and the entire cost for the same is borne by it. 72. From the record we also found that even the maintenance of the Rail system such as alignment of track & gauge maintenance, patching of ballast, maintenance of railway track sleepers, signalling points and railway gate crossing from private siding to connecting point of nearest railway station is done by the assessee. 73. Thus the operation of rail is not merely hauling of wagons but comprises of various activities 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 pri....
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....ctory premises. Further even the maintenance of the Rail system such as alignment of track & gauge maintenance, patching of ballast, maintenance of railway track sleepers, signaling points and railway gate crossing from private siding to connecting point of nearest railway station is done by the railway system. Thus, the revenue of the railway undertaking is the sum aggregate of the above services rendered by it to the cement division. For the purpose of computation, the railway undertaking has adopted the minimum freight rate (further discounted at 50%) which the Indian railways charges for the transportation of these materials. Since this is the easiest available comparable, it has been adopted by assessee for calculating one of the component of its "revenue". 80. We further found that an amount towards loading and unloading charges is added to the above revenue for inward and outward movement of goods which is also carried out by the rail undertaking. The basis, for computing this component of revenue is 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 R....
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....facility to such authorities within the period stipulated in the agreement. The Central Government realizing the need to encourage investment particularly in the area of surface transport, water supply, water treatment system, irrigation project, sanitation and sewerage system or solid waste management systems made certain amendments to the conditions for eligibility of claim u/s. 80lA through Finance Act, 2001. Amongst others amendments, the Central Govt. removed the abovementioned condition and accordingly, the amended section 80IA(4) clause (b) stood as under from AY. 2002-03 onwards: "(b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility;" 84. Thus, the Finance Act, 2001 amongst other conditions, particularly deleted the requirement for an assessee to transfer the infrastructure 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 Ltd....
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....nd 80lE, the first year in which the production is started is taken as initial previous year whereas, after the amendment in provisions of section 80lA w.e.f. 01.04.2000 the initial assessment year is at the option of the assessee to avail the benefit. 88. In view of the amended provisions of Section 80-IA, the year in which the claim is first made i.e. initial assessment year, must apply for determination of eligibility of the claim. In respect of AY. 2004-05 onwards including assessment years 2009-10 and 2010-11, since the condition relating to transfer of such facility to Central Govt. was no longer a pre-requisite for eligibility of claim u/s 80-IA(4)(b), the assessee has correctly made the claim. 89. In view of the above, we can safely conclude that even if an assessee does not fulfil all the requisite conditions for availing the tax holiday benefit in the year in which the new infrastructure facility is set up or has commenced operation, but in a subsequent year, all the requisite 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 ....
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....en away. Now, when the assessee exercises the option of choosing the initial assessment year as culled out in section 80IA(2) from which it chooses its' 10 years of deduction out of 20 years, then only deduction u/s 80lA can be determined. 91. ITAT Chennai Bench have dealt with similar issue in case of Mohan Breweries & Distilleries Ltd. v. Asstt. CIT [2009] 116 ITD 241 which pertains to AY. 2004-05 (i.e., after the amendment of S. 80-IA by the Finance Act 1999), the Chennai Tribunal has held that the initial assessment year is the first year of claim and S. 80-IA itself becomes applicable only when the assessee makes the claim for the first time and not before that. Hon'ble Madras High Court has upheld the judgment of Chennai Tribunal and concurred with the view that Section does not mandate that first year of 10 consecutive assessment years should be always first year of set-up of enterprise. The High Court has held that as initial year is not defined in Section 80lA as compared to Section 80IB where it is specifically 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 trea....
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....ed to the amalgamating or the demerged company if the amalgamation or demerger had not taken place. 95. Section 80IA(2) further provides that the deduction is available at the option of the assessee for any ten consecutive assessment years out of twenty years beginning from the year in which the undertaking or enterprise develop and operate any infrastructure facility. UTCL has started to claim deduction within the prescribed period of twenty years. The claim is thus legitimately made by assessee complying the requirements mentioned under section 801A. 96. In view of the above discussion and respectfully following the order of the Tribunal in assessee's own case for the Ays. 2004-05 to 2008-09, we do not find any merit in the action of the Revenue authorities declining the claim of deduction u/s.80IA(4). Accordingly AO is directed to allow the deduction as claimed by the assessee with respect to its rail system. We direct accordingly. 90. Learned Departmental Representative does not dispute the fact that the issue before us is covered by this decision of the coordinate bench, though he places reliance on the stand of the authorities below, and seeks to justify the same. ....
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....s claim was duly supported by an independent audit report in form 10CCB along with audited profit and loss account. The computation was done by taking into account market value of goods as on the date transfer and this notional savings on account of charges of wharfage, stevedoring, storage (at Jetty) and transportation (from Muldwarka to Kodinar cenement manufacturing unit). The market value of the captive Muldwarka port unit by considering the saving in port tariff by comparing the port tariff payable to Gujarat Pipavav Port Ltd (GPPL), with the actual port tariff paid at Muldwarka port unit and saving in road transportation between its cement manufacturing unit and GPPL. When Assessing Officer examined the computations given by the assessee, he was of the view that the notional savings of the assessee are much more than actual charges borne by the assesse, as evident from the fact, for example, that "the assessee has, in actual incurred and paid Rs 5,43,27,689 on account of wharfage, stevedoring and storage charges for their material (cement, clinkers, coal, gypsum) but has computed the notional market value for the same at whopping Rs 17,20,08,407 which are more than 300% of th....
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....vis-à-vis next nearest port, i.e. Pipavav, is wrong and against the express provisions of the law" and added that "what is required to calculate sale price which undertaking would have fetched if its services get sold open in the market". The Assessing Officer, in this background, invoked 80IA(10) and held the maximum permissible markup to be 20%. Accordingly, the 80IA deduction was reworked to Rs 2,04,86,557, on the basis of the following calculations: Description Rs. Income from services as shown in 10CCB 770229912 Less: Notional receipts on account of Port Services 172008407 Less; Notional transport receipts 512391730 Add: Notional receipts on account of Port Services with 20% mark up to actual payments of Rs. 54327689 65193226.8 Add: Notional receipts on account of transport charges with 20% up to actual payments of Rs. 86594997 103913996.4 Expenses as claimed 242897381 Profit of the Year 12039617.2 Add: Depreciation as per Books 18927319 Less: Depreciation as per Act 10480379 Business profits 20486557.2 Deduction u/s. 80IA @ 100%` 20486557.2 94. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without success. The assessee ....
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....ably deemed to have been derived therefrom". In our considered view, the provisions of Section 80IA(10) thus come into play when the close connection of the assessee with any other person, or any other reason of such a nature- as essentially a general expression following a specific expression entails by virtue of the principle of ejusdem generis, the course of business is so arranged as to produce more than ordinary profits. There is no question of impact on the profits in this case due to a close connection with any other person or contrived business operations, and that is not even an issue here, and the business does not "produce" more than ordinary profits for such reason. There is no arrangement in the transaction of business leading to contrived profit figures. What is used for computing the profits is working out the notional profits and that computation of notional profits has a certain basis. All that can be seen and examined by the Assessing Officer whether such a computation is in accordance with the law or not, but it is not open to the Assessing Officer, by invoking section 80IA(10), to disturb this computation- unless the computation itself does not meet the test of ....
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....t if the assessee spends Rs 100 in covering a distance of 11 km, the savings are worked out on the basis that the assessee will, at best, spend Rs 120 (that is at 20% markup on the actual expenses of Rs 100); that is a clearly incongruous approach. There is no good reason to reject the actual figures, just because actual figures show higher savings. There is thus not only there is no legally sustainable reason for invoking section 80IA(10), what the Assessing Officer has done post invoking section 80IA(10) is equally devoid of legally sustainable reasons. 97. In view of these discussions, as also bearing in mind the entirety of the case- as also following the coordinate bench decision in the case of Assam Cardon (supra), we uphold the plea of the assessee, and vacate the adjustment made by the Assessing Officer to the claim of the assessee- particularly when similar claims were all along allowed to the assessee. The Assessing Officer is directed to delete the disallowance made by him, and grant the claim of deduction under section 80IA in respect of the jetty, as claimed by the assessee. 98. Ground no. 5 is thus allowed. 99. In ground no. 6, the assessee has raised the following....
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....s. The assessee is not satisfied and is in further appeal before us. 101. We have heard the rival contentions, perused the material on record and duly considered the fact of the case in the light of the applicable legal position. 102. We find that Section 80IA(5), which has been heavily relied upon by the assessee, provides that " notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made". All that this provision does is that it provides for the profits of the eligible unit being treated on a standalone basis, but then in case the Assessing Officer makes an adjustment for the payment which has earned the CENVAT....
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....e facts and in the circumstances of the case and in law, the CIT(A) was not justified in agreeing with the AO in apportioning indirect Head Office expenses on the basis of turnover of the undertakings eligible for tax holiday u/s 80IA/80IC computed in the audited accounts filed along with Form 10CCB instead of turnover of the eligible undertakings recomputed in the order u/s 143(3). c) Without prejudice to above, on the facts and in the circumstances of the case and in law, assuming without admitting that if it is held that indirect Head Office expenses is required to be allocated, such allocation should be made on the basis of total cost of the respective eligible undertaking to the total cost of the appellant company instead of allocation on the basis of turnover made in the order u/s 143(3). 106. So far as these grievances of the assessee are concerned, it is sufficient to take note of the fact that in the computation of profits of the eligible units, the assessee has made no adjustment for the common head office expenses. The assessee's stand was that such expenditure does not have direct or immediate nexus with these units. This plea did not find favour with the Asses....
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....it 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-à-vis overall expenditure. 110. Ground no. 7 is thus partly allowed in the terms indicated above. 111. In ground no. 8, the assessee has raised the following grievances: Disallowance of Education Cess amounting to Rs. 14,70,79,787/-: a) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of AO in not allowing deduction for Education Cess levied on Income Tax and Dividend Distribution Tax aggregating to Rs. 14,70,79,787/- as allowable expenditure in computing the total income. b) The Appellant prays that the disallowance of education cess be deleted. 112. Learned counsel, however, submits that the assessee does not wish to press this grievance, and these grounds of appeal, therefore, may be dismissed as not pressed. The prayer is accepted. The ground of appeal is dismissed as not pressed. 113. Ground no. 8 is thus dismissed in the terms indicated above. 114. In ground no. 9, the assessee has raised the following grievances: Disallowance of claim of leave encas....
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....e considered view that the assessee also deserves to succeed on this ground of appeal on a foundational issue. The reason is this. There is no dispute that the amount in question was in the capital field, and that it does not, therefore, is not required to be routed through the profit and loss account. On such facts, and in the case of Shivalik Ventures Pvt Ltd Vs DCIT [(2015) 60 taxmann.com 214 (Mum)], a coordinate bench of thisb Tribunal has, inter-alia, held that "In view of the above said legal provisions, the assessee has contended that the profits and gains arising on transfer of a capital asset by a company to its subsidiary company does not fall under the definition of "Income" as given in sec. 2(24) of the Act and hence it does not enter into the computation provisions of the Income tax Act. Accordingly it was contended that, an item of receipt which is not considered as "income" at all and which does not enter into the computation provisions of the Income tax Act, cannot be subjected to tax u/s 115JB of the also". Learned Departmental Representative has not been able to show anything contrary to this decision of the coordinate bench. In this view of the matter, and respec....
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....gly. 125. In ground no. 13, the assessee has raised the following grievances: On the facts and circumstances of the case, and in law, the CIT(A) erred in confirming the action of the AQ and thereby denying, the benefit of Article 10 of the India Mauritius Double Tax Avoidance Agreement (DIAA'), in respect of dividend declared by the Appellant to Holding Investment Ltd Mauritius and accordingly, the tax on distributed income ought to have been levied it the rate of 5 percent. 126. Learned counsel submits that the learned CIT(A) did not admit this additional plea, and prays that the ground may be admitted and sent to the file of the Assessing Officer for adjudication on merits. Learned Departmental Representative, however, opposes the plea. 127. Having heard the rival contentions and having perused the material on record, we deem it fit and proper to admit the ground of appeal but remit the same to the file of the Assessing Officer for adjudication on merits. Ordered, accordingly. 128. Ground no. 13 is thus allowed for statistical purposes. 129. In the result, the appeal of the assessee is partly allowed in the terms indicated above. 130. We will now take up the appeal file....
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....ar relief allowed to the assessee. We see no reasons to take any other view of the matter for this assessment year. Respectfully following our decisions in the assessee‟s own cases, we uphold the relief granted by the learned CIT(A) on this count as well. We thus confirm the conclusions arrived at by the CIT(A) on this count as well, and decline to interfere in the matter. 137. Ground no. 3 is thus dismissed. 138. In ground no.4, the Assessing Officer has raised the following grievance: "Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in allowing the appeal of the assessee and holding excise duty exemption availed by the assessee as capital receipt?" 139. This is also a recurring issue and has come up for consideration in a number of preceding assessment years in assessee‟s own cases. In the assessee‟s own case for the immediately preceding year, and for the detailed reasons set out in paragraphs 40 to 42 and following the decisions in the preceding assessment years referred to therein, we have upheld the similar relief allowed to the assessee. We see no reasons to take any other view of the matter for this ass....
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.... in the case of Chaphalkar Bros (supra), and the learned Departmental Representative has not brought any material on record to show that the purpose of the subsidy is in the revenue field, or even claimed that. We, therefore, approve the conclusions arrived at by the learnd CIT(A) and decline to interfere in the matter. 145. Ground nos. 5 and 6 are thus dismissed. 146. In ground no.7, the Assessing Officer has raised the following grievance: "Whether, on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in allowing the pre-operative expenses amounting to Rs. 10,73,50,135/, whereas the assessee itself claimed these expenses as capital expenses in the books of accounts adding it to capital work in progress/ fixed assets?" 147. This is also a recurring issue and has come up for consideration in assessee‟s own case for several preceding assessment years. In our order for the assessment year 2009-10, this issue has been discussed at length from paragraphs 96-100, and in the assessee‟s own case for the immediately preceding year 2010-11, which is being disposed of vide this consolidated order, and for the detailed reasons set out in paragra....
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....t out in paragraphs 56 to 58 and following the decisions in the preceding assessment years referred to therein, we have upheld the similar relief allowed to the assessee. We see no reasons to take any other view of the matter for this assessment year. Respectfully following our decisions in the assessee‟s own cases, we uphold the relief granted by the learned CIT(A) on this count as well. We thus confirm the conclusions arrived at by the CIT(A) on this count as well, and decline to interfere in the matter. 154. Ground no. 9 is thus dismissed. 155. In ground no.10, the Assessing Officer has raised the following grievance: "Whether, on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in allowing the exclusion of Sales tax incentive, excise duty exemption, road transport subsidies and interest subsidies while computing the Book profit u/s. 115JB of the Act, even though the said incentives are revenue in nature? 156. As we have, for the detailed reasons set out earlier, approved the action of the CIT(A) in treating these subsidies as a capital receipt in nature, this ground of appeal is rendered infructuous and is dismissed as such. 157. Grou....
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....h the same issue for the immediately preceding assessment year, and for the detailed reasons set out in paragraphs 79 to 84 earlier in this order, we have decided this issue in favour of the assessee. We see no reasons to take any other view of the matter than the view so taken for the immediately preceding assessment year, i.e. 2011-12. As a matter of fact, the orders for the said assessment year extensively rely upon, and refer to, this assessment year. Therefore, respectfully following our decision for the assessment year 2011-12, we uphold the plea of the assessee, and direct the Assessing Officer to delete the adjustments made by him in this regard. The assessee gets the relief accordingly. 164. Ground no. 1 is thus allowed. 165. In ground nos. 2 & 3, the assessee has raised the following grievances: 2(a). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in confirming the action of the AO in not allowing the claim of tax holiday u/s 80-IA aggregating to Rs. 1,56,56,92,349/- on infrastructure facility, being Rail System, developed, operated and maintained by the appellant at various locations. 2(b). Without ....
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....nd preconceived notion. 2(g). Without prejudice to above, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in rejecting the method of computing deduction u/s 80IA on Rail System adopted by the Appellant and applying method which is unsustainable in law. 2(h). Without prejudice to above, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in confirming the AO's action who himself was in a quandary in suggesting two alternative methods for computing deduction us 801A on Rail System and thus was not justified in not quantifying the exact amount of deduction available to the appellant if deduction u/s 80-IA on allowance of deduction in appellate proceedings. 2(i) Without prejudice to above, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred and not justified in not deciding upon the AO's suggestion that in case the appellant was found to be eligible in appellate proceedings, adjustments on account of allocated HO expenses and "CENVAT" expenses were to be made while determining the claim. 166. While dealing with the same issue f....
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....2. As a matter of fact, the orders for the said assessment year extensively rely upon, and refer to, this assessment year. Therefore, respectfully following our decision for the assessment year 2011-12, we uphold the plea of the assessee, and direct the Assessing Officer to delete the adjustments made by him in this regard. The assessee gets the relief accordingly. 170. Ground no. 3 is thus allowed. 171. In ground no. 4, the assessee has raised the following grievances: 4(a). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in agreeing with the AO in treating CENVAT credit availed on inputs and capital goods used in the undertakings eligible for deduction u/s 801A as cost of the eligible undertakings. 4(b). Without prejudice to above, on the facts and in the circumstances of the case and in law, assuming without admitting that if it is held that CENVAT credit relating to undertakings eligible for deduction u/s 80IA is required to be reduced from the profits of the eligible undertakings, such adjustment should be made on the basis of the actual Cenvat Credit availed on Inputs and capital goods used in the underta....
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....Office expenses on the basis of turnover of the undertakings eligible for tax holiday u/s 80IA/80IC computed in the audited accounts filed along with Form 10CCB instead of turnover of the eligible undertakings recomputed in the order u/s 143(3). 5(c). Without prejudice to above, on the facts and in the circumstances of the case and in law, assuming without admitting that if it is held that indirect Head Office expenses is required to be allocated, such allocation should be made on the basis of total cost of the respective eligible undertaking to the total cost of the appellant company instead of allocation on the basis of turnover made in the order u/s 143(3). 175. While dealing with the same issue for the immediately preceding assessment year, and for the detailed reasons set out in paragraphs 106 to 111 earlier in this order, we have decided this issue against the assessee in principle but have given some relief on the basis of allocation of expenses. We see no reasons to take any other view of the matter than the view so taken for the immediately preceding assessment year, i.e. 2011-12. As a matter of fact, the orders for the said assessment year extensively rely upon, and r....
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.... the payments are actually made. Learned Departmental Representative does not oppose this prayer, though he adds that the deduction can only be allowed when it is otherwise admissible, and that aspect of the matter will have to be examined by the Assessing Officer. That is indeed the correct approach. While we dismiss the grievance of the asseseee, we make it clear that the Assessing Officer will take a call, as and when the payment is actually made, on the admissibility of deduction in accordance with the law. 182. We have no reasons to take any other view of the matter than the view so taken by us in assessee‟s own case. The grievance of the assessee is, in terms of and subject to the above observations which will apply mutatis mutandis in this assessment year as well, rejected. 183. Ground no. 7 is thus dismissed. 184. In ground no. 8, the assessee has raised the following grievance: "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in confirming the action of the AO/TPO in enhancing the Arm's Length Price of international transaction, being License Fee amounting to Rs. 3,46,89,411/- at 8.5% of Net S....
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....'ble jurisdictional High Court‟s judgment in the case of CIT Vs Harinagar Sugar Mills Ltd [ITA No 1132 of 2014, dated 4th January 2017] and by a coordinate bench decision in the case of ACIT Vs JSW Steel Limited [(2019) 112 taxmann.com 55 (Mum)]. Learned Departmental Representative, however, relied upon the stand of the authorities below. 189. We find that a coordinate bench of this Tribunal, in JSW Ltd‟s case (supra), has inter alia, observed as follows: 47. We further noted that Hon'ble Kolkata High Court, in the case of Pr. CIT v. Ankit Metal & Power Ltd. [2019] 109 taxmann.com 93/266 Taxman 237 Ltd. had considered an identical issue and after considering the decision of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) held that when a receipt is not in the character of income as defined under section 2(24) of the I.T. Act, 1961, then it cannot form part of the book profit u/s 115JB of the I.T. Act, 1961. The Hon'ble High court, further observed that sales tax subsidy received by the assessee is capital receipt and does not come within definition of income under section 2(24) of the I.T. Act, 1961 and when, a receipt is not a in the n....
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.... the purpose of computation of book profit u/s 115JB of the I.T.Act 1961. Hence, we direct the Ld. AO to exclude sales tax subsidy received by the assessee amounting to Rs. 36,15,49,828/- from book profits computed u/s 115JB of the I.T. Act, 1961. 190. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench. Respectfully following the same, we uphold the plea of the assessee and direct the Assessing Officer to exclude the sales tax incentive subsidy for computing book profit under section 115 JB of the Act. The assessee gets the relief accordingly. 191. Ground nos. 9 is thus allowed in the terms indicated above. 192. In ground no.10, the assessee has raised the following grievance: 10(a). On the facts and in the circumstances of the case and in law, the Ld. CIT(A)erred in not admitting additional ground raised by the Appellant that the Appellant ought to be granted the benefit of Article 10 of the India Mauritius Double Tax Avoidance Agreement on the dividends declared to Holderind Investments Ltd., Mauritius. 10(b). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not admitting additional e....
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....,33,291/- whereas the same is in the nature of revenue incentive." 202. While dealing with the appeal for the assessment year 2011-12 earlier in this order, and for the detailed reasons set out in paragraphs 135 to 138 and decisions referred to therein, we have dismissed exactly the same grievance of the assessee. Respectfully following the view so taken in assessee‟s own case, we dismiss this grievance as well, and decline to interfere in the matter. 203. Ground no 2 is thus dismissed. 204. In ground no. 3, the Assessing Officer has raised the following grievance: "On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in allowing the exclusion of excise duty incentive availed by the assessee, aggregating to Rs.126,32,00,487/-, as capital in nature, while computing its total income, whereas the same is in the nature of revenue incentive. 205. This is also a recurring issue and has come up for consideration before us in assessee‟s own case for several preceding assessment years. While dealing with the appeal for the assessment year 2011-12 earlier in this order, and for the detailed reasons set out in paragraphs 139 to 141 and decision....
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....une of Rs.267,03,82,371/-" 214. This is also a recurring isse and has come up for our consideration in a number of preceding assessment years in the assessee‟s own cases. While dealing with the appeal for the assessment year 2010-11 earlier in this order, and for the detailed reasons set out in paragraphs 52 to 55 and decisions referred to therein, we have dismissed exactly the same grievance of the assessee. We see no reasons to take any other view of the matter than the view so taken by us. Respectfully following the view so taken in assessee‟s own case, we dismiss this grievance as well, and decline to interfere in the matter. 215. Ground no 6 is thus dismissed. 216. In ground no. 7, the Assessing Officer has raised the following grievance: "On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in directing the assessing officer to delete the addition of unutilized CENVAT credit on last day of accounting year being 31.03.2012 to the closing stock u/s. 145A of the Act." 217. This is also a recurring issue and has come up for our consideration in a number of preceding assessment years in the assessee‟s own cases. While dealing....