TaxTMI 
TaxTMI 
2022 (11) TMI 1309
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....and in law, the Commissioner of Income-tax(Appeals)-7 [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 situ....
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....this Court is of the view that the amendment of Section 14A, which is "for removal of doubts" 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. Gro....
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....ived during the year without cognizing the fact that the interest income was contingent in nature at provisional assessment stage and can 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 ques....
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....ing Book Profit u/s 115JB of the Act." 25. Having heard the rival contentions and having perused the material on record, we are of the considered view that the assessee deserves 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 di....
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....stries Ltd [(2006) 286 ITR 1 (P&H)]. The entire amount of Rs 1169.93 crores was added to income of the assessee. Aggrieved, assssee carried the matter in appeal before the CIT(A). Learned CIT(A) took note of the 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 pa....
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.... assessee, and that is not even the case of the revenue. The CIT(A) is simply swayed by the wording of the preamble of the scheme- something clearly impermissible. These subsidy schemes are materially similar in nature, and 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 ....
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....in Gujarat through dispersal of industries in the most backward area and backward areas. It is thus clear that the object of both the scheme was to ensure development of backward areas or for development of core sector industries in the State or for 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 se....
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.... commencement of production, such subsidy must be treated as assistance for the purpose of the trade." 14. In the result, we do not find that the Tribunal has committed any error. No question of law, therefore, arises. Tax Appeals are therefore dismissed.' 10. In the case of 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 comm....
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....p of the units based on the fixed percentage of the capital cost and not for running the business of the assessee. Moreover, even this subsidy which is determined based on sales tax assessment orders for 9 years, 6 years etc., are subject to maximum outer limit already fixed under the respective schemes. Though the quantification of 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 pri....
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....istribution as dividend to its shareholders. But the assessee was free to use the money in its business entirely as it liked and was not obliged to spend the money for a particular purpose like extension of docks as in the Seaham Harbour Dock Co. 5 case (supra). 16. There is a Canadian case St. John Dry Dock & Ship Building Co. Ltd. v. Minister of National 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 ....
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....ant." 19. Sahney Steel was distinguished, in para 16 by then stating that this Court found that the assessee was free to use the money in its business entirely as it liked. 20. Finally, it was found that, applying the test of purpose, the Court was satisfied that the payment received by the assessee under the scheme was not in the nature of a helping hand to the trade but was capital in 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 ....
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....said State. Thus considered, it was obvious that the incentives would have to be held capital and not revenue. Mr. Ganesh, learned Senior Counsel, pointed out that by an order dated 19.04.2016, this Court stated that the issue raised in those appeals was covered, inter alia, by the judgment in Ponni Sugars & Chemicals Ltd. case (supra) and the appeals were, therefore, dismissed. 25. We have no hesitation in holding that the 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....
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.... the mechanism of price differential and the duty differential. According to the Department, price and costs are essential items that are basic to the profit making process and that any price related mechanism would normally be presumed to be revenue in nature. In other words, according to the Department, since incentives were given through price and duty differentials, the character of the impugned incentive in this case was revenue and not capital in nature. On the 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....
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....the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant." 10. In a recent judgement dated 8.1.2013 in case of DCIT-Circle1(2)-Baroda v. Inox Leisure Ltd.,we 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 f....
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...., it was held that subsidy was on capital account. 5.4. Applicability of Special Bench decision of Mumbai Tribunal in the case of Reliance Industries reported in 88 ITD 273. The ld. Special Counsel for the Revenue vehemently submitted that the decision of the Hon'ble Special Bench has been reversed by the Hon'ble Supreme Court by remitting the matter back to the Hon'ble Bombay High Court. First of all, it would be relevant to bring on record the crux of the decision of the Special Bench in the 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 incom....
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....at the subsidy was received after the commencement of production or conditional upon it. Therefore, in our view and with respect, the Tribunal in the case of Reliance Industries Ltd. ( supra) had correctly interpreted and understood the ratio of the judgment of the Supreme Court in Sahney Steel & Press Works Ltd.‟s case (supra). 38. In this view of the matter, we answer the question referred to us in the affirmative. 5.4.2. The ld. AR vehemently submitted that the department did not challenge the decision of the Special Bench before the Hon'ble Bombay High Court. 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 decis....
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....s very assessee and restored the issue back to the Assessing Officer. In the earlier order, the Tribunal had remanded the issue to the file of the Assessing Officer "to decide the issue afresh after considering the decision of Special Bench of the Tribunal in the case of Reliance Industries Ltd. (supra)". Thus, the Tribunal remanded the issue back to the Assessing Officer to be decided in the light of the Special Bench judgment in the case of Reliance Industries Ltd. The Revenue's grievance in this respect is two fold. It was contended that the issue was raised for the first time before the Tribunal and the 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 be....
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....ary No.22929/2019. In other words, the Revenue while preferring SLP before the Hon'ble Supreme Court did not even challenge this ground of subsidy and the decision of Special Bench of Tribunal in the case of Reliance Industries Ltd., Hence, the order of the Hon'ble Jurisdictional High Court in assessee‟s own case for A.Y.2001-02 had become final on the very same issue. Though the said decision has been rendered for subsequent assessment year as compared to the years under consideration before us, in view of identical facts and the same legal issue, and more especially, in order to address the fact of binding precedent of Special 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.c....
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....of a larger bench. It is this faith of judicial hierarchical system that is the strength of our functioning, and we must follow the same. We, therefore, regret our inability to follow the division bench in the case of Jindal Power, no matter how deeply we respect and admire the work of all our colleagues, and we would rather be guided by the special bench decision - which is exactly what another division bench, on the same set of facts as before us, did in the case of Ajanta Manufacturing Ltd. (supra). As for learned Commissioner (DR)'s suggestion that we should follow the jurisdictional High Court decision in the case off Colourman Dyechem Ltd. (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. ....
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.... "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 that gain arising out of pre-payment of deferred sales tax liability as a capital receipt?" 38. As learned representatives fairly agree, whatever we decide, on this issue in the appeals for the preceding assessment years, which were also heard along with these cross appeals, will also follow mutatis mutandis on this assessment year as well. This issue is covered, in favour of the assessee, by Hon'ble jurisdictional High Court‟s judgment in the case of CIT Vs Sulzer India Ltd [(2014) 369 ITR 717 (Bom)] which is now 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 pl....
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....ax at Net Present Value (NPV), the Assessee made a repayment of Rs. 3,37,13,393/- against the total liability of Rs. 7,52,01,378/-. The Assessee remitted the balance amount of Rs. 4,14,87,985/- and credited the said amount to its capital reserve account. The Assessing Officer asked the Assessee to show cause as to why the said amount should not be taxed in the hands of the Assessee as a revenue receipt. Relying on Circulars of the Central Board of Direct Taxes being Nos. 496 and 674, the Assessee claimed that the deferral Sales Tax under the Deferral Scheme was required to be treated as actually paid for the purposes of section 43B of the I.T. Act. Further, the conversion of Sales Tax liability into loans 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. Aga....
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....ourt took into consideration the provisions of Section 41 of the Act and the conditions which are required to be satisfied for bringing a particular receipt as "income" within the ambit thereof and found that those conditions are not satisfied in the present case. The High Court also repelled the contention of the Revenue that the assessee obtained the benefit of reduction of sales tax liability under Section 43B of the Act as per the CBDT Circular No. 496 dated 25th September, 1987. The relevant portion of the discussion in this behalf reads as under: "It is not possible to agree with Mr. Gupta. Because, premature payment of Sales Tax already collected but its remittance to the Government, as Mr. Gupta envisages, is not covered 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 f....
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....as loan liability payable after 12 years in 6 annual/equal installments. Subsequently and pursuant to the amendment made to the 4th proviso to section 38 of the Bombay Sales Tax Act, 1959, the Assessee accepted the offer of SICOM, the implementing agency of the State Government, paid an amount of Rs. 3,37,13,393/- to SICOM, which, according to the Assessee, represented the NPV of the future sum as determined and prescribed by the SICOM. In other words, what the Assessee was required to pay after 12 years in 6 equal installments was paid by the Assessee prematurely in terms of the NPV of the same. That the State may have received a higher sum after the period of 12 years and in installments. However, the statutory arrangement and vide 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 f....
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....on are made to attract investments in the industrial sector for special category states, including Uttarakhand. The Assessing Officer noted that "though it is apparent from the excise notification that exemption is granted for only those units which are located in the backward areas and which have undertaken substantial expansion, however incentives are available only post production" and therefore he "finds no difference in sales tax and excise exemption claimed". Following the stand taken for sales tax exemption etc, he held that the excise exemption receipts are also revenue in nature. Aggrieved, assessee carried the matter in appeal before the CIT(A). Learned CIT(A) also confirmed the stand of the Assessing Officer on the short ground that the exemption notification does not specifically state the object and purpose of the concession to be promotion of industry in the specified areas etc. The assessee is aggrieved, and is in appeal before us. 18. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 19. We have noted that the Assessing Officer himself states that....
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.... was not taxable as revenue receipt. Such and similar issue has came up before different High Courts and Supreme Court on the numerous occasions. Reference to all those judgments would be un-necessary. However, the principle that has evolved is that, not the nomenclature of the subsidy or the fact that, the computation of the subsidy benefit is in terms of tax payable, would not be conclusive. What is to be examined in each case is the purpose for granting such subsidy. We may refer to the decision of the Supreme Court in case of CIT v. Chaphalkar Bro. [2017] 88 taxmann.com 178/[2018] 252 Taxman 360/400 ITR 279. It was a case arising out of judgment of this Court in which, the dispute between assessee and the Revenue was with respect to subsidy granted to the multiplex cinema operators in the form of entertainment tax waiver. The subsidy was granted in view of the fact that, industry was highly capital intensive. The Revenue argued that, the subsidy was revenue in nature. This Court after referring to several decisions of the Supreme Court including the case of CIT v. Ponni Sugars and Chemicals Ltd. [2008] 306 ITR 392/174 Taxman 87 and Sahney Steel and Press Works Ltd. v. CIT [1997....
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....cheme is only one - there is no larger or immediate object. That the object is carried out in a particular manner is irrelevant, as has been held in both Ponni Sugars and Sahney Steel." 8. In the present appeal also, as noted, the subsidy was granted under schemes framed by the State and the Central Government, to be given to the assesses who set up new industry in Kutch District. The scheme was envisaged to encourage investment which would in turn, provide fresh employment opportunity in the district which had suffered due to devastating earthquake. The computation of subsidy may be on the basis of sales tax or excise duty. Nevertheless, the purpose test would ensure that, the subsidy was capital in nature. 9. The second question raised by the Revenue is consequent of the first question, in which, the Revenue argues that, if the subsidy is treated as a capital in nature, the same must bring down assessee's costs of acquisition of plant and machinery. The assessee's claim of depreciation to that extent must shrink. Assessee argues that, the Tribunal correctly held that, the subsidy had not been given in relation to acquisition of plant or machinery and tha....
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.... with the establishment of industries in the backward areas. Once the decision to give cash subsidy was taken, the Government had to work out some method to determine the quantum of such subsidy. In other words, the question as to how the amount of cash subsidy should be determined had to be considered by the Government. The Government, in order to determine the amount of cash subsidy, decided to follow one of the recognized methods of working it out on the basis of the amount invested by an entrepreneurs in acquiring capital assets as cash subsidy. The scheme does not say as to in what manner the subsidy was granted is to be utilized. In other words, the entrepreneur to whom the subsidy was granted was free to utilize it in any manner he liked. It would, therefore, appear that quantification of subsidy on the basis of investment was a measure adopted by the Government for convenience to work out the subsidy. If subsidy could be utilized by the entrepreneur in any manner he liked, could it be said that it was granted for meeting the cost of the capital assets? In our opinion, taking an overall view of the various provisions of the scheme, it is difficult to hold that cash subsidy w....
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.....2 is concerned, this court finds that the same is squarely covered by the decision of the Supreme Court in CIT v. P. J. Chemicals Ltd., [1994] 210 ITR 830. In the said case, after review of the law on the point, the Supreme Court has held as under (head note): "Where Government subsidy is intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, the specified percentage of the fixed capital cost, which is the basis for determining the subsidy, being only a measure adopted under the scheme to quantify the financial aid, is not a payment, directly or indirectly, to meet any portion of the 'actual cost The expression 'actual cost' in section 43(1) of the Income Tax Act,1961, needs to be interpreted liberally. Such a subsidy does not partake of the incidents which attract the conditions for its deductibility from 'actual cost'. The amount of subsidy is not to be deducted from the 'actual cost' under section 43(1) for the purpose of calculation of depreciation etc." 20. In view of these discussions, as also bearing in mind the entirety of the case, we uphold the plea of the assessee. The Assessi....
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....essment years on this issue, will also apply mutatis mutandis on this assessment year as well. Vide our order for the assessment year 200-10, we have decided an exactly the same ground of appeal, in favour of the assessee, as follows: 96. In ground no.8, 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. 39,82,07,328/-whereas the assessee itself claimed these expenses as capital expenses in the books of accounts adding it to capital work in progress/fixed assets?" 97. During the assessment proceedings, the Assessing Officer noted that the assesee has made this claim only by way of a revised return and that no such claim was originally made by the assessee. It was also noted that the books maintained under the Companies 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 observe....
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....he matter. 100. Ground no. 8 is thus dismissed. 51. We see no reasons to take any other view of the matter than the view so taken by us in assessee‟s own cases for the preceding assessment years. Respectfully following the same, we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. 52. Ground no. 5 is thus dismissed. 53. In ground no.6, 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 additional depreciation on all the eligible assets acquired before 01.04.2008?" 54. Learned representatives fairly agree that this issue is also covered by coordinate bench decisions, including in the assessee‟s own cases for the preceding assessment years, even as the learned Departmental Representative relied upon and justified the stand of 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: ....
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....ry acquired and installed after 31-03-2005. The word 'new' is not defined in the Act. According to the Shorter Oxford Dictionary the word 'new' means "not existing before; now made, or brought into existence, for the first time". The AO held that the assets on which additional depreciation was claimed by the assessee is neither "new" nor brought into existence in the hands of the assessee in the relevant previous year. It is already used in earlier years and is already depreciated and, therefore, old in the hands of the assessee in the previous year. He held that the qualification that the asset should be new was basic qualification for entitlement of additional depreciation as laid down in the provisions of Sec.32(1)(iia) of the Act and that conditions was not satisfied in the case of the Assessee. The AO accordingly disallowed the claim of the Assessee for additional depreciation. 28. Before we set out the conclusions of the CIT(A) on this 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) buildin....
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....ng existing 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 ]: "Subs. for "twenty-five per cent" by Finance (No. 2) Act, 2004, (w.e.f. 1-4-2005)." Sec.32(1)(iia) as substituted by Finance Act, 2005, (w.e.f. 1-4-2006) reads as follows: " (iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to twenty per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii):"' 29. It can be seen from the provisions of Sec.32(1)(iia) as it existed from 1-4-1981 to 31-3-1988 and reinserted subsequently from 1-4-2003 that the benefit for claiming additional depreciation was restricted only to the initial assessment year. However the provisions of Sec.32(1)(iia) as substituted by the finance Act, 2005 w.e.f. 1-4-2006, the benefit for claiming additional depreciation was not so restricted to....
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....d not interpreted out of context the same as held by Apex Court in the case of Orissa State Warehousing Corporation, Mohammad Ali Khan and Madurai Mills Co. Ltd. (Referred to by the Appellant.) Further, it is also imperative to state that Section 32(1)(iia) is a beneficial provision enacted with the view to provide benefit to the assessee. The same is also evident from the Explanatory Notes to the Finance Act, 2005 wherein it has been clarified that in order to encourage investment the provisions of sec. 32(1)(iia) have been amended. In so far as the language used in the provision in concerned one has to construe the language beneficially and in favour of the assessee as held by the Jurisdictional High Court in the case of Indian JuteMill Association in 134 ITR 68. There is little merit in the contention of the AO that the asset is not new in the second year. In my view for claiming additional depreciation the assessee has to acquire and install the plant & machinery after 31-03-2005 and the same should be new in the year of installation. There is no requirement that the assets should be new in the year of claim of additional depreciation. For the reasons....
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....not made with retrospective effect. It was argued that the legislature has consciously not restricted the allowance of additional depreciation on the original cost for AY 2006-07 till AY 2013-14 to one year only and therefore the additional depreciation should be allowed on the original cost of the asset for the second and subsequent years as well. It was submitted that the condition imposed by the relevant provisions was 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. 32. We have given very careful consideration to the rival submissions and are of the view that the provision of section 32(1)(iia) as amended w.e.f. 01-04-2006 by the Finance Act 2005, there is no restriction that the additional depreciation will be allowed only in one year or that it would be allowed only on the written down value. The law as it prevailed prior to the said amendment imposed such a condition that additional depreciation will be allowed only in the year of installation of machinery or plant or the year in which it is first put to use or the year in which the concerned undertaking begin....
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....ised the following grievance: "Whether, on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in excise duty exemption while computing the Book profit us. 115JB of the Act, whereas the same is in the nature of revenue incentive?" 61. While dealing with another ground of appeal, and consistent with the past history of the case of the assessee, we have held that the excise duty exemption is, in the light of the objects of the scheme, is a capital receipt. As a corollary to this finding in the case of the case for this, as also the other related preceding assessment year, this ground of appeal becomes infructuous inasmuch as this ground of appeal proceeds on the assumption that excise duty exemption is revenue in nature. Grievance of the Assessing Officer is thus dismissed as devoid of legally sustainable merits. 62. Ground no. 8 is thus dismissed. 63. In ground no.9, the Assessing Officer has raised the following grievance: "Whether, on the facts and in the circumstances and in the law, the Ld. CIT(A) was right in directing the Assessing Officer to compute Surcharge @ 7.5% instead of @10% while computing Tax us 115-O of the Act?....
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.... b) The Appellant prays that the aforesaid addition be deleted. 71. So far as this ground of appeal is concerned, the relevant material facts are like this. During the course of the assessment proceedings, the Assessing Officer noticed that the assessee had debited a sum of Rs 1,83,76,076 under the head "Employees Compensation Expenses‟ under the employee stock option scheme, being the loss on stock options offered to the employees. This was computed on the basis of the difference between the offer price of shares to employees and the fair market value of the shares as on the date on the declaration of the scheme. Reliance was also placed on Hon'ble Madras High Court's judgment in the case of CIT Vs PVP Ventures Limited [(2014) 101 ITR 161 (Mad)], wherein the difference between the market value of the shares and the value at which the shares were allotted to employees under ESOP was held to be an allowable deduction. The Assessing Officer was, however, of the view that this is notional, and best a contingent expense in nature inasmuch it is not certain as to how many employees will actually exercise the option, and what will be the share price on the date of the ....
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....d, we have to follow the same humbly. A coordinate bench of the Tribunal, in the case of Tej International Pvt Ltd Vs DCIT [(2000) 69 TTJ 650 (Del)], has observed that "In the hierarchical judicial system that we have, better wisdom of the Court below has to yield to higher wisdom of the Court above and, therefore, one a authority higher than this Tribunal has expressed an opinion on that issue, we are no longer at liberty to rely upon earlier decisions of this Tribunal even if we were a party to them. Such a High Court being a non-jurisdictional High Court does not alter the position as laid down by Hon'ble Bombay High Court in the matter of CIT v. Godavari Devi Saraf [1978] 113 ITR 589 (Bom.)...." The authorities below were, therefore, not justified in simply brushing aside the judgment of Hon'ble Madras High Court in the case of PVP Ventures (supra). In any event, even on merits, we may usefully refer to the observations made by a coordinate bench in the case of Dheeraj Amin Vs ACIT [(2016) 71 taxmann.com 288 (Bang)], wherein and after analysing the judgment of Hon'ble Supreme Court in the case of Chainrup Sampatram Vs CIT [(1953) 54 ITR 506 (SC)], the coordinate ben....
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.... held as follows: 5. So far as these grievances of the assessee are concerned, it is sufficient to take note of the fact that so far as this assessment year is concerned, it is the first assessment year post insertion of rule 8D and as is the settled legal position in this regard, rule 8 D is to be applied for computing the disallowance. To that extent, our decisions for the preceding assessment years will not hold good. However, since the assessee has not used any borrowed funds, no amount shall be disallowed under rule 8 D in respect of the interest. On this issue, Hon'ble jurisdictional High Court has, in the case of PCIT Vs Shapoorji Pallonji & Co Ltd [(2020) 117 taxmann.com 625(Mum)] has, inter alia, observed as follows: 6. On thorough consideration we find that the principle of apportionment does not arise in this case as the jurisdictional facts have not been pleaded by the Revenue. In fact Tribunal while affirming the order of the first appellate authority noted that the first appellate authority had deleted the addition made by the assessing officer under section 14-A of the Act by observing that the interest-free fund available with the respondent - ....
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.... is allowed. 80. In ground no. 3, 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 AO in reducing the claim for deduction u/s 80-IA on captive power generating units by an amount of Rs. 78,84,57,823/- by modifying the basis adopted by the Appellant for determining the 'market value' of power captively consumed. b) The CIT(A) was not justified and grossly erred in not following the binding judicial precedents without providing any cogent reasons; c) The Appellant prays that the AO be directed to allow deduction u/s. 801A as claimed by the Appellant. 81. So far as this grievance of the assessee is concerned, the relevant material facts are as follows. The power requirements of the assessee‟s cement manufacturing units are mainly fulfilled by the captive power plants set up therein. In case of any additional requirements, the cement manufacturing units also purchase the electricity directly from the State Electricity Boards. In the computation of the deduction under section 80IA, the "market value‟ is required to be taken i....
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....and provided to the another be valued. The assessee contended that such valuation should be at the rate at which the electricity distribution companies are allowed to supply electricity to the consumers. The revenue on the other hand argues that the appropriate rate should be the rate at which the electricity is purchased by the distribution companies from the electricity generating companies. 5. This controversy arose in the background of the fact that the assessee had set up a captive power generating unit and claimed deduction under Section 80IA of the Income Tax Act, 1961 ("the Act" for short) in respect of the profits arising out of such activity. Obviously, therefore the attempt on the part of the assessee was to claim larger profit under the unit which was eligible for such deduction as against this, attempt of the revenue would be see that the ineligible unit shows greater profit. 6. The Tribunal in the impugned judgment extracted extensively from the order of CIT (Appeals) and independent reasons for confirming the same. In such order CIT (Appeals) had placed reliance on an earlier judgment of the Tribunal in case of Reliance Infrastructure Ltd. v. Addl. ....
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....ion (d) as framed is not a substantial question of law." 8. Thus, the issue at hand had been examined by this Court on earlier occasion and the view of the Tribunal under similar circumstances was approved. 9. Additionally, we also notice that similar issue came up for consideration before Chhattisgarh High Court in case of CIT v. Godawari Power & Ispat Ltd. [2014] 42 taxmann.com 551/223 Taxman 234, in which the Court held and observed as under: " 31. The market value of the power supplied to the Steel-Division should be computed considering the rate of power to a consumer in the open market and it should not be compared with the rate of power when it is sold to a supplier as this is not the rate for which a consumer or the Steel-Division could have purchased power in the open market. The rate of power to a supplier is not the market rate to a consumer in the open market. 32. In our opinion, the AO committed an illegality in computing the market value by taking into account the rate charged to a supplier: it should have been compared with the market value of power supplied to a consumer." 10. Gujarat High Court in case of Pr. CIT v. Guja....
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.... by the nature of excise duty and came to the figure of Rs. 4.90 to ascertain the market value of electricity generated by the eligible unit and supplied to non eligible business of the assessee. No error was committed by the Tribunal. No question of law therefore, arises. Tax Appeal is dismissed." 11. Judgment of Calcutta High Court in case of CIT v. ITC Ltd. [2016] 236 Taxman 612/[2015] 64 taxmann.com 214 was also brought to our notice in which the said High Court has taken a different stand. However, since the issue has already been examined by this Court earlier and in view of the decisions of the Chhattisgarh and Gujarat High Court, we see no reason to entertain this question. 84. In view of the above, as bearing in mind the entirety of the case- including the fact that in assessee‟s own case for several preceding assessment years, the Assessing Officer had disputed the approach adopted by the assessee, we deem it fit and proper to uphold the plea of the assessee, and direct the Assessing Officer to delete the impugned adjustment of Rs 78,84,57,823. The assessee gets the relief accordingly. 85. Ground no. 3 is thus allowed. 86. In grounds nos. 4 & 5, th....
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.... operation of the rail system (i.e. running of the goods train) was being done by the Indian Railways and not the assessee company; (e) all the four cement plant sites were notified as independent booking stations and the freight was charged for the entire distance- including the distance from these private sidings to the railheads; (f) the notional profit computation is incorrect; and (g) the decisions of the Tribunal were not applicable as these critical facts were not placed before the Tribunal. The claim for deduction under section 80IA in respect of the rail system was rejected. Aggrieved, assessee carried the matter in appeal but without success. Learned CIT(A) reiterated the same arguments and upheld the stand of the Assessing Officer. The assessee is not satisfied and is in further appeal before us. 88. 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. 89. We find that the very case, on the basis of investigation in which the authorities below had decided the matter in favour of the assessee, came up before a coordinate bench of this Tribunal, and, in the said ca....
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....those agreements were for laying out private sidings and not for any rail system [as referred to in Explanation (a) to the clause (t) of sub-section (4) section 80IA in reference to the infrastructure facility] as claimed by the assessee that railway had laid down those [sidings] partly on the land belonging to the railways and partly belonging to the assessee company so as to facilitate the transportation of raw materials/cement bags through railway wagons [from / to their plant sites]. The AO also noted that the assessee [rather L&T Ltd.] had primarily requested the' railway department to extend the sidings [railway tracks] to the site of cement plants of the company so as to enable it to transport its goods [raw material & cement] from/to their plant sites itself [so that it could avoid transportation through the roads till the nearest railway station and loading and unloading etc]; that on such request the railway authorities conducted survey and laid down sidings and charged the assessee for laying out the railway track and other related infrastructure. The AO also noted that the wagons were actually run on those sidings by the railway authority and not by the assessee com....
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....otal claim for that year amounted to Rs 52.38 crs. [Rs 21.09 crs. -Hirmi; Rs 25.56 crs. -Tadipatri & Rs 5.73 crs. -Arakkonam]. In A.Y. 2008-09, the claim extended to one more rail system at Durgapur [West Bengal] and the total claim amounted to Rs 61.56 crs. This claim for AY 2009-10 i.e. for the year under consideration had risen to 73.13 crs. 12. The rail systems at all these four locations viz. Hirmi, Tadipatri, Arakkonam & Durgapur are said to have commenced the operations in AY. 2000-01, AY. 1999-00, AY. 2001-02 ft AY. 2002-03 respectively [refer assessee's reply dated 06.01.2014] It was further observed by CIT(A) that the L&T Ltd. on whose request the private sidings were set up at all these four locations, never claimed any such deduction u/s 80IA(4). The deductions are being claimed by the assessee company since AY. 2004-05, after the various cements plants were transferred to the assessee company [in the year 2003-04] as per demerger scheme. In AY. 2004-05, claim was made [for the first time] in respect of such Rail System at Hirmi. Then in AY. 2007-08, it started claiming deduction in respect of rails systems at Tadipatri and Arakkonam and then in AY. 2008-09....
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.... have increased due to such savings. It was such that the mere fact that it does not raise an invoice from its railway unit to its cement unit cannot govern the tax implication of the profits delivered by the rail system. In support of its contention that treatment of a transaction in books of accounts cannot govern the tax statement reliance was placed on the decision of the Supreme Court in the case of Kadernath Jute Manufacturing Company Ltd. 82 ITR 362; in the case of Tutcorin Alali Chemicals Ltd. in 227 ITR 172; in the case of Godhra Electricity Company in 91 Taxman 91; in the case of Bokaro Steel Ltd in 263 ITR 315 and in the case of Sutlet Cotton Mills Ltd. in 116 ITR 1 and submitted that it would be totally incorrect to say that an assessee who raises internal invoices would be entitled to benefit of Sec 80IA and an assessee who does not raise internal invoices would not be entitled to such benefit. 13.2. The assessee further submitted that Sec. 80IA(8) itself contemplates a situation where goods or services are transferred by an eligible undertaking to non-eligible undertaking and vice versa. In such cases, deduction is to be allowed based on the market value of s....
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....one place to another and thereby augmenting profits of the company as a whole by saving transportation cost which it would have otherwise incurred. It was further submitted that the profits derived from the rail systems are clearly arising out of the business of developing operating and maintaining the rail system. 13.5. It was further submitted that substantial investment has been made in developing the railway system. There is an agreement with the railways for operating and maintaining the rail system. It employs required personnel directly or through the railway authorities and it bearing the salary cost relating thereto. It was submitted that the rail system is developed on the basis of entirely different technology and employs different equipment and machinery from those applied by the cement unit for cement production. It is was further submitted that the rail system is not formed by splitting up or reconstruction of a business already in existence or by the transfer to a new business of machinery previously used for any purpose. It was therefore argued that the rail system is not a part of the cement unit but is an, independent unit. It was further submitted' t....
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....e case, findings given by the AO and submissions made by the appellant, I find that the only issues in this case is whether the appellant is eligible for deduction u/s. 80IA in r/o profits derived from the rail system. There is no dispute that the appellant (i) is a company (if) has developed the rail system and (iii) it" has entered into an agreement for operation and maintenance of the rail system with the railways i.e the Government. Thus all the 3 conditions required to be fulfilled as per Sec. 80IA(4)(i) have been satisfied by the appellant. Moreover rail system is defined in explanation to sec. 80IA(4)(i) as an infrastructure facility. Further separate books of account are being maintained by the appellant. The mere fact that internal invoices are not raised does not mean that the rail system is not a profit centre. It is also found that all the doubts raised by the AO in the assessment order have been fully explained by the appellant the AO has himself stated in the assessment order that the rail system was developed by L&T Ltd which has been inherited by the appellant as a result of the demerger and Circular No. 733 dated 03.01.1996categorically stated that benefit of sec. ....
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.... facility was said to have become operational. 18. The CIT(A) observed that the L&T Ltd., did not claim exemption on operation of those rail systems. Rather the assessee company has started claiming exemption from AY. 2004-05 after the ownership over the cement plants together with such rail systems were transferred to it following the demerger scheme in FY. 2003-04. 19. The CIT(A) further observed that the provision of railway track, signals, level crossings etc are the essential components of a rail system but that in itself would not give rise to any profit. For that movement of traffic [i.e. material] is to be made over those railway tracks. The profit would arise by charging the freight thereon. 20. The CIT(A) further observed that as per' the agreement, the railway track, signals, level crossings etc were laid out on the cost of L&T Ltd. The cost of maintenance was also to be borne by L&T Ltd. [and now by the assessee]. On that only expenses are incurred and there would be no profit element. Then the issue arises of running the wagons onto those tracks. As per the agreement, the assessee was not permitted to run the wagon onto those tracks. ....
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....g system and all the essential components of rail system. The terms of the agreement also provided for its operation and maintenance. He vehemently argued that the rail systems were developed in accordance with the agreements entered with the Indian Railways, wherein assessee was allowed to operate and maintain these sidings under supervision and as per the guidelines of Indian Railway. Our attention was invited to the various clauses particularly Class 2, 6, 7(a), 17 and 8(b) which stipulate for construction of railway sidings at the cost of the assessee. Construction work was awarded either to railway or third party contractors based on their expertise and the work was undertaken under the supervision of the Railways. Clause 6 is specifically provided for payment in advance to the railway administration, the total estimated cost of the work done by the party and thus by the railway administration. Clause 7(a) stipulate that assessee will provide and deliver at site the permanent way and other materials in accordance with the railway administration standard and specifications. Clause 17 stipulate that assessee shall provide labour for and bear the cost of all Operations on the sid....
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....om 340/210 Taxman 229 (Mag.)/349 ITR 309 (Bom.) 3. CIT v. Paul Brothers. [1995] 79 Taxman 378/216 ITR 548 (Bom.) 4. CIT v. Macbrout Engineering (P.) Ltd. [2014] 52 taxmann.com 219 /[2015] 232 Taxman 406 (Bombay) 5. CIT v. Modi Industries Ltd. [2010] 8 taxmann.com 129/327 ITR 570 (Delhi) 6. CIT v. Delhi Press Patra Prakashan Ltd. [2013] 34 taxmann.com 3/217 Taxman 288/355 ITR 14 (Delhi) 7. Saurashtra Cement & Chemical Industries Ltd. v. CIT [1979] 2 Taxman 22/[1980] 123 ITR 669 (GUJARAT) 8. Ace Multi Axes System Ltd. v. Dy. CIT [2015] 228 Taxman 98/[2014] 49 taxmann.com 168/367 ITR 266 (Karnataka) 9. ITO v. Smt. Urmila Bhandari [IT Appeal Nos.766, 2593 (Delhi) of 2013, dated 20-10-2014] 10. Dy. CIT v. Selvel Advertising (P.) Ltd. [2015] 58 taxmann.com 196 (Kol.-Trib.) 11. Century Enka Limited v. Dy. CIT [2015] 58 taxmann.com 318/154 ITD 426 (Kol.-Trib.) 12. Janak Dehydration (P.) Ltd. v. Asstt. CIT [2011] 44 SOT 93 (Ahmedabad) (URO) 13. U.P. State Bridge Corporation Ltd. v. Dy. CIT [2015] 62 taxmann.com 61/70 SOT 517 (Lucknow - Trib.) 14. Asst. CIT v. Apex Packing Products (P.) Ltd. [IT Appeal Nos. 145 to 150 (P....
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....lower authorities in their respective orders as cited by learned AR and DR during the course of hearing before us in the context of factual matrix of the case. 34. Grievance of both the assessee and revenue revolves around assessee's eligibility for claim of deduction u/s.80IA (4) of the Income-tax Act. From the record we found that assessee UltraTech Cement Ltd. ('UTCL') has acquired the cement business of Larsen & Toubro Limited (L&T') along with the Rail systems at Hirmi, Tadipatri, Arrokonam and Durgapur in the FY. 2003-04. These Railway systems were developed on or after 01/04/1995 by the L&T. year wise details of the aforesaid rail systems are as follows: Unit I Rail system Undertakings Year of Commencement of operations (A. Y.) Initial year of claim (A.Y.) Rail system at Hirmi in the state of Chhattisgarh 2000-01 2004-05 Rail system at Tadipatri in the state of Andhra Pradesh 1999-00 2007-08 Rail system at Arakkonam in the state of Tamil Nadu 2001-02 2007-08 Rail System at Durgapur in the state of West Bengal 2002-03 2008-09 35. M/s. L&T had entered into agreements with the Railway authorities to ....
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....actory premises, and therefore the Agreements entered into by the assessee with the Indian Railways cannot be regarded as required agreements between the Govt. and the assessee. In this respect the assessee submitted as under before the lower authorities. (a) as per section 80- IA(4)(i)(b) the agreement has to be entered with the Central Govt or a State Govt 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. Indian Railways is the statutory body under the Indian Railways Act. (b) The provision of Sec.80-IA (8) contemplates a situation where goods or services are transferred by an eligible undertaking and vice versa. Undoubtedly therefore, the section itself envisages situations of captive consumption. (c) Further as mentioned in clause 15 of the agreement, the rail systems developed by the appellant can be made available to any third party with the prior approval of the Indian Railways. 36. It was therefore contended that the agreements as entered into by the assessee with Indian Railways are as envisaged u/s 80- IA( 4 )(i) and in....
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....ated 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 specifications. All charges incurred in laying and fitting the permanent way materials and all other equipments which may be provided shall entirely be borne by the applicant." (d) Clause No. 17 - Working of the Siding - wherein it is mentioned that " ... the applicant shall provide labour for and bear the cost of all Operations on the siding. The applicant shall be responsible for the strict compliance by himself and his employees and agents of all rules, regulations and standing....
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....deduction under the said section. Further, the circular also states that rail systems developed other than under the BOLT scheme were also eligible for benefit u/s 80-IA. In case of the assessee, the clarification of benefits u/s. 80-IA being available to those rail systems who do not 'operate and maintain' the systems clearly establishes that, enterprises who in fact operate and maintain the rail systems were certainly eligible for tax holiday benefits. As the assessee has entered into agreements with the railway authorities to develop, operate & maintain the rail systems, which in fact the company has done from the initial day. There was indeed an 'infrastructure' facility eligible for deduction u/s 80lA. We also found that the Hon'ble ITAT in assessee's own case for AY. 2006-07, has categorically allowed the deduction u/s. 80-IA for its rail system after dealing with the Circular No. 733 dtd 3.1.1996. 43. The Rail systems of assessee at Hirmi, Tadipatri, Arakkonam and at Durgapur were developed under the Agreements entered into with Indian Railways and the assessee is allowed to Operate and Maintain in accordance with terms and conditions of the ....
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.... as entered into by the assessee with Indian Railways are as envisaged u/s 80- IA(4)(i) and in no case it can be inferred that they are not the required agreements under section 80-IA. 47. We also found that no siding charges are levied by Indian Railways for the rail systems developed by the assessee. The assessee has developed, operates and maintains the rail systems. The systems are being operated by the assessee as permitted under the agreements entered into with Indian Railways and under the rules and regulations of Indian Railways from time to time. The entire cost was borne by the assessee and is appearing in the balance sheet of the assessee as placed on record. We have also verified the same and found it correct. 48. Contention of revenue authorities that Railways had constructed the rail system is not factually correct. In fact, M/s. L&T had entered into agreement with the appropriate rail authorities to Develop its rail systems. M/s. L&T had constructed the rail system by awarding contract to the private parties for construction of rail sidings (including upto the nearest rail head) under the supervision of Indian Railways approved agency, and the entir....
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....dministration from time to time for the working of sidings and for all accidents, loss or damage that may be ensured or be caused by reasons of negligence or non-observance of such rules, regulations and orders .... " Further, the appellant carries out all the operations for smooth movement of its goods, viz. Shunting of the Wagons, placing of the wagons at appropriate locations, Loading / Unloading of Wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, Weighing of Wagons on Motion Weigh Bridges, Maintaining signa ling systems, Wagons, Couplings, Rake formation for dispatch, hauling of Wagons through its own locomotives, etc. Further, in Clause No. 14 - Traffic on Siding - it is mentioned that applicant undertakes to shunt the wagons from such point to his premises and back with his own labour and the railway administration would not be responsible for any delay, loss and damages caused in consequence of the failure of the applicant to arrange for such shunting. " Thus, the rail system is being operated by the appellant and the cost of above operations is borne by appellant. (e) ....
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.... considered as lower of the freight chargeable through Rail and Road freight saved. The rail freight being lower is considered after further discounting it by 50% based on the circular of Indian Railways for the freight chargeable upto the nearest railway station. 52. We also found that assessee has furnished all the information with regard to No. of Railway Engines / Locomotives and Railway Wagons owned by the assessee before the lower authorities which are as under:- Rail Systems at No. of Engines / Locomotives No.of Wagons Hirmi 2 49 Tadipatri 2 76 Arakkonam 1 30 Durgapur 2 30 53. Unit wise details of amount of claim of deduction u/s.80-IA on the profits of Rail System for AY. 04-05 to AY. 09-10 is as under:- Rail Systems at AY. 04-05 AY. 05-06 AY. 06-07 AY. 07-08 AY. 08-09 AY. 09-10 Hirmi 15.63 16.13 20.95 21.09 24.33 28.26 Tadipatri -- -- -- 25.56 25.22 31.03 Arakkonam -- -- -- 5.73 6.30 7.11 Durgapur -- -- -- -- 5.71 6.72 54. We have also verified the calculation of revenue from rail system, filed befo....
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....nfrastructure facility' which was applicable till AY. 2001-02. The assessee company began its claim of deduction from AY 2004-05 when the definition was simplified with no indication about 'public facility'. Thus CIT(A) was not correct while declining claim of deduction u/s.80IA(4) on this reasoning. 57. As per our considered view, even assuming that the requirement of public facility is to be fulfilled, it is worth noting that a section of public is also considered to be public. This principle has been laid down by the Hon'ble Supreme Court in the context of a Chamber of Commerce CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 wherein it was ruled that even though the Andhra Chamber of Commerce was established only to serve the traders and businessmen in the State of Andhra Pradesh, such traders and businessmen constituted a section of public and therefore the Chamber existed for a public charitable purpose. In the ultimate analysis of the facts in the case of assessee Company, the benefits of such siding does ensure to the public in general - to the consumers of cement. Any benefit to the business even though it is first enjoyed by the particular trad....
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....reement 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, with whom the assessee has entered into an agreement, is the statutory body designated under the Indian Railways with whom the assessee has entered into an agreement, is the statutory body designated under the Indian Railways Act. We found that the agreement does not merely contain the terms and conditions of the construction of railway siding i.e. development of siding (laying of tracks, signal system and all the essential components of Rail Systems) but it also contains the terms and conditions relating to its operation and maintenance as well. 60. Our attention was also invited to letter No. 99/TC(FM)26/1/Pt-II (Sub-Liberalization of siding 'Rules) of the Railway Boar clarifying that the capital cost of new siding, maintenance cost, cost of Railway staff etc. will be borne by the enterprise only, which also supports our view. 61. As far as operations is concerned, we found that the assessee carries out al....
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....nce of the Railway siding. Thus this fulfils the requirement in clause (b). 66. The last requirement as per clause (c) is regarding commencement of operation and maintenance of facility on or after 1st April, 1995. All the railway sidings were developed after April, 1995 as can be verified from the date of agreements entered into by the assessee with the Railway authorities; which are as under:- Location Authority with which Agreement is entered Date of agreement Hirmi South Eastern Railway March 2000 Tadipatri South central Railway 03-05-1999 Arakkonam Southern Railway 08-01-2001 Durqapur Eastern Railway 18-10-2002 67. This also is an undisputed fact and there is no adverse remark by the AO or CIT(A) in this regard. In view of above all the conditions specified in section 80IA(4) has been complied with by the assessee entitling it to claim the tax holiday. 68. With regard to CIT(A)'s observation that the actual operation of Rail System [i.e. running of goods train] onto the private sidings between the serving railway station and plant premises [upto interchange point! exchange yard], was being done by the ....
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.... portion of private sidings [upto interchange point / exchange yard], we observe that this is a fact which is undisputed by the assessee and nothing turns out of it. 75. CIT(A) also alleged that the notional profit computed for so called rail system has been very exorbitant and the method is also not correct. It need to be computed in the manner as explained in para 3.2.14 [with reference to table F] above. If that is done, there would hardly be any profit to those rail systems. 76. In this regard, we found that prior to setting up of railway siding, the assessee used to transport its goods through road to the nearest railway station. Only the few components of the cost of road transportation, which the cement division of the assessee was hitherto incurring for transportation of materials to and from the factory premises, is adopted as the basis of calculating the revenue of the railway undertaking. The revenue is, however, computed for the actual services rendered by the railway undertaking to the cement division. 77. After verifying the computation of income eligible for deduction u/s.80IA, as filed by assessee, we found that the CIT(A) has misunderstoo....
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.... the railway undertaking. 81. In view of the above discussion, the explanation given by the CIT(A) and the tabular representation of the computation of revenue of rail system in Table F, has no relevance since it is merely based on his incorrect assumption. 82. Further, we found that observation of CIT(A) with respect to the freight rate is also not correct in so far as for comparison, he has considered the rate per quintal as against per Metric Ton adopted by the assessee which can be observed from the calculation submitted by assessee before the lower authorities. Without any evidence in hands, the CIT(A) has merely stated that crucial facts were not disclosed by the assessee without referring to any specific facts which were not disclosed. Perhaps he is indicating about the operations of railway siding being carried out by the railways and not by the assessee. However, as aforesaid, he is comparing the operation of railway siding with merely hauling of wagons. The operations of railway siding involves various activities other than the hauling of wagons. Mere haulage of wagons cannot be equated with operations of railway siding. We found that assessee has filed ....
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....99/352 ITR 513, wherein Court held as under:- "32. It is true that with effect from 1-4-2002 some significant changes were made in the said provisions. Three of these changes which are material were: (i) that sub-section (4) of section 80-IA now required the enterprise to carry on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility. This was in contrast to the previous requirement of all three conditions being cumulatively satisfied; (ii) that the explanation of the term 'infrastructure facility' was changed to besides others, a road including toll road instead of hitherto existing expression 'road', and (iii) that the requirement of transferring the infrastructural facilities developed by the enterprise to the Central or the State Government or the local authority within the time stipulated in the agreement was done away with. 33. These changes, however, would not alter the situation vis-a-vis the impugned amendment. These legislative changes did enlarge the scope of the deduction and in a sense, made it available to certain assessees who would not have been, but for the chan....
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....aced on the decision of the Hon'ble ITAT of Jaipur in the case of Asstt. CIT v. Shiv Agrevo Ltd. [2009] 34 SOT 1 (URO). In this case, the assessee-company, whose main object was extraction of seeds for obtaining edible oils and refining thereof, set up a new industrial undertaking for the extraction and refining of edible oil. It claimed to have temporarily commenced the activity on and from 1-1-1997 on a trial run; however, the systematic activity of refining commenced only in the previous year relating to the assessment year 1998-99. After the final completion of the project, the assessee-company applied directly for a permanent registration certificate of its status as a small scale industry (SSI) under section 11-B of the Industrial Development Regulation Act, 1951 (IRDA) to the prescribed authority, who granted the certificate dated 30-3-1998, which was a conclusive and final proof of such a status under the provisions of IRDA. The return of income filed earlier by the assessee for the assessment year 1999-2000 as subsequently revised, wherein a claim of deduction under section 80-IA was made. The Assessing Officer disallowed the claim of the assessee, on the ground that t....
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.... to be treated as initial assessment year for the purpose of Section 80IA. 92. It is pertinent to mention here that once the deduction for the very first is allowed then in subsequent year the deduction cannot be disallowed on the same ground. Hon'ble High Court decision in the case of Saurashtra Cement & Chemical Industries Ltd. (supra), has pointed out that once deduction is allowed in the first year, revenue has no power to deny the deduction in subsequent assessment years as provided under the Act. 93. Even the Supreme Court in case of Bajaj Tempo Ltd. v. CIT [1992] 62 Taxman 480 /196 ITR 188 held that a provision in the taxing statute for promoting growth and development is to be construed liberally and hence, even the restriction contained in such a provision has to be construed so as to advance the objective of the provision and not to frustrate it. 94. The CIT(A) has also raised an objection to the effect that since L&T was not eligible for deduction u/s.80IA on operation of those rail system, then whether the assessee company, which inherited the cement business [i.e. cement plants together with said rail system] of the L&T Ltd in the FY. 200....
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.... authorities below, and seeks to justify the same. We have also noted that in three immediately preceding assessment years, the same stand of the assessee, which has been rejected now, was accepted during the scrutiny assessment proceedings. While it is indeed true that there is no res judicata in the income tax assessment proceedings, at the same time, following the principles of consistency duly recognized by Hon'ble Supreme Court in the case of Radhasoami Satsang Vs CIT [(1992) 193 ITR 321 (SC)], unless there is a change in the material facts, the issues which have been settled one way or other must to be disturbed. In this view of the matter, and respectfully following the coordinate bench in the case of Ultratech Cement Ltd (supra), we uphold the plea of the assessee. The Assessing Officer is, therefore, directed to delete the impugned disallowance in respect of claim of 80IA in respect of rail system. The assessee gets the relief accordingly. 91. Ground no. 4 is thus allowed. 92. 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 CIT(A) erred in confirming the action of the AO ....
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.... same at whopping Rs 17,20,08,407 which are more than 300% of the actual charges" and this fact "clearly shows that the assessee had so arranged his affairs to show extraordinary profits...... to avail higher deduction under section 80IA of the Act, than admissible." It was in this backdrop and solely for this recorded reason that the Assessing Officer invoked Section 80IA(10) which provides that "Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom". He then referred to the Explanation to Section 80IA(8) , which provides that market value, in relation to any goods or services, means -(a) the pric....
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....557.2 94. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without success. The assessee is not satisfied and is in further appeal before us. 95. 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. 96. We find that the Assessing Officer has invoked the provisions of Section 80IA(10) for the short reason, as set out in the assessment order, 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 the actual charges" and this fact "clearly shows that the assessee had so arranged his affairs to show extraordinary profits...... to avail higher deduction under section 80IA of the Act, than admissible". Clearly, therefore, there is nothing more than the quantum of savings which has led to the As....
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....r, by invoking section 80IA(10), to disturb this computation- unless the computation itself does not meet the test of law. The only question thus open to the Assessing Officer was to take a call on whether this system of computing the profits on the basis of notional savings is an acceptable method of computing the profits or not. Once the Assessing Officer holds, as he implicitly did in this case as well, that the method is acceptable, it is not open to him to reject the results just because the savings were more than a very large portion of the expenditure. The mention of figures like 300% is in a way inappropriate because even if post construction of the jetty, the expense level is so reduced that the benefit is 300% of the actual expenses, all it means is that the savings are more than 3 times the actual expense level, i.e. 75% of earlier expenditure- but then unless such large savings are possible, none would make such huge investments in an infrastructure that he does not own at all. As regards the savings approach, it has been approved by the coordinate benches- as in, for example, in Assam Carbon Products Ltd Vs ACIT [(2007) 12 SOT 41 (Kol)], and no contrary decision has be....
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.... claimed by the assessee. 98. Ground no. 5 is thus allowed. 99. In ground no. 6, the assessee has raised the following grievances: 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 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. 100. 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 the assessment proceedings, the Assessing Officer noted that while computing the deduction under section 80IA in respect of captive power plants, ports and rail systems, the assessee had debited the expenses directly attributable to the eligible units, net of CENVAT credit availed, wherever applicable, on the expenditure incurred. These CENVAT credits are available under the excise provisions and adjusted against the excise duty liability on goods produced by the related cement manufacturing units. In effect, the component of expenses of statutory duties/ taxes is credited directly to "CENVAT receivable ac....
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....ng treated on a standalone basis, but then in case the Assessing Officer makes an adjustment for the payment which has earned the CENVAT credit, he must also make an adjustment for the corresponding CENVAT credit availed by any other unit of the assessee - other than the eligible unit. If the captive power unit makes a payment of X amount, and in turn, it generates a CENVAT credit of X amount, which is availed by another unit, say Ropar Cement Manufacturing Unit, the hypothetical independence embedded in the profit computation on a standalone basis requires that the Ropar Cement Manufacturing Unit must reimburse the captive power unit for such a CENVAT credit. It cannot be open to the assessee to provide for the expenses which have earned the CENVAT credits, but not to account for the CENVAT credits and the benefits accruing form the same. In any event, the fiction envisages under section 80IA(5) is to enable computation of profits on a standalone basis, rather than to increase the scope of profits itself and allocate notional expenditure to the eligible units. When the eligible units are other units are treated as independent of each other, and the profit computations are on a sta....
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....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 Assessing Officer, as he was of the view that the head office expenditure are common expenses which need to be allocated to every unit, including eligible units, as all the units benefit from the same. The allocation of expenses was done on the basis of the turnover. Aggrieved, the assessee carried the matter in appeal before the CIT(A), but without any success. The assessee is not satisfied and is in further appeal before us. 107. 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. 108. We are unable to see any merits in the stand of the assessee that the head office expenses cannot be allocated to all the units, as deductions and allowance of eligible units are required to be taken into account while treating such units as profit centres, and computing the profits accordingly. The fiction of the eligible units being treated on a standalone basis does not require that the profits of the units are to be computed as if the....
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....s 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 encashment of Rs. 6,54,66,319/- 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 AO in not allowing the claim of leave encashment amounting to Rs. 6,54,66,319 / -. b) The Appellant prays that the AO be directed to allow the claim of the Appellant. 115. Learned representatives fairly agree that whatever is decided on the above issue for the assessment year 2006-07, the cross-appeals for which were heard along with this set of cross-appalls will apply mutatis mutandis for this assessment year as well. While dealing with the assessment year 2006-07, we have held as follows: 44. Learned counsel for the assessee fairly submits that the issue now stands covered against the assessee, and deduction on a provision basis is indeed inadmissible. He, however, prays that a direction may be given that the Assessing Officer at least allows it on a payment basis as and when the p....
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....ovisions 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 respectfully following the views of the coordinate bench, we uphold the plea of the assessee and direct the Assessing Officer to delete the impugned addition to the book profits under section 115JB. The assessee gets the relief accordingly. 120. Ground no. 10 is thus allowed. 121. Ground no. 11 has already been discussed earlier in this order and is allowed. No further adjudication is, as such, required. 122. In ground no. 12, the assessee has raised the following grievances: Addition of Rs. 6,54,66,319/- in respect of leave encashment on provision basis while computing book profits u/s. 115 B of the Act: a) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of the AO in not excluding the provision for leave encashment while computing book profits u/s. 115JB. b) The Appellant prays that the AO be directed to exclude the provision for leave encashment while c....
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....le 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 filed by the Assessing Officer. 131. In ground no. 1, 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) as right in allowing the appeal of the assessee and holding the sales tax incentives as capital in nature?" 132. While dealing with the appeal for the assessment year 2010-11 earlier in this order, and for the detailed reasons set out in paragraphs 32 to 35 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. 133. Ground no 1 is thus dismissed. 134. In ground no. 2, the Assessing Officer has raised the following grievance: "Whether, on the facts and in the circumstances of the case and in law, the....
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....see‟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 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 140. Ground no. 4 is thus dismissed. 141. In ground no.5, 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 road transport subsidy availed by the assessee, aggregating to Rs. 41,05,28,050/-, as capital in nature, whereas the same is in the nature of revenue incentive." 142. In a related ground of appeal, i.e. ground no. 6, 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)....
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.... 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 paragraphs 48-51 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. 148. Ground no. 7 is thus dismissed. 149. In ground no.8, 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 additional depreciation on all the eligible assets acquired before 01.04.2009?" 150. This is....
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....n, 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. Ground no. 10 is also dismissed. 158. In the result, the appeal of the revenue is dismissed. 159. To sum up, while the appeal of the assessee for the assessment year 2011-12 is partly allowed, the appeal of the revenue for the assessment year 2011-12 is dismissed. Assessment year 2012-13 160. These cross-appeals and cross-objections pertain to the same assessee and are directed against the order dated 05th January 2018 passed by the learned CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2012-13 161. We will first take up the appeal filed by the assessee. 162. In ground no. 1, the assessee has raised the following grievances: 1(a). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) w....
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....os. 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 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 confirming the action of the AO in holding that for the purpose of claim of tax holiday u/s 801A on infrastructure facility, being Rail System, the same should be a facility for public utility. The Ld. CIT(A) also erred in concluding that the Appellant was not operating rail system merely because sidings were laid from / upto the plant site. 2(c). 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 holding that the agreements entered into between the Appellant and the Indian Railways cannot be termed as....
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....ction 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 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. 167. Groun....
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.... 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 undertakings eligible for deduction u/s 80IA. 4(c). Without prejudice to above, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified in agreeing with the AO's action of apportioning CENVAT credit on the basis of turnover of the undertakings eligible for deduction u/s 80IA 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). 4(d). 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 undertakin....
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....e 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 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 make necessary adjustments in the quantum of adjustments, as resulting from the revised basis of allocation. Subject to these observations, plea of the assessee is rejected. 176. Ground no. 5 is thus partly allowed in the terms indicated above. 177. In ground no. 6, 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....
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....e 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 Sales applying CUP Method instead of 0.30% of the Net Sales as submitted by the appellant in the absence of exact comparables." 185. So far as this grievance of the assessee is concerned, it is to be noted that during the relevant previous year, the assessee received licence fees of Rs 25,15,710 being 0.30% of the net sales from its Sri Lanka AE by the name of Holcim (Lanka) Ltd. When the arm‟s length price determination in respect of this transaction came up for the consideration of the Transfer Pricing Officer, the TPO was of the view that the entity level ben....
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....r. 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 nature of income, it cannot form part of book profit u/s 115JB of the I.T. Act, 1961. The Court, further observed that the facts of case before the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) were altogether difference, where the income in question was taxable, but was exempt under a specific provision of the Act, and as such it was to be included as a part of book profit, but where the receipt is not in the nature of income at all, it cannot be included in book profit for the purpose of computation u/s 115JB of the I.T. Act,....
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.... 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 evidences submitted by the Appellant. 10(c). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have held that the dividend declared by the Appellant should have been liable to dividend distribution tax (DDT') at the rate of 5 percent as against 16.2225 percent and the refund of excess DDT paid ought to have been allowed to the Appellant. 193. Learned counsel submits that the learned CIT(A) did not admit this additional plea, and prays that the ground may be adm....
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.... 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 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 in this assessment year. Respectfully following the view so taken in assessee‟s own case, we dismiss this grievance as well, and decline to interfere in the matter. 206. Ground no 3 is thus dismissed. 207. In ground no. 4, the Assessing Officer has raised the following grievance: "On the facts and in th....
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....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 with the appeal for the assessment year 2011-12 earlier in this order, and for the detailed reasons set out in paragraphs 153 to 155 and decisions referred to therein, we have dismissed exactly the same grievance of the assessee. The same is view of the coordinate benches in assessee‟s own cases right form 1999-2000 onwards. We see no reasons to take any other view of the matter than the view so taken by u....