TaxTMI 
TaxTMI 
2023 (2) TMI 1210
X X X X Extracts X X X X
X X X X Extracts X X X X
....ontention which is duly considered while adjudicating present appeal. Further, the Ld. AR of the Assessee has vehemently relied upon decision of coordinate bench in the case of Ambuja Cement Limited, holding company of Assessee for AY 2005-06 to 2012-13 and same are summarised herein below: - SR No ITA No Date of order 1 5883/Mum/2012& 5927/Mum/2012 for AY. 2005-06 30/10/2022 2 2848/Mum/2013 and 2366/Mum/2013 for AY 2006-07 03/11/2022 3 6375/Mum/2013 & 6405/Mum/2013 for AY 2007-08 07/11/2022 4 2968/Mum/2015 & 3307/Mum/2015 for AY 2008-09, 1665/Mum/2019 & 2428/Mum/2019 for AY 2009-10 07/11/2022 5 2384/Mum/2019 for AY 2010-11, 3475/Mum/2018 for AY 2011-12 &1241/Mum/2018 for AY 2012-13 07/11/2022 6 2384/Mum/2019 & 2958/Mum/2019 for AY 2010-11, 3843/Mum/2019 & 3475/Mum/2019 for AY 2011-12, 1241/Mum/2018 & 1889/Mum/2018 for 2012-13 07/11/2022 ITA 3786/MUM/2009 (REVENUE APPEAL) 2. First we take up Revenue Appeal in ITA No. 3786/Mum/2009 (where ever applicable common ground in assessee's appeal is also taken up together). 3. In the Ground No.1, Department has raised the following grievance: - "On ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The Assessing Officer has applied average rate of interest @10% on above figure of Rs..153 crores and made disallowance at Rs..15.30 crores. 7. In appeal Ld.CIT(A) has discussed the above issue at Para No.5.4 and 5.5. of his order and held as under: "5.4 I have carefully considered the submission Under Sec. 14A(1), no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not fall part of the total income under Income Tax Act. Under Section-14A(2), if the Assessing Officer is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to exempted income, he will determine the amount of expenditure incurred in relation to the exempted income, in accordance with the prescribed method. The prescribed method referred here is Rule 8D. There is no direct expenditure specifically incurred to earn the exempted income. Under Rule8D(2)(ii), the interest expenditure which is not directly attributable to any particular income or receipt is to be computed. 5.5 I have carefully considered the Ld. AR's submission that sufficient interest free own funds are available and t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessment order and heavily relied on the decision in the case of Williamson Financial Services Limited, (ITA No 154 to 156/Gau/2019), ITAT Gauhati Bench in which it was held that rule 8D is applicable retrospectively. Hence she contended that the observation of Assessing Officer is proper and prayed that order of Assessing Officer may be restored. 11. Considered the rival submissions and material placed on record. It is observed that Assessing Officer has not made disallowance u/s 14A applying rule 8D as it was not in statute in the year under consideration. The Assessing Officer has made proportionate disallowance of interest as per formula mentioned in Para No. 4.2 of Assessment Order. It is observed that Assessee has sufficient own funds in form of share capital and reserves and surplus in comparison with investment in shares made by it. On this issue, Hon'ble Supreme Court held in the case of South Indian Bank Ltd[2021] 130 taxmann.com 178 as under: "Section 14A of the Income-tax Act, 1961 - Expenditure incurred in relation to exempt income not includible in total income (General) - Assessee-scheduled banks earned income from investments made in tax-free secur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....TR 466." 13. Respectfully following the binding decision of Hon'ble Supreme Court and Hon'ble Jurisdictional High Court referred supra, disallowance u/s 14A made by Assessing Officer is accordingly deleted. Thus, ground of appeal no. 1 in departmental appeal is dismissed and ground of appeal filed by Assessee is allowed. 14. In the Ground No 2, Department has raised the following grievance: "On the facts and the circumstances of the case and in law the CIT(A) erred in deleting the addition of different unutilised CENVAT credit of Rs..16,93,37,435/- without appreciating the fact that the Assessing Officer has rightly made the said addition by invoking the provision of Sec. 145A of the Act." 15. The Assessing Officer has dealt with the issue at Para No. 5 to 5.3 of Assessment Order. The Assessing Officer has observed that Assessee has following exclusive method of accounting and unutilised CENVAT credit on closing stock of raw material and stores is Rs..16,93,37,435/- which is required to be added back to total income of assessee considering provisions of Section 145A of the Act. 16. In appeal Ld.CIT(A) has discussed the above issue at Para No. 6.4 and 6.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9;ble High Court relying on the decision of the Hon'ble Supreme Court in the case of CIT v. Indo Nippon Chemicals Co. Ltd. [2003] 130 Taxman 179/261 ITR 275 held that the unutilised credit cannot be directly added to the income of the assessee. The relevant para of the said decision is reproduced hereunder:- "5. We have considered the submissions. It is not disputed that the assessee was liable to excise duty. The assessee got credit in the excise duty already paid on the raw materials purchased by it and utilized in the manufacturing of excisable goods. The assessee was adopting the exclusive method i.e. valuing the raw materials on the purchase price minus (-) the Modvat credit. The same would be permissible. The Apex Court in the case of Indo Nippon Chemicals Co. Ltd. (supra) while affirming the order of High Court, has observed that the income was not generated to the extent of Modvat credit or unconsumed raw material. Merely because the Modvat credit was irreversible credit offered to manufacturers upon purchase of duty paid raw materials, that would not amount to income which was liable to be taxed under the Act. It is also held that whichever method of accountin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Ld.CIT (A) has discussed the above issue at Para No. 7.3 of his order and held as under: 7.3 As I find the issue is squarely covered by the decision of the Bombay High Court in the case of Otis Elevator Co. Ltd. vs. CIT reported at 195 ITR 682. This issue has also been decided in favour of the Assessee by the ITAT and my predecessors in the earlier years. Following such decisions, the addition made by the Assessing Officer is deleted. 23. Aggrieved with the above observation of Ld.CIT(A), Revenue has filed this appeal. During the course of appellate proceedings, Ld. AR of the assessee has relied upon finding of Ld.CIT(A) and contended that identical issue is also decided in its favour in A.Y. 1987-88 to 1991-92 and also in A.Y. 2004-05, whereas Ld.DR has relied upon finding of Assessing Officer and contended that observation of Assessing Officer may be restored. 24. Considered the rival submissions and material placed on record. It is observed that identical issue has been decided in favour of assessee by Coordinate bench assessee's own case for A.Y. 2004-05 in ITA No 5259/Mum/2027 dated 27/05/2022 wherein it is held as under: "3. We have heard the rival co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Ambuja Cement Limited in ITA No 5883/Mum/2012 & 5927/Mum/2012 (for A.Y. 2005-06) vide order dated 31/10/2022 has dismissed revenue's appeal. Respectfully following the above said decisions as discussed herein above, this ground in Departmental Appeal is dismissed. 26. In the Ground No 4, Department has raised the following grievance: "On the facts and the circumstances of the case and in law the CIT(A) erred in deleting the addition of Rs..1,50,42,422/- holding that the amount received on sale of TDR is a capital receipt. 27. During the course of appellate proceedings, Ld.AR of the assessee has admitted that it is capital receipt and Ld. DR has relied on the findings of Assessing Officer. Considering the above, addition made by Assessing Officer for Rs..1,50,42,422/- is sustained and this ground of appeal in departmental appeal is allowed. 28. In the Ground No 5, Department has raised the following grievance: "On the facts and the circumstances of the case and in law the CIT(A) erred in deleting the addition made by the Assessing Officer on account of sales tax subsidy under the normal provisions and u/s.115JB of the Act, relying on the order of his prede....
X X X X Extracts X X X X
X X X X Extracts X X X X
....DR has mainly relied upon finding of Assessing Officer and contended that order of Assessing Officer may be restored. On the other hand, the Ld. AR has relied upon finding of Ld.CIT(A) and argued that each scheme of sales tax was considered by Ld.CIT(A) in appellate proceedings and issue is decided in assessee's favour. It was also explained that relevant decisions for various courts, each scheme was also provided during the course of appellate proceedings, The Ld.AR of the assessee has also referred to decision of Coordinate bench in its own case for A.Y. 2003-04 wherein identical issue was decided in favour of the assessee. The Ld. AR has also relied upon decision of coordinate bench in the case of Ambuja Cement Limited (referred supra) for A.Y. 2005-06 to 2011-12 wherein sales tax incentives received by assessee for various units set up in different states and availed different incentive schemes as capital receipts. The Ld. AR has also relied upon decisions of various ITAT as well as High court for various different schemes wherein sales tax incentives are treated as capital receipts. 32. Considered the rival submissions and material placed on record. On this issue, coordinat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he preamble of the schemes are concerned, and concluded that while the amounts aggregating to Rs 130,57,12,796, in respect of Punjab and Maharashtra Schemes, are indeed capital receipts in nature, and exempt from tax as such, the amounts aggregating to Rs 39,36,21,956 are revenue in nature, and to that extent the Assessing Officer was justified in including the same in taxable income. None of the parties is satisfied. While the assessee is aggrieved of the amount of Rs 39,36,21,956 being included in his taxable income, the Assessing Officer is aggrieved of the learned CIT(A)'s granting relief of Rs 130,57,12,796. Both parties are in appeal before us. 6. 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. 7. We find that the learned CIT(A) has, in his elaborate analysis, primarily followed the Special Bench decision in the case of DCIT Vs Reliance Industries Ltd [(2004) 88 ITD SB 273 (Mum)]. Upon analysis of this decision, he has noted that 'for deciding the nature of subsidy, whether capital or revenue, what should be seen and examined is the purpose for which....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r to consider the Sales-tax exemption benefit of Rs. 5,45,81,171/- as capital receipts is concerned, Mr.Mehta contended that in view of the decision of the Calcutta and Punjab High Court, the Tribunal has committed an error in reversing the view taken by CIT (Appeals) so far as Tax Appeal No.226 of 2010 is concerned, wherein the CIT (A), after discussing the evidence has held in favour of the department. In this regard, he has relied upon the decision of High Court of Bombay in the case of CIT v. Reliance Industries Ltd. [2010] 8 taxmann.com 218/[2011] 339 ITR 632, wherein it is held that object of subsidy being to set up new units in backward area is a capital receipt and another decision of High Court of Calcutta in the case of CIT v. Chhindwara Fuels [2001] 114 Taxman 707/[2000] 245 ITR 9, wherein it is held that subsidy in the form of refund of sales-tax received after commencement of production cannot be treated as capital receipt. 8. On the other hand, Mr. Soparkar, learned counsel appearing for the respondent contended that so far as Tax Appeal No.226 of 2010 is concerned, after discussing the evidence on record, the Tribunal has followed earlier decision and discus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....IT v. Munjal Auto Industries Ltd. [2013] 37 taxmann.com 115/218 taxman 135 (Guj.) the issue is squarely covered and the decisions which are sought to be relied upon by learned advocate for the appellant are not applicable in the facts of the present case. In the case of Birla VXL Ltd. (supra), this Court has observed as under:- '12. It can thus be straightaway seen that the benefit, though computed in terms of the Sales Tax liability in the hands of the recipient, the same was not mean to give any benefit on day-today functioning of the business, or for making the industry more profitable. The principle aim of the scheme was to cover the capital outlay already made by the assessee in undertaking special modernization of its existing industry. 13. In a recent decision dated 28th January 2013 in Tax Appeal No. 450 of 2012 and connected appeals, we had an occasion to examine the nature of incentives received by the assessee from the State Government in the form of entertaining tax waiver for setting up multiplexes. In such context, we had in wake of the revenues contention that the receipt was revenue in nature, held and observed as under : "From the pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed capital investment has been defined as to include various investments in land under use, new construction, plant and machinery etc. The entitlement was related to percentage of fixed capital investment. 8. It is undoubtedly true that such subsidy was computed in terms of sales tax deferment and necessarily therefore, would accrue to an industry only once the commercial production commences. However, this by itself would not be either a sole or concluding factor. In case of Sahney Steel and Press Works Ltd. and others v. Commissioner of Income-tax reported in 228 ITR 253, the Apex Court held and observed that the character of the subsidy in the hands of the recipient whether revenue or capital will have to be determined, having regard to the purpose for which the subsidy is given. The source of find is quite immaterial. If the purpose is to help the assessee to set up its business or complete a project the monies must be treated as having been received for capital purposes. Such But if monies are given to the assessee for assisting him in carrying out the business operations and given after the satisfaction of the conditions of commencement of production, such subsidy mu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o income tax. In this regard, we find that ld. AR placed reliance on the decision of Hon'ble Supreme Court in the case of Ponni Sugars and Chemicals Ltd., reported in 306 ITR 392, wherein the incentive conferred under that scheme were two fold. First, in the nature of higher free sale sugar quota and second, in allowing the manufacturer to collect Excise duty on sale price on the free sale sugar in excess of the normal quota, but to pay to the Government only the Excise duty payable on the price of levy sugar. The Hon'ble Supreme Court in para 14 of its decision had held that "character of receipt of subsidy has to be determined with respect to the purpose for which the subsidy is given. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial." In fact, the Hon'ble Supreme Court while rendering this decision had duly considered its earlier decision in the case of Sahney Steel and Press Works Ltd., reported in 228 ITR 253 and had absolutely no quarrel with that judgement. Rather, it concurred with the decision rendered in Sahney Steel and Press Works Ltd., case. In this regard, it would be relevant to reproduce the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lnshire Sugar Co. Ltd. 5 case (supra)that subsidy given by the Canadian Government to encourage construction of dry docks was 'an aid to the construction of dry dock and not an operational subsidy'. 17. This precisely is the question raised in this case. By no stretch of imagination can the subsidies whether by way of refund of sales tax or relief of electricity charges or water charges can be treated as an aid to setting up of the industry of the assessee. As we have seen earlier, the payments were to be made only if and when the assessee commenced its production. The said payments were trade for a period of five years calculated from the date of commencement of production in the assessee's factory. The subsidies are operational subsidies and not capital subsidies. 5.3.6. Yet another decision was rendered by Hon'ble Supreme Court in the case of CIT vs. Chapalkar Brothers reported in 400 ITR 279 which held that where the object of respective subsidy schemes of State Government was to encourage development of multiple theatre complexes, incentives would be held to be capital in nature and not revenue receipts. The relevant operative portion of the judgm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re of the view that the object, as stated in the statement of objects and reasons, of the amendment ordinance was that since the average occupancy in cinema theatres has fallen considerably and hardly any new theatres have been started in the recent past, the concept of a Complete Family Entertainment Centre, more popularly known as Multiplex Theatre Complex, has emerged. These complexes offer various entertainment facilities for the entire family as a whole. It was noticed that these complexes are highly capital intensive and their gestation period is quite long and therefore, they need Government support in the form of incentives qua entertainment duty. It was also added that government with a view to commemorate the birth centenary of late Shri V. Shantaram decided to grant concession in entertainment duty to Multiplex Theatre Complexes to promote construction of new cinema houses in the State. The aforesaid object is clear and unequivocal. The object of the grant of the subsidy was in order that persons come forward to construct Multiplex Theatre Complexes, the idea being that exemption from entertainment duty for a period of three years and partial remission for a period of tw....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r find that the Hon'ble Gujarat High Court in CIT vs. Munjal Auto Industries Ltd., in Tax Appeal No.450 with 451-453 of 2012 dated 28/01/2013 also had an occasion to consider the very same issue in dispute before us. In this case also, the Revenue had taken a specific argument that since subsidy would be received only once unit goes for production, subsidy would be revenue nature. The Hon'ble Gujarat High Court referred to the relevant subsidy scheme noted that concession was capped @125% of fixed capital investment and could be availed within 9 years. The Hon'ble Gujarat High Court after considering the decision of Hon'ble Supreme Court both in the case of Sahney Steel and Press Works Ltd., and Ponni Sugars and Chemicals referred to supra had held as under:- "7. From 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ded that the subsidy given was up to 10% of the capital investment calculated on the basis of the quantum of investment in capital and, therefore, receipt of such subsidy was on capital account and not on revenue account. It was also urged in that case that subsidy granted on the basis of refund of sales tax on raw materials, machinery and finished goods were also of capital nature as the object of granting refund of sales tax was that the assessee could set up new business or expand his existing business. The contention of the assessee in that case was dismissed by the Tribunal and, therefore, the assessee had come to this Court by way of a special leave petition. It was held by this Court on the facts of that case and on the basis of the analyses of the Scheme therein that the subsidy given was on revenue account because it was given by way of assistance in carrying on of trade or business. On the facts of that case, it was held that the subsidy given was to meet recurring expenses. It was not for acquiring the capital asset. It was not to meet part of the cost. It was not granted for production of or bringing into existence any new asset. The subsidies in that case were granted ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s held as under : "10. From the above noted provisions of thescheme it can be clearly seen that the entire purpose of granting tax exemption was for giving the boost to the terrorism sector. This was to be achieved by attracting higher investment in areas with tourism potential. In order to achieve such purpose, exemption from various taxes as may be applicable was granted. It is true that the exemption was to be computed in terms of tax otherwise payable by the industry. However, the purpose of such exemption was to meet with the capital outlay already undertaken by the assessee. This clearly comes out from various provisions of the scheme. For example, the scheme was applicable only to the new project or to a existing project provided investment in fixed capital or capacity was increased atleast by 50%.Thus, the very eligibility for seeking exemption was linked with new investment being made in fixed capital. Further though the scheme envisaged a certain period spanning for 5 to 10 years during which such exemption could be availed depending on the category of the unit, such exemption would cease the moment the total incentives touched 100% of the eligible capital invest....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and in the circumstances of the case and in law the assessee company is justified in its claim that the sales-tax incentive allowed to it during the previous year in terms of the relevant Government order constitutes capital receipt and is not to be taken into account in the computation of total income?" The Hon'ble Tribunal for Asst Years 1984-85 and 1985-86 had held the sales tax exemption to be capital in nature as the same was given for industrial development of the backward districts as well as generation of employment. However, the matter was referred to the Special Bench as it was alleged that the decision for AY 1985-86 was virtually overruled by subsequent decision of the Mumbai Tribunal in the case of Bajaj Auto Ltd (ITA No. 49 and 1101 of 1991). The Special Bench held that the decision of Bajaj Auto has not overruled the decision of Hon'ble Mumbai Tribunal for AY 1985- 86 on the following basis: i) There cannot be any question of overruling the decision of one Bench by another bench of equal strength as it would be contrary to the established norms of judicial system in the country. ii) Even on merits it cannot be said that the Tribun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecial Bench and accepted the same. When that appeal was further challenged by the Revenue before the Hon'ble Supreme Court, the Hon'ble Supreme Court remitted the matter back to the Hon'ble Bombay High Court. Accordingly, he argued that the decision of Special Bench was never reversed by the Hon'ble Supreme Court as stated by the ld. Special Counsel for the Revenue and accordingly still is a good law and therefore a binding precedent on this Division Bench. In fact, in assessee's own case for A.Y.2001-02 in ITA No.778 of 2015 dated 18/12/2018 before the Hon'ble Jurisdictional High Court, wherein the question Nos. c & d was exactly on this point. For the sake of convenience, the question Nos. c & d raised by the Revenue before the Hon'ble Jurisdictional High Court is reproduced hereunder:- "(c) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in restoring the issue of taxability of the sale tax exemption benefit of Rs.58 crores availed by the assessee to the file of the Assessing Officer for deciding afresh after considering the decision of the Special Bench of the ITAT in the case of DCIT V. Reliance Industries Ltd., 88 ITD 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t against this judgment of the High Court, the Department had approached the Supreme Court and the Supreme Court had held that a question of law did arise. The Supreme Court framed a question and placed the matter back before the High Court. We are informed that this appeal is still pending. 4. On the other hand, learned Counsel for the assessee firstly contended that the Tribunal had merely remanded the issue back to the Assessing Officer. In earlier orders, the Revenue had approached the Court against the similar orders of the Tribunal. The High Court on two occasions, in the order dated 27.09.2016 and 22.11.2016 passed in Income Tax Appeal Nos. 475 of 2014 and 102 of 2014 respectively had not entertained the challenge of the Revenue. In any case, it was contended that the facts on record are available and the Tribunal has merely asked the Assessing Officer to take a decision on the assessee's contention. 5. As long as the material exists on record, a contention raised by the assessee for the first time before the Tribunal, cannot be barred. So much is clear from series of judgments of various Courts including of this Court in case of CIT Vs. Pruthvi Brokers....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nue in this regard are hereby dismissed. 5.4.5. Further, we find that the Co-ordinate Bench of Ahmedabad Tribunal in the case of ACIT vs. Genus Electrotech Ltd., reported in 72 taxmann.com 101 had an occasion to consider the fact of Special Bench decision in a more elaborate manner. The relevant operative portion is reproduced hereunder:- "11. We find that so far as the Special Bench decision of this Tribunal in the case of Reliance Industries Ltd. (supra) is concerned, it still holds the field. All that has happened, as a result of Hon'ble Supreme Court's decision dated 9th September 2011, is that Hon'ble Bombay High Court has now admitted the question "whether, on the facts and circumstances of the case, the Hon'ble Tribunal was right in holding that sales tax exemption was a capital receipt" and will, in due course though, adjudicate on this legal issue. To that extent, Hon'ble Bombay High Court's order dated 15th April 2009, to the extent of declining to admit this question, stands reversed. However, the decision of the Special Bench still holds good as the same has not, and at least not yet, even been examined by Hon'ble Bombay Hig....
X X X X Extracts X X X X
X X X X Extracts X X X X
....358 of 2012, has admitted appeal against the decision of this Tribunal in Ajanta's Manufacturing Ltd. case (supra) and all these issues will now come up for consideration of Their Lordships. The fact that appeal is admitted does not, as we have stated earlier as well, does not affect the binding nature of the judicial precedents. There is no dispute before us that the scheme under which the sales tax and excise duty subsidy are given to this assessee are the same as in the case of Ajanta Manufacturing Ltd. (supra). All the material facts being the same, there is no reason to take any other view of the matter than the view so taken by the coordinate bench. We must, therefore, uphold the conclusions arrived at by the Commissioner (Appeals), which are in consonance with the Special Bench decision in the case of Reliance Industries Ltd. (supra) and coordinate bench decision in the case of Ajanta Manufacturing Ltd. (supra), and decline to interfere in the matter." (emphasis supplied by us) 5.4.6. In view of the above, no fault could be attributed on the ld. CIT(A) placing reliance on the decision of the Special Bench of the Tribunal and granting relief to the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ive, however, relied upon the stand of the authorities below. 51. We find that a coordinate bench of this Tribunal, in JSW Ltd's case (supra), has inter alia, observed as follows: 47. We further noted that Hon'ble Kolkata High Court, in the case of Pr. CIT v. Ankit Metal & Power Ltd. [2019] 109 taxmann.com 93/266 Taxman 237 Ltd. had considered an identical issue and after considering the decision of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) held that when a receipt is not in the character of income as defined under section 2(24) of the I.T. Act, 1961, then it cannot form part of the book profit u/s 115JB of the I.T. Act, 1961. The Hon'ble High court, further observed that sales tax subsidy received by the assessee is capital receipt and does not come within definition of income under section 2(24) of the I.T. Act, 1961 and when, a receipt is not a in the 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 taxabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e see no reasons to take any other view of the matter than the view so taken by the coordinate bench. Respectfully following the same, we uphold the plea of the assessee and direct the Assessing Officer to exclude the sales tax incentive subsidy for computing book profit under section 115 JB of the Act. The assessee gets the relief accordingly." 33. It is observed that coordinate bench has also decided similar issue in favour of Ambuja Cement Limited, holding company of assessee from A.Y. 2006-07 to 2011-12 as stated supra. It is observed that various observations made by Assessing Officer and arguments made by Ld. DR are already dealt with by various decisions referred supra hence there is no reason to deviate from the finding given by Coordinate Bench referred supra. Thus, sales tax incentives received by assessee are rightly considered as Capital Receipts by Ld.CIT(A) both for the purposes of normal tax as well for the purposes of computation u/s.115JB of the Act and be excluded while computing taxable income. 34. In the result, ground of appeal raised by the Departmental is dismissed. 35. In the Ground No 6, Department has raised the following grievance: "On t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....appraisal of the above said finding, we find that CIT(A) has decided the issue on the basis of the decision of the case titled as Bharat Earth Movers and Echjay Forgings P. Ltd. (supra). Furthermore, we noticed that the issue has been squarely covered by assessee‟s own case in ITA. No.4987/M/2007. The relevant finding has been given in para no. 19 which is hereby reproduced as under.: "19. Deletion of addition in respect of provision for Director's Retirement Benefit in computing income under normal provisions of the Act of Rs..2,84,53,850/ is the subject matter of the next ground. During the assessment proceedings, the Assessing Officer found that the assessee had created provision for director's retirement benefit on the basis of actuarial valuation and it was added in computing total income. Subsequently, exclusion was claimed before the FAA. As the similar addition was deleted in MAT computation, so, he allowed the claim made by the assessee. 19.1. Before us, the DR argued that the FAA allowed the claim that was not before the Assessing Officer. The DR contended that provision made for Director's Retirement Benefit was made on the basis of ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "On the facts and in the circumstances of the case and in law the CIT(A) erred in deleting the addition of Rs..1,51,06,703/- in respect of interest payment made to SBI Bank- Bahrain Branch holding that provisions of Sec. 194A is not applicable and hence disallowance u/s.40(a) is not called for. 42. The Assessing Officer has dealt with the issue at Para No. 12 to 12.2 of Assessment Order. The Assessing Officer has observed that in original return of income, assessee company has made disallowance u/s 40 (a) for Rs..1,51,06,703/- in respect of interest payment made to SBI Bank-Bahrain branch as no TDS was deducted. However, in revised return of income, Assessee Company has not made any disallowance on the ground that State Bank of India being a Banking Company under the Banking Regulation Act, 1990, provision of Section 194A is not applicable. This contention of assessee is not found acceptable to Assessing Officer on the ground that SBI offshore banking unit Bahrain is agent for loan borrowed from SBI International(Mauritius) limited and if interest is paid to NRI, provisions of Section 195 is applicable. As assessee company has not deducted TDS on such payment, Assessing O....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he purview of TDS as per the provision of section 194A(3)(iii) of the Act. The only dispute is with regard to the residential status of lender of external commercial borrowings to the assessee and interest payment on such external commercial borrowings. The assessee claims that it has borrowed external commercial borrowings from Singapore branch and which is a main lender of the loan. Therefore, any interest payment to ICICI Bank Ltd., Singapore branch is not coming within the provisions of section 195 of the Act. No doubt, any payment made to a resident banking company is outside the purview of provision of section 195 of the Act. Similarly, any payment made to a non-resident including a banking company is coming within the provision of section 195 of the Act. The primary dispute is with regard to the residential status of payee in Singapore and the lender of external commercial borrowings. As per the letter of Jt. CIT(OSD)-3(1), Mumbai, the residential status of the ICICI Bank Ltd., has been clarified........" 46. It is observed that Ld.CIT(A) in his order has given finding that Bahrain Branch of State Bank of India (SBI) is part of SBI which is governed by the Banking Regulat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....led further appeal. During the course of appellate proceedings, Ld.DR has relied upon finding of Assessing Officer and contended that observation of Assessing Officer may be restored. On the other hand, Ld. AR of the assessee has relied upon finding of Ld.CIT(A) and further relied upon decision of Coordinate bench in its own case for A.Y. 1991-92 to 1994-95 (ITA No 1105 of 1997 &Ors), ITA No 3783 of 2000 for A.Y. 1996-97 and ITA No 7594 of 2004 for A.Y. 1999-2000. 51. Considered the rival submissions and material placed on record. On identical issue claimed by the assessee is allowed by Coordinate bench in ITA No 7594 of 2004 dated 28/06/2012 (A.Y. 1999-2000) and held as under: "12.1 The expenditure of Rs..7,95,594 was incurred for dismantling old and unserviceable assets in phased manner. By incurring expenditure no new assets of enduring nature was brought into existence and hence was claimed as revenue expenditure. AO disallowed the expenditure relying on the Tax Audit Report. The same was upheld by the CIT (A) following the decision in the case of Lake Palace Hotels and Motels Pvt. Ltd vs. CIT (1995) 213 ITR 735 (Raj.). Similar issue in assessee's own case has b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the FY: 1995-96. From 1996-97 to 1998-99 the Assessee has not claimed any deduction u/s. 80IA as there was no profit from this unit. In AY:1999-2000 this plant made profit and the Assessee claimed deduction u/s. 80IA. However this deduction was not necessary as the total income became a loss. But the claim of deduction was made. Then in Jan,1999, it was sold to Tata Power. M/s. Tata Power has not availed deduction u/s. 80IA. The AO has mentioned that Tata Power was not eligible for deduction. The Assessee says that they have not claimed it. In September, 2004 the unit was re-purchased by the Assessee who has claimed deduction u/s. 80IA for AY:2005-06 which is presently under consideration. 15.11 Before going through the interpretation of the provisions it will be pertinent to examine the provisions of sec. 80IA. As per sec. 80IA(2) the deduction can be claimed by an assessee for any ten consecutive assessment years out of 15 years beginning from the year in which the undertaking or the enterprise commences its activities which is eligible for deduction. In this case, the Assessee has done power generation which is one of the eligible activities under this section. So the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fit of the unexpired period provided that the undertaking is taken over as a running concern. Admittedly this circular was issued on sec.84 which was replaced by sec. 80J later. The Calcutta High Court in the case of P.K. Engg and Forging Pvt Ltd (supra) have held that both these sections are similar and sec. 84 was since omitted and replaced by 80J. Since the fields covered by both the sections are the same, the circular was applicable to sec. 80J also. The provisions of sec. 80IA is also applicable to profits and gains derived by an undertaking or an enterprise. So the spirit of the Board's circular will also be applicable to this section. If an undertaking is transferred as a going concern, the new owner can claim the deduction u/s. 80IA, if the claim otherwise comes under the provision of this section. Further, in the light of the judicial pronouncements cited earlier, the Assessee's case is not a case of splitting of an industrial undertaking. The generation unit as a whole has been sold to the Assessee. Since the deduction u/s. 80IA is allowable on the profits of this unit, the Assessee who has purchased the unit can claim such deduction, as the other conditions presc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fifteen years which does not mean that if assessee has not claimed deduction u/s 80IA in intervening period after claim made in initial year, it is not entitled for remaining period covered in block of ten years. 59. On the other hand, Ld. DR has relied upon the observation of assessing officer wherein it is stated that assessee has not set up any industrial undertaking but same has been formed by transfer of previously used plant and machinery on which deduction under Section 80IA is not available. She also submitted that TCS has not claimed the deduction and the same cannot be claimed in the hands of the assessee as it is not the new assets but used assets, as per the provisions the assessee cannot claim deduction in the second hand machineries. She prayed that the order of Assessing Officer may be sustained. 60. Considered the rival submissions and material placed on record. The Assessee has claimed deduction u/s 80IA on two units purchased from Tata Power Limited and such deduction is denied on the ground that assessee has not set up any undertaking and same has been formed by transfer of previously used plant & machinery. It is relevant to refer to provisions of Section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....siness. On this issue, Hon'ble Bombay High court in the case of CIT v. Sonata Software Ltd[2012] 21 taxmann.com 23 has held as under:- "Section 10A of the Income-tax Act, 1961 - Free trade zone - IOCL set up a software division in 1980s - IOCL made an application for setting up an undertaking in a Software Technology Park (STP) for which an approval was obtained on 30-9-1993 - Plant and machinery for said undertaking was imported in July, 1994 and first export was effected in October, 1994 - Thus, manufacturing activities, commenced in STP undertaking after stipulated date of 1-4-1994 as provided in section 10A - Subsequently, in October 1994 itself, IOCL transferred entire software division as a going concern on slump sale basis to assessee - It was apparent from records that ownership of business or undertaking changed hands and, thus, it could not be regarded as a case of reconstruction - It was also undisputed that entire business of software was transferred to assessee, and, thus, assessee-undertaking could not be said to be one formed by splitting up of business - Whether on facts, assessee had fulfilled conditions mentioned in section 10A(2) and, thus, its claim for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on record clearly established that the amalgamated company was already incorporated and formed and had come into existence on March, 1973 and had become an industrial undertaking carrying on industrial and commercial activities on and from June 20, 1973, i.e., prior to the amalgamation of the amalgamating company with the amalgamated company, which had become effective from October 31, 1973. The amalgamated company was not formed by the splitting up, or the reconstruction, of a business already in existence. Therefore, the Tribunal was right in holding that the assessee company was entitled to relief under sections 80J and 80HH of the Act". 63. The CBDT had also accepted the above legal position with regard to deduction under section 84 of Income Tax Act, 1922 (Section 80J of Income-tax Act, 1961), way back in 1963 and clarified the matter vide Letter: F No 15/5/63-IT (A-I), dated 13 December 1963, which reads as under:- "The Board agree the benefit of section 84 attaches to the undertaking and not to the owner, thereof. The successor will be entitled to the benefit for the unexpired period of five years provided the undertaking is taken over as a running concern". ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....supra, assessee is entitled to deduction u/s 80IA on two units purchased from Tata Power Company Limited. 67. It is emanating from assessment order and order of Ld.CIT(A) that TG-2 started commercial production from 1st April 1995 and no deduction was claimed till A.Y. 1998-99 as such unit was incurring losses. The assessee was eligible for deduction u/s 80IA for such unit in A.Y. 1999-2000 but no deduction was claimed as there was no positive Gross Total Income of assessee but it is fact that assessee was eligible for deduction was mentioned in notes forming part of return of income. It is undisputed fact that Assessing Officer has not disputed such claim in assessment proceedings. Subsequently, such unit was transferred to Tata Power Company and was again re-purchased by assessee in current year and assessee has claimed deduction u/s 80IA. So far as observation of Ld.CIT(A) that assessee is not entitled for such deduction as 80IA was not claimed by undertaking during the period A.Y.2000-2001 to AY 2004-05, it is observed that Ld.CIT(A) himself has accepted that assessee can claim deduction u/s 80IA for consecutive 10 years out of block of 15 years from commencement of business....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted at Para No. 16.7 of assessment order on the ground that same does not have any direct nexus with such units. However, such explanation was not accepted by Assessing Officer and allocated such expenses on the basis of turnover of assessee company and turnover of respective power units. 72. This issue is dealt by Ld.CIT(A) at Para No. 16.4 of his order as under: "After careful consideration, I am not agreeable to the submissions of the Ld.AR. The head office of the company overlooks the operations of all its affiliated units and the expenses incurred at the head office is related to all affiliated units. So, in order to work out the profits from any particular unit, proportionate expense of the head office has to be taken into consideration, otherwise the profit and loss of the unit will give a very distorted picture. In view of this the AO is justified in considering proportionate head office expenditure for working out the profits of the power plant on which deduction u/s. 80IA has been claimed. However, from the details of the expenditure considered by the AO, the Ld.AR has pointed out that, the cost audit fee of Rs..1,54,280 and subscription to CMA - Rs..64,46,000....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... given by Ld.CIT(A) to that extent is upheld. Further, on this issue, coordinate bench in the case of Ambuja Cement Limited, holding company of assessee in ITA Nos. 1889 and 1241/Mum/2018, 2384, 2958, 3475 and 3843/Mum/2019(for A.Y. 2010-11 to 2012- 13) vide order dated 07/11/2022 has held as under: "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 they are independent of each other, and once that fiction sets in, the expenses incurred by someone other than eligible unit, in the interest of the eligible unit, are to be taken into account while computing the profits of the eligible unit. Accordingly, the allocation of expenses, as the learned Assessing Officer rightly contends, must be done. The assessee has further contended that HO expenses are not „derived from‟ or &bdquo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in favour of the Assessee following the decision of the Bombay High Court in the case of Echjay Forgings P Ltd and the Special Bench of ITAT in the case of CIT Vs Usha Martin Industries. Since the facts are the same I follow the decisions, and allow the ground of appeal. The recent decision of the Supreme Court in the case of CIT Vs HCL Comnet Systems & Services Ltd, 305 ITR 409 will also support the issue. My decision in the earlier ground also will be relevant in this regard." 79. Against the observation of Ld.CIT(A), department has filed this ground in this appeal. Before us, Ld. AR has relied upon appellate order passed in its own case for A.Y. 2002-03 to 2004-05 and contended that no such adjustment is required to be made. On the other hand, Ld. DR has relied upon finding given by Assessing Officer and argued that order of Assessing Officer may be restored. 80. Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee's own case for A.Y. 2004-05 in ITA No 5259/MUM/2007 dated 27/05/2022 has decided issue in its favour. The relevant finding is reproduced herein below: 14.2.3. Revenue is in appeal, challenging the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n order in appeal no. CIT(A)-I/IT/232/04- 05 for AY 1998-99 stated herein above, the addition made by the Assessing Officer is deleted and this ground of appeal is allowed." . On appraisal of the said finding, we noticed that the claim of the assessee has been allowed in view of the decision of Bombay High Court in the case of CIT Vs. Echjay Forgings (P) Ltd. (2001) 251 ITR 15 (Bom) and JCIT Vs. Usha Martin Industries Ltd. (2007) 104 ITD 249 (Kolkata Tribunal) SB. We also noticed that the matter of controversy has been adjudicated by CIT(A) for the A.Y. 1998-99 also and against the said decision, the revenue is not in appeal. It is reiterated that the adjustment can only be made in view of Section 115JB of the Act which has been specified in Explanation to Section 115JB of the Act. In view of the said circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is being decided in favour of the assessee against the revenue." (Emphasis Supplied) 14.2.6. In view of the above, we confirm the order of CIT(A) and hold that provi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....epresentative of the Assessee reiterated the submissions made before the lower authorities and relied upon the decision of the Tribunal in Assessee's own case for the Assessment Year 1990-91, 2002-03 and 2003-04 wherein the tribunal had granted relief to the Assessee. 14.3.4. We note that in the immediately preceding assessment year (AY 2003- 04), identical issue has been decided in favour of the Assessee. The relevant extract of the common order, dated 13.03.2019, passed by the Tribunal in 4242&4988/MUM/2007 for the Assessment Year 2003-04 reads as under: "46. Under this issue the revenue has challenged the allowance of claim of provision for additional gratuity in computing book profit u/s 115JB of the Act amounting to Rs..1,21,90,817/-. The proposition is the same which has been discussed above while deciding the issue no. 15. The finding of the CIT(A) in this regard is hereby reproduced as under.: "38.2 I have considered the submission made on behalf of the appellant. Respectfully following the order of Hon'ble Tribunal for the A.Y. 1990-91 as well as my own orders for AY 1998-99 in appeal no. CIT(A)- I/IT/232/04-05 the addition made by the Assessing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....under: "23.6 I have carefully considered the submissions. The provision for leave encashment on the basis of actual valuation report cannot be treated as unascertained liability in view of the decision of the Supreme Court in the case of Bharat Earth Movers reported at 244 ITR 428. Further the Ld.AR has brought to my notice that the addition of provision for additional gratuity in computing book profit has been deleted by the IT AT, in the Assessee's own case for 1990-91, relying on the decision of the Bombay High Court in the case of Echjay Forgings Pvt Ltd, (supra). Further this issue has been decided by my predecessor in AYs:2003-04 and 2004-05 in favour of the Assessee. Following these decision the appeal is allowed. " 89. Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee's own case for A.Y. 2004-05 in ITA No 5259/MUM/2007 dated 27/05/2022 has decided this issue in its favour. The relevant finding is reproduced herein below: "14.4.4. We have considered the rival contentions and perused the material on record. We note that the CIT(A) has granted relief to the Assessee by following the judgment of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....002-03 to 2004-05 and contended that no such adjustment is required to be made. The Ld. DR has relied upon finding given by Assessing Officer and argued that order of Assessing Officer may be restored. 94. Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee's own case for A.Y. 2004-05 in ITA No 5259/MUM/2007 dated 27/05/2022 has decided this issue in its favour. The relevant finding is reproduced herein below: "14.5.3. Revenue is in appeal, challenging the decision of CIT(A) of deletion of INR1,88,97,500/-. While dismissing Ground No. 6 above, we have concluded that Provision for Director's Retirement Benefit is not a provision for unascertained liability. We note that the CIT(A) has granted relief to the Assessee by following the judgment of the Hon'ble Supreme Court in the case of Bharat Earth Movers (245 ITR 528). Further, in the immediately preceding assessment year (AY 2003- 04), identical issue has been decided in favour of the Assessee. The relevant extract of the order, dated 13.03.2019, passed by the Tribunal in the case of the Assessee for the ITA. No. 5259 & 4895/Mum/2007 Assessment Year: 2004-05 Ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s retirement benefits made while computing book profit u/s 115JB is deleted. Accordingly, this ground of appeal in Departmental Appeal is dismissed. 96. In the Ground No 15, Department has raised the following grievance: "On the facts and the circumstances of the case and in law the CIT(A) erred in deleting the addition of provision for contingencies while computing the book profit u/s.115JB of the Act." 97. The Assessing Office has dealt with this issue at Para No. 26 of his order and observed that assessee has not explained how provision for contingencies made by assessee is towards ascertained liability hence while computing book profit u/s 115JB, same was added back to total income. This issue is dealt by Ld. CIT(A) at Para No. 25.7 of his order as under: "25.7 As the Ld.AR has pointed out this is a provision for diminution of the value of investment, and as such cannot be taken as a unascertained liability to be covered u/s. 115JB. This view is supported by the decision of the Special Bench of ITAT, Calcutta in the case of Usha Martin Industries and the recent decision of the Supreme Court in the case of CIT -vs.- M/s HCL Comnet systems & Services Ltd. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vision for contingencies in computation of book profit u/s 115JB of the Act in sum of Rs..3,75,00,000/-. While arguing the case the Ld. Representative of the assessee has admitted that this fact that this issue has been covered against the assessee due to insertion of clause (i) to Explanation 1 to Section 115JB vide Finance No. 2 Act, 2009 w.e.f 01.04.2001 and also in accordance with law settled in the assessee's own case in ITA. No.4241/M/2007 dated 29.07.2015. Accordingly, we set aside the finding of the CIT(A) on this issue and restored the issue before the Assessing Officer to decide the issue afresh by giving an opportunity of being heard to the Assessee in accordance with law. Accordingly, we decide this issue in favour of the revenue against the assessee." (Emphasis Supplied) 14.6.5. Respectfully following the aforesaid decision of the Tribunal, we remand the issue back to the file of the Assessing Officer for fresh adjudication keeping in view the provisions of Clause (i) to Explanation 1 to Section 115JB(2) of the Act and after giving Assessee an opportunity of being heard. The order of CIT(A) on this issue is set aside with the aforesaid directions. Ground No. 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the AO is entitled to do is as per the explanation to sec. 115JA. The disallowance of capital expenditure as done by the AO is not one of the items covered in this explanation. Under the circumstances, the AO is not entitled to do this adjustment which is deleted. As has been brought to notice by the Ld.AR this issue was the subject matter of the appeal before my predecessors in AYs: 1998-99, 2002-03, 2003-04 & 2004-05 and in all these years my predecessors have decided the appeal in favour of the Assessee. Since the facts are the same, the appeal is allowed on the same grounds particularly because the AO has relied on the assessment orders of the earlier years for making the adjustment." 103. Against the observation of Ld. CIT(A), department has filed this ground in this appeal. Before us, Ld. AR has stated that identical issue is decided in its favour by coordinate bench of ITAT in A.Y. 2002-03 to 2004-05. The Ld. DR has relied upon finding given by Assessing Officer and argued that order of Assessing Officer may be restored. 104. Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee's own case for A.Y. 2004-05 in ITA N....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ollowing grievance: "On the facts and the circumstances of the case and in law the CIT(A) erred in directing AO to exclude profit on sale of fixed assets while computing the book profit u/s.115JB of the Act." 107. On identical issue in Assessee's appeal, in the Ground No7, following issue is raised: "That on the facts and in the circumstances of the case, The Ld. CIT (Appeals) was not justified and grossly erred in confirming the denial of claim of exclusion of profit on sale of investments of Rs..5,02,75,745/- in computing Book Profit u/s 115JB." 108. The Assessing Officer has dealt with this issue at Para No. 28 of his order. The Assessing Officer has observed that assessee has reduced book profit u/s 115JB by profit on sale of fixed assets and profit on sale of Investments. The Assessing Officer has referred to decision of Hon'ble Supreme court in the case of Apollo Tyres Limited [255 ITR 273] and observed that reduction claimed by the assessee does not come under any of the items stated in the explanation and he denied such deduction as claimed in return of income. This issue is dealt by Ld. CIT(A) at Para No. 28.6 and 28.7 of his order as under: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g book profits under Section 115JB of the Act the same were excluded. In response to query raised during the course of assessment proceedings, the Assessee, vide letter dated 16.11.2006, filed detailed submission substantiating the claim. However, the Assessing Officer rejected the claim of the Assessee by placing reliance on the judgment of Hon'ble Bombay High Court in the case of CIT vs. Veekay Lal Investments Co. Pvt. Ltd. 249 ITR 597 (Bom) 19.2. Being aggrieved, the Assessee filed before CIT(A) on this issue. 19.4. We note that in the immediately preceding Assessment Year 2003-04, the Tribunal has decided this issue in favour of the Revenue, vide common order 13.03.2019 passed in ITA No. 4242/MUM/2007 and ITA No. 4988/MUM/2007, holding as under: "52. Under this issue the revenue has challenged the deletion of the addition of profit on sale of fixed assets in computation of book profit u/s 115JB of the Act in sum of Rs..5,19,20,846/-. At the time of argument, the Ld. Representative of the assessee has disclosed this fact that this issue has been decided against the assessee in the ITA. No. 5259 & 4895/Mum/2007 Assessment Year: 2004-05 assessee*s own ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and without giving the benefit of indexed cost of acquisition results in taxing the income other than actual/real income. In other words, a mere book keeping entry cannot be treated as income. ..................." 113. On perusal of the aforesaid decision, it is evident that the assessee will be entitled to indexed cost of acquisition while computing capital gains u/s 115JB of the Act. It is also to be noted that in the immediately preceding year Coordinate Bench has held that long term capital gains credited in the books of accounts is taxable to which even the Ld. AR fairly conceded subject to the decisions as relied supra. However, he claimed that the indexed cost of acquisition does not form part of income computed u/s 115JB of the Act. Respectfully following the ratio laid down by Hon'ble Karnataka High Court, the Assessing Officer is directed to recompute taxable long term capital gains arising on transfer of fixed assets after giving the benefit of indexed cost of acquisition while computing taxable profits u/s 115JB of the Act. Thus, the related ground of appeal in Departmental Appeal as well as Assessee's appeal is partly allowed subject to the above directions....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T (2004) 90 ITD 34 (Hvd,). Further reliance was placed on the decisions of the Hon'ble Mumbai Tribunal in the case of DCIT -vs.- Govind Rubber (P) Ltd. (2004) 89 ITD 457 (Mum) and Hon'ble Rajasthan High Court in the case of CIT - vs.- Pesticides India Ltd. (2006) 283 ITR 304 (Rai). Recently, the above view was fortified in the case of Smruthi Organics Ltd, -vs.- DCIT (2006) 101 ITD 205 (Pune), wherein the Hon'ble Tribunal held that notwithstanding that the gross total income of the appellant is a loss, it is entitled to deduction u/s 80HHC on the basis of Book Profit in view of clause(vii) of explanation to section 115JA. Similar view has been expressed by the Special Bench of Hon'ble Mumbai ITAT in the case of M/s. Syncome Formulations (I) Ltd. - vs. DCIT in ITA No.2711/Mum/2003. 29.8 Ld.AR further brought to my notice that similar issue has been decided in favour of the appellant by the CIT (Appeals) from AYs. 2001-02 to 2004-05." 116. Against the above observation of Ld. CIT(A), department has filed further appeal. The Ld. AR has relied upon the finding of Ld.CIT(A) and contended that Section 115JB is an alternative mode of taxation where taxation is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to subtract the amount of profit eligible for deduction under section 80HHC of the Act while calculating the book profit, was omitted by the Finance Act 2011 with retrospective effect from 1-4-2005. As per the assessee this amendment was brought under the statute to nullify the effect of the judgment of Hon'ble Supreme Court in the case of Ajanta Pharma reported in 327 ITR 305. According to the assessee the Parliament is authorized to bring any amendment with retrospective effect but it can't do so to nullify the effect of order of the Hon'ble Supreme Court. In other words, the Parliament to nullify the effect of the Supreme Court judgment can bring the amendment but with prospective date. Accordingly such amendment was unconstitutional. The assessee also contended that at the time of filing the return of income the clause (iv) of explanation 1 to section 115JB of the Act was very much in force. The provisions of section 294 of the Act provides that the provisions specified under the statute as on 1st day of the assessment year shall be prevalent. As such, the clause (iv) of explanation 1 to section 115JB of the Act was very much in force as on the 1st day of the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt point of time. 100. On the contrary, the learned DR vehemently supported the order of the authorities below. 101. We have heard the rival contentions of both the parties and perused the materials available on record. The controversy in the present case arises whether the assessee is entitled the benefit of reducing the profit of the business eligible for deduction under section 80HHC of the Act while computing the book profit under the provisions of section 115JB of the Act. Such benefit was available to the assessee in pursuance to the clause (iv) of explanation 1 to section 115JB of the Act which, before omission, reads as under: (iv) the amount of profits eligible for deduction under section 80HHC , computed under clause (a) or clause (b) or clause (c ) of subsection (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or 101.1. The above benefit to the assessee was denied by the Finance Act 2011 with retrospective effect 01-04-2005. Admittedly, at the time of filing the return of income the assessee was entitled for the benefit as discussed above. But on a later date there w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e discrimination to them. It is for the reason that there will not be allowed the benefit granted under the statute but withdrawn by way of retrospective amendment. Thus, the impugned amendment will create disharmony among different taxpayers. In view of the above and after considering the facts in totality, we are of the view that the assessee cannot be deprived for the benefit granted to it under the statute by way of retrospective amendment in the given facts and circumstances. Hence, the ground of appeal of the assessee is allowed." 120. During the course of the hearing the Ld. DR referred to the retrospective amendment brought to the statute and prayed that the findings of Assessing Officer may be restored. Considering the issues under consideration, respectfully following the aforesaid decision of coordinate bench in the case of Torrent Pharmaceuticals Limited, the ground raised by the department is dismissed. This ground of appeal in Departmental Appeal is dismissed. 121. In the Ground No 19, Department has raised the following grievance: "On the facts and the circumstances of the case and in law the CIT(A) erred in directing the Assessing Officer to exclude R....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n computation of book profit u/s 115JB of the Act. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record.: - "40.3 I have considered the submissions made on behalf of the appellant. In my view write back of share premium account is an allowable deduction in view of clause (i) of Explanation to Section 115JB(2). Therefore, respectfully following the decision of the Hon'ble ITAT for A.Y. 1990- 91 as well as the orders of my predecessor for A.Y. 1997- 98 and A.Y. 1998-99 the addition made by the Assessing Officer of Rs..76,63,200/- is deleted. Hence this ground of appeal is allowed." 51. On appraisal of the above said finding, we noticed that the claim of the Revenue is in connection with the deletion of addition made in respect of amount withdrawn from share premium account in computation of book profit u/s 115JB of the Act. The claim was allowed in view of the decision of Hon'ble ITAT Mumbai in the assessee's own case for the A.Y.1990-91 in ITA. No. 5259 & 4895/Mum/2007. Further the matter has been adjudicated by Hon'ble ITAT in the assessee's own case for the A.Y. 1998-99 in ITA. No.6320/M/2003. Since the case of the assessee h....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by the Ld. AR. Since the facts are the same, I follow these orders and accordingly allow the appeal. The addition made by the Assessing Officer is deleted." 128. Against the observation of Ld.CIT(A), department has filed appeal. Before us, Ld. AR relied upon finding of Ld. CIT(A) and argued that issue is in favour of assessee by decision of ITAT for AY 2002 - 03 [ITA No.4987/M/2007 &Ors.], AY 1999 - 00 [ITA No.7594/M/2004] and A.Y.1997-98 [ITA No.3298/M/2001]. On the other hand, Ld. DR has relied upon finding given by Assessing Officer and argued that order of Assessing Officer may be restored. 129. Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee's own case for A.Y. 2002-03 in ITA No 4987/M/2007 dated 29/07/2015 has decided issue in favour of assessee. The relevant finding is reproduced herein below: "5. Additional ground no.4 is about exclusion of amount transferred to debenture redemption reserved in computing group profit of provisions of section 115JB of Rs..50 crores. 5.1. During the course of hearing before us, representatives of both the sides agreed that identical issue had been decided in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ollo Tyres. The adjustment sought to be done by the AO is not one of the items provided under the explanation to sec. 115JB. Hence the addition made by the AO is deleted and the ground of appeal is allowed. As the Ld.AR has brought to my notice, this ground was allowed by my predecessors in AYs;1998-99 to 2002- 03 and 2004-05. Facts being the same, I have followed such decisions." 133. Against the observation of Ld.CIT(A), department has filed this appeal. The Ld. AR has contended that adhoc disallowance u/s 14A cannot be made while computing book profit u/s 115JB of the Act. The Ld.AR has mainly relied upon following decisions: (i) CIT v. Bengal Finance & Investments Pvt. Ltd. [ITA No.337 of 2013 (Bombay HC)] (ii) ACIT v. Vireet Investment (P.) Ltd [(2017) 165 ITD 27 (Delhi Tribunal) (SB)] 134. On the other hand, Ld. DR has relied upon finding given by Assessing Officer and argued that order of Assessing Officer may be restored. 135. Considered the rival submissions and material placed on record. The Assessing Officer has made disallowance u/s 14A while computing income as per normal provisions of the Act as well as book profit u/s 115JB of the Act. The ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 144. In the Ground No 9 Assessee has raised the following grievance: "That on the facts and in the circumstances of the case, the Ld. CIT erred in confirming the denial of claim of exclusion of Premium on Redemption of Foreign Convertible Bond of Rs..20,69,06,874/- in computing Book Profit u/s 115JB" 145. The Assessing Office has dealt with this issue at Para No. 4 of his order. The Assessing Officer has observed that assessee has reduced its book profit by Rs..20,69,06,874/- as premium on Redemption of Foreign Currency Convertible Bonds adjusted against Share premium account. The Assessing Officer has referred to decision of Hon'ble Supreme court in the case of Apollo Tyres Limited [255 ITR 273] and observed that reduction claimed by the assessee does not come under any of the items stated in the explanation and he denied such deduction as claimed in return of income. This issue is dealt by Ld. CIT(A) at Para No. 32.6 of his order as under: "32.6 I have considered assessee's explanation. As per section 115JB every assessee, being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y given impact to Profit & loss account, there would not have been any change in Profit shown in Audited Annual accounts. While computing book profit u/s 115JB of the Act, assessee has claimed deduction of Premium on Redemption of Foreign Convertible Bond of Rs..20,69,06,874/- but same has been denied by Assessing Officer only on the ground that such amount was not debited in Profit & loss account prepared under Companies Act, 1956. However, this observation of lower authorities is incorrect as accounting treatment adopted by assessee is according to Companies Act 1956. Section 78 of Companies Act, 1956 deals with share premium account and reads as follows: "Application of premiums received on issue of shares. 78. (1) Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called "the [securities] premium account"; and the provisions of this Act relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the [securities] premium account were paid-up share capital of the company. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of Companies Act, 1956 only. 150. On this issue, Coordinate bench of ITAT in the case of 63 Moon Technologies Limited (Formerly Financial Technologies (India) Limited in ITA No 4775 & 4776/Mum/2016 dated 16/12/2021 has held as under: "18. The argument of revenue that the amount has not been debited in account is also not sustainable as the assessee has very much been debited in the account to the debit of share premium account. The Companies Act duly permits the same. Hence, the plea that amount is contingent and not debited is not correct, when revenue itself has accepted the debit in this regard of the amount to the share premium account. Revenue authorities cannot take a shifting stand that the amount is correctly accrued and debit to share premium account is correct, but the same is still a contingent amount. The assessee could have very well debited the amount to the profit and loss account, but it has chosen to debit the amount to share premium account in the books, which is also permitted as per Companies Act. No infraction of law in this regard was pointed out. Since revenue has accepted the debit of the premium to share premium account, it is clear that reven....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ility. This decision was confirmed by the CIT(A). However, the Tribunal overruled the case of the Department in view of the judgment of the Supreme Court in the case of Madras Industrial Investment Corporation Ltd. v. CIT . Being aggrieved, the Department has come by way of the appeal to this Court. Arguments 3. None appears for respondent though served. 4. Mr. R.V. Desai, learned counsel appearing for the Department/appellant, submitted that the ratio of the judgment of the Supreme Court in the case of Madras Industrial Investment Corporation (supra) as also the judgment of this Court in the case of Tapatia Tools Ltd. v. Jt CIT (2003) 126 Taxman 544 (Bom) was not applicable as in this case the AO found alteration in the terms of issue of debentures during the life of the issued debentures. He submitted that originally the debentures were issued at 2 per cent. which was changed to 0 per cent during the life of issued debentures. That, originally the issued debenture was for 5 years which was changed to 10 years during the existence of the issued debentures. He submitted that in the case of Madras Industrial Investment Corporation (supra) as also in the case of Tap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion (supra) and Hon'ble Bombay High Court decision in the case of Taporia Tools Ltd. (supra) and had found no fault even on the ground that the borrower had the discretion to change the terms of the issued debentures. As there was nothing in the record to show that during the assessment year in question, the borrower had exercised such a discretion. In the present case also, there is nothing on record that the borrower had exercised any such discretion. In this view of the matter, the said case law is fully applicable on the facts of the case and the liability on account of debenture redemption premium is liable to be deducted from the income and cannot be treated as contingent liability. Furthermore Mumbai Tribunal in the case of Mahindra and Mahindra ITA No. 8597/Mum/2010heldas under:- "Next ground of appeal is about disallowance of pro rata premium of Rs. 5.39 crores payable on redemption of 'Foreign Currency Convertible Bonds'(FCCB).As per the AO the bonds were convertible into shares and, therefore, could not be construed as a borrowing, that they increased capital base of the company and that the expenditure incurred was capital in nature. The AR sub....