AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (11) TMI 532
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....)-1, Mumbai whereby appeal filed by Assessee against the order giving effect to CIT(A)'s order dated 12/09/2011 was partly allowed. 2. The various grounds are raised in present cross appeals requiring adjudication which are taken up together. To avoid repetition of facts and for the sake of convenience, the grounds of appeal having common facts and/or legal issues are taken up together. During the course of appellate hearing, Assessee has filed paper books in support of its contention which is duly considered while adjudicating present appeal. During the course of appellate hearing, 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....
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....chases and sales and the net effect is Nil. Thus, the recasted Profit & Loss a/c as per provisions of Sec. 145A did not result in any modification in net profit. The AR of the appellant also relied on the judicial pronouncements -vs.- Berger Paints (India) Ltd. (No. 2) (2002) 254 ITR 503 (Cal), S. Kumars Ltd. -vs.- IGT I.T.A. no.2547/M/02, CIT vs. Indo Nippon Chemicals Ltd. (2003) 261 ITR 275 (SC) and Hawkins Cookers Ltd. -vs.- ITO (2008-TIOL-480- ITAT-Mum). The AR of the appellant further submitted that similar addition made by the AO has been deleted by my predecessor in AY 2001-02 to AY 2005-06. 6.3 I have considered the A.O.'s order as well as the appellant's AR submission. Having considered both, I find that similar issue was decided by my predecessor in favour of the appellant from A.Y.-2001-02 to 2005-06 in the appellant's own case. Thus, respectfully following the said order of my predecessor and also following the rule of consistency, the addition so made by the A.O. on this account is deleted. Thus, this ground of appeal is allowed in view of the aforesaid order of my predecessor referred as above." 7. Against the observation of Ld. CIT(A), Revenue has filed f....
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....accounting followed by the assessee, i.e. 'Inclusive method', wherein the taxes are included in the opening stock, purchases, etc. or the 'Exclusive method', the MODVAT credit does not have any impact on the profit of the assessee. Thus, following the ratio laid down by the Hon'ble Supreme Court in the case of Indo Nippon Chemicals Co. Ltd. (supra) and followed by the Hon'ble Bombay High Court in the case of Diamond Dye Chem Ltd. (supra), we set-aside the order of the CIT (A) and direct the Assessing Officer to delete the addition made on account of unutilised MODVAT credit. This Ground of appeal is accordingly allowed." 19. It is observed that on identical issue, Coordinate bench in Para No. 32 to 34 in the case of 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 decisions of Coordinate as discussed herein above, the ground raised in Departmental Appeal is dismissed. 9. Respectfully following the above decision, we dismiss the ground raised by the revenue. 10. In the Ground No 2, Department has raised the following grievance: ....
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....d 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 contentions and perused the material on record. We note that the Tribunal has decided identical issue in the favour of the Assessee in Assessee's own case in ITA No. 647/Mum/1997 (AY 1991-92), ITA No. 2361/Mum/1995 (AY 1990- 91), ITA No. 288/Mum/1993 (AY 1989-90), ITA No. 968/Mum/1992 ITA. No. 5259 & 4895/Mum/2007 Assessment Year: 2004-05 (AY 1988-89), and ITA No. 43/Mum/1991 (AY 1987-88) by following the decision of the Hon'ble Bombay High Court in the case of Otis Elevator Co (I) Ltd. v. CIT (supra), and American International Banking Corporation v. CIT (supra). The relevant extract of the order of the Tribunal in ITA No. 43/Mum/1991 pertaining to AY 1987-88, followed in subsequent years, reads as under: "8. Ground no. 2 relates to disallowance of payments to clubs. The Assessing Officer made disallowance of Rs. 8,125/- representing payments made by the assessee to clubs. On appeal, it was contended that reimbursement of cl....
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....allowing the assessee's claim of sales tax subsidy amounting to Rs.1,51,85,22,523/- treating the same as capital receipt while computing the book profit u/s.115JB of the I. T. Act." 17. The Assessing Officer has dealt with the issue at Para No. 7 to 7.12 of Assessment Order. The Assessing Officer has observed that assessee has claimed sales tax incentives for various units such as Tikaria (UP), Chanda (Maharashtra), New Wadi (Karnataka), Gagal (HP) and DSCL(WB) for Rs 1,51,85,22,523/-. The Assessing Officer has examined different schemes under which incentive is granted to assessee and same was considered as revenue receipt mainly relying upon decision of Hon'ble Supreme Court in the case of Sahney Steel and Press Works Ltd 228 ITR 253. He has further observed that sales tax incentive given to assessee is for expansion of units and cannot be treated as capital receipt. Thus, Assessing Officer has treated such receipts as revenue receipts both while computing income as per normal provisions of the Act as well as while computing book profit u/s 115JB of the Act. 18. In appeal Ld.CIT (A) has discussed the above issue at Para No. 8.10 of his order and held as under: "I h....
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....essee before us is a company engaged in the business of manufacturing of cement and generation of electricity. The assessee has set up its plants in different parts of the country, and as the location of some of these plants was in backward areas, the assessee had received certain sales tax concessions from the respective State Governments. These concessions were in the nature of exemptions and remissions etc, and were granted under specific schemes announced, under the industrial policies, from time to time. During the relevant previous year, the assessee received amounts aggregating to Rs 169,93,34,752, but all these receipts were treated as tax exempt on account of being in the nature of capital receipts. When income tax return filed by the assessee was subjected to the scrutiny assessment proceedings, the Assessing Officer noticed that the assessee had a lodged a claim for exclusion of Rs 169.93 crores, being sales tax exemption/incentives received by it, as capital receipt, and hence not liable to tax. The Assessing Officer declined this claim, primarily on the basis of certain observations in the judgments in the cases of Tamilnadu Sugar Corporation Ltd Vs CIT [(2001) 251 ITR....
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....judicial precedents have been cited in this context. Learned CIT(A) has then held that so far as the object and purpose for which the subsidy is given, only the subsidy schemes of the Maharashtra and Punjab State specifically state that the subsidies in question are for achieving dispersal of industries outside Mumbai, to attract them to the underdeveloped and developing areas of the State, and to promote the growth of the industry in the State, in the preamble to the scheme. It is on this basis that he has held that so far as the subsidies given by the Maharashtra and Punjab States are concerned, these are required to be treated as capital in nature, whereas, the subsidies received from the State Governments of Himachal Pradesh and Rajasthan, in the absence of specific mention to the effect in the preambles of the subsidy schemes that these subsidies are required to be held to be revenue in nature. However, in our considered view, the approach of discerning the purpose of the subsidy, solely from the specific words used in the preamble of the scheme and without examining the overall scheme of the Act- which is admittedly to promote the growth of industry, is incorrect and superfic....
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.... Limited v. CIT 228 ITR 253 (SC), he submitted that the impugned sales tax exemption increased the profits of the assessee by eliminating the expenses which the assessee would have had to incur later and therefore the impugned receipts were in the revenue field. He also referred to Explanation (10) to Section 43 (1) of the Income Tax Act inserted in with effect from 01/04/99 to emphasise that the action of the assessee in not reducing the cost of assets by the amount of subsidy for working out the Written Down Value was indicative of the fact that the impugned receipts were not in the nature of capital receipts. 55. We have heard both the parties and considered their rival submissions. Perusal of the scheme extending the aforesaid incentives to "prestigious" units announced by Government of Gujarat on 26/07/91 makes it amply clear that the scheme was announced to attract investment in core sector industry having potential, to spur industrial growth in ancillary, tertiary and secondary sector of the economy. The other scheme announced by the Government of Gujarat as Capital Investment Incentive Scheme on 11th September 1995 was intended to attract investments to generate gr....
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....sion 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. 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 fund 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. But, if monies are given to the assessee for....
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....cisions cited before us. After considering the material on record, we are of the view that the issues involved in these appeals are squarely covered by the decisions of this Court in Birla VXL Ltd. (supra) and in Munjal Auto Industries Ltd. (supra). Therefore, the questions of law posed for our consideration in these appeals are answered in favour of the assessee and against the department. Accordingly, all these appeals are dismissed. 8. In the case of JCIT Vs Grasim Industries Limited ( ITA Nos 2155/Mum/2016 and Ors; order date 29th April 2022), a coordinate bench has dealt with these legal issues in considerable detail and observed as follows: 5.3.5. ............. the dominant purpose for which the incentive scheme per se introduced by the respective State Governments was only for the purpose of setting up of industries in the respective areas for industrial development in State and also to accelerate development and absolutely not for augmenting the profits of the assessee. Effectively, the schemes of various State Governments envisaged the rapid industrialisation, growth and new employment generation in the respective areas which would in turn promote the gro....
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....e business of manufacturing sugar from home grown beet. The company was paid various sums under British Sugar Industry (Assistance) Act, 1931, out of monies provided by the Parliament. The question was whether these monies were to be taken into account as trade receipts or not. The object of the grant was that in the year 1981, in view of heavy fall in prices of sugar, sugar industries were in difficulty. The Government decided to give financial assistance to certain industries in respect of sugar manufactured by them from home-grown beet during the relevant period. Lord Macmillan held that- "What to my mind is decisive is that these payments were made to the company in order that the money might be used in their business." He further observed that: "I think that they were supplementary trade receipts bestowed upon the company by the Government and proper to be taken into computation in arriving at the balance of the company's profits and gains for the year in which they were received." 15. In the case before us, the payments were made to assist the new industries at the commencement of business to carry on their business. The payments were nothing bu....
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....analysed the entire case law and it has laid down the basic test to the applied in judging the character of a subsidy. The test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the Scheme with which we are concerned in this case is that the incentive must be utilised for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the Subsidy Scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of 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 incen....
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....in mind in that the subsidy scheme kicks in only post construction, that is when cinema tickets are actually sold. We hasten to add that the object of the scheme 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 Sugar and Sahney Steel. 23. Mr. Ganesh, learned Senior Counsel, also sought to rely upon a judgment of the Jammu and Kashmir High Court in Shree Balaji Alloys v. CIT [2011] 9 taxmann.com 255/198 Taxman 122/ 333 ITR 335. While considering the scheme of refund of excise duty and interest subsidy in that case, it was held that the scheme was capital in nature, despite the fact that the incentives were not available unless and until commercial production has started, and that the incentives in the form of excise duty or interest subsidy were not given to the assessee expressly for the purpose of purchasing capital assets or for the purpose of purchasing machinery. 24. After setting out both the Supreme Court judgments referred to hereinabove, the High Court found that the concessions were issued in order to achieve the twin objects of acceleration of industri....
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.... 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 must be treated as assistance for the purpose of the trade. 9. Such decision was considered in case of Ponni Sugars and Chemicals Ltd.(supra) and the Apex Court held and observed as under : "13. The main controversy arises in the....
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....ed on behalf of the assessee on the facts of that case stood rejected and it was held that the subsidy received by Sahney Steel could not be regarded as anything but a revenue receipt. Accordingly the matter was decided against the assessee. The importance of the judgment of this Court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the scheme with which we are concerned in this case is that the incentive must be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the subsidy scheme was to enable the assessee to run the business more profitably then the r....
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....as per the scheme. From the combined reading of salient features of the scheme, we have no doubt in our mind that the incentive was being offered for recouping or covering a capital investment or outlay already made by the assessee." 11. In the result we find no error in view of the Tribunal. Tax Appeals are dismissed. 5.3.7.1. It is pertinent to note that against this judgement, civil appeals were dismissed by the Hon'ble Supreme Court vide its order dated 08/05/2018 on the ground that the issue is already covered in the decision of Chapalkar Brothers referred to supra. 5.3.8. Before us, the ld. Special Counsel for the Revenue referred to various decisions of Hon'ble High Courts. But, all those decisions were rendered prior to the decision of Hon'ble Supreme Court referred to above. Hence, the decisions relied upon by the ld. Special Counsel for the Revenue would not advance the case of the Revenue. 5.3.9. It is pertinent to note that in each of the aforesaid decisions of Hon'ble Supreme Court, the Courts have been mindful of the fact that the subsidy has to be received after commencement of business and to be availed within 9,10 & 12 years, as ....
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....bunal in Asst Year 1985-86 on the decision of Hon'ble Supreme Court in the case of Sahney Steel & Press Works Ltd. v. CIT (228 ITR 253) cannot be said to be erroneous. The Tribunal did recognise that the object with which subsidy is given is decisive as laid down by Hon'ble Supreme Court. If the scheme is for setting up or expansion of industry in a backward area, it will be capital, irrespective of the modality or source of fund. If the scheme is for assisting of carrying out of business operations, it is revenue. Hon'ble Supreme Court demonstrated the principle that the object of the subsidy must be given primary importance over the source of fund. 5.4.1. Ultimately the Special Bench after placing reliance on the decision of Hon'ble Supreme Court in Sahney Steel and Hon'ble Madras High Court in the case of CIT v. Ponni Sugars & Chemicals Ltd. Reported in 260 ITR 605 held that the decision of the Tribunal in Asst Year 1985-86 is correct and observed the following: 37....The observations of the Madras High Court lend support to the view that the purpose and object of the Scheme under which the subsidy is given is of more fundamental importance than the fact that t....
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....benefit of Rs.58 crores as revenue receipt and had included this amount in the returned income and it had been taxed accordingly and the assessee did not raise this issue before the CIT(A) and the issue had attained finality?" 5.4.3. While disposing of the questions Nos. c & d, the Hon'ble Jurisdictional High Court categorically held that the decision of the Special Bench of Tribunal had not been reversed or stayed by any higher judicial forum and it holds good as on date. The relevant operative portion of the judgement of Hon'ble Jurisdictional High Court in this regard is reproduced as under:- "3. We will first address the questions no. (c) and (d), which are different elements of the same issue. The respondent assessee had received a subsidy. It is undisputed that up to the level of Income Tax Appellate Tribunal, the assessee did not raise a contention that such subsidy was towards capital account and, therefore, not taxable. However, before the Tribunal such a contention was raised. The Tribunal by the impugned judgment relied upon its earlier judgment for the Assessment Year 1999- 2000 in case of this very assessee and restored the issue back to the Assessing....
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....in case of Reliance Industries Ltd. has been partially reversed by the Supreme Court. A question of law has been framed and placed for consideration of the 4 of High Court. However, this does not mean that the judgment of the Tribunal as on today stands reversed or stayed. In any case, quite apart from the judgment in the case of Reliance Industries Ltd. of the Special Bench of the Tribunal, it is always been for the assessee to contend before the Assessing Officer by pointing out the relevant clauses of the subsidy that in law the subsidy cannot be treated to be towards revenue account. It would be equally open for the Revenue to oppose such a contention if so advised. The Assessing Officer and the Revenue authorities would have to take a decision in accordance with law. These questions, therefore, are not considered." (emphasis applied by us while placing reliance on the decision of Hon'ble Jurisdictional High Court) 5.4.4. Against this judgement on other issues, the Revenue preferred an SLP before the Hon'ble Supreme Court and the same was dismissed vide order dated 23/08/2019 in SLP (Civil) Diary No.22929/2019. In other words, the Revenue while preferring SLP ....
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....mined, on merits, by Hon'ble Bombay High Court. That is quite different from disapproving the special bench decision, but it appears that the coordinate bench was led to believe, and there could not have been any other reason for ignoring the special bench decision, that this Special Bench decision is reversed. That is patently incorrect, and when we pointed it out to the learned Commissioner (DR), he did not have much to say except to rely upon the coordinate bench decision which seems to have followed that approach. The coordinate bench, in the case of Jindal Steel & Power Ltd. (supra), did indeed travel much beyond its limited mandate in ignoring a binding judicial precedent simply because appeal against that special bench decision is now pending before Hon'ble Bombay High Court. When posed with a special bench decision and a division bench directly on the issue, though touching different chords, we have no difficulty in recognizing our limitations. The wisdom of a division bench, even if superior- as strenuously argued by the learned Commissioner, has to make way for the higher wisdom of a larger bench. It is this faith of judicial hierarchical system that is the streng....
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....ove still holds good in law. In the case of CIT Vs Chaphalkar Brothers [(2018) 400 ITR 279 (SC)], Hon'ble Supreme Court has held that where the object of respective subsidy schemes of State Governments was to encourage the development of Multiple Theatre Complexes, incentives would be held to be capital in nature and not revenue receipts, and, following the same logic, the sales tax subsidy schemes, which are admittedly to encourage industrial growth in the specific areas and the overall scheme in all the sales tax subsidy and exemption schemes unambiguously indicate so, are capital receipts in nature. 10. In view of these discussions, as also bearing in mind the entirety of the case, we uphold the plea of the assessee that the amount of Rs 39,36,21,956 added to the income of the assessee must stand deleted, and reject the grievance of the Assessing Officer against the grant of relief of Rs 130,57,12,796 by the CIT(A)." 9. In grounds nos. 12 and 13, the assessee has raised the following grievances: 12. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in not allowing exclusion of Sales Tax Inc....
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.... 48. We further noted that the ITAT special bench of Kolkata Tribunal, in the case of Sutlej Cotton mills Ltd. v. Asstt. CIT [1993] 45 ITD 22 (Cal.) (SB), held that a particular receipt, which is admittedly not an income cannot be brought to tax under the deeming provisions of section 115J of the Act, as it defies the basic intention behind introduction of provisions of section 115JB of the Act. The ITAT Jaipur bench, in case of Shree Cement Ltd. (supra) had considered an identical issue and held that incentives granted to the assessee is capital receipt and hence, cannot be part of book profit computed u/s 115JB of the Act. Similarly, the ITAT Kolkata Bench, in the case of Sipca India (P.) Ltd. v. Dy. CIT [2017] 80 taxmann.com 87 (Trib.) had considered an identical issue and held that when, subsidy in question is not in the nature of income, it cannot be regarded as income even for the purpose of book profit u/s 115JB of the Act, though credited in the profit and loss account and have to be excluded for arriving at the book profit u/s 115JB of the Act. 49. Insofar as, case laws relied upon by the department , we find that all those case laws have been either consider....
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....as observed that in original return of income, appellant has disallowed additional gratuity. However, in revised return of income, appellant has claimed such amount as deduction on the ground that Hon'ble ITAT in A.Y. 1990-91 has allowed such claim as deduction. However, this contention of appellant was not found acceptable to Assessing Officer on the ground that relief has been granted by ITAT on this issue is sub-judice hence such claim is not allowed. He made net disallowance of Rs 3,20,98,901/- while computing total income of appellant. 24. This issue is dealt by CIT(A) at Para No. 12.3 of his order as under: 12.3 I have considered the A.O.'s order as well as the appellant's A/R submission. Having considered both, I find merits in the arguments of the appellant. I find that similar issue has been decided in favour of the appellant by the-Hon'ble ITAT as well as the by my predecessor in the appellant's own case. Thus, in view of the same, I am of the considered view to not to deviate from the orders of erstwhile CIT(A) as well as from the orders of Hon'ble ITAT, Mumbai. Hence considering all the factual position of the case, I consider it proper and appropriate to ho....
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....oan from State Bank of India, Bahrain 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 Officer made disallowance u/s 40(a) of the Act. 30. This issue is dealt by CIT(A) at Para No. 14.4 of his order as under: "14.4 I have considered the A.O.'s order as well as the appellant's A/R submission. Having considered both, I find that similar issue has been decided in favour of the appellant by my predecessor in A.Y.-05-06 in the appellant's own case. Hence considering the rule of consistency, I consider it proper and appropriate not to deviate from the order of erstwhile CIT(A). Accordingly this ground of appeal is allowed." 31. Against the observation of CIT(A), Revenue has filed further appeal. During the course of appellate hearing, assessee ha....
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....rowings. 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 Regulation Act and this fact is not disputed by LD DR. Further it is also a settled position that a branch office is part of the entire SBI and not a separate legal entity. Payment to foreign branch of Indian entity tantamount to payment made to Indian company only. Accordingly, provisions of Section 195 are not applicable in respect of payments made to foreign branch of Indian Bank. Considering such fact and relying upon decision of Coordinate bench referred supra, we are inclined to accept the findings of Ld.CIT(A) for deleting the addition made by Assessing Officer. This ground of appeal in Departmental appeal is dismissed. 33. Respectfully following the above decision, we dismiss the ground raised by the Revenue. 34. In the Ground No 6, Department has raised the following grievance: "On the facts and the circumstances of the case and in law the CIT(A) erred in direc....
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....he Department Appeal in Ground no 9 and held as under: "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 80IA which reads as under: "3) This section applies to an undertaking referred to in [clause (ii) or] clause (iv) of sub-section (4)] which fulfils all the following conditions, namely: (i) it is not formed by splitting up, or the reconstruction, of a business already in existence : Provided that this condition shall not apply in respect of an 52[undertaking] which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such 52[undertaking] as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose:" 61.....
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....ee - 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 exemption under section 10A was to be allowed - Held, yes [In favour of assessee] 62. Further, in CIT v. Silical Metallurgic Ltd (324 ITR 29), the facts before Hon'ble Madras High Court were as follows: there were three units at different places being new industrial undertakings eligible for deduction under the applicable provisions. They belonged to different companies assessed separately. The companies were amalgamated into one and the amalgamated company continued to carry on the business of the undertakings. It claimed the deduction of tax holiday for all the eligible undertakings. The Assessing Officer disallowed the deduction on the ground that it did not set up the aforesaid units and there was no provision in the Act for granting ....
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.... 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". The Board set out two principles (prima facie, independent of one another or the later dependent on the primary and the first principle): i. The deduction attaches to the undertaking and not to the owner; and ii. A successor would be entitled to the deduction, for the residual period, if the undertaking is transferred as a running concern 64. The aforesaid Board Circular have been relied upon by various Courts and its applicability have been upheld. The Hon'ble Allahabad High Court in the case of Prisma Electronics [2015] 377 ITR 207 was concerned with deduction under section 80-IB on conversion of proprietorship concern into partnership firm. In this regard, it was held as under: "11. From a per....
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....s 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 which does not mean that if in block of 10 years, deduction u/s 80IA was not claimed for one or more reasons, such claim is lapsed for subsequent years. Further it is also a settled position that the deduction u/s 80IA is qua undertaking and not qua entity. Every undertaking will be entitled to avail deduction u/s 80IA for a period of 10 consecutive years from 15 years from the commencement of business. There is substance in the argument of Ld. AR of the assessee that Tata Power Company Limited might not have claimed for deduction u/s 80IA for various reasons and there is nothing on record to prove that said company was not entitled for deduction in respect of 80IA on such power plant. On the other hand, claim ....
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....oes 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. 44. This issue is dealt by CIT(A) at Para No. 16.3 of his order as under: "16.3 I have considered the A.O.'s order as well as appellant AR*s submission. Having considered both, I find that similar issue was again decided by my predecessor in A.Yr.2005-06 vide his Appellate Order No.CIT(A)-I/IT/232/07-08 dated 13.03.2009 wherein he directed the A.O. to exclude the Cost Audit Fee and Subscription to CMA allocating the expenditure in relation to units for deduction u/s.80-IA of the Act. If that my predecessor CIT(A) has dealt with this issue in Ground No. 13 of the order from para 16.1 to 16.4 of the appellate order. Following the said decision of my predecessor and also in respect of rule of consistency, I direct the A.O. to accordingly exclude the Cost Audit Fee and Subscription to CMA in respect of cement manufacturing unit. Accordingly, the A.O. is directed to exclude this item out of expenditure as mentioned on page 41 of the assessment order at Se....
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....3; or „derived by‟ the eligible undertakings, and, for this reasons, these expenses cannot be allocated to the eligible undertaking. We see no reasons to decline allocation of head office expenses to ensure that the profits of the eligible units are correctly worked out, on the basis of hypothetical independence embedded in the eligible units being treated on a standalone basis. To this extent, we reject the plea of the assessee. However, the basis of allocation as turnover is not really correct and reasonable, nor the relationship between the turnover and expenses always linear; the allocation would be more appropriate based on expenditure incurred by the units vis-à-vis overall expenditure. To this extent, we uphold the plea of the assessee. 109. In view of the above discussions, as also bearing in mind the entirety of the case, we reject the grievance of the assessee against allocation of HO expenses, but we permit the assessee's plea to the limited extent that the allocation of HO expenses should be done on the basis of expenditure incurred by the units vis-àvis overall expenditure" 78. Respectfully following decisions of coordinate b....
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....epresentative relied upon the assessment order, the Authorised Representative 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 2002-03 and 2003-04 wherein the Tribunal had granted relief to the Assessee. 14.2.4. We note that the Hon'ble Bombay High Court has, in the case of CIT vs. Echjay Forgings (P) Ltd. (2001) 251 ITR 15 has held as under: "4. The short point which arises for consideration in this appeal is, whether the Assessing Officer was right in disallowing claims for deduction in respect of the five items and ordering addition thereof to the net profit for the purposes of section 115J. 5. The addition of the five items to the net profit is, accordingly, discussed hereinbelow: (I) Addition of wealth-tax paid by the assessee to the net profit 6. Mr. Desai, the learned senior counsel for the department, fairly concedes that the net profit, as shown in the profit and loss account, will not be increased by the amount of wealth-tax paid because under clause (a) of the Explanation to section 115J(1A), what is contemplated is t....
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....B of the Act. Accordingly, Ground No 8 raised by the Revenue is dismissed." 81. Respectfully following the decision of coordinate bench referred supra, addition of provision for wealth tax made while computing book profit u/s 115JB is deleted. Accordingly, this ground of appeal in Departmental Appeal is dismissed. 52. Respectfully following the above decision, we dismiss the ground raised by the revenue. 53. In the Ground No 9, Department has raised the following grievance: "1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of provision for normal and additional gratuity amounting to Rs.8,28,97,873/- while computing the book profit u/s. 115JB of the I. T. Act." 54. The Assessing Officer has dealt with this issue at Para No. 22.1 of his order and observed that as assessee has not established that Gratuity provisions are made towards ascertained liabilities, same are added back while computing total income. This issue is dealt by CIT(A) at Para No. 20.1 of his order as under: "20.1 I have considered the A.O.'s order as well as the appellant's A/R submission. Having considered both, I....
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....ectfully 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 Officer is deleted and the ground stands allowed in favour of the appellant." 47. On appraisal of the said finding, we noticed that this issue has been covered by decision of Hon'ble ITAT in the assessee's own case for the A.Y. 1990-91 in ITA. No.2361/M/1995 & in the A.Y. 2002-03 in ITA. No.4987/M/2007. There is nothing on record to which it can be assumed that the order has been varied or changed in appellate proceeding. Since this issue has been duly adjudicated in favour of the assessee by above mentioned decision of the Hon'ble ITAT, 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." 14.3.5. Respectfully following the decision of the co-ordinate Bench of the Tribunal in the case of the Assessee for the Assessment Year 1990- 91 (ITA No. 2361/Mum/1995), Assessment Year 2002-03 (ITA No. 4987/Mu....
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....nt Appeal in Ground No 13 in AY 2005-06 and held as under: "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 Hon'ble Supreme Court in the case of Bharat Earth Movers (245 ITR 528), and the Hon'ble Bombay High Court in the case of CIT v. EchjayForgins (P) Ltd. (2001) 251 ITR 15. We do not find any infirmity in the order passed by the CIT(A) to the extent it holds that provision for Leave Encashment of INR 3,26,00,238/- is in the nature of provision for ascertained liability created on the basis of actuarial valuation and is, therefore, not required to be added back while computing Book Profits in terms of Clause (c) of Explanation 1 to Section 115JB(2) of the Act. Accordingly, order of CIT(A) on this issue is confirmed and Ground No. 10 raised by the Revenue is dismissed." ....
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....ding given by Assessing Officer and argued that order of Assessing Officer may be restored. 67. Similar issue was considered by us in the Department Appeal in Ground No 18 in AY 2005-06 and held as under: 118. Considered the rival submissions and material placed on record. It is relevant to refer to provisions of Section 115JB on statue for year under consideration. "(iv) the amount of profits eligible for deduction under section 80HHC, computed under clause (a) or clause (b) or clause (c) of sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or (v) the amount of profits eligible for deduction under section 80HHE computed under sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or (vi) the amount of profits eligible for deduction under section 80HHF computed under sub-section (3) of that section, and subject to the conditions specified in that section; or" 119. During the course of hearing the Ld. AR referred to identical decision of Ahmedabad ITAT in the case of Torrent Pharma....
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.... 1-4-2005 wherein the benefit given to the assessee under clause (iv) of explanation 1 of section 115JB of the Act was denied to the assessee. Accordingly, the AO did not allow the deduction of the amount of Rs. 79,58,97,799/- to the assessee while calculating the amount of profit under section 115JB of the Act. 97. Aggrieved assessee preferred an appeal to the learned CIT-A, who confirmed the order of the AO by observing as under: I have considered the assessment order, facts on the case and the submissions made by the appellant. The AO made the impugned addition since assessee has subtracted the profit eligible u/s.80HHC of Rs..79,58,97,799/- from its book profit. In view of the amendment brought into section 80HHC by the Finance Act, 2011 with effect from 1.4.2005, the said profit u/s.80HHC is not eligible for deduction from the book profit. In view of the same the AO's action is disallowing the same was correct and the same is upheld. Ground of appeal no.11 is dismissed. 98. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 99. The learned AR before us contended that the amendment brought under the st....
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....evant extract of the Judgment reads as under: It was clear from the language of the validation clause of section 148 of the Finance Act, 2002, that the liability was extended not by way of clarification but by way of amendment to the Finance Act with retrospective effect. It is well-established that while it is permissible for the Legislature to retrospectively legislate, such retrospectivity is normally not permissible to create an offence retrospectively. There were clear judgments, decrees or order of courts and Tribunals or other authorities which were required to be neutralized by the validation clause. It could only be assumed that the judgments, decrees or orders, etc., had, in fact, held that persons situate like the appellants were not liable as service providers. This is also clear from the Explanation to the validation section which says that no act or acts on the part of any person shall be punishable as an offence which would not have been so punishable if the section had not come into force. [Para 7] The liability to pay interest would only arise on default and is really in the nature of a quasi-punishment. Such liability although created retrospectively coul....
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....imited 255 ITR 273 and observed that reduction claimed by the assessee on account of withdrawal from share premium amount 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 CIT(A) at Para No. 24.2 of his order as under: "24.2 I have considered the A.O.'s order as well as the appellant's A/R submissions. Further I have also taken note of earlier orders in the appellant's own case of Hon'ble ITAT as well as of my predecessor. Considering the same, I find that the issue has been decided in appellant's favour by the Hon'ble ITAT in AY 1990-91 and also by my predecessor in AYs 1998-99, 1999-00, 2003-04 to 2005- 06, Respectfully following of the said orders, I consider it proper and appropriate not to deviate from the aforesaid orders referred above. Thus, this ground of appeal is accordingly adjudicated. 71. Against the observation of CIT(A), department has filed appeal. Before us, Ld. AR relied upon finding of CIT(A) and argued that issue is in favour of assessee by decision of ITAT for A.Y. 2003-04 and 2004-05. The Ld. DR has relied upon finding given by Assessing Officer an....
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....covered by decision of the Hon'ble ITAT in the assessee's own case, therefore, 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) 21.4. In view of the above, we do not find any infirmity in the order passed by CIT(A). Accordingly, we confirm the order of CIT(A) holding that amount of INR 9,66,64,158/-, transferred from Share Premium Account to the profit & loss account was correctly reduced from Book Profits by the Assessee while computing book profit as per the provisions of Clause (i) of Explanation to Section 115JB(2) of the Act. Accordingly, Ground No. 20 raised by the Revenue is dismissed." 125. Respectfully following decision of coordinate bench referred supra, we confirm the order of Ld. CIT(A) holding that amount transferred from Share Premium Account to the profit & loss account was correctly reduced from Book Profits by the Assessee while computing book profit as per the provisions of Clause (i) of Explanation to Section 115JB(2) of th....
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....ble Supreme Court in the case of Apollo Tyres Ltd. vs. CIT (supra), The accounts of the Assessee have been prepared in accordance with Parts II and III of Schedule VI to the Companies Act and the same has been duly certified by the statutory auditors, and therefore, in absence of any specific clause in Section 115JB(2) of the Act providing for increase of Book Profits by the amount of VRS expenses, no further adjustment is called for on this account. In the immediately preceding assessment year (AY 2003-04), identical issue has been decided in favour of the Assessee wherein the Tribunal has, vide common order, dated 13.03.2019, passed in ITA No. 4242/MUM/2007 & ITA No. 4988/MUM/2007 has held as under: "34. Under this issue the revenue has challenged the deletion of addition made in respect of VRS expenditure pertaining to earlier years in computing Book Profit u/s 115JB of the Act in sum of Rs..18,69,64,996/-. The relevant finding has been given in CIT(A) in Para No. no. 27.4. On appraisal of the above said finding, we are of the view that the CIT(A) has allowed the claim of the assessee on the basis of decision of the case titled as Apollo Tyres Ltd. CIT (2002) 255 ITR 27....
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....cision of Coordinate Bench for 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. 82. 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 the issue in favour of assessee. The relevant finding is reproduced herein below: "17. Ground No. 16: On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition in respect of capital expenditure debited to P & L account of INR 14,16,56,815/- in computation of book profit u/s 115JB of the Act. 17.1. During the relevant previous year, the Assessee had debited INR 14,16,56,815/- to the Profit & loss account being capital expenditure. The Assessing Officer added back the aforesaid capital expenditure to Book Profits for the reason that the same has been added back while computing profits under normal provisions of the Act. .......... 17.4. We have heard the rival contentions and perused the record. We note that the in the immediate....
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....ment Year 2003-04 (ITA No. 4988/Mum/2007), we confirm the order of CIT(A) holding that capital expenditure of INR 14,16,56,815/- debited to Profit & Loss Account is not required to be added back while computing book profits under Section 115JB of the Act. Accordingly, Ground No. 16 raised by the Revenue is dismissed." 83. Respectfully following decision of coordinate bench referred supra, we uphold finding of CIT(A) for deleting addition being capital expenditure debited to Profit & Loss account comprising of WDV of assets and on account of cost not owned by company in computing book profit. This ground of appeal in departmental appeal is thus, dismissed. 84. In the Ground No 15 Department has raised the following grievance: "15. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.8,80,00,000/-being expenditure incurred to earn dividend income while computing the book profit u/s.115JB of the I. T. Act." 85. The Assessing Office has dealt with this issue at Para No. 4.3 of his order. The Assessing Officer has observed that assessee has earned exempt dividend income in year under consideration and comput....
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.... High Court and thus the order has attained finality. It is also found that the Hon'ble Bombay High Court of Bombay had dismissed the departmental appeal with regard to the issue while deciding the appeal for AY 1999-00. Considering the above facts we decide the last additional ground against the AO." 130 It is matter of fact that department has not challenged the appellate order of A.Y. 1998-99 before Hon'ble High court and matter has attained finality. Hon'ble Bombay High court in the case of Raymond Limited [2012] 21 taxmann.com 60 has held that Amount set apart as a Debenture Redemption Reserve (DRR) is not a reserve within the meaning of Explanation (b) to section 115JA. Respectfully following decision of coordinate bench referred supra, we confirm the order of Ld.CIT(A) holding that amount transferred to Debenture Redemption Reserve cannot be added back while computing Book Profits. This ground of appeal in Departmental Appeal is dismissed. 89. Respectfully following the above decision, we dismiss the ground raised by the Revenue. 90. Ground no. 17 and 18 is general in nature and is thus dismissed. 91. In the result, the appeal of the department is dismi....
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....y is provided with the intention of providing opportunity to local employment and use of local resources. Further to that, the subsidy in the form of 100% outright exemption is provided for a period of 10 years from the date of commencement of commercial production. Thus, meaning of the said scheme is that the excise duty exemption incentive, which the appellant has claimed as capital in nature will arise only to the appellant, if it commenced the production after substantial expansion as envisaged under the aforesaid memorandum dated 07/01/2003. Further to that this expansion of the existing unit must generate potential for local employment and use of local resources. Even the activities of the production of undertaking must be environment friendly. Hence in my considered view such receipts germinate to the appellant only after commercial production. Hence, it has direct relation to production of the undertaking. Thus, the same is revenue oriented. 9.6 Further to that, a close perusal of the Notification No.50/2003 Central Excise dated 10th June,2003 were taken, which stipulates the excise duty exemption as notified by sub-section 1 of section 5(a) of Central Excise Act, ....
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....10,983.72 lacs 68% Details as per annexure1(b) 3. Connected land 26,635 MW 4.10 MW 15% 4. Employment 564 nos. - - 9.8 It is apparently evident that enhancement of production of capacity of clinker comes at Serial No. 12 of Annexure I of Notification No.50/2003 dated 10/6/2003, which is appearing negative list of Annexure I. Further to that, it is also important to take note of the fact that in the Annual Report of the appellant company for year ending 31.03.2004 it has been mentioned that on page 15 at Serial No,6 of the report that "During the year under review, your company has completed modernisation of Gagal Unit 1 including upgradation of pollution control equipment at a cost of Rs.49.46 crores". 9.9 This note in Annual report of the appellant company, which is for the shareholders/stakeholders of the appellant company clearly suggest that modernization of Gagal Unit I has completed as on 31/03/04 itself. Further in the Annual report for the year ending 31/03/05 at page-15 at Serial No.6 of Annual report mentions that "6.2 The project for augmentation of capacity of Gagal Unit I & Unit II are expec....
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....rmed regarding the commencement of trial production and subsequently the commencement of commercial production. Necessary certificates confirming that the expansion has been undertaken have also been obtained from the Director of Industries and District Industries Centre. iii) Without prejudice to the aforesaid, they submit the various documents/records. The Director of Industries Government of Himachal Pradesh, Shimla who are the jurisdictional authorities concerning setting up or expansion of an industrial unit in Himachal Pradesh, have already confirmed and acknowledged that the expansion of the unit is complete." It is nowhere assigning any verification of the actual expansion plan undertaken in the spirit of said notification. 9.11 In view of the aforesaid facts, I find that there was no targeted expansion of Gagal Unit I for increase in capacity of production of the appellant company was undertaken in compliance to office memorandum No.l(10)/2001/NER dated 07/01/2003 or in notification no,50/2003 central excise dated 10/06/03. The appellant company merely intended to enjoy the benefit of exemption declared by the Government of India without any spec....
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....ablish that the investment which are claimed to be invested in compliance to notification no.50/2003 dated 10/06/03 is not correct, but basically same was in a normal course of upgradation plan of the plant which find place of mention in the Annual report of the appellant company of F.Y.-2003-04 as stated above. • Even I find that the subsequent details of different invoices are purchased till may 2005 i.e.05/05/05 by serial no.548. In this regard, even I find that the machinery are of different variety of electric and electronic nature, which all require to be placed in order for put to use for production and definitely for all these activities of all assembling of these plant & machinery requires a concentrated effort from an agency. But the appellant company have not stated anything about the same. • On the basis of submission made by the appellant company, I find that civil work was assigned to a company namely M/s Gannon Dunkerley co. Ltd. by letter dated 11/05/04 by the appellant company, wherein the letter of intent no.355/04 dated 10/05/04 was allotted by the appellant company. The work stated therein clearly suggest that the same is for augmentati....
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....paper book of part A, which merely states of keeping the proposal for undertaking substantial expansion on record, but it is clear from the above stated facts in earlier para's that the appellant claim that expansion was completed on 03/05/05 itself is in doubt. In addition to this, the appellant's reference of sanction /6r approval of expansion plan by letter of director of industries dated 05/07/04 was made in following manner. The same is extracted as under:- (b) In view of aforesaid approval as well as taking note of memorandum dated 07/01/03 of Government of India through with aforesaid expansion plan was announced have the purpose behind it to promote the existing industries, which are situated in the areas specified in Annexure II of the notification, which are environment friendly with potential for local employment and use of local resources. But whereas I find on the basis of appellant's own submission that the total number of employees on 07/12/05 were 568 and in F.Y.-05-06 to 07-08, the total employees gone down to 540 as per form I issued by General Manager Distt, Bilaspur appearing on page 139 of part A. 9.12 Taking note of all the above facts and ob....
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....ound of above stated facts of the receipt of exemption of Central Excise which arise to appellant company only subsequent to commencement of commercial production only, I am of the considered view that the appellant claim raised through this ground of appeal is or from the spirit of truth of the notification of Govt, of India as discussed earlier. 9.15 Hence, in my considered view, such receipt can only be held to be revenue receipt and by no stretch of imagination, the same is held as capital receipt. It is an admitted fact that appellant's plant was already in existence before incentive has been announced by the Government of India. Hence the appellant company will be entitled for incentive merely after carrying out for enhancement/ expansion of production capacity as envisaged in the office memorandum dated 07/01/2003 and Notification No.50/2003 dated 10/06/2003. In view of this fact, I am of the considered view that the receipt which has been claimed by appellant company as capital receipt is completely unfounded and untenable, even, on the basis of applicability of fundamental rules of purpose test also as laid down by the Hon'ble Apex Court in the aforesaid judicial ....
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....vailed excise duty exemption, amounting to Rs 46,83,11,376, in respect of their Darlaghat Unit, HP, and it was claimed as a capital receipt in nature. It was also noted that in terms of general Exemption No, 51 (Notification No. 50/2003 dated 10th June 2003) the assessee is entitled to 100% excise duty exemption for a period of ten years in respect of its cement manufacturing plant at Darlaaghat. The assessee's submission was that this exemption was in response to the announcement made by the Hon'ble Prime Minister to the effect that tax and central excise concession 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 m....
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.... scale investments in the Kutch District since on account of devastating earth-quake, development of the district had suffered. The Scheme envisaged that, the same was confined only with the Kutch District. Similar, being the purpose and philosophy of the Government of India, while granting excise duty exemption, we may not separately take note of the back-ground thereof. In view of these facts, the question arises is - whether the Tribunal was justified in holding that Sales Tax and Excise duty exemption enjoyed by the assessee under the said subsidy scheme, 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 a....
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....theatre complexes, the idea being that exemption from entertainment duty for a period of three years and partial remission for a period of two years should go towards helping the industry to set up such highly capital intensive entertainment centres. This being the case, it is difficult to accept Mr. Narasimha's argument that it is only the immediate object and not the larger object which must be kept in mind in that the subsidy scheme kicks in only post construction, that is when cinema tickets are actually sold. We hasten to add that the object of the scheme 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....
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....kward areas. These areas were identified as backward because there was un-development or underdevelopment of industries in these areas. It was, therefore, that the Government decided to give financial incentives to encourage and induce entrepreneurs to move to backward areas and establish industries there so that the region may develop and promote the welfare of the people living in that region. One of the incentives which the Government decided to grant was cash subsidy so that entrepreneurs could utilize such cash subsidy for any purpose connected 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. I....
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....centive to encourage entrepreneurs to move to backward areas and establish industries. In such a case, specified percentage of the fixed capital cost, which was the basis for determining the subsidy, would be granted. The Court held that, such basis for determining the subsidy was only a measure adopted under the scheme to quantify the financial aid and it was not a payment, directly or indirectly to meet any portion of the actual cost of acquisition of capital asset. It was held and observed as under:- ' In so far as question No.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 &#....
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....r has observed that while filing return of income, assessee has not made any suo moto disallowance for expenditure incurred for earning exempt income. He observed that Rule 8D has been framed according to provisions of Sub Section 2 & 3 of Section 14A of the Act and such Rule 8D has retrospective operation of law. The Assessing Officer has relied upon decision of Mumbai ITAT decision in the case of Daga Capital Management Pvt Limited in support of its claim. He computed disallowance under Rule 8D read with Section 14A at Rs..8.80 crore which comprises of proportionate interest disallowance at Rs. 6.90 crore and other expenditure at Rs. 1.90 crore. In appeal CIT (A) has discussed the above issue at Para No. 5.7. of his order and held as under: "5.7 I have considered the A.O.'s order as well as the appellant's A/R submission. I have also taken note of the recent decision of jurisdictional High Court in the case of Godrej & Boyce Mfg. Co. Ltd v/s. DCIT [2010]. Taking note of these facts, I am of the considered view that Rule 8D is applicable only for A. Y.- 08-09 onwards. In view of the same, the application of rule 8D cannot be upheld, in view of the jurisdictional High Cour....
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.... 105. 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. Though Rule 8D is not applicable in year under consideration, it is fact on record that assessee has earned exempt (dividend) income and for earning such income, reasonable expenditure ought to have been incurred. So far as proportionate interest disallowance u/s 14A is concerned, it is observed that Assessee has sufficient own funds in the form of share capital and reserves and surplus in comparison with investment in shares made by it. On this issue, Hon'ble Supreme Court in the case of South Indian Bank Ltd[2021] 130 taxmann.com 178 has held 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 securities - Assessing Officer made proportionate disallowance of interest attributable to funds invested to earn tax free income under section 14A on grounds that separate accounts were not mainta....
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....ssing Officer in connection with proportionate interest disallowance is deleted. 108. So far as disallowance of other administrative expenditure is considered, it is observed that coordinate bench in the case of Ambuja Cement Limited in ITA No 5883 & 5927 of 2012 for A.Y. 2005-06 has held as under: "22. Having heard the rival contentions and having perused the material on record, we are of the considered view that disallowance @ 1% of tax-exempt income will meet the ends of justice for the reason that the period pertains to the preamendment law and rule 8D does not, therefore, has any application in the matter, and that, in accordance with a series of coordinate bench decisions, it has been consistently held so far as the pre-amendment period is concerned, a disallowance of 1% is reasonable- particularly when the assessee has made investments entirety out of his own funds and when there are no borrowings costs involved. It is an undisputed position, on the facts of this case, that the assessee has made the investments entirely out of his own funds. The disallowance is thus restricted to 1% of the tax-exempt income. The assessee gets the relief accordingly." 109. Cons....
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....on Report while the sale value of the undertaking of refractory business of the appellant company. Even I find that in para 3.1 of Page 17 of the sale agreement, the total consideration mentioned of Rs.257 crores in lieu of the transfer of the business of refractories undertaking, nowhere in the entire sale agreement or anywhere is assigned the item-wise consideration of specific asset of the said business as claimed by. the appellant company. The said valuation was carried out by the appellant company for the sake of its own known purpose. Even I find that nowhere in the sale agreement dated 29.09.2005, the item-wise value of transfer of any asset has been mentioned. Even after perusal of the Annual Report of the appellant company for A.Yr. 2005-06, there is nowhere any specific assignment of any item of the said refractory business. The claim of value of technical know-how assigned by the appellant company is for self-serving purposes. It was nowhere earlier assigned in the balance-sheet of the undertaking of refractory business. It is also not a case that the appellant company has not sold any portion of the refractory business. The purpose behind getting the valuation done was ....
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....escribed form alongwith the return of income, a report of an accountant as defined in the Explanation below sub-section (2) of section 288, indicating the computation of the net worth of the undertaking or division, as the case may be, and certifying that the net worth of the undertaking or division, as the case may be, has been correctly arrived at in accordance with the provisions of this section. Explanation 1. - For the purposes of this section, "net worth" shall be the aggregate value of total assets of the undertaking or division as reduced by the value of liabilities of such undertaking or division as appearing in its books of account: Provided that any change in the value of assets on account of revaluation of assets shall be ignored for the purposes of computing the net worth. Explanation 2. - For computing the net worth, the aggregate value of total assets shall be- (a) in the case of depreciable assets, the written down value of the block of assets determined in accordance with the provisions contained in sub-item (C) of item (I ) of subclause (c) of clause (6) of section 43; (b) in the case of capital assets in respect of which the wh....
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.... slump sale in section 2(42C) is nothing but codification of what was hitherto judicially hitherto judicially recognized. Section 2(42C) is nothing but declaration of the existing law of slump sale. As regards the taxability of gains from slump sale, the Hon'ble High Court has held at page 235 of the said Report as under: "In this appeal, we were only required to consider whether the transaction was a slump sale and having come to the conclusion that there was a sale of business as a whole, we have to remand the matter back to the Assessing Officer to compute the quantum of capital gains. For that purpose, the Assessing Officer will have to decide the cost of the undertaking for the purposes of computing the capital gains that may arise on transfer. That, the Assessing Officer will also be required to decide its value under section 5 of the Income-tax Act. Further, the Assessing Officer will be required to decide on what basis indexation should be allowed in computing the capital gains and the quantum thereof Lastly, the Assessing Officer will be required to decide the quantum of depreciation on the block of assets. It may also be mentioned that these parameters, which we ....
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.... (i). The consideration for the business will be Rs.2570 million, i.e. the enterprise value being paid for the business. (ii). ACC Refractories Business will be transferred as a going concern on an as is where is basis' as a slump sale or a slump sale with an item-wised/category break up (i.e. land, plant & machinery, copyright, technical know-how etc.) in a manner, which minimizes transaction costs and provides maximum tax and other structural benefits to both ACC and ICICI Venture. (iii). ICICI Venture is at a level of preparedness where it is confident of completing the financial and accounting and legal due diligence, etc. and closing the transaction within a matter of 60 days from the date of acceptance of the offer," 13.10 Further to that, the appellant also drawn my attention to the Board Note which appears on Page 1061 to 1063 of the Paper Book of Part 'C'. In the said Board Note, it has been clearly mentioned as Transaction Structuring and Tax and Duty Implication. The relevant portion from the Board Note is extracted herein below:- "The transaction would be a sale of ACCR undertaking on an "as is where is basis" with all its employ....
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....crores. It has been mentioned that the transfer of business concern is stipulated and that is only the lump sum price determined between the Transferor and Transferee. Therefore, I find that taking note of the entire Business Transfer Agreement and its index and the schedules wherein the refractory business of the appellant company was transferred to the Transferee as a going concern, in my considered view, the transfer was only a slump sale. It cannot be given any other colour when the intention, purpose and the specific clauses of the agreement read it as a slump sale. 13.14 The appellant's act of getting the valuation done and trying to disclose the income arising on account of transfer of refractory business of the appellant company in its own way is nothing but an attempt to ensure lesser tax liability on account of the appellant that manipulating the provisions of the Act. In my considered view, when there is a complete provision for the taxability of any business transaction then, there is no necessity to draw or interpolate with the provision for the taxability of such transaction but it is the obligatory on the part of the assessing to ensure that he levied the ta....
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....statute is an edict of the legislature. The language employed in a statute is the determinative factor of legislative intent. The first and primary rule of construction is that the intention of the legislation must be found in the words used by the legislature itself. The Court further observed that while interpreting a provision the Court only interprets the law and cannot legislate it. If a provision of law is misused and subjected to the abuse of the process of law, it is for the legislature to amend, modify or repeal it, if deemed necessary. The principles of casus omissus cannot be supplied by judicial interpretative process. Two principles of construction - one relating to casus omissus and the other in regard to reading the statute as a whole -appear to be well settled. Under the first principle a casus omissus cannot be supplied by the Court except Tirthe case of clear necessity and when reason for it is found in the four comers of the stature at the same time a casus omissus should not be readily inferred and for that purpose all of a stature or section must be construed together and every clause of section should be construed with reference to the context and other clause....
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....nd other decisions referred in the submission in support of its contention are delivered by the Apex Court prior to the enactment of the provisions of section 50B of the Act. 13.16 Further, I am of the considered view that once there is an explicit provision available on the statute for taxing such business transaction then, deriving any analogy or benefit from a decision of the Apex Court, which is pronounced prior to the enactment of the said provision is not warranted at all, when the said provisions are amply clear and explicit. Hence, when there is no ambiguity in the provisions of law, then any interpolation or addition to the explicit provision is not permitted in the spirit of law as held by Hon'ble Apex Court as discussed above. Therefore, not find any necessity to derive any further help or any such help from judicial pronouncement. 13.17 Even I find that the appellant intends to argue that the appellant company has not furnished the net worth valuation as envisaged u/s.50B(3) of the Act On this basis, the appellant company claimed that the sale transaction is an itemwised asset. But in my considered view, this act of the appellant will not help the appe....
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....essee, have come to the conclusion that the sale of the refractory business is not an itemized sale of various business assets but a slump sale u/ s. 50B of the Act.Ld.DR relied on the orders passed by the Assessing Officer and Ld.CIT(A). 116. Considered the rival submissions and material placed on record. It is observed that assessee has divested its refractory business for total consideration of Rs..257.47 crores to ACE refractories Limited. While filing return of income, the assessee has shown income on the basis of such sale treating the same as item-wise sale on the basis that assessee company got valuation done of individual assets of the undertaking by the approved valuer. Thus, sale consideration received which was referable to depreciable asset has been reduced from respective block of assets while computing depreciation and sale consideration referable to non-depreciable assets was considered in computing capital gain except for technical know how. The assessee has considered value assigned to technical know how as capital receipt relying on decision of Hon'ble Supreme Court in the case of B.C. Shrinivas Shetty 128 ITR 249. The assessee has offered sale consideration r....
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....er hand, Ld. DR has mainly relied upon finding given by lower authorities, brought to our notice various observations made by the lower authorities and contended that working of capital gain u/s 50B made by Assessing Officer needs to be upheld. 120. On the other hand, Ld. DR has also referred to relevant terms of BTA agreement and submitted that the section 50B is introduced in 1.4.2000, in this regard she relied on the decision of Hon'ble Kerala High court in the case of CIT Vs Accelerated Freeze Drying Pvt Limited 198 Taxman 18 in support of her claim. Further she brought to our notice Para No. 13 of the appellate order and relied on the findings of Ld.CIT(A). She also submitted that the case law relied by the Ld.AR are relating to Old provisions and before amendment, hence it may not be applicable. 121. Considered the rival submissions and material placed on record. On perusal of relevant facts on records, it is relevant to refer to Section 50B of the Act which is reproduced as under:- "50B. Special provision for computation of capital gains in case of slump sale- (1) Any profits or gains arising from the slump sale effected in the previous year shall be ....
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....2 (42C) of the Act defines "slump sale" means the transfer of one or more undertaking, by any means, for a lump sum consideration without values being assigned to the individual assets and liabilities in such transfer. Section 50B was introduced by virtue of the Finance Act, 1999 w.e.f. 1 st April, 2000 to provide for special provisions for computation of capital gains in the case of slump sale. Prior to the insertion of the aforesaid Section, there was much debate as to whether capital gains arising out of slump sale of an undertaking were taxable under the provisions of the Act. The principal ground for excluding capital gains on a slump sale from the charge of tax was the absence of any machinery provisions for computing the cost of acquisition of the undertaking as in a slump sale only the lump sum consideration is fixed without assigning any values to separate assets constituting the undertaking. 122. Further, Section 2 (42C) of the Act defines "slump sale" means the transfer of one or more undertaking, by any means, for a lump sum consideration without values being assigned to the individual assets and liabilities in such transfer Section 50B was introduced by virtue of th....
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....preme Court in the cases of CIT v. Artex Mfg. Co. [1997] 227 ITR 260 wherein the gains were held to be taxable: "Section 41(2), read with section 45, of the Income-tax Act, 1961 - Balancing charge - Assessment year 1967-68 - Assessee-firm sold its business as a going concern - Plant, machinery and dead-stocks were revalued by valuers and sale consideration was arrived at though there was no reference to value of plant, machinery and dead-stock in agreement to sell - Whether on facts section 41(2) was attracted - Held, yes - Whether surplus to extent of difference between written down value and actual cost had to be taxed under section 41(2) and remaining surplus, if any, had to be treated as capital gains - Held yes Section 45, read with section 41(2), of the Income-tax Act, 1961 - Capital gains - Chargeable as - Assessment year 1967-68 - Whether, where business is sold as a going concern valuing plant and machinery, etc., surplus arising over and above difference between written down value and actual cost has to be taxed under section 45 - Held, yes" 125. The Hon'ble Supreme court at Para No. 12 of its order has observed that "Shri Ganesh, the learned counsel appearing for the ....
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....roved in Shareholder meeting, it was never stated that assessee is selling the undertaking on "Slump Sale" basis which also supports the contention of assessee that provisions of Section 50B is not applicable to it. It is observed that both assessing officer and CIT(A) has applied provisions of Section 50B by simply relying upon relevant para of BTA wherein it is stated that " vendor agrees to sell, convey, assign and transfer the Refractory business as a going concern on a slump sale basis (para 2.1) but has completely ignored the relevant final bidding offer for the Refractory business as reproduced at Page No 51 of CIT(A)'s order wherein it is clearly mentioned that ACC Refractories business will be transferred as a going concern on an " as it where is basis" as a slump sale or a slump sale with item wise/category wise break up (i.e., land, plant & machinery, copyright, technical know howetc) which clearly prove that sale of under taking was after assigning value to each assets/liabilities transferred by assessee. Taxability cannot be decided solely relying upon few words as mentioned in BTA but needs to be decided based upon all relevant facts/evidences which are material in na....
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....6 taxmann.com 929 has held that "Where transfer price of undertaking was based on individual assets and liabilities, said sale would not qualify as 'Slump Sale' as per section 2(42C)". In the case of Sanmar Speciality Chemicals Limited [2020] 118 taxmann.com 78, similar view is rendered by Hon'ble Madras High court. 129. So far as observation of Ld.CIT(A) that valuation was carried out by assessee for its own purpose, it is observed that such valuation is never disputed by lower authorities. The fact that sale of undertaking was item wise sale was clearly mentioned in Board Note as well as Bid Letter as discussed herein above hence it cannot be held that valuation was only for individual purpose. It was not the case that valuation was done after sale of undertaking or made by buyer of undertaking for allocating value of assets in its books of account after acquiring the undertaking but it was made by seller i.e assessee and that too before sale of items wise assets/liabilities of undertaking. The observation of Ld.CIT(A) that annual report of assessee company nowhere show any specific assignment of any item of the refractory business is not determinative considering the ....
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....n during the relevant assessment year for certain consideration. The consideration agreed was the aggregate value for the land, building, machinery and all equipment's with liabilities specifically mentioned in the agreement entered into between the parties. The sale was in two parts; one sale deed executed and registered covered land and building, and for the purpose of payment of stamp duty and registration fee a valuation was separately made based on which stamp duty and registration fee were paid. The assessee initially treated the sale of the industrial unit as 'slump sale' and obtained auditor's report in Form No. 3EA prescribed under rule 6H of the Income-tax Rules, 1962, which is the requirement for the purpose of assessment of capital gains on 'slump sale' under section 50B(3). However, in the return filed, the assessee showed the transaction for assessment of capital gains as the sale of depreciable items under section 50 and contended that Form No. 3EA was furnished as a precaution. The Assessing Officer noticed that the sale was a 'slump sale' falling within the definition of section 2(42C) and, accordingly, made the assessment for capital gains as provided under sectio....
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....eal hence same is dismissed as not pressed. 137. In the Ground No 10 and 11 Assessee has raised the following grievance: - "10. 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 fixed assets of Rs. 1,83,49,29,359/- in computing Book Profit u/s 115JB." "11. 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. 1,18,47,64,879/- in computing Book Profit u/s 115JB." 138. The Assessing Office has dealt with this issue at Para No. 24 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. T....
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.... 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 case for the A.Y.2002-03 in ITA. No.4241/M/2007 dated 29.07.2015. Since this issue has been decided against the Assessee in the assessee's own case (supra), therefore, the finding of the CIT(A) on this issue is hereby ordered to be set aside and we allow the claim of the revenue for the addition of said amount while computing the book profit u/s 115JB of the Act. Accordingly, this issue is decid....
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.... IT Act. It is also to be noted that in the immediately preceding year i.e. AY 2004-05, 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. However, it was only during the current year as well as AY 2005-06 that the Ld. AR of the assessee referred to the decision of Hon'ble Karnataka High Court as relied and reproduced supra. Extensively relying on it 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 as well as investments after giving the benefit of indexed cost of acquisition (if applicable) while computing taxable profits u/s 115JB of the Act. Thus, Assessee's appeal is partly allowed for statistical purpose, subject to the directions herein above. 144. In the Ground No 12 Assessee has raised the following grievance: "12. That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred ....
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....facts have been discussed by Hon'ble Bombay High court in the case of Reliance Infrastructure Limited v. CIT [76 Taxmann.com 257 (2016)]and held as under: II. Section 40(a)(ii) of the Income-tax Act, 1961 - Business disallowance - Taxes (Foreign tax) - Assessment year 1983-84 - Indian assessee executed projects in Saudi Arabia and paid taxes there - Whether since foreign tax was paid on a part of global income which had accrued or arisen in India, to extent of said tax, benefit of double taxation relief under section 91 would not be available; however, assessee would be entitled to a deduction in respect of tax so paid as an expenditure incurred to earn global income - Held, yes [Para 4][In favour of assessee]........... 4. Regarding question (iii) :- (a) The applicant assessee claimed that it should be allowed a deduction of the tax paid in Saudi Arabia, if it is held that the benefit of Section 91 of the Act is not available. This deduction is claimed only to the extent tax has been paid in Saudi Arabia on the income which has accrued/arisen in India. This claim was made on the basis of Real Income Theory. ........................ (h) ....
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....79-80. In fact, the decisions of this Court in South East Asia Shipping Co. (supra) and Tata Sons Ltd. (supra), which are being relied upon in preference to Inder Singh Gill (supra) cannot be accepted as both the orders being relied upon by the applicant was rendered not at the final hearing but on applications under Section 256(2) of the Act and at the stage of admission under Section 260A of the Act. This unlike the judgment rendered in a Reference by this Court in S. Inder Singh Gill (supra). Moreover, the decision in South East Asia Shipping Co. (supra) is not available in its entirety. Therefore, it would not be safe to rely upon it as all facts and on what consideration of law, it was rendered is not known. Similarly, the decision of this Court in Tata Sons (supra) being Income Tax Appeal No.209 of 2001 produced before us, dismissed the appeal of the Revenue by order dated 2nd April, 2004 by merely following its order dated 23rd March, 1993 rejecting the Revenue's application for Reference under Section 256(2) of the Act. Thus, it also cannot be relied upon to decide the controversy. Moreover, the order of this Court in Tata Sons Ltd. (supra) as produced before us for Ass....
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....dian Income Tax Act, 1922 Act also contains a similar provision in Section 10(4) thereof. However, the Indian Income Tax Act, 1922 contains no definition of "tax" as provided in Section 2(43) of the Act. Consequently, the tax paid on income/profits and gains of business/profession anywhere in the world would not be allowed as deduction for determining the profits/gains of the business under Section 10(4) of the Indian Income Tax Act, 1922. Therefore, on the state of the statutory provisions as found in the Indian Income Tax Act, 1922 the decision of this Court in S. Inder Singh Gill (supra) would be unexceptionable. However, the ratio of the aforesaid decision in S. Inder Singh Gill (supra) cannot be applied to the present facts in view of the fact that the Act defines "tax" as income tax chargeable under the provisions of this Act. Thus, by definition, the tax which is payable under the Act alone on the profits and gains of business are not allowed to be deducted notwithstanding Sections 30 to 38 of the Act. (m) It therefore, follows that the tax which has been paid abroad would not be covered with in the meaning of Section 40(a) (ii) of the Act in view of the de....
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....of the Act, the tax paid in Saudi Arabia on income which has accrued and/or arisen in India is not eligible to deduction under Section 91 of the Act. Therefore, not hit by Section 40(a)(ii) of the Act. Section 91 of the Act, itself excludes income which is deemed to accrue or arise in India. Thus, the benefit of the Explanation would now be available and on application of real income theory, the quantum of tax paid in Saudi Arabia, attributable to income arising or accruing in India would be reduced for the purposes of computing the income on which tax is payable in India. (p) It is not disputed before us that some part of the income on which the tax has been paid abroad is on the income accrued or arisen in India. Therefore, to the extent, the tax is paid abroad on income which has accrued and/or arisen in India, the benefit of Section 91 of the Act is not available. In such a case, an Assessee such as the applicant assessee is entitled to a deduction under Section 40(a)(ii) of the Act. This is so as it is a tax which has been paid abroad for the purpose of arriving global income on which the tax payable in India. Therefore, to the extent the payment of tax in Saudi Arabi....
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.... exempt income. 1(b) That on the facts and in the circumstances of the case, and without prejudice to ground no.1(a), the Ld. CIT (A) erred in applying ratio of investment and total funds to the total interest expense considering the fact that interest expenses were incurred on borrowing used specific purposes. 1(c). That on the facts and in the circumstances of the case, and without prejudice to ground no.1(a), the Ld. CIT (A) erred in considering ad-hoc amount of Rs.30,00,000/- as expenses of treasure Department for the purpose of computing disallowance u/s.14A. 153. It is observed that identical issue is already decided partly in favour of assessee while dealing with Ground No 2 of Assessee appeal in ITA No 5655/Mum/2011 referred supra hence this ground of appeal does not require separate adjudication and same is dismissed. 154. In the Ground No 2, Assessee has raised the following grievance: "That on the facts and in the circumstances of the case, Ld. CIT (Appels) was not justified and grossly erred in confirming the action of Assessing Officer in foreign currency, thereby violating the method prescribed in Section 91. 155. It is observed tha....
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....by relying on the decision of Hon'ble Bombay High Court in the case of CIT v. Pruthvi Brokers and Shareholders P Ltd [349 ITR 336]. On the other hand, Ld DR objected for the above proposition and the assessee could claim the same in the return of income and also not claimed by filing the revised return of income. 3. Considered the rival submissions and material placed on record. It was submitted that the assessee made the payment to BIS Marking in the current assessment year and the same is eligible to claim as business expenditure. After considering the submissions, we are inclined to remit this issue back to the file of Assessing Officer to verify the claim of the assessee and allow the same on the payment basis as per law. Therefore, this additional ground raised by the assessee is allowed for statistical purpose. ITA NO.3135/MUM/2019 (A.Y: 2009-10) 4. At Para No. 94, we dealt with the issue of Leave Encashment allowance u/s 115JB, we observe that the similar issue was considered by us in the A.Y.2008-09 in Ground No 13 and instead of reproducing the decision, we have wrongly reproduced the findings given in the A.Y.2005- 06. The more relevant facts for this ground is f....
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....ar as proportionate interest disallowance u/s 14A is concerned, it is observed that Assessee has sufficient own funds in the form of share capital and reserves and surplus in comparison with investment in shares made by it. On this issue, Hon'ble Supreme Court in the case of South Indian Bank Ltd [2021] 130 taxmann.com 178 has held as under: "Section 14A of the Income-tax Act, 1961 - Expenditure incurred in relation to exempt income not includible in total income (General) - Assesseescheduled banks earned income from investments made in tax-free securities - Assessing Officer made proportionate disallowance of interest attributable to funds invested to earn tax free income under section 14A on grounds that separate accounts were not maintained for investment in tax-free securities - Whether since interest free own funds available with assessee exceeded their investments; investments would be presumed to be made out of assessee's own funds and proportionate disallowance was not warranted under section 14A on ground that separate accounts were not maintained by assessee for investments and other expenditure incurred for earning tax-free income - Held, yes [Para 27] [....
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....rred in relation to exempt income not includible in total income - Assessment year 2008-09 - Whether only those investments are to be considered for computing average value of investment which yielded exempt income during year - Held, yes [Para 11.16][Matter remanded]" 14. The above referred decision has been followed by co-ordinate Bench in the case of DCIT v. Shree Global Tradef in Ltd. in ITA No. 1374/Mum/2022 dated 22 nd December, 2022 has held as under: "11. Having heard the rival submissions and perused the materials available on record. It is observed that the assessee has made a suo moto disallowance of Rs.1,263/- for which the assessee contends that the A.O. ought not to have applied Rule 8D on the ground that suo moto disallowance has been made by the assessee. The assessee further contends that without prejudice, the disallowance should be restricted only to the investments which have yielded an exempt income for the assessee during the impugned year. It is also pertinent to point out that since the assessee had not borrowed funds during the relevant year, no disallowance as per Rule 8D(2)(i) of the Income Tax Rules was warranted. It is also observed th....