TaxTMI 
TaxTMI 
2025 (2) TMI 1335
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....blic was substantially interested, was engaged in different manufacturing and trading activities at the relevant time. For Assessment Year 2006-07, the Assessee filed return of income on 27/11/2006 declaring total income of INR. 10,62,16,40,458/-. The Assessee filed as revised return on 20/03/2008 declaring total income of INR 10,60,25,15,698/-. The case of the Assessee was selected for regular scrutiny and notice u/s 143(2) of the Act was issued the Assessee on 15/10/2007. The Assessing Officer completed assessment under Section 143(3) of the Act vide Assessment Order, dated 26/12/2008, assessing the total income of the Assessee at INR. 11,06,04,76,832/- after making certain additions and disallowances. 3. Being aggrieved, the Assessee preferred appeal before the CIT(A). The CIT(A) partly allowed the appeal preferred by the Assessee vide order, dated 18/05/2009. 4. Not being satisfied with the relief granted by the ld. CIT(A), the Assessee has preferred appeal before this Tribunal. The Revenue has also filed cross-appeal challenging the relief granted by the ld. CIT(A). Appeal by Assessee: ITA No.3762/MUM/2009 5. We would first take up appeal preferred by the Assessee.....
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.... depreciation claimed by the Assessee. 7.3. Being aggrieved, the Assessee challenged the disallowance of deprecation of INR. 5,88,509/- before the CIT(A). It was reiterated before the CIT(A) that the assets under consideration formed were originally used for the purpose of business of the Assessee and formed part of Block of Assets. As per Section 32 of the Act depreciation was to be allowed on the Written Down Value (WDV) of the Block of Asset as computed as per Section 43(6) of the Act. Under the block concept once an asset is added to the Block of Assets it loses its identity and the depreciation on a particular asset cannot be worked out separately. Rejecting the aforesaid submission, the CIT(A) confirmed the disallowance of depreciation of INR. 5,88,509/- made by the Assessing Officer. 7.4. Being aggrieved, the Assessee in appeal before the Tribunal on this issue. 7.5. We have heard both the sides and have perused the material on record. 7.6. It is admitted position that during the relevant previous year, the income from Let-Out Assets was offered to tax by the Assessee under the head 'Income from House Property'. Section 22 of the Act dealing with 'Income from Hou....
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....et forming part of Block of Assets. However, the same are not applicable to the facts of the present case. Explanation 2A and 2B to Section 43(6) of the Act are applicable in a case of demerger, while Explanation 5 to Section 43(6) of the Act is applicable in a case of transfer by a stock exchange under a scheme of corporatisation. Further, in the present case there is no transfer of asset and the Assessee continues to be the owner of the Act. We note that while deleting the disallowance of depreciation made by the Assessing Officer in identical facts and circumstances in the case of the Assessee for the Assessment Year 2005-2006 [ITA No.3517/MUM/2006, Common Order, dated 04/07/2023] the Tribunal had held as under: "27. It is the plea of the assessee that since the property was acquired in the assessment year 1987-88 and forms part of the block of assets, therefore, the lower authorities have erred in carving out the depreciation for this property and disallowing the same. ....................................... In this regard, it is pertinent to note that the property in question forms part of the block of assets since the assessment year 1987-88 and the depreciation on t....
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....) and also taxing of balancing charge under section 41(2) in the year of sale. Instead of these two provisions, now whatever is the sale-proceed of sale of any depreciable asset, it has to be reduced from the block of assets. This amendment was made because now the assessees are not required to maintain particulars of each asset separately and in the absence of such particular, it cannot be ascertained whether on sale of any asset, there was any profit liable to be taxed under section 41(2) or terminal loss allowable under section 32(1)(iii).This amendment also strengthen the claim that now only detail for "block of assets" has to be maintained and not separately for each asset " 33. Having regard to this legislative intent contained in the aforesaid amendment, it is difficult to accept the submission of the learned counsel for the Revenue that for allowing the depreciation, user of each and every asset is essential even when a particular asset forms part of 'block of assets'. Acceptance of this contention would mean that the assessee is to be directed to maintain the details of each asset separately and that would frustrate the very purpose for which the amendment....
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....Assessee is dismissed as not pressed. 9. Ground No. 4. "4. Income derived from the Undertaking 4.1. On the facts and circumstance of case and in law, the CIT(A) erred in upholding the action of AO that receipts of Rs. 48,448/- is not income derived from undertaking eligible for deduction u/s. 80IA. 4.2. The CIT(A) ought to have held that receipt of Rs. 48,448/- is derived from business of undertaking eligible for deduction u/s. 80IA. 9.1. We have heard both the sides and have perused the material on record in relation to this issue. Both the sides agreed that identical issue had come up for consideration before the Tribunal in appeal for the Assessment Year 2005-06 and the issue was remanded back to the file of the Assessing Officer. On perusal of the Common Order, dated 04/07/2023 passed by the Tribunal in ITA No.3517/MUM/2006 pertaining to Assessment Year 2005-2006, we find that the Tribunal had issued following directions (after taking into consideration the order, dated 23/06/2023, pertaining to Assessment Year 2004-2005): "41. Since in the year under consideration also, various receipts under the broad category of "miscellaneous receip....
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....have been considered carefully. The question for consideration is whether interest under section 244A granted to assessee in the proceedings under section 143(1)(a) of the Act is taxable in the year of its receipt or in the year in which proceedings under section 143(1)(a) attains finality. According to the charging provisions of sections 4 and 5 of the Act, the income is chargeable in the year in which it is either accrued or received as the case may be. The issue regarding accrual of income is concluded by the judgment of the Hon'ble Supreme Court in the case of E.D. Sassoon & Co. Ltd. v. CIT [1954] 26 ITR 27, wherein it has been held that income accrues when right to receive is acquired and such right can be said to have been acquired when an enforceable debt is created in favour of the assessee. This legal position has been applied by the Courts including the Apex Court in various cases. 8. Let us now look at the relevant provisions of section 244A of the Act which for the benefit of this order are stated below : "244A. (1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of his section, be entitled to ....
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....ccrue on the date of refund itself. Therefore, when such interest is actually granted along with the refund then, in our opinion, the requirement of sections 4 and 5 of the Act are fully satisfied and the same can be taxed in the year of receipt. 9. The main contention of the assessee's counsel is that such right is contingent as the interest so received can be varied or withdrawn after the assessment under section 143(3). We are unable to accept such contention of assessee for the reasons given hereafter. According to the dictionary meaning, a right or an obligation can be said to be contingent when such right or obligation is dependent on something not yet certain. According to section 244A, the only condition for grant of interest is that there must be a refund due to assessee under any provision of the Act. There is no other condition in the said provision affecting such right. Therefore, the moment a refund becomes due to assessee, an enforceable debt is created in favour of assessee and assessee acquires a right to receive the interest. Sub-section (3) of section 244A only affects its quantification under certain circumstances and not the right of interest. The Hon'b....
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....see would be without remedy if the interest is reduced by virtue of assessment under section 143(3). This apprehension, in our opinion, is unfounded. If interest is reduced by virtue of sub-section (3) of section 244A on account of assessment under section 143(3), the interest granted in earlier year gets substituted and it is the reduced amount of interest that would form part of income of that year. Thus, it would amount to mistake rectifiable under section 154 of the Act. In our opinion, if the basis, on which income was assessed is varied or ceases to exist, then such assessment would become erroneous and can be rectified. This can be explained with an example. For instance, land in a village belonging to various persons is acquired by Government for some development works and the compensation is awarded by the Collector with interest, if any. But one of the land holders challenges the acquisition proceedings in the High Court and later on succeeds as the acquisition is declared illegal. By virtue of such High Court order, such compensation has to be returned and Government will have to restore the land to the villagers. Therefore, if capital gain has been assessed in the hands....
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....taxable income of the appellant for the previous year. 17.2. The AO is directed this year also to follow the same direction as given to him in the earlier AYs by the CIT(A)s and therefore the alternate ground is allowed." (Emphasis Supplied) 10.5. Thus, the CIT(A) has concluded that the income is to be taxed during the relevant previous year. However, following the decision of the Tribunal in the case of the Assessee for the Assessment Year 1993-94, the CIT(A) has directed the Assessing Officer to exclude interest, if subsequently withdrawn from taxable income of the Assessee for the relevant previous year. We find that the decision of the CIT(A) is in line with the above decision of the Tribunal in the case of Avada Trading Co. Pvt. Ltd. (supra) as well as the decision of the Tribunal in the case of the Assessee for Assessment Year 2005-2006 [ITA No.3517/MUM/2006, Common Order, dated 04/07/2023]. The relevant extract of the aforesaid decision of the Tribunal for the Assessment Year 2005-06 reads as under: "42. The issue arising in ground no.10, raised in assessee's appeal, is pertaining to the taxability of interest received from the Income Tax Depart....
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.... of interest amounting to Rs. 13,64,09,609/- is concerned, granted alongwith interest. However, if in the subsequent year refund of interest is withdrawn, then the same should be reduced from the total income of the assessee. Accordingly, we direct the A.O. to tax interest income in terms of the order of the tribunal for A.Y. 1993-94 as reproduced above, keeping in view our above observation" 16. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal is respectfully followed, we order accordingly." 44. Therefore, in view of the above, ground no.10, raised in assessee's appeal is allowed with similar directions, as rendered by the coordinate bench in the preceding assessment years." (Emphasis Supplied) 10.6. In view of the above decision of the Special Bench of the Tribunal in the case of Avada Trading Co. Pvt. Ltd. (supra) and the decision of the Tribunal in the case of the Assessee for the Assessment Year 2005-06 (supra), contention of the Assessee that the CIT(A) erred in upholding the action of Assessing Officer in taxing the interest received from Income Tax Department during the relevan....
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....come Tax (Appeals) -XXVI [hereinafter referred as "CIT(A)"] on the following additional grounds: 1. The learned CIT(A) ought to have held that the sum of Rs. 2,68,71,018 being dividend received from Alexandria Carbon Black Company, a company incorporated and registered in Egypt (U.A.R.) was not taxable in India. 2. The appellant craves leave to add, to alter, amplify or delete all or any of the ground (s) before or at the time of hearing." 47. The issue arising in the aforesaid additional ground of appeal is pertaining to the taxability of dividend received from Egyptian company. Since, the issue raised by way of additional ground is a legal issue, which can be decided on the basis of material available on record, we are of the view that the same can be admitted for consideration and adjudication in view of the ratio laid down by the Hon'ble Supreme Court in NTPC v/s CIT, [1998] 229 ITR 383 (SC). During the year under consideration, the assessee received Rs. 2,68,71,018, as a dividend from M/s Alexandria Carbon Black Company S.A.E., a company incorporated and registered under the laws of Egypt (U.A.R.). It is the plea of the assessee that the aforesaid di....
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...." "88 We summarise our conclusion as under:- (i) ..... (ii) The notification dated 28th August 2008, reflects a particular intent and objective of the Government of India, as understood during the course of negotiations leading to formalization of treaty. Therefore, such a notification has to be reckoned as clarificatory in nature and hence interpretation given by Govt. of India through this notification will be effective from 1st April 2004, i.e., from the date when provision of section 90(3) was brought in the statute, giving a Legal frame work for clarifying the intent of one of the negotiating parties;" "66. The coordinate bench of the Tribunal also noted the legal position as it existed prior to the aforesaid amendment as under:- "57A. If we analyse all the judgments as have been referred to above, it is evident that:- * Firstly, in R.M. Muthaiah (supra), the expression "may be taxed" has not been expressly dealt with, however, in the context of Article-6(1), wherein similar phraseology has been used, the High Court has given its decision that once it has been taxed in the foreign country, the same cannot be taxed in India.....
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....to the source country only on the income earned in such country and the country of resident is completely precluded from taxing the same income." 66. Since the year under consideration before the coordinate bench in the aforesaid decision was the assessment year 2003-04, the coordinate bench following the decision of the Tribunal in Essar Oil Ltd v/s ACIT, [2013] 42 taxmann.com 21 (Mum-Trib.) came to the conclusion that the amendment w.e.f 01/04/2004, by which sub-section (3) to section 90 has been brought in the statute, whereby there was a clear departure from the earlier position, is not applicable to that year. However, since the amendment vide Finance Act, 2003 to section 90 was held to be effective from 01/04/2004 and thus applicable from the assessment year 2004-05, therefore the year under consideration will be governed by the aforesaid amended provisions and Notification no. 91 of 2008 dated 28/08/2008 issued under section 90(3) of the Act is also applicable. We find that the coordinate bench of the Tribunal in Technimont (P.) Ltd. v/s ACIT, [2020] 116 taxmann.com 996 (Mumbai - Trib.), after taking into consideration the aforesaid amendment observed as under:- ....
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....ssee. Accordingly, the additional ground filed by the assessee vide application dated 23/01/2013 is dismissed." 49. In the absence of any allegation regarding the change in facts or in law in the present case, we find no reason to deviate from the conclusion so reached by the coordinate bench in the preceding year. Therefore, respectfully following the aforesaid decision, the additional ground raised by the assessee vide application dated 23/01/2013 is dismissed." (Emphasis Supplied) Thus, Co-ordinate Bench of the Tribunal admitted the additional ground and after analyzing the change in legal position, rejected the plea of the Assessee holding that dividend income received by the Assessee from Alexandria Carbon Black Company would be liable to tax in India. 12.2. The facts and circumstances prevailing in the Assessment Year 2006-07 are identical to those prevailing in the Assessment Year 2005-06. During the relevant previous year the Assessee had received dividend of INR. 3,17,72,987/- from Alexandria Carbon Black Company, a company incorporated and registered in Egypt (U.A.R.). By way of additional ground under consideration the Assessee has claimed that th....
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.... the learned AO be directed to increase the deduction allowed to the assessee on account of interest cost by Rs 0.71 Cr being TUF subsidy deducted from interest cost claimed during the year. 3. The Appellant craves leave to add and/or to amend and/or to alter the above Ground of appeal." 51. The issue arising in the aforesaid additional ground of appeal is pertaining to treating the subsidy received by the assessee under Technology Upgradation Fund ("TUF") Scheme as capital receipt and thus not chargeable to tax. Since, the issue raised by way of additional ground is a legal issue, which can be decided on the basis of material available on record, we are of the view that the same can be admitted for consideration and adjudication in view of the ratio laid down by the Hon'ble Supreme Court in NTPC v/s CIT, [1998] 229 ITR 383 (SC). 52. As per the assessee, the TUF subsidy is provided by the Central Government to sustain and improve the competitiveness and overall long-term viability of the Textile Industry and as an incentive for technology upgradation of the textile industry. It was submitted that the subsidy is granted via - Resolution on TUFS on Techno-O....
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....ted that the Hon'ble Rajasthan High Court in the case of PCIT vs. Nitin Spinners Ltd. in DB Income Tax appeal No.31/2019 decided on 19/09/2019 has held subsidy received under TUF as capital in nature. Similar view has been taken by Mumbai Tribunal in the case of ACIT vs. SVG Fashions Ltd. in ITA No.704/Mum/2016 for assessment year 2012-13 decided on 17/07/2018. The ld. Authorized Representative for the assessee to further buttress his submissions placed reliance on the following decisions:- (1) CIT vs. Gloster Jute Mills Ltd.,96 taxmann.com 303 (Cal) (2) CIT vs. Sshyam Lal Bansal, 200 Taxman 14 (P&H) 38.2 The ld. Authorized Representative for the assessee further submitted that CIT(A) has decided this issue after seeking remand report of Assessing Officer and examining TUF scheme in details. The ld. Authorized Representative for the assessee further submitted that the Tribunal in assessee's appeal for assessment year 2009-10 (supra) has admitted this issue raised in additional ground of appeal and has restored to Assessing Officer for fresh adjudication. 39. The ld. Departmental Representative submitted that the issue may be restored to Assessing....
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....n the Assessment Year 2006-07 are identical to those prevailing in the Assessment Year 2005-06. During the relevant previous year the Assessee had received INR. 1.70 Crore as Subsidy under TUF Scheme. By way of additional ground under consideration the Assessee has claimed that the aforesaid subsidy received under TUF Scheme is capital in nature and therefore, not liable to tax as revenue receipts. Respectfully following the decision of the Tribunal in the case of the Assessee for the Assessment Year 2005-06 [ITA No. 3517/MUM/2017, Common Order, dated 04/07/2023] we admit the additional ground raised by the Assessee and allow the same in favor of the Assessee holding that the subsidy of INR. 1.70 Crore received by the Assessee during the relevant previous year under TUF Scheme to be a capital receipt. The Assessing Officer is directed to recompute the income of the Assessee accordingly. In terms of the aforesaid Additional Ground No. 2 to 2.1 raised by the Assessee are allowed. 14. Additional Ground No. 3. "3.1 On the facts and the circumstances of the case and in law, the learned AO erred in treating Education cess as disallowable expenditure under Section 40(a)(ii) of....
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....of the Income-tax Act, in clause (a), in sub-clause (ii), after Explanation 2, the following Explanation shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2005, namely:-- 'Explanation 3.-- For the removal of doubts, it is hereby clarified that for the purposes of this sub-clause, the term "tax" shall include and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax." (Emphasis Supplied) 14.8. The Memorandum to the Finance Bill, 2022 provided following the above amendment proposed by the Finance Bill: "Clarification regarding treatment of cess and surcharge Section 40 of the Act specifies the amounts which shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession". Sub-clause (ii) of clause (a) of section 40 of the Act provides that any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains shall not be deducted in computing the income chargeable under the head "....
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....a particular year. This CBDT circular needs to be seen from the perspective that "Education Cess" imposed by Finance Act 2004 and subsequent Acts and then designated as "Education and Health Cess" are actually tax in the form of additional surcharge, as stated clearly in each of the relevant Finance Act imposing such "Cess". It is only called "Cess" since they were imposed for a particular purpose of fulfilling the commitment of the Government to provide and finance quality health services and universalized quality basic education and secondary and higher education. 7. This circular was in reference to "Cess" imposed by State Government which is actually of the nature of "Cess" and not of the nature of "Additional Surcharge" being termed as "Cess" in the relevant Finance Act. When an additional surcharge is imposed by the Central Government and it is named as "Cess", then its allowability needs to be examined whether an additional surcharge is allowed to be a deduction or not. Hon'ble Supreme Court in the case of K Srinivasan has held that "surcharge" and "additional surcharge" are tax. Hence, the additional surcharge named as "Cess" and imposed by the Central Government t....
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....f additional surcharge (though named as 'cess'). In the case of CIT Vs. K Srinivasan [1972] 83 ITR 346 (SC) Hon'ble Supreme Court has held that 'surcharge' and 'additional surcharge' are tax. By way of the deeming fiction created by Explanation 3 to Section 40(a)(ii) of the Act, term 'tax' is deemed to have always included 'cess by whatever name called, on such tax'. The validity to amendment by way of which Explanation 3 to Section 40(a)(ii) of the Act was inserted is not under challenge. The Memorandum to Finance Bill, 2022 clearly states that additional surcharge is levied by the Central Government through the Finance Act (which has been named as 'cess') in nothing but tax, and hence, the same needs to be disallowed under sub-clause (ii) of clause (a) of section 40 of the Act. Given the clear legislative intent, accepting the contention of the Assessee would defeat the very purpose for which Explanation 3 to Section 40(a)(ii) of the Act was inserted. 14.10. Further, we do not find any merit in the contention advanced on behalf of the Assessee to the effect that cess is not levied on the profits & gains of any business or profession. In our view, though cess is calculated as a....
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....Rajasthan High Court's decision in Chambal Fertilisers & Chemicals Ltd. Vs. JCIT, [2019] 107 taxmann.com 484 (Raj.) and held that education cess paid by the respondent assessee would not be allowed as an expenditure under Section 37 read with 40(a)(ii) of the Act. Therefore, in view of the above, the additional grounds raised by the assessee vide application dated 30/01/2019, are dismissed. 57. In the result, the appeal by the assessee is partly allowed for statistical purposes." 14.13. In view of the above, we in view of Section 40(a)(ii) of the Act deduction for education cess cannot be allowed to the Assessee. Accordingly, Additional Ground No.3.1 to 3.2. raised by the Assessee are dismissed. AY 2005-06: ITA No.4385/MUM/2009: Appeal by Revenue 15. The Revenue has raised 10 grounds of appeal which require adjudication and are taken up hereinafter in seriatim. 16. Ground No. 1. "1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the disallowance of Rs. 4,57,39,010/- made u/s 43B of the Act by relying upon the order of the ITAT in the assessee's own case for the AY. 1993-94 without appreciating that the departmen....
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....ble statute. Therefore, failure of the Assessee to make payment towards the same during the relevant previous year cannot lead to disallowance under Section 43B(b) to (f) of the Act. It was also submitted that identical issue stands decided in favour of the Assessee by the Co-ordinate Benches of the Tribunal in appeals pertaining to the preceding assessment years. 16.5. We have given a thoughtful consideration to the rival contentions and have perused the material on record and have examined the position in law. 16.6. We note that in the case of Checkmate Services Pvt. Ltd. (supra) the Hon'ble Supreme Court has, in the context of Section 43B of the Act, observed as under: "5. With effect from 1-4-1984, Section 43B was inserted. It reads inter alia, as follows: "Section 43B. Certain deductions to be only on actual payment. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of-- xx xx (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fu....
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.... Section 43B falls in Part-V of the IT Act. What is apparent is that the scheme of the Act is such that Sections 28 to 38 deal with different kinds of deductions, whereas sections 40 to 43B spell out special provisions, laying out the mechanism for assessments and expressly prescribing conditions for disallowances. In terms of this scheme, section 40 (which too starts with a non-obstante clause overriding Sections 30-38), deals with what cannot be deducted in computing income under the head "Profits and Gains of Business and Profession". Likewise, section 40A(2) opens with a non-obstante clause and spells out what expenses and payments are not deductible in certain circumstances. Section 41 elaborates conditions which apply with respect to certain deductions which are otherwise allowed in respect of loss, expenditure or trading liability etc. If we consider this scheme, Sections 40- 43B, are concerned with and enact different conditions, that the tax adjudicator has to enforce, and the assessee has to comply with, to secure a valid deduction. xx xx 38. This court had occasion to consider the object of introducing section 4....
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.... - was introduced to ensure timely payments were made by the employer to the concerned fund (EPF, ESI, etc.) and avoid the mischief of employers retaining amounts for long periods. That Parliament intended to retain the separate character of these two amounts, is evident from the use of different language. Section 2(24)(x) too, deems amount received from the employees (whether the amount is received from the employee or by way of deduction authorized by the statute) as income - it is the character of the amount that is important, i.e., not income earned. Thus, amounts retained by the employer from out of the employee's income by way of deduction etc. were treated as income in the hands of the employer. The significance of this provision is that on the one hand it brought into the fold of "income" amounts that were receipts or deductions from employees income; at the time, payment within the prescribed time - by way of contribution of the employees' share to their credit with the relevant fund is to be treated as deduction (Section 36(1)(va)). The other important feature is that this distinction between the employers' contribution (Section 36(1)(iv)) and employees' c....
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....er: "4. To understand the circumstances in which section 43B came to be inserted in the Act and the mischief which it sought to prevent, it is necessary to look at the memorandum explaining the provisions in the Finance Bill of 1983 [1983] 140 ITR (St.) 160 : "59. Under the Income-tax Act, profits and gains of business and profession are computed in accordance with the method of accounting regularly employed by the assessee. Broadly stated, under the mercantile system of accounting, income and outgo are accounted for on the basis of accrual and not on the basis of actual disbursements or receipts. For the purposes of computation of profits and gains of business and profession, the Income-tax Act, defines the word 'paid' to mean 'actually paid or incurred' according to the method of accounting on the basis of which the profits or gains are computed. 60. Several cases have come to notice where taxpayers do not discharge their statutory liability such as in respect of excise duty, employer's contribution to provident fund, Employees' State Insurance Scheme, etc., for long period of time, extending sometimes to several years. For the p....
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.... was remedial in nature, designed to eliminate unintended consequences which may cause undue hardship to the assessee and which made the provision unworkable or unjust in a specific situation. 6. Looking to the curative nature of the amendment made by the Finance Act, 1987 it has been submitted before us that the proviso which is inserted by the amending Finance Act, 1987 should be given retrospective effect and be read as forming a part of section 43B from its inception. This submission has taken support from decisions of a number of High Courts before whom this question came up for consideration. The High Courts of Calcutta, Gujarat, Karnataka, Orissa, Gauhati, Rajasthan, Andhra Pradesh, Patna and Kerala appear to have taken the view that the proviso must be given retrospective effect. Some of these High Courts have held that 'sum payable' under section 43B(a) refers only to the sum payable in the same accounting year, thus excluding sales-tax payable in the next accounting year from the ambit of section 43B(a). The Delhi High Court has taken a contrary view holding that the first proviso to section 43B operates only prospectively. We will refer only to some of t....
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....fee was payable in the same accounting year. If the tax was payable in the next accounting year, section 43B would not be attracted. This was done in order to prevent any undue hardship to assessees such as the ones before us. The memorandum of reasons takes note of the combined effect of section 43B and the first proviso inserted by the Finance Act, 1987. After referring to the fact that the first proviso now removes the hardship caused to such taxpayers it explains the insertion of Explanation 2 as being for the purpose of removing any ambiguity about the term 'any sum payable' under clause (a) of section 43B. This Explanation is made retrospective. The memorandum seems to proceed on the basis that section 43B read with the proviso takes care of the hardship situation and hence Explanation 2 can be inserted with retrospective effect to make clear the ambit of section 43B(a). Therefore, section 43B(a), the first proviso to section 43B and Explanation 2 have to be read together as giving effect to the true intention of section 43B. If Explanation 2 is retrospective, the first proviso will have to be so construed. Read in this light also, the proviso has to be read into sect....
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.... upon the CIT(A)'s orders in the assessee's own case of the A.Y. 1900-2000 and 2001-02 which have not been accepted by the department and further appeal has been filled before the ITAT." 17.1. The Assessing Officer made disallowance of INR. 45,08,009/- being amount contributed by the Assessee to various local organisations. The amount disallowed consisted of (a) contribution of INR. 12,44,409/- made towards local organizations, (b) contribution of INR. 30,50,002/- to the Grasim Jan Kalyan Trust and (c) contribution of INR. 2,14,200/- towards cement supply to Sidharth Vihar Trust. In appeal before CIT(A), it was contended that the aforesaid contributions per made by the assessee to help it maintain business smoothly, to ensure good relations, maintain good profile and secure benefit to its business. The CIT(A) granted relief to the Assessee and deleted the disallowance made by the Assessing Officer by following the decision of his predecessor in appeals pertaining to Assessment Years 1996-97 to 2005-06. Being aggrieved the Revenue has preferred appeal on this issue. 17.2. We have heard both the sides and have perused the material on record. There is nothing on record to co....
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....urther filed by the Revenue before the Hon'ble High Court in assessment years 1988-89, 1994-95, 1995-96, the same has been decided in favour of the assessee. The order of the Tribunal for 2000-01 was not challenged by the Department before the Hon'ble High Court on this issue. Respectfully following the order of the Tribunal and Hon'ble High Court in assessee's own case, we do not find any reason to interfere with the order of the ld. CIT(A)." 53. Respectfully following the above decision, we sustain the order passed by the Ld.CIT(A) and dismiss the Ground No. 2 raised by the revenue. We order accordingly. 79. The learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee's own case and no change in facts and law was alleged in relevant assessment year. This issue is recurring in nature and has been decided in favour of the assessee in the preceding years. Therefore, respectfully following the judicial precedent in assessee's own case cited supra, ground no.2, raised in Revenue's appeal is dismissed." 64. In the absence of any allegation regarding the change in facts or in law in the present case, we find no reason....
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....ised in Revenue's appeal, is pertaining to the deletion of disallowance on account of rural development expenses. 66. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal, vide order dated 13/06/2023, passed in assessee's own case for the assessment year 2003-04 cited supra, while deciding similar issue in favour of the assessee by following the decision rendered in the preceding year, observed as under:- "83. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench, vide order dated 14/12/2021, passed in assessee's own case for the assessment year 2002-03, while following the decision rendered in the preceding year, decided the similar issue in favour of the assessee by observing as under:- "60. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2001-02 in favour of the assessee. While deciding the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum/2003 d....
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....orders for the Asst. Years 2002-03 and 2003-04 without appreciating that the department has not accepted the orders by filing appeal to ITAT." 19.1. Ground No. 3 raised by the Revenue challenges the order of CIT(A) deleting the disallowance of INR. 94,95,125/- made by the Assessing Officer in respect of advertisement films by treating the same as capital expenditure. 19.2. We find that identical issue had come up for consideration before the Tribunal in the case of the Assessee in the preceding assessment years; and the same was decided in favour of the Assessee and against the Revenue. For the immediately preceding Assessment Year 2005-06, the Tribunal had rejected identical ground raised by the Revenue vide Common Order dated 04/07/2023 passed in appeal preferred by the Revenue [ITA No. 3854/MUM/2006] holding as under: "68. The issue arising in ground no.4, raised in Revenue's appeal, is pertaining to the deletion of disallowance made on account of expenses incurred for making advertisement films. 69. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal, vide order d....
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....ed in Revenue's appeal is dismissed." 70. In the absence of any allegation regarding the change in facts or in law in the present case, we find no reason to deviate from the conclusion so reached by the coordinate bench in the preceding year. We find that this issue is recurring in nature and has been decided in favour of the assessee in the preceding years. Therefore, respectfully following the judicial precedent in assessee's own case cited supra, ground no.4, raised in Revenue's appeal is dismissed." 19.3. In absence of any change in law or in facts having been pointed out by the Revenue, we decline to interfere with the order passed by the CIT(A) by respectfully following the above decision of the Tribunal in the case of the Assessee for the Assessment Year 2005-2006. Thus, Ground No.4. raised by the Revenue is dismissed. 20. Ground No. 5 "5. On the facts and in the circumstances of the case, the Ld.CIT(A) erred in treating the subsidy amount of Rs. 148.05 crores as non-taxable capital receipt, without appreciating the fact that the main objective of the scheme was to increase sales by giving a sales tax incentive and that there was no capital objective ....
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....s and perused the material available on record. We find that in the year under consideration, the assessee received Sales Tax subsidy under the following schemes, which has been claimed to be capital in nature:- * Packet Scheme of Incentive, 1988 dated 01/10/1988 by State of Maharashtra * Sales Tax New Incentive Scheme for Industries 1989, Rajasthan * Sales Tax Exemption Scheme (Madhya Pradesh Industrial Policy & Action Plan, 1994) * Sales Tax Waiver Scheme (Package of Fiscal Incentives offered by Government of Tamil Nadu to Industries) * Punjab Industrial Incentive Code under the Industrial Policy, 1996 * Haryana Valued Added Tax Act, 2003 * Sales Tax Incentive Scheme (Incentives offered by Government of Gujarat under the New Incentive Policy-Capital Investment Incentive (General) Scheme-1995-2000) 16. We find that the coordinate bench of the Tribunal, vide order dated 23/06/2023, passed in assessee's own case in Grasim Industries Ltd. in ITA No.3439/Mum./2005 and ITA No.4337/Mum./2005, for the assessment year 2004- 05, after considering the Sales Tax subsidy received under the aforesaid schemes held the same ....
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....hemes together with its objects and preamble, we find that 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 growth of the State. Hence, it could be safely concluded that subsidy / incentive granted is only for setting up of the units based on the fixed percentage of the capital cost and not for running the business of the assessee. Moreover, even this subsidy which is determined based on sales tax assessment orders for 9 years, 6 years etc., are subject to maximum outer limit already fixed under the respective schemes. Though the quantification of the subsidy has been made post commencement of business, the measurement of subsidy is immaterial. In our considered opinion, none of the schemes contemplated to finance the assessee in the fo....
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....nd 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 but supplementary trade receipts. It is true that the assessee could not use this money for distribution as dividend to its shareholders. But the assessee was free to use the money in its business entirely as it liked and was not obliged to spend the money for a particular purpose like extension of docks as in the Seaham Harbour Dock Co. 5 case (supra). 16. There is a Canadian case St. John Dry Dock & Ship Building Co. Ltd. v. Minister of National Revenue 4 DLR 1, which has close similarity to the case of Seaham Harbour Dock Co. 's case (supra). In that case it was held that where subsidies were....
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....record the eligibility certificate issued under the aforesaid scheme granted to the assessee's unit located at Reddipalayam Village for the manufacture of cement. Therefore, upon perusal of the aforesaid documents we are of the considered view that the sales tax exemption scheme floated by the Government of Tamil Nadu is of the nature similar to the schemes considered by the coordinate bench in the earlier years, and thus, sales tax exemption received under this scheme is in the nature of capital receipt. 58. Similarly, as regards the Sales Tax Incentive Scheme (Incentives offered by the Government of Gujarat under the New Incentive Policy-Capital Investment Incentive (General) Scheme-1995-2000), forming part of the paper book from pages 553-575, we find that the said scheme was to accelerate the development of the backward areas of the State and to create large-scale employment opportunities. Further, under the said scheme, it was also stressed that the need is to increase the total flow of investment to the industrial sector with the proper development of infrastructure and human resources to sustain long-term growth and achieve sustainable development. From the perusal ....
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....he order passed by the CIT(A). Thus, Ground No.5. raised by the Revenue is dismissed. 21. Ground No. 6 "6. On the facts and in the circumstances of the case, the Ld. CITIA) erred in allowing the assessee's appeal by stating that provisions of section 41(1) and 28(iv) are not applicable to the case, without appreciating the fact that the loan liability which is in the nature of sales tax liability is only a trading liability and hence cannot be treated as a capital liability and subsequently remission of the same cannot be treated as capital receipt." 21.1. The relevant facts in brief are that the during the assessment proceedings the Assessing Officer noted that the Assessee had disclosed a surplus of INR. 4.13 Crores arising from prepayment of loan liability as Extraordinary Item credited to the Profit & Loss Account. The Assessing Officer treated the same as income by placing reliance upon the order, dated 28/03/2008, passed by the Ld. Commissioner of Income Tax - VI, Mumbai under Section 263 of the Act for the Assessment Year 2005-2006. In appeal, the CIT(A) deleted the aforesaid addition accepting the contention of the Assessee that the provisions of Section 41(1....
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....ate Government accepted lesser amount after twelve years or reduced such instalments, then it could have been a case of remission or cessation. However, in the case before us the State Government has chosen to receive the money immediately which was receivable from 1-5-2003 to 1-5-2008. The amount of Rs. 3,37,13,393 was actually paid to SICOM on 30-12-2002. Thus, the amount which was payable from 1-5-2003 to 1-5-2008, has been paid on 30-12-2002. Thus, it does not satisfy the condition of actual remission in praesenti as opined by the Learned Authors in the above commentary. It is a simple case of collecting the amount at net present value which is due later on and even the formula for collecting the net present value was also given by the SICOM and the amounts have been paid as per that formula. Therefore, such payment of net present value of the future liability cannot be, in our opinion, classify as remission or cessation of the liability so as to attract the provisions of section 41(1)(a) of the Income-tax Act, 1961. We are fully conscious that issue before us is regarding statutory liability and the above discussion and the provisions of the Indian Contract Act referred to by ....
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.... 2005-2006), and the judicial precedents referred to in the paragraph above. 21.6. In view of the above, we decline to interfere with the order passed by the CIT(A) on this issue. Accordingly, Ground No. 6 raised by the Revenue is dismissed. 22. Ground No. 7 "7. On the facts and in the circumstances of the case, the Ld.CIT(A) erred in holding that conversion of shares of Rajshree Polyfil Ltd. which were acquired in 1992-93, into shares of Century Enka Ltd. is not transfer as the same was on account of amalgamation and has accepted indexation of F.Y 1992-93 instead of indexation of F.Y. 1998-99 while calculating capital gain, without appreciating the fact that this finding is contrary to the provisions of section 48, which provides that indexation will be from the first year in which the assessee held the asset i.e. F.Y. 1998-99, the year in which the shares were first allotted to the assessee." 22.1. The Ground No. 7 raised by the Revenue is directed against the order of the CIT(A) deleting addition made by Assessing Officer in relation to long-term capital gains disclosed by the Assessee in the return of income. 22.2. The relevant facts in brief are that the A....
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....the CIT(A), was that the benefit of indexation must be granted from the year of acquisition of shares of RPL (i.e. 1992-1993). 22.6. During the course of hearing decision of the Special Bench of the Tribunal in the case of Deputy Commissioner of Income-tax, 12(2) vs. Manjula J. Shah: [2009] 126 TTJ 145 (Mumbai) (SB)[16/10/2009] was cited on behalf of the Assessee. In that case while examining a transaction of transfer of asset received by the assessee as gift, it was held that the assessee would be entitled to the benefit of indexed cost of acquisition with reference to year in which previous owner first held the asset. We note that the aforesaid decision of the Special Bench of the Tribunal has been confirmed by the Hon'ble Bombay High Court in Commissioner of Income-tax-12 vs. Manjula J. Shah [2013] 355 ITR 474 (Bombay). The relevant extract of the aforesaid judgment of the Hon'ble Bombay High Court reads as under: "16. It is the contention of the revenue that since the indexed cost of acquisition as per clause (iii) of the Explanation to Section 48 of the Act has to be determined with reference to the Cost Inflation Index for the first year in which the asset was hel....
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.... deeming fiction seeks to tax the gains arising on transfer of a capital asset acquired under a gift or will and the capital gains under Section 48 of the Act has to be computed by applying the deemed fiction, it is not possible to accept the contention of revenue that the fiction contained in Explanation 1(i)(b) to Section 2(42A) of the Act cannot be applied in determining the indexed cost of acquisition under Section 48 of the Act. 19. It is true that the words of a statute are to be understood in their natural and ordinary sense unless the object of the statute suggests to the contrary. Thus, in construing the words 'asset was held by the assessee' in clause (iii) of Explanation to Section 48 of the Act, one has to see the object with which the said words are used in the statute. If one reads Explanation 1(i)(b) to Section 2(42A) together with Section 48 and 49 of the Act, it becomes absolutely clear that the object of the statute is not merely to tax the capital gains arising on transfer of a capital asset acquired by an assessee by incurring the cost of acquisition, but also to tax the gains arising on transfer of a capital asset inter alia acquired by an asse....
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.... the assessee but also the cost of improvement incurred by the previous owner shall be deducted from the total consideration received by the assessee while computing the capital gains under Section 48 of the Act. The question of deducting the cost of improvement incurred by the previous owner in the case of an assessee covered under Section 49(1) of the Act would arise only if the period for which the asset was held by the previous owner is included in determining the period for which the asset was held by the assessee. Therefore, it is reasonable to hold that in the case of an assessee covered under Section 49(1) of the Act, the capital gains liability has to be computed by considering that the assessee held the said asset from the date it was held by the previous owner and the same analogy has also to be applied in determining the indexed cost of acquisition. 22. The object of giving relief to an assessee by allowing indexation is with a view to offset the effect of inflation. As per the CBDT Circular No. 636 dated 31/8/1992 [see 198 ITR 1 (St)] a fair method of allowing relief by way of indexation is to link it to the period of holding the asset. The said circular furth....
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....as transfer in terms of Section 47 of the Act). 22.8. In view of the above, we do not find any infirmity in the order passed by the CIT(A) on this issue. Accordingly, Ground No. 7 raised by the Revenue is dismissed. 23. Ground No. 8 "8. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in directing the Assessing Officer not to reduce the claim of deduction of Rs. 1,00,90,705/- u/s 80IA by relying upon his earlier orders on the issue for Asst. Years 1996-97 to 2003-04 without appreciating that the department had not accepted the same by filing an appeal to the ITAT." 23.1. Ground No. 8 raised by the Revenue challenges the order of the CIT(A) overturning the decision of the Assessing Officer to allocate the Head Office Expenses over different units claiming deduction under Section 80IA of the Act. 23.2. Both the sides agreed that identical issue had come up for consideration before the Tribunal in the case of the Assessee in the immediately preceding Assessment year 2005-06. In appeal preferred by the Assessee, the Tribunal had held that head office expenses cannot be allocated to units claiming deduction under Section 80IA of the Act. The r....
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....own case and no change in facts and law was alleged in relevant assessment year. This issue has been decided in favour of the assessee in the preceding years also. Therefore, respectfully following the judicial precedent in assessee's own case cited supra, ground no.9, raised in Revenue's appeal is dismissed." 77. In the absence of any allegation regarding the change in facts or in law in the present case, we find no reason to deviate from the conclusion so reached by the coordinate bench in the preceding year. We find that this issue is recurring in nature and has been decided in favour of the assessee in the preceding years. Therefore, respectfully following the judicial precedent in assessee's own case cited supra, ground no.6, raised in Revenue's appeal is dismissed." 23.3. Respectfully following the above decision of the Tribunal in the case of the Assessee for the Assessment Year 2005-2006, we decline to interfere with the order passed by the CIT(A). Thus, Ground No.8. raised by the Revenue is dismissed. 24. Ground No.9 "On the facts and in the circumstances of the case, the Ld.CIT(A) erred in deleting the claim of Rs. 31,42,48,060/- in respect of prof....
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....nfrastructure facility for the rail system and the same satisfies the conditions for deduction under section 80IA of the Act. We find that the assessee on this aspect made detailed submissions before the AO, which have been recorded in para 21.3 of the assessment order. Similarly, the assessee also made submissions before the learned CIT(A), which have been recorded in para 16.4-16.13 of the impugned order, as under:-" "16.4 The appellant made detailed submission with regard to the issue in dispute before the undersigned. It stated that the appellant company had established a cement plant in Raipur. The nearest available Railway Siding was at a distance of around 20 kilometres from the plant. To facilitate inward and outward movement of goods, the appellant developed infrastructure facility of Rail System. which was made operative in September 1999. The appellant company duly entered into an agreement with Southern East Railway, which is a part of Government of India. It was submitted that there was option available u/s 80IA with the appellant to claim deduction for any 10 consecutive years at its own choice. The appellant has opted for claiming the deduction from AY 2003-....
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....ing and maintaining the Rail System. It employees required personnel directly or through the railway authorities and is bearing the salary cost. relating thereto. Rail System is developed on the basis of entirely different technology and employs different equipment and machinery from those applied by the cement unit for cement production. It was also submitted that the Rail System is not formed by splitting up on reconstruction of a business already in existence or by the transfer to a new business of machinery previously used for any purpose. It was therefore, argued that the Rail System is not a part of the cement unit but is an independent unit. 16.9 The appellant submitted that the conditions specified in Section 80IA(4) in respect of an infrastructure facility are fully satisfied in the present case. The Rail System is owned by the appellant company which is a company registered in India. The appellant has entered into an agreement with the Central Government for operating and maintaining the new infrastructure facility. It has started operating and maintaining the infrastructure facility after 1st April 1995. 16.10 The appellant submitted that there is no ba....
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....ty to use the faclity for any purpose other than for the purpose of appellant's business. The entire loading and unloading is done under the insistence of and supervision of the appellant. The appellant decides the destination to which the material is to be transported. Entire risk and reward in relation to the Rail System are of the appellant. Therefore, it was submitted that the appellant has effective and total control over the Rail System.". 123. After considering the aforesaid submission, the learned CIT(A) vide impugned order came to the conclusion that all the 3 conditions required to be fulfilled as per section 80IA(4)(i) of the Act are satisfied by the assessee. At the outset, it is pertinent to note that in respect of the same rail terminal at Rawan District, Raipur, deduction under section 80IA of the Act was allowed in the case of assessee's subsidiary company in UltraTech cement Ltd v/s DCIT, in ITA No. 1412/Mum./2018, etc., vide order dated 14/12/2021, by the coordinate bench of the Tribunal. 124. In the assessment order, the AO held that in the present case, the rail system does not have any agreement with the authorities mentioned above. On the....
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....sideration, i.e. assessment year 2003-04. Therefore, we are of the considered view that in order to determine the eligibility of the assessee for deduction under section 80IA of the Act, the provisions of the Act as applicable for this year become relevant. We find that vide Finance Act 2001, w.e.f. 01/04/2002, the provisions of section 80IA (4) of the Act were amended and the same reads as under:- (4) This section applies to- (i) any enterprise carrying on the business of (i) developing or ( ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely :- (a) it is owned by a company registered in India or by a consortium of such companies; (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995 126. We find ....
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....id section only requires that there has to be an agreement, which condition as noted by the coordinate bench of the Tribunal in the preceding year is duly satisfied. In the absence of any allegation of change in facts and law as compared to the preceding year, we find no reason to deviate from the view so taken by the coordinate bench in the preceding year. Therefore, respectfully following the decision of the coordinate bench cited supra rendered in assessee's own case, we find no infirmity in the impugned order in allowing deduction under section 80IA of the Act to the assessee in respect of profits from Rail System, Raipur, and Hotgi. As a result, ground no.7, raised in Revenue's appeal is dismissed." 80. In the absence of any allegation regarding the change in facts or in law in the present case, we find no reason to deviate from the conclusion so reached by the coordinate bench in the preceding year. Therefore, respectfully following the judicial precedent in assessee's own case cited supra, ground no.7, raised in Revenue's appeal is dismissed." (Emphasis Supplied) 24.4. In view of the above, we do not find any infirmity in the order passed by the CIT(A) o....