DCIT-3(4), MUMBAI vs. M/S. AMBUJA CEMENTS LTD.,, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM AND SHRI PRASHANT MAHARISHI, AM आयकर अपील सं/ I.T.A. No.2031/Mum/2023 (निर्धारण वर्ा / Assessment Year: 2008-09) DCIT-3(4) बिधम/ M/s. Ambuja Cements Ltd 29th Floor, Center-1, World 3rd Floor, Elegant Vs. Trade Center, Cuffe Parade, Business Park, MIDC Mumbai-400005. Cross, Road B Andheri East, Mumbai-400059.

Cross Objection No. 90/Mum/2023 Arising out of I.T.A. No.2031/Mum/2023 (निर्धारण वर्ा / Assessment Year: 2008-09) M/s. Ambuja Cements Ltd बिधम/ DCIT-3(4) 3rd Floor, Elegant Business 29th Floor, Center-1, Vs. Park, MIDC Cross, Road B World Trade Center, Andheri East, Mumbai- Cuffe Parade, Mumbai- 400059. 400005.

आयकर अपील सं/ I.T.A. No.2032/Mum/2023 (निर्धारण वर्ा / Assessment Year: 2010-11) DCIT-3(4) बिधम/ M/s. Ambuja Cements Ltd 29th Floor, Center-1, World 3rd Floor, Elegant Vs. Trade Center, Cuffe Parade, Business Park, MIDC Mumbai-400005. Cross, Road B Andheri . East, Mumbai-400059.

Cross Objection No. 91/Mum/2023 Arising out of I.T.A. No.2032/Mum/2023 (निर्धारण वर्ा / Assessment Year: 2010-11) M/s. Ambuja Cements Ltd बिधम/ DCIT-3(4) 3rd Floor, Elegant Business 29th Floor, Center-1, Vs. Park, MIDC Cross, Road B World Trade Center, Andheri East, Mumbai- Cuffe Parade, Mumbai- 400059. 400005. स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AAACG0569P (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) Assessee by: None Revenue by: Shri Ajay Chandra (DR)

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd सुनवाई की तारीख / Date of Hearing: 11/10/2023 घोषणा की तारीख /Date of Pronouncement: 11/12/2023 आदेश / O R D E R PER BENCH: These are appeals preferred by the revenue and respective Cross Objections (‘CO’) filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [in short ‘Ld. CIT(A)’] dated 31-03-2023 for AY 2008-09 and AY 2010-11 respectively.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd under the normal provisions of the Act at Rs.19,73,22,13,399/- and book profit under the provisions of section 115JB of the Act at Rs.24,69,15,43,321/-. Thereafter, the AO reopened the assessment and noted that the assessee has claimed deduction under section 80IA on rail system comprising of railway sidings, railway tracks, loading and unloading systems, at Ropar, Maratha, Sankrail, Farraka and Bhatapara units. He also noted that these rail systems alongside the cement plants are to enable the transportation of raw material (i.e. coal etc) and finished goods (i.e. cement) to and from the cement plants of the assessee. And the assessee’s claim that the rail system met all the requirement of Section 80IA(4) was also noted by AO. And the AO noted the method adopted for computing the income was being excess of road freight and handling charges payable for transportation of goods by road to the nearest railhead, over the tariff payable for transportation of goods from railway siding to the rail head as per tariff notified by the Indian Railways. However, this claim of assessee did not find favour with the AO during the assessment for AY. 2008-09 [even though the same stand of the assessee was accepted for three consecutive preceding assessment years]. After elaborately discussing the facts in detail, and extensively referring to investigations carried out in this regard in the case of Ultratech Cements Limited, the Assessing Officer concluded on this issue that (a) the so called rail system of the assessee company is simply a private rail siding, and is not any infrastructure of public utility; (b) the agreements entered into between the assessee company and the Indian Railways consisting of

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd terms and conditions for private sidings, and could not be viewed as an agreement for building, operating and maintenance of a rail system; (c) the conditions stipulated under section 80IA have not been satisfied; (d) the actual operation of the rail system (i.e. running of the goods train) was being done by the Indian Railways and not the assessee company; (e) all the four cement plant sites were notified as independent booking stations and the freight was charged for the entire distance- including the distance from these private sidings to the railheads; (f) the notional profit computation is incorrect; and (g) the decisions of the Tribunal were not applicable as these critical facts were not placed before the Tribunal. On the aforesaid reasons, the claim for deduction under section 80IA in respect of the rail system was rejected. Aggrieved, the assessee assailed the action of AO before the Ld. CIT(A)/NFAC which was allowed by the Ld. NFAC following the order of this Tribunal in assessee’s own case (ITA. No.3475/Mum/2019 dated 07.11.2022). Aggrieved, the revenue has preferred this appeal by raising ground no. 1.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd agreement for building, operating and maintenance of a rail system; (c) the conditions stipulated under section 80IA have not been satisfied; (d) the actual operation of the rail system (i.e. running of the goods train) was being done by the Indian Railways and not the assessee company; (e) all the four cement plant sites were notified as independent booking stations and the freight was charged for the entire distance- including the distance from these private sidings to the railheads; (f) the notional profit computation is incorrect; and (g) the decisions of the Tribunal were not applicable as these critical facts were not placed before the Tribunal; and moreover, the revenue has preferred appeal before the Hon’ble High Court which is still pending before the Hon’ble High Court Thereafter, according to Ld. DR, the claim for deduction under section 80IA of the Act in respect of the rail system was rightly rejected by the AO. Therefore, he prayed that the impugned order be reversed.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd the Act. But AO did not accept the claim of assessee, even though the assessee pointed out that same stand of the assessee was accepted for three consecutive preceding assessment years. After elaborately discussing the reasons/facts in detail, and extensively referring to investigations carried out in the case of Ultratech Cements Limited, the Assessing Officer concluded that (a) the so called rail system of the assessee company is simply a private rail siding, and is not any infrastructure of public utility; (b) the agreements entered into between the assessee company and the Indian Railways consisting of terms and conditions for private sidings, and could not be viewed as an agreement for building, operating and maintenance of a rail system; (c) the conditions stipulated under section 80IA have not been satisfied; (d) the actual operation of the rail system (i.e. running of the goods train) was being done by the Indian Railways and not the assessee company; (e) all the four cement plant sites were notified as independent booking stations and the freight was charged for the entire distance- including the distance from these private sidings to the railheads; (f) the notional profit computation is incorrect; and (g) the decisions of the Tribunal were not applicable as these critical facts were not placed before the Tribunal. Thus the AO rejected the claim for deduction under section 80IA in respect of the rail system. On appeal, the Ld. NFAC after appreciating the fact that this issue have been racked up in the hands of assessee and claim disallowed after the investigation made in the case of Ultratech Cement Ltd after reopening the assessment of assessee, and the fact that this Tribunal in the case of

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd Ultra-Cement has been pleased to allow the claim of assessee on Rail System u/s 80IA of the Act. We do not find any merit in this ground of appeal of revenue. We note that this issue has already been examined by this Tribunal in the case of Ultra-Cement Ltd as well as in assessee’s own case and therefore, this issue is no longer res-integra and the Ld. NFAC has followed the order of this Tribunal on this issue in assessee’s own case for AY. 2012-13 (supra), which is reproduced as uunder;-

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd L&T Ltd. by way of demerger] to enable the transportation of raw material [coal etc] and finished goods [i.e. cements] at their cement plants through railway wagons, at all the said; four locations. It was explained that prior to putting up those rail systems, the assessee used to transfer the material from the cement plants [at all the four locations] to the nearest railway station and vice versa on road through trucks. Before the AO the claim of deduction was justified by assessee by taking the plea that the various conditions as prescribed u/s 80IA(4) was met with in as much as it had entered into an agreement with the government through department of Railways for developing, maintaining and operating the rail system [infrastructure facility]; and that in pursuance thereof it had developed the integrated rail system in between the plant and the nearest railway track [of Indian Railways] and running it [in between] for movement of the inward and outward material so as to enable it to transport the materials from its plants straightaway to the various destinations and vice versa at all those four locations; and that by way of such operation of rail systems, it has been able to save the expenses for loading [at those plants] into the trucks, road freight and expenses for unloading and loading the same at the site of nearest Indian railways and that resulted into the. profit of such rail systems.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd and loading and unloading etc]; that on such request the railway authorities conducted survey and laid down sidings and charged the assessee for laying out the railway track and other related infrastructure. The AO also noted that the wagons were actually run on those sidings by the railway authority and not by the assessee company. The AO also took note that railway authorities had posted its staff for weighing raw material/ cement bags loaded/unloaded by the assessee; and that all activities were directly or indirectly being carried out by the railway authorities and the assessee only reimbursed the expenses or charges levied by the railways in r/o siding maintenance etc. as per the agreement. The AO inferred that the so called "rail system" [of the assessee company] is not a self reliant, independent unit; and that it is providing services to the cement plants of the assessee company only. The AO also stated that railway department do not allow operation of the railways by any private enterprise and for that reason it [railway department] had formulated a Build-own-lease- transfer (BOLT) scheme whereby the private enterprises could set-up the necessary and crucial components of a railway system and provide that on lease to Indian Railways for maintenance and operation; and in the context referred to the CBDT circular No. 733, dated 03.01.1996 whereby the benefit of Sec. 80IA was also extended to such rail system constructed / developed by the private enterprises as per the said BOLT scheme. By that circular, the Board had also clarified that such concession would be available only to an infrastructure facility meant for development of rail systems and not to any other infrastructural facility including rolling stocks. The AO also observed that the assessee, had not given the said railway system or the crucial component thereof on lease to the railway department [had it been so, the profit by way of lease rent from such rail. system would have qualified for deduction u/s 80lA as per the concession given by the aforesaid circular]. Finally, the AO held that assessee was not eligible to claim the deduction u/s 80lA in r/o such rail systems and disallowed the claim accordingly.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd 11. In its appellate order CIT(A) noted that the issue has come up first in A.Y. 2004-05. In that year, the assessee had claimed deduction of Rs 15.63 crores in r/o rail system at Hirmi, Raipur District, Chattisgarh. In A.Ys. 2005- 06 & 2006-07, the assessee claimed deduction of Rs.16.30 crs. & Rs 20.95 crs. respectively in r/o that rail system at Hirmi. In A.Y. 2007- 08, the claim was made in r/o two more rail systems [one at Tadipatri in Andhra Pradesh & the other at Arakkonam in Tamil Nadu]. The total claim for that year amounted to Rs 52.38 crs. [Rs 21.09 crs. -Hirmi; Rs 25.56 crs. -Tadipatri & Rs 5.73 crs. -Arakkonam]. In A.Y. 2008-09, the claim extended to one more rail system at Durgapur [West Bengal] and the total claim amounted to Rs 61.56 crs. This claim for AY 2009-10 i.e. for the year under consideration had risen to 73.13 crs.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd

8143/mum/2010 and 1813/Mum12012, order dated 28.02.2014]. The relevant part of the Tribunal's decision in AY. 2004- 05 is reproduced hereunder:

"13. Regarding the issue in r/o deduction u/s 80lA on profit of Rail system at Hirmi, the AO rejected the claim on the ground that the rail system is not a profit centre but it is a cost centre and that the rail system is not an independent unit but it is 100% depending on the cement unit. Detailed submissions filed by the assessee which are reproduced in the assessment order was not found satisfactorily to the AO. Detailed submissions were again filed before the CIT(A). It was explained that the company had established a cement plant in Hirmi, The nearest available railway siding was at a distance of around 15 km. from the plant. To facilitate inward and outward movement of goods, the assessee developed infrastructure facility of rail system which was made operating in 1999. The assessee company duly entered into an agreement with the railways, which is a part of Government of India. It was submitted that there was option available u/s 80lA with the assessee to claim deduction for any of 10 consecutive years as its own choice. The assessee has opted for claiming the deduction from A.Y. 2004-05 on wards. It was submitted that the income offered for tax by the assessee includes income from rail system and that certificate of M/s Sharp & Tannan, CA in Form No. 10CCB certifying the correctness of the aforesaid claim was duly submitted to the AO. 13.1. It was further submitted that the rail system is a profit centre. The rail system is engaged in business of providing transportation facility to the cement plant, profit of which is embedded in the profit of the assessee company as a whole. It was submitted that by developing this infrastructure facility, there has been saving in transportation cost and overall profits of the company have increased due to such savings. It was such that the mere fact that it does not raise an invoice from its railway unit to its cement unit cannot govern the tax implication of the profits delivered by the rail system. In support of its contention that treatment of a transaction in books of accounts cannot govern the tax statement reliance was placed on the decision of the Supreme Court in the case of Kadernath Jute Manufacturing Company Ltd. 82 ITR 362; in the case of Tutcorin Alali Chemicals Ltd. in 227 ITR 172; in the case of Godhra Electricity Company in 91 Taxman 91; in the case of Bokaro Steel Ltd in 263 ITR 315 and in the

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd

case of Sutlet Cotton Mills Ltd. in 116 ITR 1 and submitted that it would be totally incorrect to say that an assessee who raises internal invoices would be entitled to benefit of Sec 80IA and an assessee who does not raise internal invoices would not be entitled to such benefit.

13.2. The assessee further submitted that Sec. 80IA(8) itself contemplates a situation where goods or services are transferred by an eligible undertaking to non-eligible undertaking and vice versa. In such cases, deduction is to be allowed based on the market value of such goods or services. It was further submitted that the section itself envisages situation of captive consumption. Reliance was placed on the decision reported in 59 ITR 514 (Guj.) and 254 ITR 17 (Bom).

13.3. Further reliance was also placed on the decision of the Supreme Court in the case of Tata Iron & Steel Company Ltd. in 48 ITR 123 and stated that in that case, the assessee was engaged in the business of extraction of iron ore and manufacturing of iron and steel therefrom. The final product sold by the company was the finished iron and steel. Under some statute, a cess was leviable on the annual net profits derived from the mines. It was contended that since no iron ore extracted is sold to an outsider, no profits could be said to have been derived from the extracting activities. This argument was advanced based on the principle that a person cannot make profits out of himself, The Supreme Court negative this argument and held that despite captive consumption of iron ore certain profits can be regarded as having derived from the extraction activities. The Supreme Court ruled in favour of bifurcating the total profits into two activities viz. the extraction activity and the manufacturing activity. It was therefore submitted that in view of the above, it is not correct to say that the assessee does not earn any profits from its rail system merely because the rail system is used for the captive purposes of the cement plant.

13.4. It was further submitted that the Board Circular No. 733 dated 03.01.1996 states that deduction u/s 80lA is applicable to an infrastructure facility meant for development of rail system. It was contended that the AO has categorically stated in para 5.2.3 of his order that rail system was developed by L&T and was inherited by the assessee out of demerger. It was further submitted that in a demerger all the property of the undertaking is necessarily transferred by the

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd

demerged company to the resulting company, therefore it is immaterial whether the rail system was developed by L&T Ltd. or by the resulting company i.e. the assessee. Further it was submitted that the facility of rail system consists of all that is required to carry on the railway activity in an organized and systematic manner. The activity of rail system is real and substantial and it is carried on with said purpose viz transportation of goods from one place to another and thereby augmenting profits of the company as a whole by saving transportation cost which it would have otherwise incurred. It was further submitted that the profits derived from the rail systems are clearly arising out of the business of developing operating and maintaining the rail system.

13.5. It was further submitted that substantial investment has been made in developing the railway system. There is an agreement with the railways for operating and maintaining the rail system. It employs required personnel directly or through the railway authorities and it bearing the salary cost relating thereto. It was submitted that the rail system is developed on the basis of entirely different technology and employs different equipment and machinery from those applied by the cement unit for cement production. It was further submitted that the rail system is not formed by splitting up or reconstruction of a business already in existence or by the transfer to a new business of machinery previously used for any purpose. It was therefore argued that the rail system is not a part of the cement unit but is an, independent unit. It was further submitted' that the conditions specified in Sec. 8OIA(4)(i) in r/o an infrastructure facility are fully satisfied in the present case. The rail system is owned by the assessee company which is a company registered in India. The assessee has entered into an agreement with the Railways for operating and maintaining the new infrastructure facility. It has started operating and maintenance the infrastructure facility after 01.04.1995.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd

3.10 After perusal of the facts of the case, findings given by the AO and submissions made by the appellant, I find that the only issues in this case is whether the appellant is eligible for deduction u/s. 80IA in r/o profits derived from the rail system. There is no dispute that the appellant (i) is a company (if) has developed the rail system and (iii) it" has entered into an agreement for operation and maintenance of the rail system with the railways i.e the Government. Thus all the 3 conditions required to be fulfilled as per Sec. 80IA(4)(i) have been satisfied by the appellant. Moreover rail system is defined in explanation to sec. 80IA(4)(i) as an infrastructure facility. Further separate books of account are being maintained by the appellant. The mere fact that internal invoices are not raised does not mean

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd

that the rail system is not a profit centre. It is also found that all the doubts raised by the AO in the assessment order have been fully explained by the appellant the AO has himself stated in the assessment order that the rail system was developed by L&T Ltd which has been inherited by the appellant as a result of the demerger and Circular No. 733 dated 03.01.1996 categorically stated that benefit of sec. 80IA is applicable to development of rail system and there is no gain saying that fact that the appellant has developed the rail system and is operating and maintaining the same. After perusal of the facts as well as the judicial pronouncements quoted above it is therefore held that the appellant is eligible for deduction u/s 80IA in r/o profits from rail system. In view of the same, the AO is directed to allow deduction u/s 80IA of Rs. 15,64,33,576/-. As stated above neither the findings of the Id CIT(A) could 'be controverted by the Id DR nor any other material was brought on record to establish otherwise. Therefore in view of the uncontroverted reasoning given by the Id. CIT(A) we confirm his order on this issue also."

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd 16. The CIT(A) observed that the agreements under reference were not at all any agreements for developing, maintaining and operating any infrastructure facility to which benefit of exemption is intended to be given in Section 80IA. For this reason also the assessee company was held to be not entitled for deduction u/s.80IA in r/o the profit from the operation of rail system.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd sidings. Therefore, it cannot be said that the assessee company had operated any rail systems at all. Therefore the deduction u/s 80lA would not be available to it onto the profit, if any, from such rail systems.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd agreement entered between the assessee company and the railway department which contained conditions for construction of railway sidings, development of sidings, laying of tracks, signaling system and all the essential components of rail system. The terms of the agreement also provided for its operation and maintenance. He vehemently argued that the rail systems were developed in accordance with the agreements entered with the Indian Railways, wherein assessee was allowed to operate and maintain these sidings under supervision and as per the guidelines of Indian Railway. Our attention was invited to the various clauses particularly Class 2, 6, 7(a), 17 and 8(b) which stipulate for construction of railway sidings at the cost of the assessee. Construction work was awarded either to railway or third party contractors based on their expertise and the work was undertaken under the supervision of the Railways. Clause 6 is specifically provided for payment in advance to the railway administration, the total estimated cost of the work done by the party and thus by the railway administration. Clause 7(a) stipulate that assessee will provide and deliver at site the permanent way and other materials in accordance with the railway administration standard and specifications. Clause 17 stipulate that assessee shall provide labour for and bear the cost of all Operations on the siding. Clause 9(b) provides for maintenance and other charges for the operation of the sidings at assessee's cost and expense to the satisfaction of railway administration.'

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd 27. With regard to disallowance u/s.14A on account of interest, our attention was invited to the profit earned by the undertaking during the year as well as interest free funds available with the assessee for making investment in tax free securities and it was contended that since investment was out of assessee's own interest free funds, in terms of decision of Jurisdictional High Court in case of CIT v. Reliance Utilities & Power Ltd. [2009] 178 Taxman 135/313 ITR 340 (Bom.) and CIT v. HDFC Bank Ltd., [2014] 49 taxmann.com 335/226 Taxman 132 (Mag.)/366 ITR 505 (Bom.), no disallowance of interest is warranted. With regard to the disallowance made under Rule 8D(2)(iii) he contended that assessee itself has offered the amount attributable for earning the exempt income, therefore, further disallowance made by Revenue authorities was not justified.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd 6. CIT v. Delhi Press Patra Prakashan Ltd. [2013] 34 taxmann.com 3/217 Taxman 288/355 ITR 14 (Delhi) ITA Nos. 1889 and 1241/Mum/2018, 2384, 2958, 3475 and 3843/Mum/2019 Assessment years: 2010-11, 2011-12 and 2012-13 7. Saurashtra Cement & Chemical Industries Ltd. v. CIT [1979] 2 Taxman 22/[1980] 123 ITR 669 (GUJARAT) 8. Ace Multi Axes System Ltd. v. Dy. CIT [2015] 228 Taxman 98/[2014] 49 taxmann.com 168/367 ITR 266 (Karnataka) 9. ITO v. Smt. Urmila Bhandari [IT Appeal Nos.766, 2593 (Delhi) of 2013, dated 20-10-2014] 10. Dy. CIT v. Selvel Advertising (P.) Ltd. [2015] 58 taxmann.com 196 (Kol.-Trib.) 11. Century Enka Limited v. Dy. CIT [2015] 58 taxmann.com 318/154 ITD 426 (Kol.-Trib.) 12. Janak Dehydration (P.) Ltd. v. Asstt. CIT [2011] 44 SOT 93 (Ahmedabad) (URO) 13. U.P. State Bridge Corporation Ltd. v. Dy. CIT [2015] 62 taxmann.com 61/70 SOT 517 (Lucknow - 14. Trib.) 15. Asst. CIT v. Apex Packing Products (P.) Ltd. [IT Appeal Nos. 145 to 150 (PNJ) of 2013, dated 3-1-2014]

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd on to the private sidings between the serving railway station and plant premises was being done by the Indian Railways and not by the assessee Company, therefore, assessee was not entitled for 80 IA(4). She further alleged that profit computed by assessee for the rail system was very exorbitant and method adopted for computation was also not correct. Our attention was invited to the computation of profit as per table 'F'of CIT(A)'s order. She further contended that when L&T Ltd., itself was not eligible for deduction u/s.80IA, how assessee company became eligible for the same after demerger and inherited the cement business i.e., cement plants together with the rail systems of the L&T Ltd., She placed reliance on the Circular No.733 dated 03/01/1996 which provided that BOLT scheme of Indian Railway shall be eligible for the benefit u/s.80IA.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd

Tadipatri, Arrokonam and Durgapur in the FY. 2003-04. These Railway systems were developed on or after 01/04/1995 by the L&T. year wise details of the aforesaid rail systems are as follows:

Unit I Rail system Undertakings Year of commencement of Initial year of (AY) operation (AY.) claim Rail system at Hirmi in the state 2000-01 2004-05 of Chhattisgarh Railway system at Tadipatri in the 1999-00 2007-08 state of Andhra Pradesh Rail system at Arakkonam in the 2001-02 2007-08 state of Tamil Nadu Rail System at Durgapur in the 2002-03 2008-09 state of West Bengal

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd be made available to any third party with the permission of the Indian Railway. For this purpose, the assessee approached to the Indian Railways for development of Rail systems which Indian railways has agreed to provide permission for laying down the railway sidings (including the rail line upto the nearest rail head) and accordingly the assessee had awarded the contract to the private parties for construction and to the Indian Railway approved agency for supervision and consultancy of the Rail system and had borne the entire cost of development including for incidental expenses paid to all the agencies. The clause in the agreement saying that railway administration is willing to lay the said sidings/construct the siding is meant for Railway administration's permission for allowing the assessee for developing the Rail system as per the norms and supervision of Indian Railways. The revenue authorities alleged that the Railway system have been developed to facilitate the transportation of goods for the assessee from and upto the factory premises, and therefore the Agreements entered into by the assessee with the Indian Railways cannot be regarded as required agreements between the Govt. and the assessee. In this respect the assessee submitted as under before the lower authorities.

(a) as per section 80- IA(4)(i)(b) the agreement has to be entered with the Central Govt or a State Govt or a Local Authority or any other statutory body for (i) developing or (ii) Operating and Maintaining or (iii) Developing, Operating and Maintaining the infrastructure facility. Indian Railways is the statutory body under the Indian Railways Act.

(b) The provision of Sec.80-IA (8) contemplates a situation where goods or services are transferred by an eligible undertaking and vice versa. Undoubtedly therefore, the section itself envisages situations of captive consumption.

(c) Further as mentioned in clause 15 of the agreement, the rail systems developed by the appellant can be made available to any third party with the prior approval of the Indian Railways.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd 36. It was therefore contended that the agreements as entered into by the assessee with Indian Railways are as envisaged u/s 80- IA( 4 )(i) and in no case it can be inferred that they are not the required agreements under section 80-IA.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd (a) Clause No. 2, Agreement to Construct Siding - Wherein it is mentioned that "the Railway administration will at the cost and the expenses of the applicant, in all respect, construct the railway sidings " Further kindly be informed that, for construction of the siding under the supervision of the Railways, the contract for construction and supervision has been awarded by the applicant and the entire cost has been borne by the applicant. (b) Clause No. 6 - Payment by Applicant against the total estimated cost - wherein it is mentioned that, "The applicant will pay in advance to the railway administration the total estimated cost of the work consisting of the estimated costs of work done by the party and those by the railway administration .... " (c) Clause No. 7(a) - Permanent way materials - "The applicant will provide and deliver at site the permanent way and other materials (which includes Girders, Rails, Sleepers, fastenings, points, crossings, fencings, signals and overhead structures and any other things connected therewith for electric tractions and other machinery and equipment necessary for working of the sidings) in accordance with the Railway administration's standards and specifications. All charges incurred in laying and fitting the permanent way materials and all other equipment which may be provided shall entirely be borne by the applicant." (d) Clause No. 17 - Working of the Siding - wherein it is mentioned that " ... the applicant shall provide labour for and bear the cost of all Operations on the siding. The applicant shall be responsible for the strict compliance by himself and his employees and agents of all rules, regulations and standing orders made by the railway administration from time to time for the working of sidings and for all accidents, loss or damage that may be ensured or be caused by reasons of negligence or non- observance of such rules, regulations and orders . (e) Clause No. 8(b) - Wherein it is mentioned that, Maintenance and other Charges for the portion of the sidings - The applicant will at their own cost and expenses in all things and to the satisfaction of the railway administration and if required by the railway administration under its supervision maintains in good order and repair the said

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd portion of the siding. Such charges as may be fixed by the railway for the supervision rendered shall be paid by the applicant.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd and maintain' the systems clearly establishes that, enterprises who in fact operate and maintain the rail systems were certainly eligible for tax holiday benefits. As the assessee has entered into agreements with the railway authorities to develop, operate & maintain the rail systems, which in fact the company has done from the initial day. There was indeed an 'infrastructure' facility eligible for deduction u/s 80lA. We also found that the Hon'ble ITAT in assessee's own case for AY. 2006-07, has categorically allowed the deduction u/s. 80-IA for its rail system after dealing with the Circular No. 733 dtd 3.1.1996.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd 80-lA (4)(i) provides the following conditions to be complied with for claiming deductions;

(i) ...... (a) it is owned by a company registered in India (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995:

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd 48. Contention of revenue authorities that Railways had constructed the rail system is not factually correct. In fact, M/s. L&T had entered into agreement with the appropriate rail authorities to Develop its rail systems. M/s. L&T had constructed the rail system by awarding contract to the private parties for construction of rail sidings (including upto the nearest rail head) under the supervision of Indian Railways approved agency, and the entire cost for construction/ development paid to the aforesaid agency and supervision charges paid to Indian Railways approved agency have been borne by the assessee, apart from all costs incurred for all the materials and incidental expenses.

(a) Clause No. 2, Agreement to Construct Siding - Wherein it is mentioned that "the Railway administration will at the cost and the expenses of the applicant, in all respect, construct the railway sidings " Further kindly be informed that, for construction of the siding under the supervision of the Railways, the contract for construction and supervision has been awarded by the applicant and the entire cost has been borne by the applicant. (b) Clause No. 6 - Payment by Applicant against the total estimated cost -wherein it is mentioned that, "The applicant will pay in advance to the railway administration the total estimated cost of the work consisting of the estimated costs of work done by the party and those by the railway administration .... " (c) Clause No. 7(a) - Permanent way materials - "The applicant will provide and deliver at site the permanent way and other materials (which includes Girders, Rails, Sleepers, fastenings, points, crossings,

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd fencings, signals and overhead structures and any other things connected therewith for electric tractions and other machinery and equipments necessary for working of the sidings) in accordance with the Railway administration's standards and specifications. All charges incurred in laying and fitting the permanent way materials and all other equipments which may be provided shall entirely be borne by the applicant." (d) Clause No. 17 - Working of the Siding - wherein it is mentioned that " ... the applicant shall provide labour for and bear the cost of all Operations on the siding. The applicant shall be responsible for the strict compliance by himself and his employees and agents of all rules, regulations and standing orders made by the railway administration from time to time for the working of sidings and for all accidents, loss or damage that may be ensured or be caused by reasons of negligence or non- observance of such rules, regulations and orders .... " Further, the appellant carries out all the operations for smooth movement of its goods, viz. Shunting of the Wagons, placing of the wagons at appropriate locations, Loading / Unloading of Wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, Weighing of Wagons on Motion Weigh Bridges, maintaining signaling systems, Wagons, Couplings, Rake formation for dispatch, hauling of Wagons through its own locomotives, etc. Further, in Clause No. 14 - Traffic on Siding - it is mentioned that applicant undertakes to shunt the wagons from such point to his premises and back with his own labour and the railway administration would not be responsible for any delay, loss and damages caused in consequence of the failure of the applicant to arrange for such shunting. " Thus, the rail system is being operated by the appellant and the cost of above operations is borne by appellant. (e) Clause No. 8(b) - Wherein it is mentioned that, Maintenance and other Charges for the portion of the sidings - The applicant will at their own cost and expenses in all things and to the satisfaction of the railway administration and if required by the railway administration under its supervision maintains in good order and repair the said

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd portion of the siding. Such charges as may be fixed by the railway for the supervision rendered shall be paid by the applicant.

There are other various clauses wherein it is evident that the Development, Operation and Maintenance is done by the appellant and the entire cost for the same is borne by the appellant.

♦ H.A. Shah & Co v. CIT [1956] (30 ITR 618) (Bom.) ♦ Amalgamated Coalfields Ltd. v. Janapada Sabha AIR 1964 SC 1013 ♦ Cruch of South India Trust Association v. Telugu Church Council [1996] 2 SCC 520 ITA Nos. 1889 and 1241/Mum/2018, 2384, 2958, 3475 and 3843/Mum/2019 Assessment years: 2010-11, 2011-12 and 2012-13 ♦ Radhasoami Satsang (supra)

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd

conservatively considered as lower of the freight chargeable through Rail and Road freight saved. The rail freight being lower is considered after further discounting it by 50% based on the circular of Indian Railways for the freight chargeable upto the nearest railway station.

Rail System at AY. 09-10 AY. 04-05 AY. 05-06 AY. 06-07 AY. 07-08 AY. 08-09 Hirmi 28.26 15.63 16.13 20.95 21.09 24.3 Tadipatri 31.03 - - - 25.56 25.2 Arakkonam 7.11 - - - 5.73 6.3 Durgapur 6.72 - - - - 5.7

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd Accountants, alongwith Balance Sheet, P&L Account, Schedules forming part of Balance sheet and P&L Account. We have also checked the amount eligible for deduction as furnished in form 10 CCB and found the same as correct.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd establishment eventually is for the general public good. It has to be noted that several industries may come up on both the sides of sidings from the interchange point till factory gate, if anyone of them wants to make use of railway sidings, it is permissible for the Railway Administration to entertain such request and by making use of the exiting siding, can extend or branch off and lay railway tracks to the industry which makes the request and lay siding accordingly. Thus, the railway siding from the point of interchange till factory gate of the assessee has immense potential, with enabling powers to the Railway Administration (which itself is a public department), to be developed into a facility that will ensure to the public at large. The railway sidings are always constructed for captive consumption. Thus, the provisions of section 80IA(4) cannot be read in the manner to make it redundant, when the legislature in all its wisdom intended to give benefit of tax holiday for construction of infrastructure facility in the form of railway which is meant for captive consumption.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd agreement for development, operation & maintenance of any Rail system, we observe that as per section 80- IA(4)(i)(b), an assessee has to enter 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 the infrastructure facility. The Indian Railways, with whom the assessee has entered into an agreement, is the statutory body designated under the Indian Railways with whom the assessee has entered into an agreement, is the statutory body designated under the Indian Railways Act. We found that the agreement does not merely contain the terms and conditions of the construction of railway siding i.e. development of siding (laying of tracks, signal system and all the essential components of Rail Systems) but it also contains the terms and conditions relating to its operation and maintenance as well.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd we observe as under:- a. Section 80-IA (4)(i) provides the following conditions to be complied with for claiming deductions;

(i) any enterprise carrying on the business of (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating any infrastructure facility which fulfils all the following conditions, namely :-

(a) it is owned by a company registered in India (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995:

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd verified from the date of agreements entered into by the assessee with the Railway authorities; which are as under:-

Location Authority with Date of agreement which Agreement s is entered Hirmi Sought Eastern March 2000 Railway Tadipatri Southern Railway 03.05.2000 Arakkonam Eastern Railway 08.01.2001 Durgapur 18.10.2002

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd own locomotives within the factory premises, etc. Thus, the rail system is being operated by the assessee and the cost of above operations is borne by assessee.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd 76. In this regard, we found that prior to setting up of railway siding, the assessee used to transport its goods through road to the nearest railway station. Only the few components of the cost of road transportation, which the cement division of the assessee was hitherto incurring for transportation of materials to and from the factory premises, is adopted as the basis of calculating the revenue of the railway undertaking. The revenue is, however, computed for the actual services rendered by the railway undertaking to the cement division.

♦ shunting of the wagons, ♦ placing of the wagons at appropriate locations, ♦ loading/unloading of wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, ♦ weighing of wagons on Motion Weigh Bridges, ♦ wagon couplings and de-couplings, ♦ rake formation for dispatch, ♦ hauling of wagons through its own locomotives within the factory premises

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd services rendered by it to the cement division. For the purpose of computation, the railway undertaking has adopted the minimum freight rate (further discounted at 50%) which the Indian railways charges for the transportation of these materials. Since this is the easiest available comparable, it has been adopted by assessee for calculating one of the component of its "revenue".

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd has allowed the deduction in AY. 2009-10 based on the similar facts available on records but changed his decision merely based on the replies to questionnaire from various Railway Department.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd 85. In this regard reliance can be placed on the decision of Gujarat High Court in case of Katira Construction Ltd. v. UOI [2013] 31 taxmann.com 250/214 Taxman 599/352 ITR 513, wherein Court held as under:-

"32. It is true that with effect from 1-4-2002 some significant changes were made in the said provisions. Three of these changes which are material were: (i) that sub-section (4) of section 80-IA now required the enterprise to carry on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility. This was in contrast to the previous requirement of all three conditions being cumulatively satisfied; (ii) that the explanation of the term 'infrastructure facility' was changed to besides others, a road including toll road instead of hitherto existing expression 'road', and (iii) that the requirement of transferring the infrastructural facilities developed by the enterprise to the Central or the State Government or the local authority within the time stipulated in the agreement was done away with.

(a) It is owned by a company registered in India. (b) It has entered into an agreement with the Government for developing / operating / maintaining the infrastructure facility, and (c) It has started operating and maintaining the infrastructure facility on or after April,1995.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd 87. Thus, under the amended conditions of the section 80-IA(4) i.e. post AY 2002-03, L&T as well as UTCL were eligible for claiming deduction u/s 801A. As per section 80IA(2), the deduction is available at the option of the assessee, for any ten consecutive assessment years out of twenty years beginning from the year in which the undertaking or enterprise develop and operate any infrastructure facility. The assessee has started claiming deduction post AY. 2004-05 and is within the period of available twenty years. Under section 80IB, u/s 80lC, 80ID and 80lE, the first year in which the production is started is taken as initial previous year whereas, after the amendment in provisions of section 80lA w.e.f. 01.04.2000 the initial assessment year is at the option of the assessee to avail the benefit.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd the project, the assessee-company applied directly for a permanent registration certificate of its status as a small scale industry (SSI) under section 11-B of the Industrial Development Regulation Act, 1951 (IRDA) to the prescribed authority, who granted the certificate dated 30-3-1998, which was a conclusive and final proof of such a status under the provisions of IRDA. The return of income filed earlier by the assessee for the assessment year 1999-2000 as subsequently revised, wherein a claim of deduction under section 80-IA was made. The Assessing Officer disallowed the claim of the assessee, on the ground that the assessee started production from the assessment year 1997-98 itself, the year in which the assessee was not a small scale industry, and, therefore, the assessee did not fulfil the condition of section 80-IA in the initial year. On appeal, the Commissioner (Appeals), allowed the assessee's claim under section 80-1A. On Revenues appeal, the ITAT held that for claiming deduction under section 80-IA, it has to be determined at end of relevant previous year that as to whether assessee is registered as SSI and there is no condition in Act that an industrial undertaking should fulfil all conditions as laid down under section 80-IA in very initial year itself and not thereafter.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd 91. ITAT Chennai Bench have dealt with similar issue in case of Mohan Breweries & Distilleries Ltd. v. Asstt. CIT [2009] 116 ITD 241 which pertains to AY. 2004-05 (i.e., after the amendment of S. 80-IA by the Finance Act 1999), the Chennai Tribunal has held that the initial assessment year is the first year of claim and S. 80-IA itself becomes applicable only when the assessee makes the claim for the first time and not before that. Hon'ble Madras High Court has upheld the judgment of Chennai Tribunal and concurred with the view that Section does not mandate that first year of 10 consecutive assessment years should be always first year of set-up of enterprise. The High Court has held that as initial year is not defined in Section 80lA as compared to Section 80IB where it is specifically provided that the year of commencement of business will be the initial year for the purpose of claiming the deduction, the year of option has to be treated as initial assessment year for the purpose of Section 80IA.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd treated as eligible to the deduction under the aforesaid section in respect of profit, if any, of those rail system for the later years. In this regard we observe that assessee has inherited the cement business from L&T Ltd., in FY. 2003-04 on account of merger. Post merger it started claiming deduction for Rail system u/s. 80-IA from Assessment year 2004-05 onwards as it satisfied all the conditions as prescribed u/s 80IA(4). Section 80IA(12) provided that in the scheme of amalgamation or merger, the deduction is available to the amalgamated / resulting company. The relevant provision of sec. 80IA(12) reproduced hereunder:-"Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger.

(a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and

(b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd AO is directed to allow the deduction as claimed by the assessee with respect to its rail system. We direct accordingly.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd 7. Ground no. 2 is against the action of the Ld. CIT(A) allowing the proportionate CENVAT credit availed for units eligible for deduction u/s 80IA of the Act amounting to Rs.2,31,07,873/-.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd Accordingly, the Assessing Officer reduced the eligible deductions under section 80IA, by the amount of CENVAT credits attributable to eligible units, as the expenses were not booked through the profit and loss account, and, to that extent, according to him, the profits stood distorted/ inflated. These allocations were done according to him, on the basis of turnover "in the absence of any item wise details". Aggrieved, inter-alia, by these adjustments on account of CENVAT credit, assessee assailed the matter in appeal before the CIT(A) who was pleased to allow by following the order of this Tribunal in assessee’s own case (supra) for AY. 2012-13. Aggrieved, the revenue is before us.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd including the assessment year for which the determination is to be made". All that this provision does is that it provides for the profits of the eligible unit being treated on a standalone basis, but then in case the Assessing Officer makes an adjustment for the payment which has earned the CENVAT credit, he must also make an adjustment for the corresponding CENVAT credit availed by any other unit of the assessee - other than the eligible unit. If the captive power unit makes a payment of X amount, and in turn, it generates a CENVAT credit of X amount, which is availed by another unit, say Ropar Cement Manufacturing Unit, the hypothetical independence embedded in the profit computation on a standalone basis requires that the Ropar Cement Manufacturing Unit must reimburse the captive power unit for such a CENVAT credit. It cannot be open to the assessee to provide for the expenses which have earned the CENVAT credits, but not to account for the CENVAT credits and the benefits accruing form the same. In any event, the fiction envisages under section 80IA(5) is to enable computation of profits on a standalone basis, rather than to increase the scope of profits itself and allocate notional expenditure to the eligible units. When the eligible units are other units are treated as independent of each other, and the profit computations are on a standalone basis, the eligible unit must get the corresponding credit for the CENVAT credits availed by the other units. Viewed thus, not accounting for the CENVAT credit does not, in our considered view, vitiate the profits of the eligible undertaking, as long as all such credits are fully availed by the other units as is the undisputed position anyway. What the assessee has done is that the expenses are debited net of the CENVAT credit availed. To this extent, we see no infirmity in the stand of the assessee.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd 103. In view of these discussions, as also bearing in mind the entirety of the case, we uphold the plea of the assessee, and direct the Assessing Officer to delete the impugned adjustment on account of CENVAT in the profits of the eligible units. The assessee gets the relief accordingly.

ITA. NO.2032/MUM/2023 for AY. 2010-11 (Revenue Appeal) 11. Ground no. 1 of revenue is regarding the assessee’s claim u/s 80IA of the Act in respect of Rail System which has already been decided by us for AY. 2008-09 (supra). And since there is no change in facts or law, the decision of ours will be follow and apply mutatis mutandis for assessment year AY 2010-11. And therefore, the action of the Ld. CIT(A) is upheld.

ITA Nos. 2031 & 2032/Mum/2023 C.O. 90 & 91/Mum/2023 A.Ys. 2008-09 & 2010-11 Ambuja Cements Ltd 13. Cross Objection (CO) No. 90 & 91/Mum/2023 has been raised by assessee against the action of AO reopening the assessment for both assessment years. Since the assessee succeed on merits, the legal issue raised by it has become academic as held by Ld. CIT(A). And therefore, left open.