M/S. GRASIM INDUSTRIES LTD.,MUMBAI vs. DCIT CIR - 6(3), MUMBAI

PER SANDEEP SINGH KARHAIL, J.M.

The present cross appeals have been filed challenging the impugned order dated 30/03/2006, passed under section 250 of the Income Tax Act, 1961 ("the Act")

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 by the learned Commissioner of Income Tax (Appeals)–XXVI, Mumbai, [―learned CIT(A)‖], for the assessment year 2005–06.

ITA no.3517/Mum./2006 Assessee’s Appeal – A.Y. 2005–06

―The appellant prefers an appeal against the order of the Commissioner of Income Tax (Appeals) - XXVI [hereinafter referred as "CIT (A)"] on the following amongst other grounds each of which is without prejudice to any other. 1. Disallowance under section 43B 1.1. On the facts and circumstances of the case and in law, the CIT (A) erred in not allowing the amounts paid or written back during the previous year amounting to Rs.1,87,21,814/-, which had already been disallowed in the past under clauses (b), (c), (d) and (e) of section 43B, consistent with the Department's stand. 1.2. The CIT (A) ought to have held that in the event the Department's stand is accepted by the ITAT in earlier years, then deduction of amounts paid or written back during the year amounting to Rs. 1,87,21,814/- should be allowed in the previous year. Club Membership Fees 2 . 2.1 On the facts and circumstance of the case and in law, the CIT (A) erred in holding that the ground of appeal relating to club membership fees is treated as partly allowed even though he has directed the AO to allow entire payment of Rs.5,02,800 as revenue expenditure. 2.2 The CIT(A) ought to have held that the entire disallowance of Rs.5,02,800/- is deleted and the ground of appeal is fully allowed. Page | 2

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 3. Sales tax exemption 3.1. On the facts and circumstances of the case and in law, the CIT (A) erred in upholding the action of the AO in treating sales tax exemption benefit of Rs. 143.12 crores as revenue receipt. 3.2. The CIT (A) failed to appreciate that the object of grant of incentive is to promote setting up of industries in backward areas and therefore the subsidy is capital in nature. 3.3. The CIT(A) ought to have held that sales tax exemption benefit of Rs.143.12 crores is capital receipt. 4. Depreciation on let out property 4.1. On the facts and circumstances of the case and in law, the CIT (A) erred in upholding the action of the AO in disallowing depreciation of Rs.45,681/-. 4.2. The CTT (A) ought to have held that once an asset forms part of block of assets, it loses its identity and depreciation on a particular asset cannot be worked out separately and disallowed. 5. Adjustment of receivable against Provisions for Doubtful debts 5.1. On the facts and circumstances of the case and in law, the CIT (A) erred in upholding the action of AO in rejecting the claim of Rs.6,01,759/- being the amount receivable from debtors adjusted during the year against provision for doubtful debts. 5.2. The CIT (A) ought to have directed the AO that in the event the Department's stand is accepted by the ITAT for A.Y. 1986-87, then deduction of Rs.6,01,759 be allowed in this year. 6. Loss on loan to Subsidiary Company 6.1. On the facts and circumstances of the case and in law, the CIT (A) erred in upholding the action of AO in not allowing deduction of Rs.37.10 crores towards loss on loans given to subsidiary Company. 6.2. The CIT (A) ought to have held that the loss of Rs.37.10 crores is allowable deduction while computing taxable business income. 7. Disallowance u/s. 40(a)(ia) 7.1. On the facts and circumstances of the case and in law, the CIT (A) erred in upholding the action of AO in disallowing the liability of Rs.2,67,92,244/- towards year-end expenses applying provision of section 40 (a)(ia). 7.2. The CIT (A) ought to have deleted the disallowance and held that the provision of section 40(a)(ia) are not applicable in the case. 8. Deduction u/s. 80G 8.1. On the fact and circumstance of the case and in law, the CIT(A) erred in upholding the action of AO in rejecting claim of deduction u/s. 80G of Rs.29,772/-.

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 8.2. The CIT (A) ought to have held that deduction u/s. 80G is allowable against the taxable profit of the Company. 9. Miscellaneous Receipts 9.1. On the facts and circumstance of case and in law, the CIT(A) erred in upholding the action of AO that miscellaneous receipts of Rs.5,71,169/- (Rs.95,09,733/- less Rs.89,38,564/-) is not income derived from undertaking eligible for deduction u/s. 80IA. 9.2. The CIT(A) ought to have held that miscellaneous receipt of Rs.5,71,169/- is derived from business of undertaking eligible for deduction u/s. 801A. 10. Interest from Income Tax Department. 10.1. On the fact and circumstances of the case and in law, the CIT (A) erred in upholding the action of AO in taxing interest of Rs.49,00,34,949/- received from Income Tax Department during the previous year. 10.2. The CIT (A) ought to have held that since the aforesaid amount of interest has not yet reached the stage of finality, it is not taxable in this assessment year. 11. The appellant prays for the cost of this appeal in view of section 254 (2B) of the I.T. Act. The appellant craves leave to add to, alter, amplify or delete any of the above ground(s) before or at the time of hearing. The appellant respectfully prays that relief prayed for in the abovementioned grounds be granted and that the appellate order of the CIT (A) be modified accordingly.‖

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 dated 13/06/2023, passed in assessee‟s own case in Grasim Industries Ltd. v/s DCIT, in ITA No.4745/Mum./2004 and ITA No.5978/Mum./2004, for the assessment year 2003–04, dismissed similar issue while following the decision rendered in assessee‟s own case in preceding years. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced below:–

―6. We find that a similar issue came up for consideration before the coordinate bench of the Tribunal in assessee's own case in Grasim Industries Ltd. v/s ACIT, in ITA no.4753/Mum./ 2004 and ITA no.5584/Mum./2004, for the assessment year 2002-03, wherein the coordinate bench, while dismissing the similar issue, following the earlier decision rendered in assessee's own case, observed as under:- "6. 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. While deciding the issue, the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum./2003 dated 22.10.2014 held as under: - "2. Rival contentions have been heard and perused the record. The assessee is engaged in manufacturing and sale various products. During the course of scrutiny assessment, the A.O. disallowed assessee's claim of deduction u/s 43-8 of the Act in respect of liabilities disallowed in earlier years which are paid/written back in the current year. The A.O. found that in the computation of income an amount of Rs. 10.85 crores has been considered as disallowance u/s 43-8 (a) of the Act by the assessee itself. However, an amount of Rs. 1.31 crores was not considered as disallowance u/s 43-8 of the Act falling under clause (b) to (d). The contention of the assessee was that the amount of Rs. 1.31 crores which falls under clauses (b) to (d) of section 43-B of the Act which are not payable as on 31-3-2001 cannot be covered by the provisions of section 43-B of the Act. However, the A.O. did not agree with this explanation and made the disallowance. The Id. CIT(A) by his impugned order, confirmed the order of the A.O. and the assessee is in appeal before us. 3. At the outset, the Id. Counsel for the assessee contended that the issue is covered by the decision of the Tribunal in earlier years i.e assessment years 1993-94 to 1998-99 and 2000-01 in assessee's own case, copy of which was placed on record. We find that similar issue was considered by the Tribunal in A.Y. 2000-01 vide order dated 9-10-2013 wherein the ground taken by the assessee was dismissed as the same has become infructuous. It was found by Tribunal that it is an alternative plea which relates to A.Y. 1993-94 decided by the Tribunal in assessee's favour. The appeal filed by the Department has been dismissed by the Tribunal vide order dated 20-12-2001. As the facts and circumstances during the year under consideration are para materia wherein appeal of department in earlier year was dismissed by the Tribunal, therefore, ground taken by assessee for disallowance during the year has become infructuous. The view taken by the Tribunal in A.Y. 2000-01 is respectfully followed, ground of the assessee becomes otiose and is accordingly dismissed.‖ 7. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in A.Y. 2000-01 is respectfully followed, ground raised by the assessee is accordingly dismissed."

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 7. Thus, respectfully following the aforesaid decision, ground no.1, raised in assessee's appeal is dismissed.‖

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 15. We have considered the submissions of both sides 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)

―54. We have considered the submissions of both sides and perused the material available on record. As per the assessee, the object for the grant of the incentive by the State Governments is to promote setting up industries in the backward/notified areas and therefore, the subsidy is capital in nature. In the year under consideration, the assessee received sales tax subsidiary under the following schemes:-  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 Exemption Scheme (M.P. Vanijyikar Adhiniyam, 1994)  Sales Tax Incentive Scheme (Incentives offered by Government of Gujarat under the New Incentive Policy-Capital Investment Incentive (General) Scheme-1995- 2000)

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006

not. The object of the grant was that in the year 1981, in view of heavy fall in prices of sugar, sugar industries were in difficulty. The Government decided to give financial assistance to certain industries in respect of sugar manufactured by them from home-grown beet during the relevant period. Lord Macmillan held that— "What to my mind is decisive is that these payments were made to the company in order that the money might be used in their business." He further observed that: "I think that they were supplementary trade receipts bestowed upon the company by the Government and proper to be taken into computation in arriving at the balance of the company's profits and gains for the year in which they were received." 15. In the case before us, the payments were made to assist the new industries at the commencement of business to carry on their business. The payments were nothing 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 given under statutory authority, the statutory purpose for which they are authorised is relevant and may even be decisive in determining whether it is taxable income in the hands of the recipient. In that case, it was pointed out after discussing the Seaham Harbour Dock Co. 's case (supra)as well as that of Lincolnshire Sugar Co. Ltd. 5 case (supra)that subsidy given by the Canadian Government to encourage construction of dry docks was 'an aid to the construction of dry dock and not an operational subsidy'. 17. This precisely is the question raised in this case. By no stretch of imagination can the subsidies whether by way of refund of sales tax or relief of electricity charges or water charges can be treated as an aid to setting up of the industry of the assessee. As we have seen earlier, the payments were to be made only if and when the assessee commenced its production. The said payments were trade for a period of five years calculated from the date of commencement of production in the assessee's factory. The subsidies are operational subsidies and not capital subsidies.‖ 56. Thus, respectfully following the aforesaid decision, rendered in assessee‘s own case, we are of the considered view that the sales tax exemption received by the assessee, in the year under consideration, under the similar schemes of the State of Maharashtra, Haryana, Rajasthan, and Madhya Pradesh are in the nature of capital receipts and therefore not taxable in the hands of the assessee. 57. As regards the Sales Tax Waiver Scheme (Package of Fiscal Incentives offered by the Government of Tamil Nadu to Industries), forming part of the paper book from pages 289-334, we find that the objective of the scheme was for fostering the pace of industrialisation and to enhance the competitiveness of Tamil Nadu for attracting a large share of industrial projects. Accordingly, the Government of Tamil Nadu introduced the aforesaid scheme which includes capital subsidies and sales tax concessions. From page No. 294 of the paper book, we find that as per the said scheme the State Government has provided a set of waivers and deferrals which can be availed Page | 9

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 by the investor setting up a mega-investment. It is further provided that the concession is available to industries set up anywhere regardless of its location. In this regard, the assessee has also placed on 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 of the eligibility certificate issued under the aforesaid scheme, forming part of the paper book on page 577, we find that the same also mentions the total investment in fixed assets by the assessee. Therefore, in view of the above, we find that the sales tax exemption scheme of the Government of Gujarat 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. 59. As regards the Punjab Industrial Incentive Code under the Industrial Policy, 1996, forming part of the paper book from pages 481-490, we find that the said scheme was formulated with a view to promote growth of the industry in the State and for that purpose it provides various incentives for new industrial units that come into production or undertake expansion on or after 01/04/1996. We find that in the scheme, inter-alia, the capital subsidy is provided to the new large and medium units set up in the notified area as mentioned in Annexure-I of the scheme. We find that under the said scheme certificate of eligibility was also issued to the assessee in respect of Vikram Bathinda Cement Grinding Unit. Thus, the dominant purpose for which this incentive scheme was introduced is also for setting up the industry in the notified area to promote industrial growth in the State. Therefore, we are of the considered view that the sales tax exemption received by the assessee under the scheme is also in the nature of capital receipt. Therefore, in view of the above, the sales tax exemptions received by the assessee under all the schemes of various State Governments, as noted above, are in the nature of capital receipt, and thus, are not taxable in the hands of the assessee. Accordingly, grounds no.7.1 and 7.2 raised in assessee‘s appeal are allowed.‖

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 has let out its co-owned office premises at 6th floor, Sakhar Bhavan, Nariman Point, Mumbai and rent received on same has been offered for tax under the head “Income from House Property”. It was further observed that the assessee has not reduced the written down value of the aforesaid premises from the value of block of assets and claimed depreciation allowance on the total block of assets, which includes the written down value on the let out premises. Accordingly, during the assessment proceedings, the assessee was asked to show cause as to why the depreciation should be allowed on the let out property. In response thereto, the assessee submitted that under the block concept once an asset is added to the block of assets it loses its identity, and depreciation on a particular asset cannot be worked out separately. It was further submitted that adjustments to the block of assets can be made only in accordance with the provisions of section 43(6) of the Act. The assessee also placed reliance upon the CBDT Circular No. 469 dated 23/09/1986. The AO, vide assessment order passed under section 143(3) of the Act, did not agree with the submissions of the assessee and held that the assessee has claimed depreciation on the let out premises and is also claiming a deduction equal to 30% of annual rental value while computing income from house property. The AO held that the assessee cannot be allowed both deductions and therefore proceeded to compute the disallowable part of depreciation.

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 was purchased by the assessee in the assessment year 1987-88. Since its acquisition, the said property forms part of the block of assets for the purpose of claiming depreciation under the Act. It is the claim of the assessee that in the preceding years the assessee used this property as one of its office premises. In the year under consideration, the said property was let out and the rental income was offered to tax under the head “Income from House Property”, after claiming a deduction under section 24 of the Act. The AO, vide assessment order, worked out the disallowable depreciation in respect of the aforesaid property while allowing deduction claimed under section 24 of the Act.

"block of assets" means a group of assets falling within a class of assets comprising— (a) tangible assets, being buildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights, trade-marks, licences, franchises or any other business or commercial rights of similar nature, in respect of which the same percentage of depreciation is prescribed ;‖

―Depreciation 32.(1) In respect of depreciation of— (i) buildings, machinery, plant or furniture, being tangible assets;

(ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998,

owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed—

(i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed;

(ii ) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed: ……….. Explanation 2.—For the purposes of this sub-section "written down value of the block of assets" shall have the same meaning as in clause (c) of sub-section (6) of section 43.‖

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006

―(c) in the case of any block of assets,— (i) in respect of any previous year relevant to the assessment year commencing on the 1st day of April, 1988, the aggregate of the written down values of all the assets falling within that block of assets at the beginning of the previous year and adjusted,—

(A) by the increase by the actual cost of any asset falling within that block, acquired during the previous year;

(B) by the reduction of the moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year together with the amount of the scrap value, if any, so, however, that the amount of such reduction does not exceed the written down value as so increased; and

(C) in the case of a slump sale, decrease by the actual cost of the asset falling within that block as reduced— (a) by the amount of depreciation actually allowed to him under this Act or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922) in respect of any previous year relevant to the assessment year commencing before the 1st day of April, 1988; and (b) by the amount of depreciation that would have been allowable to the assessee for any assessment year commencing on or after the 1st day of April, 1988 as if the asset was the only asset in the relevant block of assets, so, however, that the amount of such decrease does not exceed the written down value;] (ii) in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1989, the written down value of that block of assets in the immediately preceding previous year as reduced by the depreciation actually allowed in respect of that block of assets in relation to the said preceding previous year and as further adjusted by the increase or the reduction referred to in item (i).

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 property in question forms part of the block of assets since the assessment year 1987-88 and the depreciation on the entire block was also allowed. The Revenue has also not disputed this fact. It is settled that once any asset forms part of the block of assets, it losses its individual identity, and thus for the purpose of depreciation, only the block of assets has to be considered. This aspect is sufficiently evident from Circular No.469 issued on 23/09/1986, which reads as under:-

―6.3 As mentioned by the Economic Administration Reforms Commission (Report No. 12, para 20), the existing system in this regard requires the calculation of depreciation in respect of each capital asset separately and not in respect of block of assets. This requires elaborate book-keeping and the process of checking by the Assessing Officer is time consuming. The greater differentiation in rates, according to the date of purchase, the type of asset, the intensity of use, etc., the more disaggregated has to be the record-keeping. Moreover, the practice of granting the terminal allowance as per section 32(1)(iii) or taxing the balancing charge as per section 41(2) of the Income-tax Act necessitate the keeping of records of depreciation already availed of by each asset eligible for depreciation. In order to simplify the existing cumbersome provisions, the Amending Act has introduced a system of allowing depreciation on block of assets. This will mean the calculation of lump sum amount of depreciation for the entire block of depreciable assets in each of the four classes of assets, namely, buildings, machinery, plant and furniture.‖

“32. Another significant and contemporaneous development, which needs to be noticed is that the Legislature has also deleted the provision for allowing terminal depreciation in respect of each asset, which was previ- ously allowable under section 32(1) (iii) 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 was Page | 14

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 brought about. It is also essential to point out that the revenue is not put to any loss by adopting such method and allowing depreciation on a particular asset, forming part of the 'block of assets' even when that particular asset is not used in the relevant assessment year. Whenever such an asset is sold, it would result in short-term capital gain, which would be exigible to tax and for this reason, we say that there is no loss to revenue either.‖

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 35. The learned Sr. Counsel, at the outset, wishes not to pursue this ground, as the full amount claimed was allowed in the assessment year 2006–07. Accordingly, ground no.7, raised in assessee‟s appeal is dismissed as withdrawn.

―49. We have considered the submissions of both sides and perused the material available on record. In the year under consideration, the assessee included miscellaneous receipts of Rs.10,10,73,313 for the purpose of computation of deduction under section 80 IA of the Act. As per the details of miscellaneous receipts, provided on page 135 of the paper book, these receipts include interest, excess/short provision, prior period adjustments, rent, miscellaneous receipts, job charges, exchange rate difference, export incentive, profit on the sale of DEPB license, notice pay and sludge sales. As per the assessee, all these receipts are directly connected with and derived from the eligible business, and therefore, should be considered for computation of Page | 16

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 deduction under section 80-IA of the Act. As is evident from the record, the learned CIT(A) only examined the receipts from job charges and excess provisions written back and considered the same to be business profits for computing deduction under section 80-IA of the Act. While, the other receipts, as noted above, under the broad category of ‗miscellaneous receipts‘ were not examined by any of the lower authorities to determine whether they are derived by the undertaking or the enterprise from the eligible business, as per the provisions of section 80-IA of the Act. Therefore, in view of the above, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication as per law, after examining each and every receipt under the category of ‗miscellaneous receipts‘, which were excluded from the business profits by the learned CIT(A) for computing the deduction under section 80 IA of the Act. Thus, to this extent, the impugned order on this issue is set aside. Accordingly, grounds No. 6.1 and 6.2 raised in assessee‘s appeal are allowed for statistical purposes.‖

Having considered the submissions of both sides and perused the material ―15. available on record, we find that the coordinate bench of the Tribunal, vide order dated 14/12/2021, passed in assessee‘s own case for the assessment year 2002–03 cited supra, by following the decision rendered in the preceding year, observed as under:– ―15. 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. While deciding the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum/2003 dated 22.10.2014 held as under: - "7. The assessee is also aggrieved for taxing of interest received from Income Tax Department amounting to Rs. 13,64,09,609/-. We find that

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 similar issue has been dealt with by the Tribunal in A.Y. 1993-94 in ITA No. 1523/Mum/1997 vide para 62 as under;- "We have heard the parties and considered the rival submissions. These refunds have been granted to the assessee in the year under consideration and therefore they would partake the character of income of the assessee. If however, any refund has been found to be not refundable to the assessee and consequently the interest granted is withdrawn the same would not partake the character of income. We accordingly direct the Assessing Officer to reduce from the taxability of the aforesaid interest granted to the assessee, the amount which has been withdrawn subsequently. We direct accordingly." 8. It was argued by the Id. A.R. that benefit of interest so allowed by the department was subsequently withdrawn as a result of the appellate orders should be given to the assessee and the interest subsequently withdrawn should not be taxed and for this, reliance was placed on the decision of the Tribunal in the case of Avada Trading Co. (P.) Ltd. vs. ACIT (2006) 100 ITD 131. 9. We have considered the rival contentions. As far as the taxability 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.‖

―The appellant prefers appeal against the order of the Commissioner of Income 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. 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.‖

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 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 dividend received from the Egyptian company is not taxable in India.

―65. 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 Ltd. (supra). During the year under consideration, the assessee received Rs.1,16,24,021 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 dividend received from the Egyptian company is not taxable in India. We find that a similar issue came up for consideration before the coordinate bench of the Tribunal in assessee‘s own case in assessment year 2003-04. Vide order dated 13/06/2023 cited supra, the coordinate bench observed as under:- ―65. Having considered the submissions of both sides, we find that as per Article 11(2) of the India- UAR (Egypt) DTAA, dividends paid by a company which is a resident of the UAR (Egypt) to a resident of India may be taxed in the UAR (Egypt). As noted above, it is the plea of the assessee that prior to amendment by Finance Act 2003, w.e.f. 01/04/2004, to section 90 of the Act, the term ―may be taxed‖ means that only the source country has the right to tax the income earned in such country and the resident country does not have any taxing rights. Therefore, the dividend received by the assessee from the Egyptian company, in the present case, is only taxable in Egypt. We find that while examining the issue of applicability of the aforesaid amendment vide Finance Act, 2003 to section 90 of the Act, and the aforesaid Notification issued under the said section, the coordinate bench of the Tribunal in Essar Oil Ltd v/s ACIT, [2013] 42 taxmann.com 21 (Mum-Trib.), observed as under:- ―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 Page | 19

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 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;‖

―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. Thus, this decision in a way interprets the phrase ―may be treated‖ to mean that source country has a right to tax to the exclusion of resident state;

• Secondly, in S.R.M. Firm (supra), the High Court has in a very clear terms, has interpreted the expression ―may be taxed‖ to mean that once the income is taxable in other contracting State that is country of source then country of resident i.e., India is precluded from including the same income in India;

• Thirdly, the Hon‘ble Supreme Court in Azadi Bachao Andolan (supra), has approved the reasoning of R.M. Muthaiah (supra) in an entirely different context, therefore, it cannot be held that the Hon‘ble Supreme Court has carved out any express law on the phraseology of ―may be taxed‖; • Fourthly, in P.V.A.L. Kulandagan Chettiar (supra‘s) the Hon‘ble Supreme Court has specifically refrained from giving any such interpretation of ―may be taxed‖ and affirmed the decision of High Court on a different reasoning and grounds. Thus, this decision does not carve out any express law on the phrase ―may be taxed‖; and

• Lastly, the Hon‘ble Supreme Court in Turquoise Investments & Finance Ltd. (supra) has not only confirmed the decision of R.M. Muthaiah (supra) but also decision of the M.P. High Court, wherein extensively reliance was placed on the decision of S.R.M. Firm (supra). Thus, this decision of the Hon‘ble Supreme Court in a way has confirmed the entire reasoning of the S.R.M. Firm (supra) which, in our opinion, is slightly different from the judgment of the Hon‘ble Supreme Court in P.V.A.L. Kulandagan Chettiar (supra) to the extent that the phrase ―may be taxed‖ was not expressly dealt with by the Hon‘ble Supreme Court as the reasoning of the High Court was affirmed on different ground. Thus, the later decision of the Hon‘ble Supreme Court in Turquoise Investments & Finance Ltd. (supra) can be said to be the view expressed by the decision in S.R.M. Firms (supra) by the Madras High Court.

In this background, that the three High Courts have expressed their views and which have been affirmed by the Hon‘ble Supreme Court in some context or the other, specially the decision of Turquoise Investments & Finance Ltd. (supra), Page | 20

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wherein the Apex Court has approved these decisions completely, then as a judicial precedence, one has to accept that the phrase ―may be taxed‖ has to be inferred as allocating the taxing right 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:- ―10. It may be recalled that, with effect from 1st April 2004, a new sub-section 3 was inserted in Section 90, and this new sub-section provided that "(a)ny term used but not defined in this Act or in the agreement referred to in sub- section (1) shall, unless the context otherwise requires, and is not inconsistent with the provisions of this Act or the agreement, have the same meaning as assigned to it in the notification issued by the Central Government in the Official Gazette in this behalf". In exercise of the powers so vested in the Central Government, vide notification no. 91 of 2008 dated 28th August 2008, it was notified as follows: In exercise of the powers conferred by sub-section (3) of section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that where an agreement entered into by the Central Government with the Government of any country outside India for granting relief of tax, or as the case may be, avoidance of double taxation, provides that any income of a resident of India "may be taxed" in the other country, such income shall be included in his total income chargeable to tax in India in accordance with the provisions of the Income-tax Act, 1961 (43 of 1961), and relief shall be granted in accordance with the method for elimination or avoidance of double taxation provided in such agreement. 11. The effect of Hon'ble Supreme Court's judgment in Kulandagan Chettiar's case (supra) thus was clearly overruled by the legislative developments. It was specifically legislated that the mere fact of taxability in the treaty partner jurisdiction will not take it out of the ambit of taxable income of an assessee in India and that "such income shall be included in his total income chargeable to tax in India in accordance with the provisions of the Income-tax Act, 1961 (43 of 1961), and relief shall be granted in accordance with the method for elimination or avoidance of double taxation provided in such agreement". A coordinate bench of this Tribunal, in the case of Essar Oil Ltd (supra) also proceeded to hold that this notification was retrospective in effect inasmuch as it applied with effect from 1st April 2004 i.e. the date on which sub-section 3 was introduced in Section 90.‖ (emphasis supplied) 67. Therefore, in view of the above, we find no merit in the plea of the assessee. Accordingly, the additional ground filed by the assessee vide application dated 23/01/2013 is dismissed.‖

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 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.

―1 On the facts and the circumstances of the case and in law the learned AO erred in not treating TUF subsidy of Rs.0.71 Cr as capital receipt and not chargeable to tax. 2 The Appellant prays that 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.‖

―06. We have carefully considered the rival contention and perused the orders of the lower authorities as well as the decision of the coordinate bench. During the Page | 22

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 course of hearing before the coordinate bench in ITA number 2525/M/2014 for assessment year 2009 – 10, assessee raised an additional ground stating that interest subsidy received under technology upgradation fund scheme amounting to ₹ 83,426,992/– is revenue receipt. The coordinate bench as per paragraph number 12 of that decision remanded back this issue to the file of the learned assessing officer for de novo adjudication in accordance with the law. This decision was arrived at by in the earlier years also this issue was remanded back to the file of the learned assessing officer. Therefore based on this the learned AO proceeded to examine the claim of the assessee that whether the interest subsidy received under technology upgradation fund scheme is revenue receipt or capital receipt. It is also to be noted that assessee itself has reduced the above subsidy from the interest expenditure debited to the profit and loss account. Thus, assessee itself treated it as a revenue income and not capital expenditure. However in assessee‘s own case in ITA number 4220 and 4704/M/2014 dated 24/2/2020 it has been held that the subsidy received by the appellant company under technology upgradation fund scheme is capital receipt. The coordinate bench held as under:- ―8. Ground No. 11: 11. "On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in directing to treat the interest subsidy of ₹ 15,23,25,727/- as capital in nature." 38.1 In ground No.11 the Revenue has assailed the findings of CIT(A) in holding interest subsidy from Technology Up gradation Fund(TUF) ₹ 15,23,25,727/- as capital in nature. The ld. Authorized Representative for the assessee submitted 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 Officer for reconsideration in line with Tribunal order in assessee‘s appeal for Assessment Year 2009-10. 40. Both sides heard. The assessee has received subsidy under TUF scheme. The assessee has claimed the subsidy as capital receipt, whereas, the Department treated the subsidy as Revenue in nature. We find that the Hon‘ble Rajasthan High Court in the case of PCIT vs. Nitin Spinners Ltd.(supra) examined the scheme in the light of various decisions and held the subsidy under TUF scheme as capital in nature. Similar view has been taken by the Hon‘ble Calcutta High Court in the case of CIT vs.Gloster Jute Mills Ltd.(supra). Thus, in view of above judgements of Hon‘ble High Courts, we see no infirmity in the findings of CIT(A). The same are upheld and ground No.11 of the appeal is dismissed. Page | 23

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―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 the Act.

3.2 The Appellant prays that the learned AO be directed to allow deduction of Education Cess while computing the total income of the Appellant.

3.3 The Appellant craves leave to add and/or to amend and/or to alter the above Ground of Appeal.‖

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 taxmann.com 420 (SC) allowed the Revenue's appeal against the Hon'ble 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.

ITA no.3854/Mum./2006 Revenue’s Appeal – A.Y. 2005–06

―1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of Rs.5,04,15,408/-u/s.43B by relying upon the order of the ITAT in the assessee's case for the AY 1993-94 without appreciating that the department had not accepted the same by filing an appeal u/s.260A. 2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of Rs.23,91,188/- towards contribution to local organization, relying upon the CIT(A)'s orders in the assessee's own case for the Asst. Years 1999-2000 & 2001-02 which have been contested by the department in further appeal before the ITAT. 3. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of Rs.81,12,672/- made by the AO on account of rural development expenses, relying upon the CIT(A)'s orders in the assessee's own case for the Asst. Years 1996-97 & 2001-02 which have been contested by the department in further appeal before the ITAT. 4. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the AO to treat the production cost of the advertisement films of Rs.4,05,99,545/- as a revenue expenditure by relying upon his earlier orders for the Asst. Years 2002-03 and 2003-04 without appreciating that the department has not accepted the orders by filing appeal with the ITAT. 5. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of Rs.1,31,93,113/- as incurred towards earning of exempt dividend income by relying upon his decision for earlier years without appreciating that the same have not been accepted by the department by filing an appeal with the ITAT. 6. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the AO not to reduce the claim of deduction of Rs.1,00,90,705/- u/s.80-IA by relying upon his earlier orders on the issue for Page | 25

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 Asst. Years 1996-97 to 2003-04 without appreciating that the department had not accepted the same by filing an appeal to the ITAT. 7. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the AO to allow deduction of Rs.25,71,93,534/- u/s.80-IA in respect of profits of Rail System Raipur and Hotgi by relying upon his decision for the AYrs. 2003-04 without appreciating that the department has not accepted the same by filing an appeal with the ITAT. 8. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.‖

―73. 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:– ―48. 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 dated 22.10.2014 held as under: - ―31. Ground No. 1 in Revenue‘s appeal relates to the disallowance u/s 43B of the Act which has been dealt with by the A.O. at para No. 9-9.5 of his order. The ld. CIT(A) dealt with this issue at page No. 2, para 5 of his order and deleted the disallowance by following the order of the Tribunal in earlier years. From the record, we found that the Tribunal has been consistently allowed the issue in favour of the assessee in assessment years 1990-91, 1993-94, 1994-95, 1996-97, 1997-98 & 1998-99. We further found that against the order of the Tribunal, the Department has not filed any appeal before the Hon‘ble High Court in assessment years 1996-97, 1997-98, 1995-96 & 1994-95. As the matter has been settled and the ld. CIT(A) deleted the disallowance by following the order of the Tribunal, we do not find any reason to interfere with the order of the Ld. CIT(A) deleting the disallowance made by the A.O. u/s 43-B of the Act.‖ 49. Respectfully following the above decision, we sustain the order passed by the Ld.CIT(A) and dismiss the Ground No.1 raised by the revenue. 74. 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 Page | 26

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 the 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.1, raised in Revenue‘s appeal is dismissed.‖

―78. 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:– ―52. 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 dated 22.10.2014 held as under: - ―32. With regard to the contribution to the local organization, the issue has been dealt with by the A.O. at page 6 -7, para 10 of his order. The ld. CIT(A) deleted the addition/disallowance by dealing the issue at page 3, para 7 of his order wherein he has followed the order of the Tribunal in earlier years. 33. We have considered the rival contentions and we found that the issue has been decided by the Tribunal consistently in favour of the assessee in the assessment years 1986-87 to 1989-90, 1994-95 & 1995-96 to 1997- 98. In an appeal further 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).‖ Page | 27

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―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 dated 22.10.2014 held as under: - ―38. Ground No. 6 of Revenue‘s appeal relates to the disallowance of rural development expenses. The A.O. has dealt with this issue at page 9, para 15 and the ld. CIT(A) has dealt with this issue at page 4-5, para 11 of his order. We found that the issue has been decided by the Tribunal in assessee‘s own case in its favour in assessment years 1998-99, 1999- 00 & 2000-01. We further found that the Department on this ground is not in appeal before the Hon‘ble High Court in these years. Respectfully following the order of the Tribunal, we do not find any reason to interfere

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 with the order of the ld. CIT(A) for deleting the rural development expenses amounting to Rs. 66,08,937/-.‖ 61. Respectfully following the above decision, we sustain the order of the Ld.CIT(A) and dismiss the ground raised by the revenue. We order accordingly.‖ 84. 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 the 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.3, raised in Revenue‘s appeal is dismissed.‖

―97. 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:– ―94. 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 dated 22.10.2014 held as under: - ―47. The issue in ground No. 13 with regard to deleting the disallowance of expenses incurred for making advertisement films has been dealt with by the A.O. at page 15-16, para 26. The ld. CIT(A) deleted the same after having observed at page 12-13, para 21 of his order. We found that the issue has already been settled by the Tribunal in assessee‘s own case in A.Y. 1976-77 and no ground was taken by the Department before the Hon‘ble High Court. Similar issue has been decided by the Hon‘ble Page | 29

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 Supreme Court in the case of Empire Jute Co. Ltd., 124 ITR 1 (SC). Accordingly, we do not find any infirmity in the order of the ld. CIT(A) deleting the disallowance by observing that advertisement film was made only for advertisement and its useful life is very short and such films do not add to the capital structure of the company.‖ 95. Respectfully following the above decision, we do not find any reason to interfere with the order of the Ld.CIT(A) and dismiss the ground raised by the revenue. We order accordingly.‖ 98. 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.6, raised in Revenue‘s appeal is dismissed.‖

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 31/03/2005, forming part of the paper book on Page–71, that the assessee has share capital and reserves & surplus of Rs.4328.35 crore, while the investment made is of Rs.2982.05 crore during the year. Therefore, it is sufficiently evident that during the year under consideration, the assessee's own funds are more than investments, including the investments for earning exempt income. We including the investments find that the Hon'ble Jurisdictional High Court in CIT vs HDFC Bank Ltd., [2014] 366 ITR 505 (Bom.) held that where assessee's own funds and other non-interest bearing funds were more than the investment in tax-free securities, no disallowance under section 14A of the Act can be made. We further find that the Hon'ble Supreme Court in South Indian Bank Ltd. vs CIT, [2021] 438 ITR 001 (SC) held that disallowance under section 14A of the Act would not be warranted where interest-free own funds exceed the investment in tax-free securities and in such a case the investment would be presumed to be made out of assessee's own funds. Therefore, respectfully following the law laid down by the Hon'ble Supreme Court and the Hon'ble jurisdictional High Court in cases cited supra, we find no infirmity in the impugned order in deleting the disallowance made under section 14A. Accordingly, ground no.5, raised in Revenue‟s appeal is dismissed.

―109. 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:– ―109. 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 dated 22.10.2014 held as under: - ―54. The issue in ground No. 18 pertains to the apportionment of head Office expenses while computing deduction u/s 80IA of the Act. Page | 31

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006

―107. 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 claim in favour of the assessee in respect of Rail System at Raipur, observed as under:– ―122. We have considered the submissions of both sides and perused the material available on record. In the present case, it is undisputed that the assessee has a cement plant in Raipur District. It is the claim of the assessee that to facilitate the inward and upward movement of goods, the assessee company developed an infrastructure facility for the rail system and the same satisfies the conditions for deduction under section 80-IA of the Act. We find that the assessee on this aspect made detailed submissions before the AO, Page | 32

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 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 801A with the appellant to claim deduction for any 10 consecutive years at its own choice. The appellant has opted for claiming the deduction from AY2003- 04 onwards. The income offered for tax by the appellant includes income from Rail System. 16.5 The appellant 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 appellant company as a whole. By developing this infrastructure facility, there has been a saving in transportation cost and all over profits of the Company has increased due to such savings. All the businesses of the appellant company are interconnected. interlaced and there is common management, funds and control. Profits of the Rail System are embedded in the overall profit of the company. In support of contention that treatment of a transaction in books of account cannot govern the tax statement, the appellant relied on the decisions of the Supreme Court 82 ITR 363 Kadernath Jute Mfg. Co. Ltd Vs. CIT and 227 ITR 172 Tuticurin Alkali Chemical Ltd. 16.6 The appellant 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 submitted that Section Itself envisages situation of captive consumption. Reliance was placed 59 ITR 514(Gui.) Anil Starch Ltd. vs CIT. 254 ITR 187(Bom.) CIT vs. Win Laboratories Pvt Ltd and 48 ITR 123(SC) Tata Iron & Steel Co. Ltd. vs State of Bihar. 16.6 Further, it was submitted that the facility of Rail System consists of all that is required to carry on the railway activity in an organised and systematic manner. The activity of Rail System is real and substantial and it is carried on with a said purpose, namely, 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. The profits derived from the Rail System are clearly arising out of the business of developing, operating and maintaining the Rail System. 16.7 The appellant submitted that substantial investment has been made in setting up the Rail System. All the assets are new assets and were not used for any purpose by any person earlier. There is an agreement with the Government for operating 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 Page | 33

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 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. 16.8 The appellant submitted that the conditions specified in Section 801A (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. 16.9 The appellant submitted that there is no basis on which the Assessing Officer has mentioned that the legislature's intention was to cover organisations like Konkan Railway, Delhi Metro Corporation, etc. There is no such specific mention in the Act. The appellant relied on the decision of the Bajaj Tempo Ltd vs CIT 156 ITR 188(SC). 16.10 Regarding maintenance of separate books of account, the appellant submitted that there is no such condition for grant of tax holiday benefit. Although separate books of account are not maintained, profit of the eligible business has been computed based on the memorandum books of account and other details maintained by the appellant. The Balance Sheet and Profit & Loss account of the eligible business has been audited by the Chartered Accountant. The appellant has filed along with its Return of Income the form No. 10CCB, duly audited, as per the provisions of Section 801A(7). In the case of CIT vs Dunlop Rubber Co (1) Ltd. 107 ITR 182 (Cal.) it was held that for the purpose of tax holiday benefits it is not necessary that the eligible unit must maintain separate books of account. 6.12 The appellant submitted that the number of employees directly employed in the eligible business is not relevant at all. There is an agreement with the railway authority for operation and maintenance of the Rail System and under the said agreement, the operations and maintenance is to be carried out by the railways and the appellant bears the cost of the employees deputed by the railway authorities for this purpose. It is settled position that in order to compute the number of workers, casual and other workers appointed through the contractors have to be taken into consideration. The number of employees, including appointed through the railway authorities, would far exceed 10. The appellant relied 152 ITR 152(Kar.), K.G. Yediyurappa & Co, and 99 Taxmann 229 Vikshana Tdg & Investment Pvt Ltd. In any case, the condition of employing a minumum of 10 workers is not applicable to an infrastructure enterprise. 16.13 The appellant argued that the AO's allegations that it has no control over the operations of the Rail system, is baseless and without merits. Merely because the workers are deputed by the railway under the operations and maintenance agreement, does not mean that the appellant has no control over the Rail System. It is not open for the railway authority 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 Sytem are of the appellant.

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 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 80-IA(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 80-IA 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 contrary, the learned DR though agreed that the assessee has entered into an agreement with South-Eastern Railway administration on 10/04/2000 for the Rail System at Rawan District, Raipur, however, submitted that the same is subsequent to the commencement of operations on 25/09/1999. The learned DR also submitted that since the infrastructure facility was made operational during the financial year 1999-2000, therefore, the claim of benefit under section 80-IA for the alleged infrastructure facility is to be examined as per the provisions of the Act relevant for the financial year 1999-2000. The learned DR also submitted that as per the provisions of section 80-IA (4)(i)(b) of the Act, as applicable for the financial year 1999-2000, such undertaking was required to be transferred to the Central Government, State Government, local authority or such other statutory body. However, the agreement dated 10/04/2000 does not have any such clause and therefore the same is not in conformity with the provisions of the Act. From the perusal of the record, it is evident that aforesaid submissions made by the learned DR were not the basis for disallowance under section 80-IA of the Act. In this regard, the following observations of the Special Bench of the Tribunal in Mahindra and Mahindra Ltd vs DCIT, [2009] 30 SOT 374 (Mumbai) (SB), becomes relevant:- ―In our considered opinion the learned Departmental Representative has no jurisdiction to go beyond the order passed by the Assessing Officer. He cannot raise any point different from that considered by the Assessing Officer or CIT(A). His scope of arguments is confined to supporting or defending the impugned order. He cannot set up an altogether different case. If the learned DR is allowed to take up a new contention de hors the view taken by the Assessing Officer that would mean the learned A.R. stepping into the shoes of the CIT exercising jurisdiction under section 263. We, therefore, do not permit the learned DR to transgress the boundaries of his arguments.‖ 125. Therefore, on this preliminary basis only, as noted by the Special Bench of the Tribunal in the aforesaid decision, the contention of the learned DR is rejected. Even otherwise, it is an accepted position that the assessee did not make any claim in the first year of its operation and the claim was made for the first time in the year under consideration, 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 80-IA 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 80-IA (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 Page | 35

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 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:‖

Grasim Industries Ltd. ITA no.3517/Mum./2006 ITA no.3854/Mum./2006 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.

Sd/– Sd/– AMARJIT SINGH SANDEEP SINGH KARHAIL ACCOUNTANT MEMBER JUDICIAL MEMBER

MUMBAI, DATED: Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai