DCIT, CIRCLE-1 ,, THANE vs. EVEREST INDUSTRIES LTD., MUMBAI

PER OM PRAKASH KANT, AM PRAKASH KANT, AM

These appeals by the Revenue These appeals by the Revenue and assessee and assessee are directed against separate orders dated 22.10.2019 against separate orders dated 22.10.2019 and 04.12.2019 passed 04.12.2019 passed by by the the Ld. Ld. Commissioner Commissioner of of Income-tax Income tax (Appeals), (Appeals), Nashik/Commissioner of Nashik/Commissioner of Income-tax (Appeals), Thane [in short ‘the , Thane [in short ‘the Ld. CIT(A)’] for assessment year 2014 CIT(A)’] for assessment year 2014-15 and 2016- -17 respectively. As common grounds of appeals have been raised in these appeals , As common grounds of appeals have been raised in these appeals As common grounds of appeals have been raised in these appeals therefore these appeals were heard together and disposed off by way therefore these appeals were heard together and disposed off by way therefore these appeals were heard together and disposed off by way of this consolidated order for convenience and avoid repetition of of this consolidated order for convenience and avoid repetit of this consolidated order for convenience and avoid repetit facts.

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(iii) Whether the CIT (A) erred on the facts and in the (iii) Whether the CIT (A) erred on the facts and in the (iii) Whether the CIT (A) erred on the facts and in the circumstances of circumstances of the case and in law, in relying on the decision the case and in law, in relying on the decision of ITAT, Mumbai and the decision of Bombay High Court (ITA of ITAT, Mumbai and the decision of Bombay High Court (ITA of ITAT, Mumbai and the decision of Bombay High Court (ITA No. 1299 of 2008)in the case of Reliance Industries Limited, No. 1299 of 2008)in the case of Reliance Industries Limited, No. 1299 of 2008)in the case of Reliance Industries Limited, even though subsequent to the Departmental appeal against even though subsequent to the Departmental appeal against even though subsequent to the Departmental appeal against the Order of High Court, the i the Order of High Court, the issue has been remitted back to ssue has been remitted back to the Bombay High Court to decide afresh and the same is still the Bombay High Court to decide afresh and the same is still the Bombay High Court to decide afresh and the same is still pending for adiudication. pending for adiudication. (iv) Without prejudice to the above grounds, whether the CIT (A) (iv) Without prejudice to the above grounds, whether the CIT (A) (iv) Without prejudice to the above grounds, whether the CIT (A) erred on facts and in law, directing the AO that the Sales Tax erred on facts and in law, directing the AO that the Sales Tax erred on facts and in law, directing the AO that the Sales Tax Incentive is not required to be deducted from the cost of assets, is not required to be deducted from the cost of assets, is not required to be deducted from the cost of assets, if the same is treated as capital receipts by the A.O. ignoring if the same is treated as capital receipts by the A.O. ignoring if the same is treated as capital receipts by the A.O. ignoring the provisions of explanation 10 to section 43(1) of the Act? the provisions of explanation 10 to section 43(1) of the Act? the provisions of explanation 10 to section 43(1) of the Act? 2. (i) Whether the CIT (A) erred on facts and in the (i) Whether the CIT (A) erred on facts and in the (i) Whether the CIT (A) erred on facts and in the circumstances of the circumstances of the case and in law in holding that the case and in law in holding that the excise duty of Rs. 49,00,05,693/ duty of Rs. 49,00,05,693/- stated to be collected by the stated to be collected by the assessee was capital in nature without any evidence placed on assessee was capital in nature without any evidence placed on assessee was capital in nature without any evidence placed on record to establish that the said amount was actually collected record to establish that the said amount was actually collected record to establish that the said amount was actually collected on account of excise duty. on account of excise duty. (ii) Without prejudice to the ground at (li) above, whether the CIT ) Without prejudice to the ground at (li) above, whether the CIT ) Without prejudice to the ground at (li) above, whether the CIT (A) erred on facts and in the circumstances of the case and in (A) erred on facts and in the circumstances of the case and in (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. 49,00,05,693/ law in holding that the excise duty of Rs. 49,00,05,693/ law in holding that the excise duty of Rs. 49,00,05,693/- collected by the assessee was not revenue in nature despite the collected by the assessee was not revenue in nature despite the collected by the assessee was not revenue in nature despite the fact that the same was collected by the assessee on goods that the same was collected by the assessee on goods that the same was collected by the assessee on goods which were exempted from levy of any duty as per the Central which were exempted from levy of any duty as per the Central which were exempted from levy of any duty as per the Central Excise Department's Notification No. 50/2002 Excise Department's Notification Excise Department's Notification No. 50/2002-CE dated No. 50/2002 10.06.2003 (iii) Whether the CIT (A) erred on facts and in the circumstances (iii) Whether the CIT (A) erred on facts and in the circumstances (iii) Whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. and in law in holding that the excise duty of Rs. 49,00,05,693/ 49,00,05,693/- collected by the assessee was capital in nature collected by the assessee was capital in nature by comparing the scheme of exemption under which the claim by comparing the scheme of exemption under which the claim by comparing the scheme of exemption under which the claim was made by the assessee by such other schemes wherein the was made by the assessee by such other schemes wherein the was made by the assessee by such other schemes wherein the mode of incentive was in mode of incentive was in the nature of refund/reimbursement the nature of refund/reimbursement or subsidy. (iv) Without prejudice to the above, whether the CIT (A) erred on (iv) Without prejudice to the above, whether the CIT (A) erred on (iv) Without prejudice to the above, whether the CIT (A) erred on facts and in law, directing the AO that the Excise duty facts and in law, directing the AO that the Excise duty facts and in law, directing the AO that the Excise duty exemption is not required to be deducted from the cost of exemption is not required to be deducted from the cost of exemption is not required to be deducted from the cost of assets, if the same is treat assets, if the same is treated as capital receipts by the A.O. ed as capital receipts by the A.O.

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ignoring the provisions of explanation 10 to section 43(1) of the ignoring the provisions of explanation 10 to section 43(1) of the ignoring the provisions of explanation 10 to section 43(1) of the Act? (v) Whether the CIT (A) erred on the facts and in the (v) Whether the CIT (A) erred on the facts and in the (v) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in not appreciating the circumstances of the case and in law, in not appreciating the circumstances of the case and in law, in not appreciating the fact that the provision to explana fact that the provision to explanation 10 section 43(1) of the IT tion 10 section 43(1) of the IT .Act, was intended to cover any subsidy or grant or .Act, was intended to cover any subsidy or grant or .Act, was intended to cover any subsidy or grant or reimbursement directly or indirectly met by the Central or State reimbursement directly or indirectly met by the Central or State reimbursement directly or indirectly met by the Central or State Government or any authority established under any law and Government or any authority established under any law and Government or any authority established under any law and the asesseee's claim of excise duty exemption is the asesseee's claim of excise duty exemption is the asesseee's claim of excise duty exemption is covered in indirect subsidy? indirect subsidy? 3. Whether the CIT (A) erred on the facts and in the Whether the CIT (A) erred on the facts and in the Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO to circumstances of the case and in law, in directing the AO to circumstances of the case and in law, in directing the AO to allow the balance additional depreciation in A.Y. 2014 balance additional depreciation in A.Y. 2014-15 balance additional depreciation in A.Y. 2014 on account of asset put to use for less than 180 days i on account of asset put to use for less than 180 days i on account of asset put to use for less than 180 days in A.Y. 2013-14, when no such provision was available in the I.T. Act, 14, when no such provision was available in the I.T. Act, 14, when no such provision was available in the I.T. Act, 1961 for A.Y. 2014 1961 for A.Y. 2014-15. 4. Whether the CIT (A) erred on the facts and in the Whether the CIT (A) erred on the facts and in the Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in allowing the circumstances of the case and in law, in allowing the circumstances of the case and in law, in allowing the foreign exchange fluctuation loss on reinstatement of lo exchange fluctuation loss on reinstatement of lo exchange fluctuation loss on reinstatement of loan without verifying whether the underlying transaction was on without verifying whether the underlying transaction was on without verifying whether the underlying transaction was on capital or revenue account and without verifying whether the capital or revenue account and without verifying whether the capital or revenue account and without verifying whether the underlying transaction was in US dollar and Japanese Yen. underlying transaction was in US dollar and Japanese Yen. underlying transaction was in US dollar and Japanese Yen. 5. (i) Whether the CIT (A) erred on the facts and in the (i) Whether the CIT (A) erred on the facts and in the (i) Whether the CIT (A) erred on the facts and in the circumstances of circumstances of the case and in law, in directing the AO to the case and in law, in directing the AO to exclude Sales Tax incentive and Excise Duty Exemption, exclude Sales Tax incentive and Excise Duty Exemption, exclude Sales Tax incentive and Excise Duty Exemption, while computing the book profits u/s 115JB while computing the book profits u/s 115JB while computing the book profits u/s 115JB of the Act, without appreciating that they have not been specifically without appreciating that they have not been specifically without appreciating that they have not been specifically excluded in Explanation 1 to section 115JB o excluded in Explanation 1 to section 115JB of the Act. f the Act. (ii) Whether the CIT (A) erred on the facts and in the (ii) Whether the CIT (A) erred on the facts and in the (ii) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO to circumstances of the case and in law, in directing the AO to circumstances of the case and in law, in directing the AO to exclude Sales Tax incentive and Excise Duty Exemption, while exclude Sales Tax incentive and Excise Duty Exemption, while exclude Sales Tax incentive and Excise Duty Exemption, while computing the book profits us 115JB of the Act despite the fact computing the book profits us 115JB of the Act despite the fact computing the book profits us 115JB of the Act despite the fact that no adjustment other than the ones mentioned in Sec.115JB no adjustment other than the ones mentioned in Sec.115JB no adjustment other than the ones mentioned in Sec.115JB is permissible as held by the Supreme Court in the case of is permissible as held by the Supreme Court in the case of is permissible as held by the Supreme Court in the case of Apollo Tyres Ltd.(255 IT 273) Apollo Tyres Ltd.(255 IT 273) 6. (i) Whether the CIT (A) erred on the facts and in the ) Whether the CIT (A) erred on the facts and in the ) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in not followi circumstances of the case and in law, in not followi circumstances of the case and in law, in not following precedent in the decision of hon'ble ITAT vide order dated precedent in the decision of hon'ble ITAT vide order dated precedent in the decision of hon'ble ITAT vide order dated

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31.01.2018 in assessee's own case for A.Y. 2009 31.01.2018 in assessee's own case for A.Y. 2009 31.01.2018 in assessee's own case for A.Y. 2009-10 wherein hon'ble ITAT rejected the grounds raised by the assessee in hon'ble ITAT rejected the grounds raised by the assessee in hon'ble ITAT rejected the grounds raised by the assessee in respect of Education Cess. Education Cess. (ii) Whether the CIT (A) erred On the facts and i) Whether the CIT (A) erred On the facts and i) Whether the CIT (A) erred On the facts and in the circumstances of the case and in law, to appreciate that fact circumstances of the case and in law, to appreciate that fact circumstances of the case and in law, to appreciate that fact that the education cess has been levied under Finance Act as that the education cess has been levied under Finance Act as that the education cess has been levied under Finance Act as an item to increase income tax and it has been held to be part an item to increase income tax and it has been held to be part an item to increase income tax and it has been held to be part of"income tax" by Hon'ble Calcutta High Court in the case of of"income tax" by Hon'ble Calcutta High Court in the case of of"income tax" by Hon'ble Calcutta High Court in the case of Srei InfrastructureFinance Ltd. ei InfrastructureFinance Ltd. (i) Whether the CIT(A)erred in his interpretation that Pre- (i) Whether the CIT(A)erred in his interpretation that (i) Whether the CIT(A)erred in his interpretation that operative expenditure of Rs. 4,33,50,999/ operative expenditure of Rs. 4,33,50,999/- was revenue in was revenue in nature? (ii)Whether on the facts and in the circumstances of the case, )Whether on the facts and in the circumstances of the case, )Whether on the facts and in the circumstances of the case, the order of the Tribunal holding thi the order of the Tribunal holding this to be revenue would not s to be revenue would not lead to a double deduction since the expenditure was shown as lead to a double deduction since the expenditure was shown as lead to a double deduction since the expenditure was shown as work in progress in theblock of assets that would subsequently work in progress in theblock of assets that would subsequently work in progress in theblock of assets that would subsequently be eligible for depreciation? be eligible for depreciation? 3. Briefly stated, facts of the case are that the assessee Briefly stated, facts of the case are that the assessee Briefly stated, facts of the case are that the assessee, a public limited company, was company, was during the year under consideration engaged during the year under consideration engaged in the business of manufacturing of in the business of manufacturing of ‘asbestos cement sheets s cement sheets’ and ‘accessories and ‘pre pre-engineered’ building products. For the year building products. For the year under consideration, the assessee under consideration, the assessee filed return of income on filed return of income on 27.02.2014 declaring total loss of Rs.58,70,89,863/- under the 27.02.2014 declaring total loss of Rs.58,70,89,863/ 27.02.2014 declaring total loss of Rs.58,70,89,863/ normal provisions of the Income normal provisions of the Income-tax Act, 1961 (in short ‘the Act’) tax Act, 1961 (in short ‘the Act’) whereas book loss of Rs.40,32,90,378/ whereas book loss of Rs.40,32,90,378/- was shown as per the was shown as per the provisions of section 115JB of the Act. provisions of section 115JB of the Act. The assessee further revised The assessee further revised its return of income on 30.03.2016 declaring total loss of its return of income on 30.03.2016 declaring total loss of its return of income on 30.03.2016 declaring total loss of Rs.57,35,23,520/- under the normal provisions and book loss at under the normal provisions and book loss at under the normal provisions and book loss at Rs.40,71,78,204/-. The return of income filed by the assessee was . The return of income filed by the assessee was . The return of income filed by the assessee was selected for scrutiny and the statutor selected for scrutiny and the statutory notices under the Act were y notices under the Act were

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issued and complied with. In the assessment order passed u/s issued and complied with. In the assessment order passed u/s issued and complied with. In the assessment order passed u/s 143(3) of the Act dated 30.12.2016, the Assessing Officer made 143(3) of the Act dated 30.12.2016, the Assessing Officer made 143(3) of the Act dated 30.12.2016, the Assessing Officer made additions to the income under the normal provisions of the Act as additions to the income under the normal provisions of the Act as additions to the income under the normal provisions of the Act as well as book profit/loss /loss u/s 115JB of the Act. Aggrieved, the the Act. Aggrieved, the assessee filed appeal before the Ld. CIT(A) wherein got part relief in assessee filed appeal before the Ld. CIT(A) wherein got part relief in assessee filed appeal before the Ld. CIT(A) wherein got part relief in the impugned order dated 22.10.2019. Aggrieved with the relief the impugned order dated 22.10.2019. Aggrieved with the relief the impugned order dated 22.10.2019. Aggrieved with the relief allowed to the assessee, the assessee, the Revenue is in appeal. The appeal of the he appeal of the assessee for the impugned as assessee for the impugned assessment year has already been sessment year has already been adjudicated by the Tribunal vide order dated 31.01.2023. adjudicated by the Tribunal vide order dated 31.01.2023. adjudicated by the Tribunal vide order dated 31.01.2023.

4.1 The ground No. 1 of the appeal of the The ground No. 1 of the appeal of the Revenu Revenue relates to deletion of disallowance deletion of disallowance of the claim of exclusion of sales tax of the claim of exclusion of sales tax incentives being capital receipts amounting to Rs.4,63,30,950/ capital receipts amounting to Rs.4,63,30,950/-. capital receipts amounting to Rs.4,63,30,950/ This amount consists consists of sales tax incentives of Rs.2,66,04,629/ of sales tax incentives of Rs.2,66,04,629/- and pre-payment of of deferred deferred sales sales tax tax incentives incentives of Rs.1,97,26,321/-.

4.2 The Ld. Assessing Officer noted that the sales tax incentives of The Ld. Assessing Officer noted that the sales tax incentives of The Ld. Assessing Officer noted that the sales tax incentives of Rs.2,66,04,629/- has been filed under has been filed under “the Orissa Industrial Policy, Orissa Industrial Policy, 2007”. It was contended by the assessee that objective of the . It was contended by the assessee that objective of the policy . It was contended by the assessee that objective of the was to incur additional inv was to incur additional investment for setting up / / expansion and modernization of industry of industry in backward area and same was linked in backward area and same was linked with the fixed capital investment. The assessee relied on the with the fixed capital investment. The assessee relied on the with the fixed capital investment. The assessee relied on the

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decision of the Hon’ble Supreme Court in the case of Sahney Steel decision of the Hon’ble Supreme Court in the case of decision of the Hon’ble Supreme Court in the case of & Press Works Ltd.’s (1997 & Press Works Ltd.’s (1997) 228 ITR 253 (SC) and submitted that and submitted that subsidy or the incentives received in the hand of the recipient have subsidy or the incentives received in the hand of the recipient have subsidy or the incentives received in the hand of the recipient have to be determined having regard to the purpose for which the to be determined having regard to the purpose for which the to be determined having regard to the purpose for which the subsidy was given.

4.3 In respect of sales tax incentiv In respect of sales tax incentives of Rs.1,97,26,321/ es of Rs.1,97,26,321/- for ‘Lakhmapur’ Unit, the assessee submitted that same had been the assessee submitted that same had been the assessee submitted that same had been quantified on the basis of quantified on the basis of net present value (NPV) of deferred sales of deferred sales tax liability granted under the new package scheme incentives of tax liability granted under the new package scheme incentives of tax liability granted under the new package scheme incentives of 1993. It was submitted that payment of net present value(NPV) of 1993. It was submitted that payment of net present value 1993. It was submitted that payment of net present value the future liability cannot be classified as remission or cessation of e future liability cannot be classified as remission or cessation of e future liability cannot be classified as remission or cessation of the liability so as to attract the provisions of section 41(1) of the Act the liability so as to attract the provisions of section 41(1) of the Act the liability so as to attract the provisions of section 41(1) of the Act and same cannot be treated as income for the purpose of the and same cannot be treated as income for the purpose of the and same cannot be treated as income for the purpose of the computation of the total income. computation of the total income.

4.4 The Assessing O The Assessing Officer noted that identical claim of the fficer noted that identical claim of the assessee has been rejected by the Assessing Officer in earlier years assessee has been rejected by the Assessing Officer in earlier years assessee has been rejected by the Assessing Officer in earlier years though the Tribunal has though the Tribunal has deleted the addition but to keep the matter deleted the addition but to keep the matter alive before the Hon’ble High Court alive before the Hon’ble High Court, the Assessing Officer made he Assessing Officer made addition of sales tax incentives amount of Rs.4,63,30,950/ les tax incentives amount of Rs.4,63,30,950/ les tax incentives amount of Rs.4,63,30,950/-. On further appeal, the Ld. CIT(A) in his detailed finding deleted the further appeal, the Ld. CIT(A) in his detailed finding deleted the further appeal, the Ld. CIT(A) in his detailed finding deleted the addition observing as under: addition observing as under:

“5. I have duly considered the submissions of the appellant I have duly considered the submissions of the appellant I have duly considered the submissions of the appellant company. The brief facts of the case are that the appellant company. The brief facts of the case are that the appellant company. The brief facts of the case are that the appellant company is engaged in the business of manufacturing and company is engaged in the business of manufacturing and company is engaged in the business of manufacturing and sale of asbestos & cement roofing sheets, accessories and sale of asbestos & cement roofing sheets, accessories and sale of asbestos & cement roofing sheets, accessories and

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pre-engineered building pr engineered building products. It provides a range of oducts. It provides a range of products products products including including including roofing roofing roofing products, products, products, paneling paneling paneling and and and partitioning. The appellant company has its units at partitioning. The appellant company has its units at partitioning. The appellant company has its units at Kymore, Kolkata, Lakhmapur, Podanur, Bhagwanpur and Kymore, Kolkata, Lakhmapur, Podanur, Bhagwanpur and Kymore, Kolkata, Lakhmapur, Podanur, Bhagwanpur and Baleshwar. In respect of Lakhmapur unit, the Certificate of Baleshwar. In respect of Lakhmapur unit, the Certificate of Baleshwar. In respect of Lakhmapur unit, the Certificate of Entitlement dated 01.10.2013 provided that said unit was t dated 01.10.2013 provided that said unit was t dated 01.10.2013 provided that said unit was liable to pay the entire amount of sales tax liability in equal liable to pay the entire amount of sales tax liability in equal liable to pay the entire amount of sales tax liability in equal annual instalments not exceeding five such instalments on annual instalments not exceeding five such instalments on annual instalments not exceeding five such instalments on expiry of 10* year as computed from the date prescribed for expiry of 10* year as computed from the date prescribed for expiry of 10* year as computed from the date prescribed for furnishing the last return furnishing the last return for the period covered in respect of for the period covered in respect of each of the order of assessment passed. As against this, each of the order of assessment passed. As against this, each of the order of assessment passed. As against this, provisions of section 94(2) of the Maharashtra Value Added provisions of section 94(2) of the Maharashtra Value Added provisions of section 94(2) of the Maharashtra Value Added Tax Act, 2002 stated that the appellant company at its own Tax Act, 2002 stated that the appellant company at its own Tax Act, 2002 stated that the appellant company at its own option could prematurely pay in place of the option could prematurely pay in place of the amount of tax amount of tax deferred by it, an amount equal to the net present value of deferred by it, an amount equal to the net present value of deferred by it, an amount equal to the net present value of the deferred tax. Considering the above facts, the the deferred tax. Considering the above facts, the the deferred tax. Considering the above facts, the Lakhmapur unit had the option to defer the payment of VAT Lakhmapur unit had the option to defer the payment of VAT Lakhmapur unit had the option to defer the payment of VAT & CST collected from customers during the relevant year & CST collected from customers during the relevant year & CST collected from customers during the relevant year aggregating aggregating to to Rs.2,71,38,148/- R to to the the Sales Sales Tax Tax Department after 10 years. However the unit opted to pre Department after 10 years. However the unit opted to pre Department after 10 years. However the unit opted to pre- pay the above tax at Net Present Value basis in terms of pay the above tax at Net Present Value basis in terms of pay the above tax at Net Present Value basis in terms of section 94(2) of the MVAT Act, 2002 read with rule 84D of section 94(2) of the MVAT Act, 2002 read with rule 84D of section 94(2) of the MVAT Act, 2002 read with rule 84D of MVAT Rules 2005 and paid an amount of Rs.74,11,826/ MVAT Rules 2005 and paid an amount of Rs.74,11,826/ MVAT Rules 2005 and paid an amount of Rs.74,11,826/- against the aforesaid tax liability. Thus by opting for NPV against the aforesaid tax liability. Thus by opting for NPV against the aforesaid tax liability. Thus by opting for NPV basis, the Lakhmapur unit had realised a profit of Rs. basis, the Lakhmapur unit had realised a profit of Rs. basis, the Lakhmapur unit had realised a profit of Rs. 1,97,26,321/ 1,97,26,321/- (i.e.Rs.2,71,38,148/- less Rs.74,11,826/ less Rs.74,11,826/-) and the same had been credited to profit & loss account as and the same had been credited to profit & loss account as and the same had been credited to profit & loss account as 'other receipts'. Furth 'other receipts'. Further Sales Tax returns filed during the er Sales Tax returns filed during the year along with the summary of returns evidencing year along with the summary of returns evidencing year along with the summary of returns evidencing deferment of VAT & CST of Rs.2,71,38,148/ deferment of VAT & CST of Rs.2,71,38,148/- were also submitted. submitted. submitted. It It It was was was claimed claimed claimed that that that the the the difference difference difference of of of Rs.1,97,26,321/ Rs.1,97,26,321/- was a capital receipt not liable to tax. The was a capital receipt not liable to tax. The issue under consideration is covered in the favour of the e under consideration is covered in the favour of the e under consideration is covered in the favour of the appellant appellant appellant company company company by by by the the the appellate appellate appellate order order order dated dated dated 16.10.2019 in appeal No.NSK/CIT(A) 16.10.2019 in appeal No.NSK/CIT(A)-3/139/2017 3/139/2017-18 for AY 2010-11 wherein elaborate discussion was made by the 11 wherein elaborate discussion was made by the 11 wherein elaborate discussion was made by the undersigned in para undersigned in para-5 as to why the Sales Tax 5 as to why the Sales Tax Incentive under 1993 Scheme was a capital receipt not liable to tax. under 1993 Scheme was a capital receipt not liable to tax. under 1993 Scheme was a capital receipt not liable to tax. There is no change in the facts & circumstances in the There is no change in the facts & circumstances in the There is no change in the facts & circumstances in the current year in respect of Lakhmapur unit as compared to current year in respect of Lakhmapur unit as compared to current year in respect of Lakhmapur unit as compared to those in AY 2010 those in AY 2010-11.The undersigned had also compared 11.The undersigned had also compared the terms and conditi the terms and conditions of 1979 and 1993Scheme of the ons of 1979 and 1993Scheme of the State Government and both the Schemes were found to be State Government and both the Schemes were found to be State Government and both the Schemes were found to be

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similar. While rendering the decision on this issue, the similar. While rendering the decision on this issue, the similar. While rendering the decision on this issue, the undersigned had also placed reliance on the decision of undersigned had also placed reliance on the decision of undersigned had also placed reliance on the decision of Supreme Court in the case of CIT Vs. Ponni Sugars & Supreme Court in the case of CIT Vs. Ponni Sugars & Supreme Court in the case of CIT Vs. Ponni Sugars & Chemicals Ltd. (306IT 392), Shree Cement Ltd. Vs. Addl. emicals Ltd. (306IT 392), Shree Cement Ltd. Vs. Addl. emicals Ltd. (306IT 392), Shree Cement Ltd. Vs. Addl. CIT (031 IT. Trib.513), CIT Vs. Rasoi Ltd.(335 IT 438), DCIT CIT (031 IT. Trib.513), CIT Vs. Rasoi Ltd.(335 IT 438), DCIT CIT (031 IT. Trib.513), CIT Vs. Rasoi Ltd.(335 IT 438), DCIT Vs. Reliance Industries Ltd. (88 ITD 273 (Mumbai SB), CIT Vs. Reliance Industries Ltd. (88 ITD 273 (Mumbai SB), CIT Vs. Reliance Industries Ltd. (88 ITD 273 (Mumbai SB), CIT Vs.Kirloskar Oil Engines Ltd. (364 IT 88). John Deere India Vs.Kirloskar Oil Engines Ltd. (364 IT 88). John Deere India Vs.Kirloskar Oil Engines Ltd. (364 IT 88). John Deere India (P.) Ltd. Vs. ITO (82 t (P.) Ltd. Vs. ITO (82 taxmann.com 201), CIT Vs. Birla VXL axmann.com 201), CIT Vs. Birla VXL Ltd. (32 taxmann.com 330), CIT Vs. Udupi Builders Pvt. Ltd. Ltd. (32 taxmann.com 330), CIT Vs. Udupi Builders Pvt. Ltd. Ltd. (32 taxmann.com 330), CIT Vs. Udupi Builders Pvt. Ltd. (319 IT 440) and CIT Vs. Balarampur Chini Mills Ltd. (238 (319 IT 440) and CIT Vs. Balarampur Chini Mills Ltd. (238 (319 IT 440) and CIT Vs. Balarampur Chini Mills Ltd. (238 ITR445). The Package Scheme of Incentives, 1993 was ITR445). The Package Scheme of Incentives, 1993 was ITR445). The Package Scheme of Incentives, 1993 was introduced with a view to revise the1988 Scheme to introduced with a view to revise the1988 Scheme to introduced with a view to revise the1988 Scheme to rationalize the scope of incentives, various scales and mode rationalize the scope of incentives, various scales and mode rationalize the scope of incentives, various scales and mode of release of incentives to intensify and accelerate the of release of incentives to intensify and accelerate the of release of incentives to intensify and accelerate the process of dispersal of industries from the developed areas process of dispersal of industries from the developed areas process of dispersal of industries from the developed areas and for development of the underdeveloped regions of the and for development of the underdeveloped regions of the and for development of the underdeveloped regions of the State, particularly t State, particularly those farther away from the Bombay hose farther away from the Bombay- Thane-Pune belt. The quantum of incentive benefit was to Pune belt. The quantum of incentive benefit was to Pune belt. The quantum of incentive benefit was to be determined with reference to the gross fixed capital be determined with reference to the gross fixed capital be determined with reference to the gross fixed capital investment of the eligible unit during the period of eligibility. investment of the eligible unit during the period of eligibility. investment of the eligible unit during the period of eligibility. The quantum of incentive benefit was variab The quantum of incentive benefit was variable and said le and said quantum of deferral benefit was directly related to the quantum of deferral benefit was directly related to the quantum of deferral benefit was directly related to the cumulative gross fixed capital investment made by the cumulative gross fixed capital investment made by the cumulative gross fixed capital investment made by the eligible unit. As and when further fresh capital investment eligible unit. As and when further fresh capital investment eligible unit. As and when further fresh capital investment was made, the quantum of Sales Tax Incentive was further was made, the quantum of Sales Tax Incentive was further was made, the quantum of Sales Tax Incentive was further increased during increased during the period of eligibility. The period of the period of eligibility. The period of entitlement of benefit could be curtailed if the gross fixed entitlement of benefit could be curtailed if the gross fixed entitlement of benefit could be curtailed if the gross fixed investment fell short of sales tax liability. For earning investment fell short of sales tax liability. For earning investment fell short of sales tax liability. For earning eligibility for the incentive benefit, the Industrial unit was eligibility for the incentive benefit, the Industrial unit was eligibility for the incentive benefit, the Industrial unit was supposed to take some initial and supposed to take some initial and final steps and it could final steps and it could apply for incentive benefit after having taken possession of apply for incentive benefit after having taken possession of apply for incentive benefit after having taken possession of the land and having made an application of DGTD for the land and having made an application of DGTD for the land and having made an application of DGTD for registration. Such application was to be processed by the registration. Such application was to be processed by the registration. Such application was to be processed by the implementing agency i.e. SICOM without wailing for the implementing agency i.e. SICOM without wailing for the implementing agency i.e. SICOM without wailing for the completion of the setting up of the Industrial unit and the letion of the setting up of the Industrial unit and the letion of the setting up of the Industrial unit and the provisional eligibility certificate was issued to the industrial provisional eligibility certificate was issued to the industrial provisional eligibility certificate was issued to the industrial unit on acquisition of at least 10% of the total fixed assets unit on acquisition of at least 10% of the total fixed assets unit on acquisition of at least 10% of the total fixed assets envisaged in the project and incurrence of expenditure to envisaged in the project and incurrence of expenditure to envisaged in the project and incurrence of expenditure to the extent of 2 the extent of 25% of the capital cost of project. In the 5% of the capital cost of project. In the aforesaid facts, the exemption availed of by the appellant's aforesaid facts, the exemption availed of by the appellant's aforesaid facts, the exemption availed of by the appellant's eligible units under the said notification, was a capital eligible units under the said notification, was a capital eligible units under the said notification, was a capital receipt not liable to tax. Though the sales tax incentive could receipt not liable to tax. Though the sales tax incentive could receipt not liable to tax. Though the sales tax incentive could have been realised only upon th have been realised only upon the commencement of e commencement of

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production yet the fixed capital investments entitled the production yet the fixed capital investments entitled the production yet the fixed capital investments entitled the assessee company to the sales tax incentive. The assessee company to the sales tax incentive. The assessee company to the sales tax incentive. The Maharashtra Government instead of giving outright subsidy Maharashtra Government instead of giving outright subsidy Maharashtra Government instead of giving outright subsidy for setting up of industry in the backward regions had for setting up of industry in the backward regions had for setting up of industry in the backward regions had permitted the indu permitted the industrial unit to realize said subsidy by way strial unit to realize said subsidy by way of sales tax collection which were either exempted or of sales tax collection which were either exempted or of sales tax collection which were either exempted or deferred at the option of the industrial unit. The main deferred at the option of the industrial unit. The main deferred at the option of the industrial unit. The main purpose of the resolution was to modernize industries purpose of the resolution was to modernize industries purpose of the resolution was to modernize industries which ordinarily would come at a considerable cos which ordinarily would come at a considerable cos which ordinarily would come at a considerable cost, particularly when such industries were located in under particularly when such industries were located in under particularly when such industries were located in under- developed areas. It was for this purpose that the said developed areas. It was for this purpose that the said developed areas. It was for this purpose that the said scheme was framed giving benefit of the Sales Tax scheme was framed giving benefit of the Sales Tax scheme was framed giving benefit of the Sales Tax Waiver/Deferment, at the option of the industry concerned. Waiver/Deferment, at the option of the industry concerned. Waiver/Deferment, at the option of the industry concerned. The entitlement of industrial uni The entitlement of industrial unit to claim eligibility for the t to claim eligibility for the Sales Tax incentive arose even while the industry was in Sales Tax incentive arose even while the industry was in Sales Tax incentive arose even while the industry was in the process of being set up. The scheme was oriented the process of being set up. The scheme was oriented the process of being set up. The scheme was oriented towards and subservient to investment in fixed capital towards and subservient to investment in fixed capital towards and subservient to investment in fixed capital assets. The object of the subsidy was to encourage the assets. The object of the subsidy was to encourage the assets. The object of the subsidy was to encourage the setting up of industries in the backward area.Para 5.1(Il) of ng up of industries in the backward area.Para 5.1(Il) of ng up of industries in the backward area.Para 5.1(Il) of said 1993 Scheme gave the details of quantum of sales tax said 1993 Scheme gave the details of quantum of sales tax said 1993 Scheme gave the details of quantum of sales tax incentive which was to be calculated as percentage of fixed incentive which was to be calculated as percentage of fixed incentive which was to be calculated as percentage of fixed capital investment depending on the category of area in capital investment depending on the category of area in capital investment depending on the category of area in which the eligible unit w which the eligible unit was being set up. The Sales Tax as being set up. The Sales Tax incentive was envisaged only as an alternative to the cash incentive was envisaged only as an alternative to the cash incentive was envisaged only as an alternative to the cash disbursement and by its very nature was to be available disbursement and by its very nature was to be available disbursement and by its very nature was to be available only after production commenced. Thus in effect, the only after production commenced. Thus in effect, the only after production commenced. Thus in effect, the subsidy in the form of Sales Tax incentive was not given subsidy in the form of Sales Tax incentive was not given subsidy in the form of Sales Tax incentive was not given to the appellant company for assisting it in carrying out the the appellant company for assisting it in carrying out the the appellant company for assisting it in carrying out the business operations. It was therefore held that Sales Tax business operations. It was therefore held that Sales Tax business operations. It was therefore held that Sales Tax Incentive availed by the appellant company under the Incentive availed by the appellant company under the Incentive availed by the appellant company under the Package Scheme of Incentives, 1993 was on capital Package Scheme of Incentives, 1993 was on capital Package Scheme of Incentives, 1993 was on capital account. 5.1 5.1 The The appellant appellant company compan y had had also also set set up up a a manufacturing facility at Somnathpur in Orissa in FY 2012 manufacturing facility at Somnathpur in Orissa in FY 2012 manufacturing facility at Somnathpur in Orissa in FY 2012- 13 and this unit started commercial production w.e.f. 13 and this unit started commercial production w.e.f. 13 and this unit started commercial production w.e.f. 17.05.2013.This unit had applied to District Industries 17.05.2013.This unit had applied to District Industries 17.05.2013.This unit had applied to District Industries Centre (DIC) for grant of Thrust Sector Status under Orissa Centre (DIC) for grant of Thrust Sector Status under Orissa Centre (DIC) for grant of Thrust Sector Status under Orissa Industrial Policy Resolution 2007. As per Para 18.4 (ji) of al Policy Resolution 2007. As per Para 18.4 (ji) of al Policy Resolution 2007. As per Para 18.4 (ji) of the Policy, New Industrial units of Thrust sector were the Policy, New Industrial units of Thrust sector were the Policy, New Industrial units of Thrust sector were eligible for reimbursement of 75% of VAT paid for a period of eligible for reimbursement of 75% of VAT paid for a period of eligible for reimbursement of 75% of VAT paid for a period of 10 years from the date of starting commercial production 10 years from the date of starting commercial production 10 years from the date of starting commercial production limited to 200% of fixed capit limited to 200% of fixed capital investment provided that the al investment provided that the

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VAT reimbursement shall be applicable only to the net tax VAT reimbursement shall be applicable only to the net tax VAT reimbursement shall be applicable only to the net tax paid after adjustment of input tax credit against the output paid after adjustment of input tax credit against the output paid after adjustment of input tax credit against the output tax liability. In view of the above facts, this unit was eligible tax liability. In view of the above facts, this unit was eligible tax liability. In view of the above facts, this unit was eligible for incentive for a period of 10 years for incentive for a period of 10 years from the date of from the date of commencement of commercial production i.e. 17.05.2013. commencement of commercial production i.e. 17.05.2013. commencement of commercial production i.e. 17.05.2013. Accordingly it had applied to DIC for grant of approval as Accordingly it had applied to DIC for grant of approval as Accordingly it had applied to DIC for grant of approval as Thrust Sector Unit. The General Manager, DIC had Thrust Sector Unit. The General Manager, DIC had Thrust Sector Unit. The General Manager, DIC had forwarded the copy of the said applicationDirectorate forwarded the copy of the said applicationDirectorate forwarded the copy of the said applicationDirectorate mclustries, Orissa. Th mclustries, Orissa. The office of the Director of Industries, e office of the Director of Industries, Odisha had issued the certificate of Thrust sector on Odisha had issued the certificate of Thrust sector on Odisha had issued the certificate of Thrust sector on 05.11.2015. On the basis of the aforesaid certificate, the 05.11.2015. On the basis of the aforesaid certificate, the 05.11.2015. On the basis of the aforesaid certificate, the appellant company had credited Sales Tax Incentive of appellant company had credited Sales Tax Incentive of appellant company had credited Sales Tax Incentive of Rs.2,66,04,629/ Rs.2,66,04,629/-to profit & loss account during the relevant he relevant year under the head 'other receipts'. The objectives of the year under the head 'other receipts'. The objectives of the year under the head 'other receipts'. The objectives of the Scheme (para 2 of the Orissa Industrial Policy) provided, Scheme (para 2 of the Orissa Industrial Policy) provided, Scheme (para 2 of the Orissa Industrial Policy) provided, including inter alia, as under: including inter alia, as under: (a) To transform Orissa into a vibrant industrialized state, (a) To transform Orissa into a vibrant industrialized state, (a) To transform Orissa into a vibrant industrialized state, (b) To promote Orissa as a major (b) To promote Orissa as a major manufacturing hub, manufacturing hub, (c) To maximize employment generation opportunities both (c) To maximize employment generation opportunities both (c) To maximize employment generation opportunities both direct and indirect, direct and indirect, (d) To make concerted efforts for balanced regional (d) To make concerted efforts for balanced regional (d) To make concerted efforts for balanced regional development. development. Further the objective for thrust sector Unit (applicable to Further the objective for thrust sector Unit (applicable to Further the objective for thrust sector Unit (applicable to Somnathpur unit), as stated in par Somnathpur unit), as stated in para 4.4 of the Scheme, was a 4.4 of the Scheme, was to facilitate directed investment into sectors that offered to facilitate directed investment into sectors that offered to facilitate directed investment into sectors that offered huge employment opportunities, maximize value addition huge employment opportunities, maximize value addition huge employment opportunities, maximize value addition and had a multiplier effect in terms of ancillary and and had a multiplier effect in terms of ancillary and and had a multiplier effect in terms of ancillary and downstream linkages. Further as per para downstream linkages. Further as per para-19 of the 19 of the Scheme, the Thrust Sector meant new industrial Units in the Thrust Sector meant new industrial Units in the specified specified specified categories categories categories which which which commenced commenced commenced fixed fixed fixed capital capital capital investment on or after the effective date and fulfilled certain investment on or after the effective date and fulfilled certain investment on or after the effective date and fulfilled certain criteria as specified therein. As regards Ancillary & Down criteria as specified therein. As regards Ancillary & Down criteria as specified therein. As regards Ancillary & Down Stream sector, the minimum capita Stream sector, the minimum capital investment had been l investment had been prescribed at Rs. 10 crores and direct employment prescribed at Rs. 10 crores and direct employment prescribed at Rs. 10 crores and direct employment generation of 100 persons. Further Down Stream industry, generation of 100 persons. Further Down Stream industry, generation of 100 persons. Further Down Stream industry, as per para- -2, meant an industrial undertaking which was 2, meant an industrial undertaking which was engaged or proposed to be engaged in value addition of the engaged or proposed to be engaged in value addition of the engaged or proposed to be engaged in value addition of the intermediate or final produce or waste product of one or e or final produce or waste product of one or e or final produce or waste product of one or more industrial undertakings. The Somnathpur unit of the more industrial undertakings. The Somnathpur unit of the more industrial undertakings. The Somnathpur unit of the

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appellant company was eligible for the incentive under the appellant company was eligible for the incentive under the appellant company was eligible for the incentive under the OIP as it had fulfilled the following conditions: OIP as it had fulfilled the following conditions: (a) It had invested amount of Rs.51.61 crore (a) It had invested amount of Rs.51.61 crores (As per (a) It had invested amount of Rs.51.61 crores (As per application filed before application filed before DIC) as against minimum required capital investment of Rs. DIC) as against minimum required capital investment of Rs. DIC) as against minimum required capital investment of Rs. 10 crore. (b) It had provided direct employment of 104 personnel (b) It had provided direct employment of 104 personnel (b) It had provided direct employment of 104 personnel (more than required minimum of 100). (more than required minimum of 100). (c) It was using fly ash as waste of industrial produce. The (c) It was using fly ash as waste of industrial produce. The (c) It was using fly ash as waste of industrial produce. The copy of report on process study & determination of copy of report on process study & determination of copy of report on process study & determination of percentage of fly ash, was also submitted. percentage of fly ash, was also submitted. The very object of the incentive scheme was to promote The very object of the incentive scheme was to promote The very object of the incentive scheme was to promote industrial development in the backward regions of the State industrial development in the backward regions of the State industrial development in the backward regions of the State of Orissa and to generate employment opportuni of Orissa and to generate employment opportuni of Orissa and to generate employment opportunity in that state. The entrepreneur setting up industries in the most state. The entrepreneur setting up industries in the most state. The entrepreneur setting up industries in the most backward areas of Orissa were entitled to the Sales Tax backward areas of Orissa were entitled to the Sales Tax backward areas of Orissa were entitled to the Sales Tax benefit. The terms and conditions of New Package Scheme benefit. The terms and conditions of New Package Scheme benefit. The terms and conditions of New Package Scheme of Incentives, 1993 for Maharashtra State and Industrial of Incentives, 1993 for Maharashtra State and Industrial of Incentives, 1993 for Maharashtra State and Industrial Policy Resolution, Policy Resolution, 2007 for Orissa State were also 2007 for Orissa State were also compared by the undersigned and both the Schemes were compared by the undersigned and both the Schemes were compared by the undersigned and both the Schemes were found to be similar as per following details: found to be similar as per following details: Particulars New New Package Package Scheme Scheme of of Industrial Industrial Policy Policy Resolution, Resolution, Incentives, 1993 Incentives, 1993 2007 Government 1088/(6603)/IND 1088/(6603)/IND-8 3391-XIV-HI-52/2007/I 52/2007/I Resolution No. Intention of The aim was to intensify and The aim was to intensify and Orissa Industrial Policy Resolution Orissa Industrial Policy Resolution- Government accelerate the process of dispersal accelerate the process of dispersal 2007 aims at reinforcing & further 2007 aims at reinforcing & further of industries from the developed of industries from the developed expanding expanding the the existing existing policy policy areas areas and and for for framework for industrial promotio framework for industrial promotion developmentoftheunderdeveloped developmentoftheunderdeveloped and and investment investment facilitation, facilitation, regions of the state particularly regions of the state particularly including including creation creation of of enabling enabling those those farther farther away away from from the the environment and maximizing the environment and maximizing the Bombay Bombay-Thane-Pune belt. (Page-1, triple objectives of value addition, triple objectives of value addition, Opening para of Preamble) Opening para of Preamble) employment generationandrevenueaugmentation. generationandrevenueaugmentation. (Page-1, Para- 1, Para-1.1 and Page-5-Para- 4) Time Frame for An eligible unit can apply for An eligible unit can apply for An industrial unit, which considers An industrial unit, which considers filing application for incentive after it has taken all the incentive after it has taken all the itself eligible for any incentives, itself eligible for any incentives, different incentives initial initial effective effective steps. steps. The The shall apply in accordance with the shall apply in accordance with the application shall be submitted to application shall be submitted to operational guidelines and the same operational guidelines and the same implementing agency at least 3 implementing agency at least 3 shall be considered and disposed of shall be considered and disposed of

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months prior to expected date of months prior to expected date of on merit by the competent authority. on merit by the competent authority. commencement commencement of of commercial commercial The claim has to be made within 6 The claim has to be made within 6 production.The eli production.The eligibility months of its starting commercial months of its starting commercial certificate shall be obtained within 6 certificate shall be obtained within 6 production. The claim has to be production. The claim has to be months from the date of commercial months from the date of commercial made within 6 months of starting made within 6 months of starting production.(Page production.(Page-10, Para-4.1) commercial commercial production.(Page- production.(Page 17,General 17,General Provisions-14.10 Provisions and 14.11) The The incentive incentive under under the the 1993 1993 The incentive incentive under under the the 2007 2007 scheme will be admissible to anew scheme will be admissible to anew scheme will be admissible to new scheme will be admissible to new unit /pioneer unit/ unit /pioneer unit/prestigious unit industrial units of MSME status, in industrial units of MSME status, in and will be in the nature of Sales and will be in the nature of Sales prioritysector, in thrust sector and sector, in thrust sector and Tax Tax Incentives Incentives by by way way of of existing industrial units which take existing industrial units which take exemption/deferral/interest exemption/deferral/interest free free up unsecured loan (page 11 unsecured loan (page 11-12, para expansion, modernization, and expansion, modernization, and 5.1(1) diversification and will be in the diversification and will be in the nature of reimbursem nature of reimbursement of net VAT paid. (Page-16, Para 16, Para-14 & 18) Steps taken to Shifting Shifting of of the the Industrial Industrial Applied Applied to to District District Industries Industries claim exemption undertaking undertaking from from Mulund Mulund to to Centre(DIC) for grant of Thrust Centre(DIC) for grant of Thrust Lakhmapur Lakhmapur SectorStatus under Orissa Industrial SectorStatus under Orissa Industrial PolicyResolution, 2007. PolicyResolution, 2007. Mode of Exemption The incentives is based on the The incentives is based on the Reimbursement of 75% of VAT paid Reimbursement of 75% of VAT paid percentage percentage of of fixed fixed capital capital for a period of ten years from the for a period of ten years from the investment. (page investment. (page-12, para 5.1-(II) date date of of starting starting commercial commercial production limited to production limited to 200% of fixed capital investment provided that the capital investment provided that the VAT VAT reimbursement reimbursement shall shall be be applicable only to the new tax paid applicable only to the new tax paid after adiustment of input tax credit after adiustment of input tax credit against the output tax liability. against the output tax liability. (Page-23, Para 23, Para-18.4(iii) Quantum The quantum depends on the area The quantum depends on the area The quantum of exemption depends The quantum of exemption depends in which unit is located (page hich unit is located (page-12 on on the the nature nature of of the the eligible eligible para 5.1(II) para 5.1(II) unit.(Page-21,Para 21,Para-18.4- differentexemptions differentexemptions for for different different units) Period of exemption The period of eligibility shall be he period of eligibility shall be The exemption can be claimed as he exemption can be claimed as computed from the date spec computed from the date specified in per the time limit specified in the per the time limit specified in the theEligibilityCertificate in respect of theEligibilityCertificate in respect of Industries Department Resolution Industries Department Resolution EligibleUnit and will be determined EligibleUnit and will be determined dated 2nd Marc dated 2nd March, 2007. (Page-21, whether the unit is pioneer or non whether the unit is pioneer or non- Para-18.4(iii) pioneer.Theperiod ofentitlement is pioneer.Theperiod ofentitlement is also also directly directly connected connected to to the the percentage percentage of of Fixed Fixed Capital Capital Investment. Investment. (page -8 para 3.11, page 11) page 11) In order to treat the incentive as capital in nature, it is to be In order to treat the incentive as capital in nature, it is to be In order to treat the incentive as capital in nature, it is to be seen whether the industrial unit was eligible to receive the seen whether the industrial unit was eligible to receive the seen whether the industrial unit was eligible to receive the incentive prior to the date of commencement of production. incentive prior to the date of commencement of production. incentive prior to the date of commencement of production.

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This is true in the case of appellant company.Further the This is true in the case of appellant company.Further the This is true in the case of appellant company.Further the Sales Tax in Sales Tax incentive was envisaged as an alternative to centive was envisaged as an alternative to cash disbursement and obviously was available only after cash disbursement and obviously was available only after cash disbursement and obviously was available only after commencement of production. In other words, if the commencement of production. In other words, if the commencement of production. In other words, if the industrial unit was eligible for incentive at the stage of industrial unit was eligible for incentive at the stage of industrial unit was eligible for incentive at the stage of being set up, then even though the same was av being set up, then even though the same was av being set up, then even though the same was available after the commencement of production, still the incentive after the commencement of production, still the incentive after the commencement of production, still the incentive would be regarded as a capital receipt. Though the sales would be regarded as a capital receipt. Though the sales would be regarded as a capital receipt. Though the sales tax incentive could have been realised only upon the tax incentive could have been realised only upon the tax incentive could have been realised only upon the commencement commencement commencement of of of production production production yet yet yet the the the fixed fixed fixed capital capital capital investments entitled the assess investments entitled the assessee to the sales tax ee to the sales tax incentive.The Orissa Government instead of giving outright incentive.The Orissa Government instead of giving outright incentive.The Orissa Government instead of giving outright subsidy for setting up of industry in the backward regions subsidy for setting up of industry in the backward regions subsidy for setting up of industry in the backward regions had permitted the industrial unit to realize said subsidy by had permitted the industrial unit to realize said subsidy by had permitted the industrial unit to realize said subsidy by way of Sales Tax collection which were either exempted or way of Sales Tax collection which were either exempted or way of Sales Tax collection which were either exempted or deferred at the option of the industrial unit. In the case of deferred at the option of the industrial unit. In the case of deferred at the option of the industrial unit. In the case of CIT Vs. Birla VXL Ltd. (32 taxmann.com 330), the assessee CIT Vs. Birla VXL Ltd. (32 taxmann.com 330), the assessee CIT Vs. Birla VXL Ltd. (32 taxmann.com 330), the assessee had received incentives under the scheme framed by the had received incentives under the scheme framed by the had received incentives under the scheme framed by the Government of Gujarat under resolution dated 2nd January Government of Gujarat under resolution dated 2nd January Government of Gujarat under resolution dated 2nd January 1991 in the form of Sal 1991 in the form of Sales Tax Waiver/Deferment scheme. es Tax Waiver/Deferment scheme. The main purpose of the scheme was to accelerate the The main purpose of the scheme was to accelerate the The main purpose of the scheme was to accelerate the industrial development and to disperse industries to under industrial development and to disperse industries to under industrial development and to disperse industries to under- developed developed developed areas areas areas as as as well well well as as as to to to provide provide provide additional additional additional employment. The Hon'ble Gujarat High Court held that it employment. The Hon'ble Gujarat High Court held that it employment. The Hon'ble Gujarat High Court held that it could be straightaway seen that the benefit, though e straightaway seen that the benefit, though e straightaway seen that the benefit, though computed in terms of the Sales Tax liability in the hands of computed in terms of the Sales Tax liability in the hands of computed in terms of the Sales Tax liability in the hands of the recipient, the same was not mean to give any benefit on the recipient, the same was not mean to give any benefit on the recipient, the same was not mean to give any benefit on day-to-day functioning of the business or for making the day functioning of the business or for making the day functioning of the business or for making the industry more profitable. The pri industry more profitable. The principle aim of the scheme nciple aim of the scheme was to cover the capital outlay already made by the was to cover the capital outlay already made by the was to cover the capital outlay already made by the assessee in undertaking special modernization of its assessee in undertaking special modernization of its assessee in undertaking special modernization of its existing industry. From the provisions of the said scheme, it existing industry. From the provisions of the said scheme, it existing industry. From the provisions of the said scheme, it clearly emerged that the subsidy though computed in terms clearly emerged that the subsidy though computed in terms clearly emerged that the subsidy though computed in terms of Sales Tax deferment or waiver, in essence it was meant es Tax deferment or waiver, in essence it was meant es Tax deferment or waiver, in essence it was meant for capital outlay expended by the assessee for set up of for capital outlay expended by the assessee for set up of for capital outlay expended by the assessee for set up of the unit in case of a new industrial unit and for expansion the unit in case of a new industrial unit and for expansion the unit in case of a new industrial unit and for expansion and diversification of an existing unit. As noted, such and diversification of an existing unit. As noted, such and diversification of an existing unit. As noted, such subsidy was available only to subsidy was available only to a new industrial unit. The a new industrial unit. The Hon'ble Gujarat High Court further held that it was Hon'ble Gujarat High Court further held that it was Hon'ble Gujarat High Court further held that it was undoubtedly true that such subsidy was computed in terms undoubtedly true that such subsidy was computed in terms undoubtedly true that such subsidy was computed in terms of Sales Tax deferment and necessarily therefore, would of Sales Tax deferment and necessarily therefore, would of Sales Tax deferment and necessarily therefore, would accrue to an a mindustry only once the commercial accrue to an a mindustry only once the commercial accrue to an a mindustry only once the commercial production com production commenced. However this by itself would not be menced. However this by itself would not be

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either a sole or concluding factor. In the result, the appeals either a sole or concluding factor. In the result, the appeals either a sole or concluding factor. In the result, the appeals of the Revenue were dismissed. Considering the above of the Revenue were dismissed. Considering the above of the Revenue were dismissed. Considering the above facts, the Sales Tax Incentive of Rs.2,66,04,629/ facts, the Sales Tax Incentive of Rs.2,66,04,629/- availed in respect of Somnathpur unit is held respect of Somnathpur unit is held to be a capital receipt not to be a capital receipt not liable to tax. The question that if a subsidy was on capital liable to tax. The question that if a subsidy was on capital liable to tax. The question that if a subsidy was on capital account then whether it had to be reduced from the cost of account then whether it had to be reduced from the cost of account then whether it had to be reduced from the cost of assets for allowing depreciation or not, was also decided in assets for allowing depreciation or not, was also decided in assets for allowing depreciation or not, was also decided in the favour of the appellant company by placing the favour of the appellant company by placing reliance on reliance on the decision in the case of Sasisri Extraction Ltd. Vs. ACIT the decision in the case of Sasisri Extraction Ltd. Vs. ACIT the decision in the case of Sasisri Extraction Ltd. Vs. ACIT (307 IT AT. 127), Rohit Exhaust Systems Pvt. Ltd. Vs. ACIT (307 IT AT. 127), Rohit Exhaust Systems Pvt. Ltd. Vs. ACIT (307 IT AT. 127), Rohit Exhaust Systems Pvt. Ltd. Vs. ACIT in ITA No. 1880/PN/2013 dated 31.03.2015 (Pune ITAT) in ITA No. 1880/PN/2013 dated 31.03.2015 (Pune ITAT) in ITA No. 1880/PN/2013 dated 31.03.2015 (Pune ITAT) and Inventaa Chemical Ltd. Vs. ACIT (42 SOT 249), wherein and Inventaa Chemical Ltd. Vs. ACIT (42 SOT 249), wherein and Inventaa Chemical Ltd. Vs. ACIT (42 SOT 249), wherein it was held that the payment of subsidy was not related to that the payment of subsidy was not related to that the payment of subsidy was not related to the actual acquisition of assets and subsidy was granted the actual acquisition of assets and subsidy was granted the actual acquisition of assets and subsidy was granted on capital investment on land, building and machinery, on capital investment on land, building and machinery, on capital investment on land, building and machinery, therefore it could not be reduced from the value of asset therefore it could not be reduced from the value of asset therefore it could not be reduced from the value of asset (WDV). Accordingly I direct the AO to d (WDV). Accordingly I direct the AO to delete the addition of elete the addition of Rs.4,63,30,950/ Rs.4,63,30,950/- made by him. This ground of appeal is made by him. This ground of appeal is accordingly allowed. accordingly allowed.” 5. We have noted that We have noted that, firstly, regarding sales tax incentives of sales tax incentives of Rs.2,66,04,629/- in relation to Orissa Industrial Policy, 2007 in relation to Orissa Industrial Policy, 2007 in relation to Orissa Industrial Policy, 2007, the Tribunal in earlier assessment years has allowed in favour of the Tribunal in earlier assessment years has allowed in favour of the Tribunal in earlier assessment years has allowed in favour of the assessee. The Ld. Counsel referred to the decision of the ITAT in ITA assessee. The Ld. Counsel referred to the decision of the ITAT in ITA assessee. The Ld. Counsel referred to the decision of the ITAT in ITA No. 653/Mum/2020 for assessment year 2013 No. 653/Mum/2020 for assessment year 2013-14 and ITA No. 14 and ITA No. 654/M/2020 for assessment year 2012 654/M/2020 for assessment year 2012-13. Further the Tribunal i 13. Further the Tribunal in ITA No. 655/Mum/2020 for assessment year 2011 ITA No. 655/Mum/2020 for assessment year 2011- -12 has followed the finding in assessment year 2010 the finding in assessment year 2010-11 and deleted the addition 11 and deleted the addition. The Tribunal in assessment year 2010 e Tribunal in assessment year 2010-11 has adjudicated the issue adjudicated the issue as under:

“12. We have heard the submissions of both the part 12. We have heard the submissions of both the part 12. We have heard the submissions of both the parties and perused the material available on record. We find and perused the material available on record. We find and perused the material available on record. We find that the present issue is fully covered in assessee’s own that the present issue is fully covered in assessee’s own that the present issue is fully covered in assessee’s own case in ITA.No.814/Mum/2007 for the A.Y. 2003-04 case in ITA.No.814/Mum/2007 for the A.Y. 2003 case in ITA.No.814/Mum/2007 for the A.Y. 2003 wherein the Tribunal allowed relief in respect of the wherein the Tribunal allowed relief in respect of the wherein the Tribunal allowed relief in respect of the

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matter in issue. Further, the Special matter in issue. Further, the Special Bench of the Bench of the Tribunal in the case of DCIT vs., Reliance Industries Tribunal in the case of DCIT vs., Reliance Industries Tribunal in the case of DCIT vs., Reliance Industries Ltd., [2004] 88 ITD 273 (Mum) held that sales tax Ltd., [2004] 88 ITD 273 (Mum) held that sales tax Ltd., [2004] 88 ITD 273 (Mum) held that sales tax subsidy received under the Package Scheme of subsidy received under the Package Scheme of subsidy received under the Package Scheme of Incentives, 1979 is for the purpose of industrial Incentives, 1979 is for the purpose of industrial Incentives, 1979 is for the purpose of industrial development of the backward districts as well as development of the backward districts as we development of the backward districts as we generation of employment, thus, establishing a direct generation of employment, thus, establishing a direct generation of employment, thus, establishing a direct nexus with the investment in fixed capital assets and nexus with the investment in fixed capital assets and nexus with the investment in fixed capital assets and hence, a capital receipt. Against this Special Bench hence, a capital receipt. Against this Special Bench hence, a capital receipt. Against this Special Bench order of the Tribunal, the Department filed an appeal order of the Tribunal, the Department filed an appeal order of the Tribunal, the Department filed an appeal before the Hon’ ble High Court of B before the Hon’ ble High Court of Bombay which is ombay which is pending for adjudication. In this connection, it is pending for adjudication. In this connection, it is pending for adjudication. In this connection, it is relevant to state that the Hon’ ble Supreme Court in the relevant to state that the Hon’ ble Supreme Court in the relevant to state that the Hon’ ble Supreme Court in the case of Union of India vs., Kamlakshi Finance case of Union of India vs., Kamlakshi Finance case of Union of India vs., Kamlakshi Finance Corporation Ltd., [1991] 55 ELT 433 (SC) has held that ‘ Corporation Ltd., [1991] 55 ELT 433 (SC) has held that ‘ Corporation Ltd., [1991] 55 ELT 433 (SC) has held that ‘ mere fact that the order of t mere fact that the order of the appellate authority is not he appellate authority is not “acceptable” to the Department and is the subject “acceptable” to the Department and is the subject “acceptable” to the Department and is the subject matter of an appeal can furnish no ground for not matter of an appeal can furnish no ground for not matter of an appeal can furnish no ground for not following it unless its operation has been suspended by following it unless its operation has been suspended by following it unless its operation has been suspended by a competent court. We find that since the order of the a competent court. We find that since the order of the a competent court. We find that since the order of the Special Bench o Special Bench of the Tribunal is still holds the field and f the Tribunal is still holds the field and in absence of any contrary decision brought to our in absence of any contrary decision brought to our in absence of any contrary decision brought to our notice by the Ld. D.R, and the order of the Ld. CIT(A) in notice by the Ld. D.R, and the order of the Ld. CIT(A) in notice by the Ld. D.R, and the order of the Ld. CIT(A) in deleting the addition made by the A.O. is in accordance deleting the addition made by the A.O. is in accordance deleting the addition made by the A.O. is in accordance with law, we find no reason to interfere with the order with law, we find no reason to interfere with t with law, we find no reason to interfere with t of the Ld. CIT(A) on this issue and, therefore, we hold of the Ld. CIT(A) on this issue and, therefore, we hold of the Ld. CIT(A) on this issue and, therefore, we hold that the amount of incentive is not a revenue receipt, that the amount of incentive is not a revenue receipt, that the amount of incentive is not a revenue receipt, but, it is a capital receipt and, therefore, we direct the but, it is a capital receipt and, therefore, we direct the but, it is a capital receipt and, therefore, we direct the A.O. to delete the addition. The Revenue fails in its A.O. to delete the addition. The Revenue fails in its A.O. to delete the addition. The Revenue fails in its grounds of appeal Nos.1 grounds of appeal Nos.1(i) to 1(iv) and, therefore, the (i) to 1(iv) and, therefore, the grounds on this issue are dismissed. grounds on this issue are dismissed.” 5.1 Since the facts Since the facts and the issue in dispute involved before us is in dispute involved before us is identical to the facts identical to the facts and dispute in assessment year 2010 assessment year 2010-11, therefore, following the same therefore, following the same,we uphold the finding of ,we uphold the finding of ld CIT(A) on the issue on dispute and the issue on dispute and the addition of Rs.2,66,04,629/ the addition of Rs.2,66,04,629/- is liable to be deleted.

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5.2 Secondly, as far as prepayment of deferred sales tax s far as prepayment of deferred sales tax s far as prepayment of deferred sales tax incentives of Rs.1,97,26,321/ .1,97,26,321/-, related to Lakhmapur Unit Lakhmapur Unit is concerned, before us, the concerned, before us, the Ld. Counsel of the assessee relied on the the assessee relied on the decision of the Mumbai Bench of the Tribunal in the case of Mumbai Bench of the Tribunal in the case of Mumbai Bench of the Tribunal in the case of Ambuja Ambuja Ambuja Cement Cement Cement Ltd. Ltd. Ltd. v. v. v. ACIT ACIT ACIT (2022) (2022) (2022) in in in ITA ITA ITA Nos. Nos. Nos. 2968/Mum/2015 and 1665/Mum/2019 and 3307/Mum/2015 2968/Mum/2015 and 1665/Mum/2019 and 3307/Mum/2015 2968/Mum/2015 and 1665/Mum/2019 and 3307/Mum/2015 and 2428/Mum/2019 and 2428/Mum/2019. The relevant finding of the decision is . The relevant finding of the decision is reproduced as under: under:

“23. A plain reading of the above ground of appeal 23. A plain reading of the above ground of appeal 23. A plain reading of the above ground of appeal clearly shows that, even going by the stand of the clearly shows that, even going by the stand of the clearly shows that, even going by the stand of the Assessing Officer, the issue is covered in favour of the Assessing Officer, the issue is covered in favour of the Assessing Officer, the issue is covered in favour of the assessee, by Hon’ble jurisdictional High Court judgment assessee, by Hon’ble jurisdictional High Court judgment assessee, by Hon’ble jurisdictional High Court judgment in the case of CIT Vs Sulzer India in the case of CIT Vs Sulzer India Ltd [(2014) 369 ITR Ltd [(2014) 369 ITR 717 (Bom)] but yet the appeal has been filed because 717 (Bom)] but yet the appeal has been filed because 717 (Bom)] but yet the appeal has been filed because the revenue has challenged the correctness of the said the revenue has challenged the correctness of the said the revenue has challenged the correctness of the said judgment. That very approach is simply erroneous judgment. That very approach is simply erroneous judgment. That very approach is simply erroneous because it is only elementary in law that the mere because it is only elementary in law that the mere because it is only elementary in law that the mere pendency of the appeal, aga pendency of the appeal, against a binding judicial inst a binding judicial precedent, in a higher judicial forum does not dilute, precedent, in a higher judicial forum does not dilute, precedent, in a higher judicial forum does not dilute, curtail or otherwise narrow down its binding nature. As curtail or otherwise narrow down its binding nature. As curtail or otherwise narrow down its binding nature. As long as the binding judicial precedent holds good in law, long as the binding judicial precedent holds good in law, long as the binding judicial precedent holds good in law, as it does unless it is upturned or reversed by a higher as it does unless it is upturned or reversed by a higher as it does unless it is upturned or reversed by a higher judicial forum, it binds the lower judicial forums. That al forum, it binds the lower judicial forums. That al forum, it binds the lower judicial forums. That apart, even otherwise, the view taken by the Hon’ble apart, even otherwise, the view taken by the Hon’ble apart, even otherwise, the view taken by the Hon’ble Bombay High Court in Sulzer’s case (supra) now stands Bombay High Court in Sulzer’s case (supra) now stands Bombay High Court in Sulzer’s case (supra) now stands approved and confirmed by the Hon’ble Supreme Court approved and confirmed by the Hon’ble Supreme Court approved and confirmed by the Hon’ble Supreme Court in the case of CIT Vs Balakrishna Industries Limited in the case of CIT Vs Balakrishna Industries L in the case of CIT Vs Balakrishna Industries L [(2017) 88 taxmann.com 273 (SC)] wherein Their [(2017) 88 taxmann.com 273 (SC)] wherein Their [(2017) 88 taxmann.com 273 (SC)] wherein Their Lordships have, inter Lordships have, inter-alia, observed as follows: alia, observed as follows: ……..The main judgment is dated 05.12.2014 which ……..The main judgment is dated 05.12.2014 which ……..The main judgment is dated 05.12.2014 which was rendered in a batch of appeals with the leading was rendered in a batch of appeals with the leading was rendered in a batch of appeals with the leading case known as 'The CIT v. Sulzer India Ltd. [2015] 54 case known as 'The CIT v. Sulzer India Ltd. [2015] 5 case known as 'The CIT v. Sulzer India Ltd. [2015] 5 taxmann.com 161/229 Taxman 264/[2014] 369 ITR taxmann.com 161/229 Taxman 264/[2014] 369 ITR taxmann.com 161/229 Taxman 264/[2014] 369 ITR 717 (Bom.). It is this judgment which has been followed 717 (Bom.). It is this judgment which has been followed 717 (Bom.). It is this judgment which has been followed in other cases. Therefore, for the sake of convenience, in other cases. Therefore, for the sake of convenience, in other cases. Therefore, for the sake of convenience,

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we shall refer to the facts as noted in Sulzer India Ltd.'s we shall refer to the facts as noted in Sulzer India Ltd.'s we shall refer to the facts as noted in Sulzer India Ltd.'s case (supra). case (supra). 4. The Assessee M/s. 4. The Assessee M/s. Sulzer India Ltd. filed return of Sulzer India Ltd. filed return of income for the assessment year 2003 income for the assessment year 2003-04 on 27th 04 on 27th November, November, November, 2013, 2013, 2013, declaring declaring declaring total total total income income income at at at Rs. Rs. Rs. 10,59,76,986/ 10,59,76,986/-, , claiming claiming deduction deduction under under section section 80HHC of the I.T. Act in the sum of Rs. 82,48,864/-. 80HHC of the I.T. Act in the sum of Rs. 82,48,864/ 80HHC of the I.T. Act in the sum of Rs. 82,48,864/ 5. During the assessment p 5. During the assessment proceedings, the Assessing roceedings, the Assessing Officer observed that the Assessee had credited amount Officer observed that the Assessee had credited amount Officer observed that the Assessee had credited amount of Rs. 4,14,87,985/ of Rs. 4,14,87,985/- to the capital reserve contending to the capital reserve contending that the said amount was a remission of loan liability. that the said amount was a remission of loan liability. that the said amount was a remission of loan liability. The The The Assessee Assessee Assessee stated stated stated that that that under under under the the the Industrial Industrial Industrial Backward Backward Area Area Scheme Sche me of of the the Government Government of of Maharashtra, it was entitled to defer the Sales Tax Maharashtra, it was entitled to defer the Sales Tax Maharashtra, it was entitled to defer the Sales Tax liability for a period of 7 years under the Deferral liability for a period of 7 years under the Deferral liability for a period of 7 years under the Deferral Scheme of 1983 and for a period of 6 years under the Scheme of 1983 and for a period of 6 years under the Scheme of 1983 and for a period of 6 years under the Deferral Scheme of 1988. In response to a Notification Deferral Scheme of 1988. In response to a Notification Deferral Scheme of 1988. In response to a Notification issued by the Gover issued by the Government of Maharashtra regarding nment of Maharashtra regarding premature repayment of deferral Sales Tax at Net premature repayment of deferral Sales Tax at Net premature repayment of deferral Sales Tax at Net Present Value (NPV), the Assessee made a repayment of Present Value (NPV), the Assessee made a repayment of Present Value (NPV), the Assessee made a repayment of Rs. Rs. 3,37,13,393/- 3,37,13,393/ against against the the total total liability liability of of Rs.7,52,01,378/ Rs.7,52,01,378/-. The Assessee remitted the balance . The Assessee remitted the balance amount of Rs. 4,14,87 amount of Rs. 4,14,87,985/- and credited the said and credited the said amount to its capital reserve account. The Assessing amount to its capital reserve account. The Assessing amount to its capital reserve account. The Assessing Officer asked the Assessee to show cause as to why the Officer asked the Assessee to show cause as to why the Officer asked the Assessee to show cause as to why the said amount should not be taxed in the hands of the said amount should not be taxed in the hands of the said amount should not be taxed in the hands of the Assessee as a revenue receipt. Relying on Circulars of Assessee as a revenue receipt. Relying on Circulars of Assessee as a revenue receipt. Relying on Circulars of the Central the Central Board of Direct Taxes being Nos. 496 and Board of Direct Taxes being Nos. 496 and 674, the Assessee claimed that the deferral Sales Tax 674, the Assessee claimed that the deferral Sales Tax 674, the Assessee claimed that the deferral Sales Tax under the Deferral Scheme was required to be treated under the Deferral Scheme was required to be treated under the Deferral Scheme was required to be treated as actually paid for the purposes of section 43B of the as actually paid for the purposes of section 43B of the as actually paid for the purposes of section 43B of the I.T. Act. Further, the conversion of Sales Tax liability I.T. Act. Further, the conversion of Sales Tax liabi I.T. Act. Further, the conversion of Sales Tax liabi into loans would be taken as discharge of the liability of into loans would be taken as discharge of the liability of into loans would be taken as discharge of the liability of Sales Tax and, therefore, the deferral amount was in Sales Tax and, therefore, the deferral amount was in Sales Tax and, therefore, the deferral amount was in the form of a loan and not a trading receipt. On this the form of a loan and not a trading receipt. On this the form of a loan and not a trading receipt. On this basis, the Assessee contended that the remission of a basis, the Assessee contended that the remission of a basis, the Assessee contended that the remission of a loan cannot be treated as a rev loan cannot be treated as a revenue receipt and taxed enue receipt and taxed as its income. The Assessing Officer rejected this claim as its income. The Assessing Officer rejected this claim as its income. The Assessing Officer rejected this claim and by holding that the Board's Circular is in the and by holding that the Board's Circular is in the and by holding that the Board's Circular is in the context of section 43B of the Income Tax Act and context of section 43B of the Income Tax Act and context of section 43B of the Income Tax Act and therefore not relevant for the present issue. therefore not relevant for the present issue. therefore not relevant for the present issue.

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money that the State Government would be entitled to money that the State Government would be entitled to money that the State Government would be entitled to receive after the end of 7 to 12 years, then, we do not receive after the end of 7 to 12 years, then, we do not receive after the end of 7 to 12 years, then, we do not see how ingredients of sub section (1) of section 41 can see how ingredients of sub section (1) of section 41 can see how ingredients of sub section (1) of section 41 can be said to be fulfilled. The obligation to remit to the be said to be fulfilled. The obligation to remit to the be said to be fulfilled. The obligation to remit to the Government the Sales Tax amount already recovered Government the Sales Tax amount already recovered Government the Sales Tax amount already recovered and collected from the customers is in no way wiped out and collected from the customers is in no way wiped out and collected from the customers is in no way wiped out or diluted. The obligation remains. All that has or diluted. The obligation remains. All that has or diluted. The obligation remains. All that has happened is an option is given to the Assessee to happened is an option is given to the Assess happened is an option is given to the Assess approach the SICOM and request it to consider the approach the SICOM and request it to consider the approach the SICOM and request it to consider the application of the Assessee of premature payment and application of the Assessee of premature payment and application of the Assessee of premature payment and discharge of the liability by finding out its NPV. If that discharge of the liability by finding out its NPV. If that discharge of the liability by finding out its NPV. If that was a permissible exercise and in terms of the settled was a permissible exercise and in terms of the settled was a permissible exercise and in terms of the settled law, then, we do not see how the law, then, we do not see how the Assessee can be said Assessee can be said to have been benefited and as claimed by the Revenue. to have been benefited and as claimed by the Revenue. to have been benefited and as claimed by the Revenue. The argument of Mr. Gupta is not that the Assessee The argument of Mr. Gupta is not that the Assessee The argument of Mr. Gupta is not that the Assessee having paid Rs. 3.37 crores has obtained for himself having paid Rs. 3.37 crores has obtained for himself having paid Rs. 3.37 crores has obtained for himself anything in terms of section 41(1), but the Assessee is anything in terms of section 41(1), but the Assessee is anything in terms of section 41(1), but the Assessee is deemed to have receiv deemed to have received the sum of Rs. 4.14 crores, ed the sum of Rs. 4.14 crores, which is the difference between the original amount to which is the difference between the original amount to which is the difference between the original amount to be remitted with the payment made. Mr. Gupta terms be remitted with the payment made. Mr. Gupta terms be remitted with the payment made. Mr. Gupta terms this as deemed payment and by the State to the this as deemed payment and by the State to the this as deemed payment and by the State to the Assessee. We are unable to agree with him. The Assessee. We are unable to agree with him. The Assessee. We are unable to agree with him. The Tribunal has found that t Tribunal has found that the first requirement of section he first requirement of section 41(1) is that the allowance or deduction is made in 41(1) is that the allowance or deduction is made in 41(1) is that the allowance or deduction is made in respect of the loss, expenditure or a trading liability respect of the loss, expenditure or a trading liability respect of the loss, expenditure or a trading liability incurred by the Assessee and the other requirement is incurred by the Assessee and the other requirement is incurred by the Assessee and the other requirement is the Assessee has subsequently obtained any amount in the Assessee has subsequently obtained any amount in the Assessee has subsequently obtained any amount in respect o respect of such loss and expenditure or obtained a f such loss and expenditure or obtained a benefit in respect of such trading liability by way of a benefit in respect of such trading liability by way of a benefit in respect of such trading liability by way of a remission or cessation thereof. As rightly noted by the remission or cessation thereof. As rightly noted by the remission or cessation thereof. As rightly noted by the Tribunal, the Sales Tax collected by the Assessee during Tribunal, the Sales Tax collected by the Assessee during Tribunal, the Sales Tax collected by the Assessee during the relevant year amounting to Rs. 7,52,01,378/- was the relevant year amounting to Rs. 7,52,01,3 the relevant year amounting to Rs. 7,52,01,3 treated by the State Government as loan liability treated by the State Government as loan liability treated by the State Government as loan liability payable after 12 years in 6 annual/equal installments. payable after 12 years in 6 annual/equal installments. payable after 12 years in 6 annual/equal installments. Subsequently and pursuant to the amendment made to Subsequently and pursuant to the amendment made to Subsequently and pursuant to the amendment made to the 4th proviso to section 38 of the Bombay Sales Tax the 4th proviso to section 38 of the Bombay Sales Tax the 4th proviso to section 38 of the Bombay Sales Tax Act, 1959, the Assessee accepted the Act, 1959, the Assessee accepted the offer of SICOM, offer of SICOM, the implementing agency of the State Government, paid the implementing agency of the State Government, paid the implementing agency of the State Government, paid an amount of Rs. 3,37,13,393/ an amount of Rs. 3,37,13,393/- to SICOM, which, to SICOM, which, according to the Assessee, represented the NPV of the according to the Assessee, represented the NPV of the according to the Assessee, represented the NPV of the future sum as determined and prescribed by the future sum as determined and prescribed by the future sum as determined and prescribed by the SICOM. In other words, what the Assessee was SICOM. In other words, what the Asses SICOM. In other words, what the Asses required to pay after 12 years in 6 equal installments required to pay after 12 years in 6 equal installments required to pay after 12 years in 6 equal installments

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was paid by the Assessee prematurely in terms of the was paid by the Assessee prematurely in terms of the was paid by the Assessee prematurely in terms of the NPV of the same. That the State may have received a NPV of the same. That the State may have received a NPV of the same. That the State may have received a higher sum after the period of 12 years and in higher sum after the period of 12 years and in higher sum after the period of 12 years and in installments. However, the statutory arra installments. However, the statutory arrangement and ngement and vide section 38, 4th proviso does not amount to vide section 38, 4th proviso does not amount to vide section 38, 4th proviso does not amount to remission or cessation of the Assessee's liability remission or cessation of the Assessee's liability remission or cessation of the Assessee's liability assuming the same to be a trading one. Rather that assuming the same to be a trading one. Rather that assuming the same to be a trading one. Rather that obtains a payment to the State prematurely and in obtains a payment to the State prematurely and in obtains a payment to the State prematurely and in terms of the correct value of the debt due to it. There is terms of the correct value of the debt due t terms of the correct value of the debt due t no evidence to show that there has been any remission no evidence to show that there has been any remission no evidence to show that there has been any remission or cessation of the liability by the State Government. We or cessation of the liability by the State Government. We or cessation of the liability by the State Government. We agree with the Tribunal that one of the requirement of agree with the Tribunal that one of the requirement of agree with the Tribunal that one of the requirement of section 41(1)(a) has not been fulfilled in the facts of the section 41(1)(a) has not been fulfilled in the facts of the section 41(1)(a) has not been fulfilled in the facts of the present case." present case." 10. After hearing the counsel for the parties at length, 10. After hearing the counsel for the parties at length, 10. After hearing the counsel for the parties at length, we are of the view that the aforesaid approach of the we are of the view that the aforesaid approach of the we are of the view that the aforesaid approach of the High Court is without any blemish, inasmuch as all the High Court is without any blemish, inasmuch as all the High Court is without any blemish, inasmuch as all the requirements of Section 41(1) of the Act could not be requirements of Section 41(1) of the Act could not be requirements of Section 41(1) of the Act could not be fulfilled in this case. fulfilled in this case. 24. In vi 24. In view of these discusssions, as also bearing in ew of these discusssions, as also bearing in mind the entirety of the case, we approve the mind the entirety of the case, we approve the mind the entirety of the case, we approve the conclusions arrived at by the learned CIT(A), and conclusions arrived at by the learned CIT(A), and conclusions arrived at by the learned CIT(A), and decline to interfere in the matter. decline to interfere in the matter.” 5.3 Since the issue in dispute involved in the year under Since the issue in dispute involved in the year under Since the issue in dispute involved in the year under consideration being consideration being identical, respectfully following the finding of espectfully following the finding of the Tribunal (supra), the Tribunal (supra), we uphold the finding of ld CIT(A) on the issue we uphold the finding of ld CIT(A) on the issue of the pre-payment payment payment of of of deferred deferred deferred sales sales sales tax tax tax incentives incentives incentives of of of Rs.1,97,26,321/-. In the result, the ground No . In the result, the ground Nos. 1(i) to (iv) . 1(i) to (iv) of the appeal are accordingly dismissed. are accordingly dismissed.

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Further the Ld. CIT(A) also he Ld. CIT(A) also held that this amount of subsidy was held that this amount of subsidy was not liable for reduction not liable for reduction from the cost of the asset from the cost of the asset under the provisions of Explanation 10 to section 43(1) of the Act. provisions of Explanation 10 to section 43(1) of the Act. provisions of Explanation 10 to section 43(1) of the Act.

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Ltd (supra) was not was not applicable and accordingly, he rejected the claim of the assessee claim of the assessee of the excise duty incentive as capital receipt. of the excise duty incentive as capital receipt. On further appeal, the Ld. CIT(A) deleted the addition observing as On further appeal, the Ld. CIT(A) deleted the addition observing as On further appeal, the Ld. CIT(A) deleted the addition observing as under:

“13. I have duly considered the submissions of the appellant. I have duly considered the submissions of the appellant. I have duly considered the submissions of the appellant. On perusal of the assessment order, it is seen that the AO On perusal of the assessment order, it is seen that the AO On perusal of the assessment order, it is seen that the AO noticed that the appellant had claimed Excise Duty noticed that the appellant had claimed Excise Duty noticed that the appellant had claimed Excise Duty Exemption of Rs.49,00.05.693/ Exemption of Rs.49,00.05.693/- in its computation of total in its computation of total income. It was claimed that th income. It was claimed that the appellant had set up its e appellant had set up its industrial units in a notified backward area i.e. Village industrial units in a notified backward area i.e. Village industrial units in a notified backward area i.e. Village Lakeshwari, Pargana Lakeshwari, Pargana-Bhagwanpur, Roorkee, Uttaranchal Bhagwanpur, Roorkee, Uttaranchal and in terms of Excise Notification No.50/2003 and in terms of Excise Notification No.50/2003 and in terms of Excise Notification No.50/2003-CE dated 10.06.2003, it had been granted Excise Duty Exemption. 10.06.2003, it had been granted Excise Duty Exemption. 10.06.2003, it had been granted Excise Duty Exemption. Following the ratio of Hon'ble Supreme Court in the case of ng the ratio of Hon'ble Supreme Court in the case of ng the ratio of Hon'ble Supreme Court in the case of CIT Vs. Ponni Sugars & Chemicals Ltd. (306 ITR 392), the CIT Vs. Ponni Sugars & Chemicals Ltd. (306 ITR 392), the CIT Vs. Ponni Sugars & Chemicals Ltd. (306 ITR 392), the amount in question had been claimed as capital receipts. amount in question had been claimed as capital receipts. amount in question had been claimed as capital receipts. However the AO held that the Excise Duty Incentive of However the AO held that the Excise Duty Incentive of However the AO held that the Excise Duty Incentive of Rs.49,00,05,693/ Rs.49,00,05,693/- was a revenue receipt and could not be eipt and could not be treated as capital receipt.The AO was of the opinion that the treated as capital receipt.The AO was of the opinion that the treated as capital receipt.The AO was of the opinion that the assessee company was not authorized to collect the Excise assessee company was not authorized to collect the Excise assessee company was not authorized to collect the Excise Duty from its customers. In that case, the question of Duty from its customers. In that case, the question of Duty from its customers. In that case, the question of payment of Excise Duty to the government and its payment of Excise Duty to the government and its payment of Excise Duty to the government and its subsequent refund, did not arise. Therefore the reliance refund, did not arise. Therefore the reliance placed by the assessee company on the decision of Ponni placed by the assessee company on the decision of Ponni placed by the assessee company on the decision of Ponni Sugars & Chemical Ltd. was totally misplaced. Further even Sugars & Chemical Ltd. was totally misplaced. Further even Sugars & Chemical Ltd. was totally misplaced. Further even if the Excise Duty Incentive was to be treated as capital if the Excise Duty Incentive was to be treated as capital if the Excise Duty Incentive was to be treated as capital receipt then the amount paid over an receipt then the amount paid over and above the Cenat d above the Cenat Credit would be considered as capital receipt. Further while Credit would be considered as capital receipt. Further while Credit would be considered as capital receipt. Further while completing the set completing the set-aside assessment for AY 2009 aside assessment for AY 2009-10 on 28.12.2018 U/s 143(3) r.w.s. 254, the AO held that the 28.12.2018 U/s 143(3) r.w.s. 254, the AO held that the 28.12.2018 U/s 143(3) r.w.s. 254, the AO held that the Excise Duty Incentive was recurring in nature and same had Excise Duty Incentive was recurring in nature and same had Excise Duty Incentive was recurring in nature and same had been given as production incentive.The AO held that the n as production incentive.The AO held that the n as production incentive.The AO held that the subsidy in question had been granted for running the subsidy in question had been granted for running the subsidy in question had been granted for running the business more efficiently and profitably. The issue under business more efficiently and profitably. The issue under business more efficiently and profitably. The issue under consideration is covered in the favour of the appellant consideration is covered in the favour of the appellant consideration is covered in the favour of the appellant company by the appellate order dated 16.10 company by the appellate order dated 16.10.2019 in appeal .2019 in appeal No. NSK/CIT(A) No. NSK/CIT(A)-3/139/2017-18 for AY 2010-11 wherein 11 wherein elaborate discussion was made by the undersigned in para elaborate discussion was made by the undersigned in para elaborate discussion was made by the undersigned in para- 13 as to why the Excise Duty Exemption was a capital 13 as to why the Excise Duty Exemption was a capital 13 as to why the Excise Duty Exemption was a capital

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receipt not liable to tax. There is no change in the facts & receipt not liable to tax. There is no change in the facts & receipt not liable to tax. There is no change in the facts & circumstances in circumstances in the current year as compared to those in AY the current year as compared to those in AY 2010-11. The undersigned had also examined Tar the terms 11. The undersigned had also examined Tar the terms 11. The undersigned had also examined Tar the terms and conditions of the Excise Incentive under the Central and conditions of the Excise Incentive under the Central and conditions of the Excise Incentive under the Central Excise NotificationNo.50/2003 Excise NotificationNo.50/2003-CE dated 10.06.2003. In CE dated 10.06.2003. In para-1 of said notification, the goods speci 1 of said notification, the goods specified in the First fied in the First Schedule and the Second Schedule to the Central Excise Schedule and the Second Schedule to the Central Excise Schedule and the Second Schedule to the Central Excise Tariff Act 1985 (5 of1986) other than the goods specified in Tariff Act 1985 (5 of1986) other than the goods specified in Tariff Act 1985 (5 of1986) other than the goods specified in Annexure-1 appended thereto, cleared from a unit located in 1 appended thereto, cleared from a unit located in 1 appended thereto, cleared from a unit located in the notified area, were exempted from the whole of the duty the notified area, were exempted from the whole of the duty the notified area, were exempted from the whole of the duty of Excise or additional duty of Excise, leviable thereon under Excise or additional duty of Excise, leviable thereon under Excise or additional duty of Excise, leviable thereon under any of said Acts. In para any of said Acts. In para-3 of said notification, it had been 3 of said notification, it had been categorically mentioned that the exemption contained in this categorically mentioned that the exemption contained in this categorically mentioned that the exemption contained in this notification shall apply to any of said units for a period not notification shall apply to any of said units for a period not notification shall apply to any of said units for a period not exceeding 10 years from the date of publication of said 10 years from the date of publication of said 10 years from the date of publication of said notification in the Official Gazette or from the date of notification in the Official Gazette or from the date of notification in the Official Gazette or from the date of commencement of commercial production whichever was commencement of commercial production whichever was commencement of commercial production whichever was later. later. The later. The The appellant's units appellant's units appellant's units were located in Village were located in Village were located in Village Lakeshwari, Pargana Lakeshwari, Pargana-Bhagwanpur, Tehsil-Rookee w Rookee which was a notified industrial area as per para was a notified industrial area as per para-5C of said 5C of said notification. The appellant was manufacturing CBS Roofing notification. The appellant was manufacturing CBS Roofing notification. The appellant was manufacturing CBS Roofing Sheets, Rapicon Panels, Flat Boards, Pre Sheets, Rapicon Panels, Flat Boards, Pre-fabricated Building fabricated Building Materials etc. and these items were not mentioned in the Materials etc. and these items were not mentioned in the Materials etc. and these items were not mentioned in the Annexure-1 of said no 1 of said notification. These facts were evident tification. These facts were evident from Office Memorandum dated 07.01.2003 of the Ministry of from Office Memorandum dated 07.01.2003 of the Ministry of from Office Memorandum dated 07.01.2003 of the Ministry of Commerce Commerce Commerce & & & Industry. Industry. Industry. On On On perusal perusal perusal of of of the the the above above above memorandum, it was seen that incentive in the form of memorandum, it was seen that incentive in the form of memorandum, it was seen that incentive in the form of Excise Duty exemption had been given with an objective to Excise Duty exemption had been given with an objective to Excise Duty exemption had been given with an objective to achieve ieve ieve industrialization industrialization industrialization in in in the the the backward backward backward areas areas areas of of of Uttaranchal, Uttaranchal, Uttaranchal, generate generate generate employment employment employment opportunities opportunities opportunities and and and utilization of local resources. During the assessment year utilization of local resources. During the assessment year utilization of local resources. During the assessment year under consideration, the Cement and PEB units of the under consideration, the Cement and PEB units of the under consideration, the Cement and PEB units of the appellant company had availed Excise Duty Inc appellant company had availed Excise Duty Incentives due entives due to commencement of commercial production in the notified to commencement of commercial production in the notified to commencement of commercial production in the notified backward area of State of Uttaranchal. The appellant backward area of State of Uttaranchal. The appellant backward area of State of Uttaranchal. The appellant company vide letter dated 15.06.2007 addressed to the Asst. company vide letter dated 15.06.2007 addressed to the Asst. company vide letter dated 15.06.2007 addressed to the Asst. Commissioner of Central Excise, Dehradun had exercised its Commissioner of Central Excise, Dehradun had exercised its Commissioner of Central Excise, Dehradun had exercised its option to avail option to avail exemption under Notification No.50/2003 exemption under Notification No.50/2003-CE dated 10.06.2003 for Corrugated Roofing Products, Flat dated 10.06.2003 for Corrugated Roofing Products, Flat dated 10.06.2003 for Corrugated Roofing Products, Flat Board, Rapicon Panels, Prefabricated Building and Housing Board, Rapicon Panels, Prefabricated Building and Housing Board, Rapicon Panels, Prefabricated Building and Housing Material to be manufactured and cleared from its unit at Material to be manufactured and cleared from its unit at Material to be manufactured and cleared from its unit at Village-Lakeshwari, Pargana Lakeshwari, Pargana-Bhagwanpura, Tehsil ehsil-Roorkee. It was seen that the appellant company had been given It was seen that the appellant company had been given It was seen that the appellant company had been given

M/s Everest Industries Ltd. 26 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

subsidy @15% of their investment in plant & machinery subsidy @15% of their investment in plant & machinery subsidy @15% of their investment in plant & machinery subject to a ceiling of Rs.30 lakhs from the State Government subject to a ceiling of Rs.30 lakhs from the State Government subject to a ceiling of Rs.30 lakhs from the State Government of Uttaranchal. The other benefit available to the appellant of Uttaranchal. The other benefit available to the appellant of Uttaranchal. The other benefit available to the appellant company for setting up its unit at Lakeshwari, a notified r setting up its unit at Lakeshwari, a notified r setting up its unit at Lakeshwari, a notified backward area was exemption from payment of Excise Duty. backward area was exemption from payment of Excise Duty. backward area was exemption from payment of Excise Duty. The appellant company had collected Excise Duty from the The appellant company had collected Excise Duty from the The appellant company had collected Excise Duty from the customers as it was fro embedded in the dealers' price. customers as it was fro embedded in the dealers' price. customers as it was fro embedded in the dealers' price. Instead of first making payment of Exc Instead of first making payment of Excise Duty to the ise Duty to the government and then getting refund, the appellant company government and then getting refund, the appellant company government and then getting refund, the appellant company had retained such amount with it. In case if the Excise Duty had retained such amount with it. In case if the Excise Duty had retained such amount with it. In case if the Excise Duty Exemption of Rs.49,00,05,693/ Exemption of Rs.49,00,05,693/- was treated as revenue was treated as revenue receipt then the whole purpose of setting up of unit in receipt then the whole purpose of setting up of unit in receipt then the whole purpose of setting up of unit in backward ar backward area would be defeated. It is clear that no ea would be defeated. It is clear that no entrepreneur would set up industry in a backward area if it entrepreneur would set up industry in a backward area if it entrepreneur would set up industry in a backward area if it was being compensated with a meager subsidy of Rs.30 was being compensated with a meager subsidy of Rs.30 was being compensated with a meager subsidy of Rs.30 lakhs only.As against this figure, the appellant company had lakhs only.As against this figure, the appellant company had lakhs only.As against this figure, the appellant company had made investment of Rs.6.66 crores in lan made investment of Rs.6.66 crores in land during the FY d during the FY 2006-07, investment of Rs.75.88 crore in building/plant and 07, investment of Rs.75.88 crore in building/plant and 07, investment of Rs.75.88 crore in building/plant and machinery during the FY 2008 machinery during the FY 2008-09 and Rs. 10.90 crores in 09 and Rs. 10.90 crores in building/plant and machinery during the FY 2014 building/plant and machinery during the FY 2014 building/plant and machinery during the FY 2014-15. The total investment of the appellant company till date stood at total investment of the appellant company till date stood at total investment of the appellant company till date stood at Rs.111.08 crores. While granting subsidies for capital 08 crores. While granting subsidies for capital 08 crores. While granting subsidies for capital investment, the Uttaranchal Government did not disburse investment, the Uttaranchal Government did not disburse investment, the Uttaranchal Government did not disburse any amount by way of cash subsidy but allowed industrial any amount by way of cash subsidy but allowed industrial any amount by way of cash subsidy but allowed industrial undertaking to collect usual charge on account of Excise Duty undertaking to collect usual charge on account of Excise Duty undertaking to collect usual charge on account of Excise Duty and retain it as capital subsidy and retain it as capital subsidy instead of depositing the instead of depositing the Excise Duty collected. The purpose of the scheme was not to Excise Duty collected. The purpose of the scheme was not to Excise Duty collected. The purpose of the scheme was not to support carrying on business in a more profitable manner but support carrying on business in a more profitable manner but support carrying on business in a more profitable manner but for promotion/setting up the production unit in a backward for promotion/setting up the production unit in a backward for promotion/setting up the production unit in a backward area. Collection of Excise Duty was simply a measu area. Collection of Excise Duty was simply a measu area. Collection of Excise Duty was simply a measurement of the subsidy to be allowed. Since the incentives were given for the subsidy to be allowed. Since the incentives were given for the subsidy to be allowed. Since the incentives were given for bringing about addition to necessary infrastructure in bringing about addition to necessary infrastructure in bringing about addition to necessary infrastructure in processing/developing processing/developing processing/developing the the the backward backward backward area, area, area, it it it was was was accordingly in the nature of capital receipt not liable to tax. accordingly in the nature of capital receipt not liable to tax. accordingly in the nature of capital receipt not liable to tax. Reliance was pla Reliance was placed on the decision of the Hon'ble Apex ced on the decision of the Hon'ble Apex Court in the case of CIT Vs. Ponni Sugars & Chemicals Ltd. Court in the case of CIT Vs. Ponni Sugars & Chemicals Ltd. Court in the case of CIT Vs. Ponni Sugars & Chemicals Ltd. (306 IT 392). This scheme was intended to accelerate (306 IT 392). This scheme was intended to accelerate (306 IT 392). This scheme was intended to accelerate industrial development in the State of Uttaranchal and industrial development in the State of Uttaranchal and industrial development in the State of Uttaranchal and Excise Duty incentive was given for setting up in Excise Duty incentive was given for setting up industries in a dustries in a notified backward area. The intention was not to increase notified backward area. The intention was not to increase notified backward area. The intention was not to increase the viability of the eligible units or assist these in their the viability of the eligible units or assist these in their the viability of the eligible units or assist these in their business operations. Reliance was also placed on the business operations. Reliance was also placed on the business operations. Reliance was also placed on the decision of Hon'ble Supreme Court in the case of CIT Vs. decision of Hon'ble Supreme Court in the case of CIT Vs. decision of Hon'ble Supreme Court in the case of CIT Vs.

M/s Everest Industries Ltd. 27 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

Chaphalkar Br Chaphalkar Brothers (88 taxmann.com 178).Reliance was others (88 taxmann.com 178).Reliance was placed on the decision of Hon'ble Jammu & Kashmir High placed on the decision of Hon'ble Jammu & Kashmir High placed on the decision of Hon'ble Jammu & Kashmir High Court in the case of Shree Balaji Alloys Vs. CIT (333 IT 335). Court in the case of Shree Balaji Alloys Vs. CIT (333 IT 335). Court in the case of Shree Balaji Alloys Vs. CIT (333 IT 335). The Hon'ble Supreme Court also dismissed the appeal filed The Hon'ble Supreme Court also dismissed the appeal filed The Hon'ble Supreme Court also dismissed the appeal filed by the Revenue challenging the decision by the Revenue challenging the decision so rendered by so rendered by Hon'ble Jammu & Kashmir High Court in the case of Shree Hon'ble Jammu & Kashmir High Court in the case of Shree Hon'ble Jammu & Kashmir High Court in the case of Shree Balaji Alloys vide Civil Appeal No. 10061of 2011 dated Balaji Alloys vide Civil Appeal No. 10061of 2011 dated Balaji Alloys vide Civil Appeal No. 10061of 2011 dated 19.4.2016. The "Excise Incentive schemes" framed for 19.4.2016. The "Excise Incentive schemes" framed for 19.4.2016. The "Excise Incentive schemes" framed for Jammu & Kashmir Government and Uttaranchal Government Jammu & Kashmir Government and Uttaranchal Government Jammu & Kashmir Government and Uttaranchal Government were found to be simil were found to be similar.since theof both the schemes were ar.since theof both the schemes were identical in nature and hence decision rendered by Hon'ble identical in nature and hence decision rendered by Hon'ble identical in nature and hence decision rendered by Hon'ble Jammu & Kashmir High Court in the case of Shree Balaji Jammu & Kashmir High Court in the case of Shree Balaji Jammu & Kashmir High Court in the case of Shree Balaji Alloys (supra) and affirmed by Hon'ble Supreme Court was Alloys (supra) and affirmed by Hon'ble Supreme Court was Alloys (supra) and affirmed by Hon'ble Supreme Court was squarely applicable to the present case. The Hon squarely applicable to the present case. The Hon'ble Mumbai 'ble Mumbai High Court had also considered an identical issue in the case High Court had also considered an identical issue in the case High Court had also considered an identical issue in the case of CIT Vs. Harinagar Sugar Mills Ltd. in ITA No. 1132 of 2014 of CIT Vs. Harinagar Sugar Mills Ltd. in ITA No. 1132 of 2014 of CIT Vs. Harinagar Sugar Mills Ltd. in ITA No. 1132 of 2014 dated dated dated 04.01.2017 04.01.2017 04.01.2017 and and and held held held that that that the the the excise excise excise duty duty duty reimbursement received by the assessee was a capital reimbursement received by the assessee was a capital reimbursement received by the assessee was a capital receipt and not char receipt and not chargeable to tax. It was therefore held by geable to tax. It was therefore held by the undersigned that Excise Duty Exemption availed by the the undersigned that Excise Duty Exemption availed by the the undersigned that Excise Duty Exemption availed by the appellant company was on capital account. The question that appellant company was on capital account. The question that appellant company was on capital account. The question that if a subsidy was on capital account then whether it had to be if a subsidy was on capital account then whether it had to be if a subsidy was on capital account then whether it had to be reduced from the cost of assets for reduced from the cost of assets for allowing depreciation or allowing depreciation or not, also stood covered in the favour of the appellant not, also stood covered in the favour of the appellant not, also stood covered in the favour of the appellant company as elaborately discussed by the undersigned in company as elaborately discussed by the undersigned in company as elaborately discussed by the undersigned in para-5 of the appellate order for AY 2010 5 of the appellate order for AY 2010-11. I accordingly 11. I accordingly hold that the Excise Duty Incentive of Rs.49,00,05,693/ hold that the Excise Duty Incentive of Rs.49,00,05,693/ hold that the Excise Duty Incentive of Rs.49,00,05,693/- is a capital receipt not liable to be taxed. The finding of the AO capital receipt not liable to be taxed. The finding of the AO capital receipt not liable to be taxed. The finding of the AO that even if the Excise Duty Exemption availed by the that even if the Excise Duty Exemption availed by the that even if the Excise Duty Exemption availed by the assessee company was a capital receipt then the appellant assessee company was a capital receipt then the appellant assessee company was a capital receipt then the appellant company would be entitled to claim only the amount over company would be entitled to claim only the amount over company would be entitled to claim only the amount over and above the Cenvat Cred and above the Cenvat Credit, suffers from a serious error it, suffers from a serious error without appreciating the fact that the appellant company had without appreciating the fact that the appellant company had without appreciating the fact that the appellant company had not availed any Cenvat Credit during the year or in the not availed any Cenvat Credit during the year or in the not availed any Cenvat Credit during the year or in the earlier years. As per Notification No.50/2003 earlier years. As per Notification No.50/2003 earlier years. As per Notification No.50/2003-CE dated 10.06.2003, the appellant company was fully exempte 10.06.2003, the appellant company was fully exempte 10.06.2003, the appellant company was fully exempted from the Excise Duty and it had not opted for Cenvat Credit the Excise Duty and it had not opted for Cenvat Credit the Excise Duty and it had not opted for Cenvat Credit Scheme as per letter dated 15.06.2007 addressed to the Scheme as per letter dated 15.06.2007 addressed to the Scheme as per letter dated 15.06.2007 addressed to the Asst.Commissioner Asst.Commissioner Asst.Commissioner of of of Central Central Central Excise, Excise, Excise, Dehradun Dehradun Dehradun for for for exercising its option to avail exemption under Notification exercising its option to avail exemption under Notification exercising its option to avail exemption under Notification No.50/2003- -CE dated 10.06.2003. 3. The The addition addition of of Rs.49,00,05,693/ Rs.49,00,05,693/-made by the AO cannot be sustained and made by the AO cannot be sustained and

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same is directed to be deleted. This ground of appeal is same is directed to be deleted. This ground of appeal is same is directed to be deleted. This ground of appeal is accordingly allowed. accordingly allowed.” 8. Before us, the Ld. Counsel of the assessee relied on the Before us, the Ld. Counsel of the assessee relied on the Before us, the Ld. Counsel of the assessee relied on the decision of the Tribunal in the case of th decision of the Tribunal in the case of the assessee for assessment e assessee for assessment year 2013-14, 2012-13, 2011 13, 2011-12 and 2010-11. The relevant finding 11. The relevant finding of the Tribunal in assessment year 2010 of the Tribunal in assessment year 2010-11 in ITA No. 11 in ITA No. 7791/Mum/2019 along with ITA No. 554/Mum/2020 is reproduced 7791/Mum/2019 along with ITA No. 554/Mum/2020 7791/Mum/2019 along with ITA No. 554/Mum/2020 as under:

“16. We have heard the rival submissions 16. We have heard the rival submissions of both the parties of both the parties and perused the material available on record. We find that and perused the material available on record. We find that and perused the material available on record. We find that the objective of grant of Excise Duty Incentive as envisaged the objective of grant of Excise Duty Incentive as envisaged the objective of grant of Excise Duty Incentive as envisaged in Office Memorandum dated 07 in Office Memorandum dated 07-01-2003 [Refer Page No. 2003 [Refer Page No. 245-262 of FBI issued by Ministry of Commerce & Industry 262 of FBI issued by Ministry of Commerce & Industry 262 of FBI issued by Ministry of Commerce & Industry is industrialization of backward area of Uttaranchal for dustrialization of backward area of Uttaranchal for dustrialization of backward area of Uttaranchal for generation of employment and utilization of local resources. generation of employment and utilization of local resources. generation of employment and utilization of local resources. Hence, the incentive received by assessee is on capital Hence, the incentive received by assessee is on capital Hence, the incentive received by assessee is on capital account. The Ld. CIT(A) also treated the sum as capital account. The Ld. CIT(A) also treated the sum as capital account. The Ld. CIT(A) also treated the sum as capital receipt by taking strength from receipt by taking strength from the Judgment of Hon’ble the Judgment of Hon’ble Jammu & Kashmir High Court in the case of Shree Balaii Jammu & Kashmir High Court in the case of Shree Balaii Jammu & Kashmir High Court in the case of Shree Balaii Alloys vs.- CIT (2011) 51 DTR 217 (J&K) which has been CIT (2011) 51 DTR 217 (J&K) which has been CIT (2011) 51 DTR 217 (J&K) which has been affirmed by Hon'ble Apex Court vide Civil appeal No. 10061 affirmed by Hon'ble Apex Court vide Civil appeal No. 10061 affirmed by Hon'ble Apex Court vide Civil appeal No. 10061 of 2011 dated 19 of 2011 dated 19-04-2016. Further the Hon’ble Jammu and 2016. Further the Hon’ble Jammu and Kashmeer High Court while rendering its Judgment in the er High Court while rendering its Judgment in the er High Court while rendering its Judgment in the case of Shree Balaji Alloys case of Shree Balaji Alloys -vs.- CIT (supra) had relied on the CIT (supra) had relied on the principles laid down by the Hon'ble Apex Court in the case of principles laid down by the Hon'ble Apex Court in the case of principles laid down by the Hon'ble Apex Court in the case of Sahnev Steel & Press Works Sahnev Steel & Press Works - vs. - CIT (1997) 228 ITR 253 CIT (1997) 228 ITR 253 (SO & CIT - vs. - Ponni Sugars & Chemicals Ltd. (2008) 306 i Sugars & Chemicals Ltd. (2008) 306 ITR 392 (SC) and after analyzing the Office Memorandum ITR 392 (SC) and after analyzing the Office Memorandum ITR 392 (SC) and after analyzing the Office Memorandum dated 14-06- -2002 behind the grant of Incentive has held that 2002 behind the grant of Incentive has held that Excise Duty refund granted with the object of creating Excise Duty refund granted with the object of creating Excise Duty refund granted with the object of creating avenues for Perpetual Employment, to eradicate t avenues for Perpetual Employment, to eradicate t avenues for Perpetual Employment, to eradicate the social problem of unemployment in the State by accelerated problem of unemployment in the State by accelerated problem of unemployment in the State by accelerated industrial development was a capital receipt. Further, the industrial development was a capital receipt. Further, the industrial development was a capital receipt. Further, the Departmental Appeal filed against the said High Court Departmental Appeal filed against the said High Court Departmental Appeal filed against the said High Court decision of Shree Balaii Alloys (supra) has also been decision of Shree Balaii Alloys (supra) has also been decision of Shree Balaii Alloys (supra) has also been dismissed by the Hon'ble Ap dismissed by the Hon'ble Apex Court. So, this issue has ex Court. So, this issue has attained finality. Since we find no infirmity in the order of the attained finality. Since we find no infirmity in the order of the attained finality. Since we find no infirmity in the order of the

M/s Everest Industries Ltd. 29 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

Ld. CIT(A) and the Ld. D.R. failed to put forth any contrary Ld. CIT(A) and the Ld. D.R. failed to put forth any contrary Ld. CIT(A) and the Ld. D.R. failed to put forth any contrary decision, we confirm the order of the Ld. CIT(A) on this issue decision, we confirm the order of the Ld. CIT(A) on this issue decision, we confirm the order of the Ld. CIT(A) on this issue and dismiss the grounds of appeal no. and dismiss the grounds of appeal no.2(i) to 2(v) of the 2(i) to 2(v) of the Revenue.” 9. Since, the issue in dispute in the year under consideration is Since, the issue in dispute in the year under consideration is Since, the issue in dispute in the year under consideration is identical to the issue decided by the Tribunal (supra) therefore, identical to the issue decided by the Tribunal (supra) therefore, identical to the issue decided by the Tribunal (supra) therefore, being a binding precedent, we do not find any illegality or perversity being a binding precedent, we do not find any illegality being a binding precedent, we do not find any illegality in the finding of the L in the finding of the Ld. CIT(A) on the issue in dispute and d. CIT(A) on the issue in dispute and accordingly, we uphold , we uphold the same. The ground Nos. 2(i) to (iv) . 2(i) to (iv) of the appeal are accordingly decided against the Revenue. are accordingly decided against the Revenue. are accordingly decided against the Revenue.

“6. In the third ground of appeal, the 6. In the third ground of appeal, the appellant has appellant has challenged the action of the A0 in not allowing the additional challenged the action of the A0 in not allowing the additional challenged the action of the A0 in not allowing the additional depreciation of Rs. 1,50,09,131/ depreciation of Rs. 1,50,09,131/- U/s 32(1)(ia) of the U/s 32(1)(ia) of the Act.Before me, the counsel of the appellant has argued that Act.Before me, the counsel of the appellant has argued that Act.Before me, the counsel of the appellant has argued that in the instant assessment year, the assessee company in the in the instant assessment year, the assessee company in the in the instant assessment year, the assessee company in the revised return of income filed on 30.03.2016 had claimed sed return of income filed on 30.03.2016 had claimed sed return of income filed on 30.03.2016 had claimed additional depreciation of Rs.4,53,24,583/ additional depreciation of Rs.4,53,24,583/- comprising of comprising of Rs.3,03,15,452/ Rs.3,03,15,452/- pertaining to FY 2013-14 relevant to AY 14 relevant to AY 2014-15 and the balance amount of Rs. 1,50,09,131/ 15 and the balance amount of Rs. 1,50,09,131/- 15 and the balance amount of Rs. 1,50,09,131/ pertained to the arrears of additiona pertained to the arrears of additional depreciation computed l depreciation computed @10% on eligible plant & machinery put to use for less than @10% on eligible plant & machinery put to use for less than @10% on eligible plant & machinery put to use for less than 180 days in FY 2012 180 days in FY 2012-13 relevant to AY 2013-14.Further the 14.Further the assessee company vide letter dated 14.12.2016 had assessee company vide letter dated 14.12.2016 had assessee company vide letter dated 14.12.2016 had modified its claim of additional depreciation by capitalising modified its claim of additional depreciation by capitalising modified its claim of additional depreciation by capitalising an amount of Rs.3,26,43,000/ amount of Rs.3,26,43,000/- to the block of plant and to the block of plant and machinery machinery machinery and and and accordingly accordingly accordingly recomputed recomputed recomputed additional additional additional depreciation of Rs.5,09,44,602/ depreciation of Rs.5,09,44,602/-. Out of total amount of . Out of total amount of

M/s Everest Industries Ltd. 30 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

Rs.5,09,44,602/ Rs.5,09,44,602/-, Rs.3,59,35,471/- pertained pertained to to the the additional depreciation in respect of eligibl additional depreciation in respect of eligible plant and e plant and machinery acquired and installed in FY 2013 machinery acquired and installed in FY 2013-14 relevant to 14 relevant to AY 2014-15 and balance amount of Rs.1,50,09,131/ 15 and balance amount of Rs.1,50,09,131/ 15 and balance amount of Rs.1,50,09,131/- pertained to balance 10% additional depreciation in respect pertained to balance 10% additional depreciation in respect pertained to balance 10% additional depreciation in respect of eligible plant and machinery acquired and installed in FY of eligible plant and machinery acquired and installed in FY of eligible plant and machinery acquired and installed in FY 2012-13 releva 13 relevant to AY 2013-14which was put to use for 14which was put to use for less than 180 days in that year. It was argued that 2nd less than 180 days in that year. It was argued that 2nd less than 180 days in that year. It was argued that 2nd provisosection provisosection 32(1)(iia) restricts deduction to 50% of the total restricts deduction to 50% of the total depreciation only in the previous year in which the asset depreciation only in the previous year in which the asset depreciation only in the previous year in which the asset was acquired. It did not debar the was acquired. It did not debar the assessee company to assessee company to claim balance additional depreciation in the subsequent claim balance additional depreciation in the subsequent claim balance additional depreciation in the subsequent year. Therefore the additional depreciation being a statutory year. Therefore the additional depreciation being a statutory year. Therefore the additional depreciation being a statutory benefit was claimed in second year to the extent of balance benefit was claimed in second year to the extent of balance benefit was claimed in second year to the extent of balance 10% which was not claimed in earlier year since the assets 10% which was not claimed in earlier year since the assets 10% which was not claimed in earlier year since the assets were put to use for less than 180 days in the previous year. were put to use for less than 180 days in the previous year. were put to use for less than 180 days in the previous year. However the Assessing Officer disallowed the claim of the However the Assessing Officer disallowed the claim of the However the Assessing Officer disallowed the claim of the assessee assessee assessee company company company on on on the the the ground ground ground that that that additional additional additional depreciation Us 32 was allowable only in the year in which depreciation Us 32 was allowable only in the year in which depreciation Us 32 was allowable only in the year in which new plant and machinery was ac new plant and machinery was acquired and put to use. It quired and put to use. It was argued that in terms of provisions of section 32()(ia) of was argued that in terms of provisions of section 32()(ia) of was argued that in terms of provisions of section 32()(ia) of the Act, the assessee company was entitled to benefit of the Act, the assessee company was entitled to benefit of the Act, the assessee company was entitled to benefit of additional depreciation @20% on new plant and machinery additional depreciation @20% on new plant and machinery additional depreciation @20% on new plant and machinery acquired and installed after the 31" day of March, 2005 acquired and installed after the 31" day of March, 2005 acquired and installed after the 31" day of March, 2005. Further second proviso to section 32(1)(il) provided that Further second proviso to section 32(1)(il) provided that Further second proviso to section 32(1)(il) provided that where the assets had been acquired and put to use for less where the assets had been acquired and put to use for less where the assets had been acquired and put to use for less than 180 days, deduction Us 32(1)(ia) should be restricted to than 180 days, deduction Us 32(1)(ia) should be restricted to than 180 days, deduction Us 32(1)(ia) should be restricted to fifty percent of the amount of depreciation calculated on such fifty percent of the amount of depreciation calculated on such fifty percent of the amount of depreciation calculated on such assets. Rele assets. Relevant provisions of second proviso to section vant provisions of second proviso to section 32(1)() were enumerated as under: 32(1)() were enumerated as under:- "Provided further that where an asset referred to in clause (i) "Provided further that where an asset referred to in clause (i) "Provided further that where an asset referred to in clause (i) or clause (ii) or clause (ia), as the case may be, is acquired by or clause (ii) or clause (ia), as the case may be, is acquired by or clause (ii) or clause (ia), as the case may be, is acquired by the assessee during the previous year and is p the assessee during the previous year and is put to use for ut to use for the purposes of business or profession for a period of less the purposes of business or profession for a period of less the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the than one hundred and eighty days in that previous year, the than one hundred and eighty days in that previous year, the deduction under this sub deduction under this sub-section in respect of such asset section in respect of such asset shall be restricted to fifty percent of the amount calculated at shall be restricted to fifty percent of the amount calculated at shall be restricted to fifty percent of the amount calculated at the percentage prescribed for an asset under clause (i) or the percentage prescribed for an asset under clause (i) or the percentage prescribed for an asset under clause (i) or clause (ii) or clause (jia), as the case may be". clause (ii) or clause (jia), as the case may be". From the above, it could be seen that the said proviso From the above, it could be seen that the said proviso From the above, it could be seen that the said proviso restricted deduction under section 32(1)(iia) to 50% of the restricted deduction under section 32(1)(iia) to 50% of the restricted deduction under section 32(1)(iia) to 50% of the

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total depreciation only in the total depreciation only in the previous year in which such previous year in which such asset was acquired. It did not debar an assessee to claim asset was acquired. It did not debar an assessee to claim asset was acquired. It did not debar an assessee to claim balance additional depreciation in the subsequent year. balance additional depreciation in the subsequent year. balance additional depreciation in the subsequent year. Therefore the additional depreciation being a statutory Therefore the additional depreciation being a statutory Therefore the additional depreciation being a statutory benefit could be claimed in second year also to the extent benefit could be claimed in second year also to the extent benefit could be claimed in second year also to the extent of balance 10% which was not claimed in the earlier year since balance 10% which was not claimed in the earlier year since balance 10% which was not claimed in the earlier year since the assets were put to use for less than g tart. 39 days in the the assets were put to use for less than g tart. 39 days in the the assets were put to use for less than g tart. 39 days in the previous year. Reliance was placed on the judgement of the previous year. Reliance was placed on the judgement of the previous year. Reliance was placed on the judgement of the Apex Court in the case of Court in the case of Bajaj Tempo Ltd. Vs. CIT (196 IT Bajaj Tempo Ltd. Vs. CIT (196 IT 188) wherein it was held that provision in a taxing statute in it was held that provision in a taxing statute in it was held that provision in a taxing statute granting incentives for promoting growth and development granting incentives for promoting growth and development granting incentives for promoting growth and development should be construed liberally and since a provision for should be construed liberally and since a provision for should be construed liberally and since a provision for promoting economic growth had to be interpreted liberally, promoting economic growth had to be interpreted liberally, promoting economic growth had to be interpreted liberally, the restriction on it too, had to the restriction on it too, had to be construed so as to advance be construed so as to advance the objective of the provision and not to frustrate it.Reliance the objective of the provision and not to frustrate it.Reliance the objective of the provision and not to frustrate it.Reliance was placed on the decisions in the case of ACIT Vs. SIL was placed on the decisions in the case of ACIT Vs. SIL was placed on the decisions in the case of ACIT Vs. SIL Investment Ltd. (73DIR 233), Apollo Tyres Ltd Vs. ACIT in ITA Investment Ltd. (73DIR 233), Apollo Tyres Ltd Vs. ACIT in ITA Investment Ltd. (73DIR 233), Apollo Tyres Ltd Vs. ACIT in ITA No.616/Coch/2011 No.616/Coch/2011 No.616/Coch/2011 dated dated dated 20.12.2013, 20.12.2013, 20.12.2013, M/s M/s M/s Ashwani Ashwa Ashwa Industries in ITA No. 140/Ahd/2013, M/s Well Known Industries in ITA No. 140/Ahd/2013, M/s Well Known Industries in ITA No. 140/Ahd/2013, M/s Well Known Polysters Ltd. In ITA No. 7015/Mum/2012, Rashtriya Polysters Ltd. In ITA No. 7015/Mum/2012, Rashtriya Polysters Ltd. In ITA No. 7015/Mum/2012, Rashtriya Chemicals Chemicals Chemicals & & & Fertilizers Fertilizers Fertilizers Ltd. Ltd. Ltd. Vs. Vs. Vs. CIT CIT CIT in in in ITA ITA ITA No. No. No. 5160/Mum/2014, Century Enka Limited Vs. DCIT in ITA 5160/Mum/2014, Century Enka Limited Vs. DCIT in ITA 5160/Mum/2014, Century Enka Limited Vs. DCIT in ITA No.560/Kol/2010 and Birla Corporation Ltd. Vs. DCIT No.560/Kol/2010 and Birla Corporation Ltd. Vs. DCIT No.560/Kol/2010 and Birla Corporation Ltd. Vs. DCIT in ITA No.683/Kol/2011. The Finance Act 2015 had inserted 3rd No.683/Kol/2011. The Finance Act 2015 had inserted 3rd No.683/Kol/2011. The Finance Act 2015 had inserted 3rd proviso to section 32(1)(ji) which provided allowance for the proviso to section 32(1)(ji) which provided allowance for the proviso to section 32(1)(ji) which provided allowance for the balance 50% of additional depreciation which had not been balance 50% of additional depreciation which had not been balance 50% of additional depreciation which had not been allowed in the year of acquisition, in the immediately allowed in the year of acquisition, in the immediately allowed in the year of acquisition, in the immediately succeeding previou succeeding previous year. The 3rd proviso to section 32(1)(ii) s year. The 3rd proviso to section 32(1)(ii) inserted by Finance Act, 2015 stipulated the allowability of inserted by Finance Act, 2015 stipulated the allowability of inserted by Finance Act, 2015 stipulated the allowability of balance additional depreciation of 10% in the subsequent balance additional depreciation of 10% in the subsequent balance additional depreciation of 10% in the subsequent year on new plant and machinery used for a period of less year on new plant and machinery used for a period of less year on new plant and machinery used for a period of less than 180 days in the preceding year than 180 days in the preceding year. The said amendment . The said amendment had been made in order to remove the discrepancy in the had been made in order to remove the discrepancy in the had been made in order to remove the discrepancy in the matter of allowing additional depreciation. The amendment matter of allowing additional depreciation. The amendment matter of allowing additional depreciation. The amendment made by Finance Act 2015 fortified the view expressed in made by Finance Act 2015 fortified the view expressed in made by Finance Act 2015 fortified the view expressed in aforesaid decisions and was applicable for earlier years aforesaid decisions and was applicable for earlier years aforesaid decisions and was applicable for earlier years also. This his his amendment amendment amendment was curative in nature was curative in nature was curative in nature and and and retrospective as it was made to remove the unintended retrospective as it was made to remove the unintended retrospective as it was made to remove the unintended hardship which was against legislative intent. It was held by hardship which was against legislative intent. It was held by hardship which was against legislative intent. It was held by the Hon'ble Madras High Court in the case of CIT Vs.T.P. the Hon'ble Madras High Court in the case of CIT Vs.T.P. the Hon'ble Madras High Court in the case of CIT Vs.T.P. Textiles (P) Ltd. (394 IT 483) that balanc Textiles (P) Ltd. (394 IT 483) that balance 10% additional e 10% additional depreciation was allowable as deducted in the immediately depreciation was allowable as deducted in the immediately depreciation was allowable as deducted in the immediately succeeding year as amendment being clarificatory in nature succeeding year as amendment being clarificatory in nature succeeding year as amendment being clarificatory in nature

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was to be applied retrospectively. Similar views had been was to be applied retrospectively. Similar views had been was to be applied retrospectively. Similar views had been taken by the Hon'ble Mumbai Tribunal in the case of MACG taken by the Hon'ble Mumbai Tribunal in the case of MACG taken by the Hon'ble Mumbai Tribunal in the case of MACG Pampac Machines Machines Machines Pvt. Pvt. Pvt. Ltd. Ltd. Ltd. Vs. Vs. Vs. Pr.CIT Pr.CIT Pr.CIT in in in ITA ITA ITA No.3565/Mum/2017 on relying on the decision in the case of No.3565/Mum/2017 on relying on the decision in the case of No.3565/Mum/2017 on relying on the decision in the case of T.P. Textiles (supra). In view of above facts, it was requested T.P. Textiles (supra). In view of above facts, it was requested T.P. Textiles (supra). In view of above facts, it was requested to allow additional depreciation of Rs.1,50,09,131/ to allow additional depreciation of Rs.1,50,09,131/ to allow additional depreciation of Rs.1,50,09,131/- to the assessee company. assessee company.” 11. Before the Ld. CIT(A), the assessee relied on the decision of the . CIT(A), the assessee relied on the decision of the . CIT(A), the assessee relied on the decision of the Hon’ble Karnataka High Court in the case of CIT v. M/s Rittal CIT v. M/s Rittal Hon’ble Karnataka High Court in the case of India Pvt. Ltd. (ITA No. 268/2014 dtd. 24.11.2015 and other India Pvt. Ltd. (ITA No. 268/2014 dtd. 24.11.2015 and other India Pvt. Ltd. (ITA No. 268/2014 dtd. 24.11.2015 and other decisions. Further, the Ld. CIT(A) following the decision of the . Further, the Ld. CIT(A) following the decision of the . Further, the Ld. CIT(A) following the decision of the Tribunal in the case of MITC Rolling Pvt. Ltd. (supra) allowed the case of MITC Rolling Pvt. Ltd. (supra) allowed the case of MITC Rolling Pvt. Ltd. (supra) allowed the claim of assessee of additional depreciation in subsequent year if of additional depreciation in subsequent year if of additional depreciation in subsequent year if the entire additional depreciation was not allowed in the first year of the entire additional depreciation was not allowed in the first year of the entire additional depreciation was not allowed in the first year of the installation. The relevant finding of the Ld. CIT(A) is reproduced the installation. The relevant finding of the Ld. CIT(A) is reprod the installation. The relevant finding of the Ld. CIT(A) is reprod as under:

“7. I have duly considered the submissions of the appellant. 7. I have duly considered the submissions of the appellant. 7. I have duly considered the submissions of the appellant. On perusal of the assessment order, it is seen that the AO On perusal of the assessment order, it is seen that the AO On perusal of the assessment order, it is seen that the AO was of the opinion that the additional depreciation could be was of the opinion that the additional depreciation could be was of the opinion that the additional depreciation could be claimed only in the year in which the new plant & machinery claimed only in the year in which the new plant & machinery claimed only in the year in which the new plant & machinery was purchased even if was purchased even if it was put to use for less than 180 it was put to use for less than 180 days. The AO held thatbalance 10% additional depreciation days. The AO held thatbalance 10% additional depreciation days. The AO held thatbalance 10% additional depreciation could not be claimed in the immediate succeeding year. On could not be claimed in the immediate succeeding year. On could not be claimed in the immediate succeeding year. On careful consideration of the facts and circumstances of the careful consideration of the facts and circumstances of the careful consideration of the facts and circumstances of the present case, I am inc present case, I am inclined to accept the arguments of the lined to accept the arguments of the appellant. The second proviso to section 32()(li) provides that appellant. The second proviso to section 32()(li) provides that appellant. The second proviso to section 32()(li) provides that where the assets have been acquired and put to use for less where the assets have been acquired and put to use for less where the assets have been acquired and put to use for less than180 days, the deduction Us 32()(a) should be restricted than180 days, the deduction Us 32()(a) should be restricted than180 days, the deduction Us 32()(a) should be restricted to fifty percent of the amount of d to fifty percent of the amount of depreciation calculated on epreciation calculated on such assets. However it does not bar the assessee to claim such assets. However it does not bar the assessee to claim such assets. However it does not bar the assessee to claim additional depreciation in the immediate succeeding year. additional depreciation in the immediate succeeding year. additional depreciation in the immediate succeeding year. The 3r proviso to section 32(1)(i) inserted by Finance Act, The 3r proviso to section 32(1)(i) inserted by Finance Act, The 3r proviso to section 32(1)(i) inserted by Finance Act, 2015 stipulates the allowability of balance additiona 2015 stipulates the allowability of balance additiona 2015 stipulates the allowability of balance additional depreciation of 10% in the subsequent year on new plant and depreciation of 10% in the subsequent year on new plant and depreciation of 10% in the subsequent year on new plant and machinery used for a period of less than 180 days in the machinery used for a period of less than 180 days in the machinery used for a period of less than 180 days in the

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preceding year. The said amendment has been introduced in preceding year. The said amendment has been introduced in preceding year. The said amendment has been introduced in order to remove the discrepancy prevailing in the matter of order to remove the discrepancy prevailing in the matter of order to remove the discrepancy prevailing in the matter of allowing additional allowing additional depreciation in the subsequent year. depreciation in the subsequent year. Moreover this issue is well settled in the favour of the Moreover this issue is well settled in the favour of the Moreover this issue is well settled in the favour of the assessee by the decisions of various Tribunals and High assessee by the decisions of various Tribunals and High assessee by the decisions of various Tribunals and High Courts. The Hon'ble Karnataka High Court in the case of CIT Courts. The Hon'ble Karnataka High Court in the case of CIT Courts. The Hon'ble Karnataka High Court in the case of CIT Vs. Rittal India Pvt. Ltd. (380 IT 423) uphel Vs. Rittal India Pvt. Ltd. (380 IT 423) upheld the decision of d the decision of the Tribunal allowing the claim of balance 10% additional the Tribunal allowing the claim of balance 10% additional the Tribunal allowing the claim of balance 10% additional depreciation depreciation depreciation in in in the the the immediate immediate immediate succeeding succeeding succeeding year year year and and and dismissed the departmental appeal. The Hon'ble High Court dismissed the departmental appeal. The Hon'ble High Court dismissed the departmental appeal. The Hon'ble High Court allowed the deduction of the balance 10% of additional allowed the deduction of the balance 10% of additional allowed the deduction of the balance 10% of additional depreciation and depreciation and held that the proviso to clause (¡i) of the held that the proviso to clause (¡i) of the section32(1) makes it clear that only 50% of the 20% would section32(1) makes it clear that only 50% of the 20% would section32(1) makes it clear that only 50% of the 20% would be allowable, if the new plant and machinery so acquired be allowable, if the new plant and machinery so acquired be allowable, if the new plant and machinery so acquired was put to use for less than 180 days in a financial was put to use for less than 180 days in a financial was put to use for less than 180 days in a financial year.However it nowhere restricts that the year.However it nowhere restricts that the balance 10% balance 10% would not be allowed to be claimed by the assessee in the would not be allowed to be claimed by the assessee in the would not be allowed to be claimed by the assessee in the next assessment year. It was further held that additional next assessment year. It was further held that additional next assessment year. It was further held that additional depreciation allowed under section 32(1)(a) of the Act was a depreciation allowed under section 32(1)(a) of the Act was a depreciation allowed under section 32(1)(a) of the Act was a one-time benefit to encourage industrialization and the time benefit to encourage industrialization and the time benefit to encourage industrialization and the provisions related to it, had to be construed reasonably, related to it, had to be construed reasonably, related to it, had to be construed reasonably, liberally and purposively, to make the provision meaningful liberally and purposively, to make the provision meaningful liberally and purposively, to make the provision meaningful while granting additional allowance. Reliance is also placed while granting additional allowance. Reliance is also placed while granting additional allowance. Reliance is also placed on the decision of Hon'ble Delhi Tribunal in the case of DCIT on the decision of Hon'ble Delhi Tribunal in the case of DCIT on the decision of Hon'ble Delhi Tribunal in the case of DCIT Vs. Cosmo Films Ltd. (13 I Vs. Cosmo Films Ltd. (13 IT Trib. 340) wherein it was held T Trib. 340) wherein it was held that clause 32(1)(ia) was inserted to provide incentives for that clause 32(1)(ia) was inserted to provide incentives for that clause 32(1)(ia) was inserted to provide incentives for fresh investment in industrial sector. The second proviso to fresh investment in industrial sector. The second proviso to fresh investment in industrial sector. The second proviso to section 32(1)(a) restricts the allowances only to 50% where section 32(1)(a) restricts the allowances only to 50% where section 32(1)(a) restricts the allowances only to 50% where the assets had been acquired and put to u the assets had been acquired and put to use for a period less se for a period less than 180 days in the year of acquisition. However this than 180 days in the year of acquisition. However this than 180 days in the year of acquisition. However this restriction was only on the basis of period of use. There was restriction was only on the basis of period of use. There was restriction was only on the basis of period of use. There was no restriction that balance of one time incentive in the form of no restriction that balance of one time incentive in the form of no restriction that balance of one time incentive in the form of additional sum of depreciation shall not be available additional sum of depreciation shall not be available additional sum of depreciation shall not be available in the subsequent year. It was further held that this additional subsequent year. It was further held that this additional subsequent year. It was further held that this additional benefit was to give impetus to industrialization and the basic benefit was to give impetus to industrialization and the basic benefit was to give impetus to industrialization and the basic intention and purpose of these provisions could be intention and purpose of these provisions could be intention and purpose of these provisions could be reasonably and liberally interpreted in view of Bajaj Tempo reasonably and liberally interpreted in view of Bajaj Tempo reasonably and liberally interpreted in view of Bajaj Tempo Vs. CIT (196 IT Vs. CIT (196 IT 188) (SC) and the assessee deserved to get 188) (SC) and the assessee deserved to get the benefit in full when there was no restriction in the statute the benefit in full when there was no restriction in the statute the benefit in full when there was no restriction in the statute to deny the benefit of balance of 50% when the new plant to deny the benefit of balance of 50% when the new plant to deny the benefit of balance of 50% when the new plant and machinery were acquired and used for less than 180 and machinery were acquired and used for less than 180 and machinery were acquired and used for less than 180 days. It was held that the assessee days. It was held that the assessee had earned the benefit had earned the benefit as soon as he had purchased the new plant and machinery as soon as he had purchased the new plant and machinery as soon as he had purchased the new plant and machinery

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in full but it was restricted to 50% in that particular year on in full but it was restricted to 50% in that particular year on in full but it was restricted to 50% in that particular year on account of period of usage. Such restrictions could not divest account of period of usage. Such restrictions could not divest account of period of usage. Such restrictions could not divest the statutory right. It was held that extra deprec the statutory right. It was held that extra deprec the statutory right. It was held that extra depreciation allowable U/s 32(1)Gia) was an extra incentive which had allowable U/s 32(1)Gia) was an extra incentive which had allowable U/s 32(1)Gia) was an extra incentive which had been earned and calculated in the year of acquisition but been earned and calculated in the year of acquisition but been earned and calculated in the year of acquisition but was restricted for that year to 50% on account of usage. This was restricted for that year to 50% on account of usage. This was restricted for that year to 50% on account of usage. This type of earned incentive must be made available in the type of earned incentive must be made available in the type of earned incentive must be made available in the subsequent year. subsequent year. The Hon'ble Mumbai Tribunal in the case of The Hon'ble Mumbai Tribunal in the case of MITC Rolling Pvt. Lid. Vs. ACIT in ITA No. 2789/Mum/ MITC Rolling Pvt. Lid. Vs. ACIT in ITA No. 2789/Mum/ MITC Rolling Pvt. Lid. Vs. ACIT in ITA No. 2789/Mum/ 2012, relying on the decision in case of Cosmo Films Ltd. relying on the decision in case of Cosmo Films Ltd. relying on the decision in case of Cosmo Films Ltd. (supra) held that the assessee was entitled to additional (supra) held that the assessee was entitled to additional (supra) held that the assessee was entitled to additional depreciation in the subsequent year if the e depreciation in the subsequent year if the entire depreciation ntire depreciation was was was not not not allowed allowed allowed in in in the the the first first first year year year of of of installation.Respectfullyfollowing the above decisions and installation.Respectfullyfollowing the above decisions and installation.Respectfullyfollowing the above decisions and considering the facts of the present case, the addition of Rs. considering the facts of the present case, the addition of Rs. considering the facts of the present case, the addition of Rs. 1,50,09,131/ 1,50,09,131/- made by the A cannot be sustained and same made by the A cannot be sustained and same is directed to be del is directed to be deleted. This ground of appeal is accordingly eted. This ground of appeal is accordingly allowed.” 12. Since, the Ld. CIT(A) has followed binding precedent Since, the Ld. CIT(A) has followed binding precedent Since, the Ld. CIT(A) has followed binding precedents of the Tribunal and Hon’ble High Tribunal and Hon’ble High Court, therefore, we do not find any therefore, we do not find any error or illegality in the order of the Ld error or illegality in the order of the Ld. CIT(A) on the issue in . CIT(A) on the issue in dispute and accordingly and accordingly, we uphold the same. The ground No. 3 of we uphold the same. The ground No. 3 of the appeal of the Revenue is accordingly dismissed. the appeal of the Revenue is accordingly dismissed.

M/s Everest Industries Ltd. 35 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

Rs.1,43,79,800/-, which was capitalised to the fixed assets , which was capitalised to the fixed assets , which was capitalised to the fixed assets following a notification i following a notification issued by the Ministry of Corporate affairs, ssued by the Ministry of Corporate affairs, Govt of India, but claimed as revenue/ business loss for the Govt of India, but claimed as revenue/ business loss for the Govt of India, but claimed as revenue/ business loss for the purpose of computation of Income purpose of computation of Income-tax. This claim of the This claim of the business loss as revenue expenditure was disallowed by the Assessing Officer revenue expenditure was disallowed by the Assessing Officer revenue expenditure was disallowed by the Assessing Officer and directed to capitalize and eligible for depreciation. The Ld. capitalize and eligible for depreciation. The Ld. capitalize and eligible for depreciation. The Ld. CIT(A) however, allowed the claim of the assessee observing as CIT(A) however, allowed the claim of the assessee observing as CIT(A) however, allowed the claim of the assessee observing as under:

“11. I have duly considered the submissions of the appellant. 11. I have duly considered the submissions of the appellant. 11. I have duly considered the submissions of the appellant. In the present case, the appellant company has suffered In the present case, the appellant company has suffered In the present case, the appellant company has suffered foreign exchange f foreign exchange fluctuation loss on reinstatement of ECB luctuation loss on reinstatement of ECB loans which were availed in AY 2008 loans which were availed in AY 2008-09. The loss has been 09. The loss has been worked out on the basis of exchange rates prevailing on the worked out on the basis of exchange rates prevailing on the worked out on the basis of exchange rates prevailing on the balance sheet date. This issue was decided in the favour of balance sheet date. This issue was decided in the favour of balance sheet date. This issue was decided in the favour of the appellant company by the appellate the appellant company by the appellate order dated order dated 16.10.2019 in appeal No. NSK/CIT(A) 16.10.2019 in appeal No. NSK/CIT(A)-3/139/2017 3/139/2017-18 for AY 2010-11 wherein elaborate discussion was made by the 11 wherein elaborate discussion was made by the 11 wherein elaborate discussion was made by the undersigned in para undersigned in para-11 to hold that the foreign exchange 11 to hold that the foreign exchange fluctuation fluctuation fluctuation loss loss loss was was was allowable. allowable. allowable. The The The issue issue issue under under under consideration is covered in consideration is covered in the favour of the appellant the favour of the appellant company by the order of Hon'ble Mumbai ITAT in its own company by the order of Hon'ble Mumbai ITAT in its own company by the order of Hon'ble Mumbai ITAT in its own case for AY 2008 case for AY 2008-09 vide order dated 15.09.2017 in ITA 09 vide order dated 15.09.2017 in ITA No.1972 & 1886/Mum/2013 and for AY 2009 No.1972 & 1886/Mum/2013 and for AY 2009-10 vide order 10 vide order dated 31.01.2018 in ITA No.3804 &3849/Mum/2015. While dated 31.01.2018 in ITA No.3804 &3849/Mum/2015. While dated 31.01.2018 in ITA No.3804 &3849/Mum/2015. While adjudicating the issue under consideration, the Hon'ble ITAT ng the issue under consideration, the Hon'ble ITAT ng the issue under consideration, the Hon'ble ITAT held that the appellant company was consistently booking held that the appellant company was consistently booking held that the appellant company was consistently booking loss or gains on FOREX on the basis of Forex rates as on the loss or gains on FOREX on the basis of Forex rates as on the loss or gains on FOREX on the basis of Forex rates as on the last day of the relevant financial year. It was further noticed last day of the relevant financial year. It was further noticed last day of the relevant financial year. It was further noticed by the Hon'ble ITAT tha by the Hon'ble ITAT that in the AY 2011-12, the AO had 12, the AO had taxed foreign exchange fluctuation gain and if gains for a taxed foreign exchange fluctuation gain and if gains for a taxed foreign exchange fluctuation gain and if gains for a particular transaction were to be taxed, the losses arising out particular transaction were to be taxed, the losses arising out particular transaction were to be taxed, the losses arising out of same could not be denied to the assessee. The of same could not be denied to the assessee. The of same could not be denied to the assessee. The undersigned had also placed reliance on the decision undersigned had also placed reliance on the decision undersigned had also placed reliance on the decision rendered by the Hon'ble Supreme Court in the case of CIT Vs. rendered by the Hon'ble Supreme Court in the case of CIT Vs. rendered by the Hon'ble Supreme Court in the case of CIT Vs. Woodward Governor India (P.) Ltd. (312 ITR254), wherein it Woodward Governor India (P.) Ltd. (312 ITR254), wherein it Woodward Governor India (P.) Ltd. (312 ITR254), wherein it was held that the valuation is a part of accounting system was held that the valuation is a part of accounting system was held that the valuation is a part of accounting system

M/s Everest Industries Ltd. 36 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

and the loss suffered by the assessee on account of and the loss suffered by the assessee on account of and the loss suffered by the assessee on account of exchange difference (on exchange difference (on revenue account) as on the date of revenue account) as on the date of balance sheet is an item of expenditure allowable Us 37(1) of balance sheet is an item of expenditure allowable Us 37(1) of balance sheet is an item of expenditure allowable Us 37(1) of the Act. Further the appellant company has recognized loss Further the appellant company has recognized loss Further the appellant company has recognized loss arising on account of foreign arising on account of foreign-exchange fluctuation as per exchange fluctuation as per Accounting Standard Accounting Standard-11. As a result, said loss is an amate loss is an amate accrued and subsisting and subsisting liability and not a contingent or liability and not a contingent or hypothetical liability. During the year under reference, the hypothetical liability. During the year under reference, the hypothetical liability. During the year under reference, the appellant company had capitalized loss of Rs. 1,43,79,800/ appellant company had capitalized loss of Rs. 1,43,79,800/ appellant company had capitalized loss of Rs. 1,43,79,800/- to the fixed assets on the basis of Notification F No. to the fixed assets on the basis of Notification F No. to the fixed assets on the basis of Notification F No. 17/33/2008/CL 2008/CL-V dated 31.03.2009. However this loss has V dated 31.03.2009. However this loss has to be allowed as a business loss considering the judicial to be allowed as a business loss considering the judicial to be allowed as a business loss considering the judicial precedent in the case of appellant company. It is a well precedent in the case of appellant company. It is a well precedent in the case of appellant company. It is a well settled law that accounting entries are not sine settled law that accounting entries are not sine- -qua-non in determining the taxability of a determining the taxability of an item of income or n item of income or deductibility of expenditure as held by the Hon'ble Supreme deductibility of expenditure as held by the Hon'ble Supreme deductibility of expenditure as held by the Hon'ble Supreme Court in the case of Kedarnath Jute Manufacturing Co. (82 IT Court in the case of Kedarnath Jute Manufacturing Co. (82 IT Court in the case of Kedarnath Jute Manufacturing Co. (82 IT 363). Further the provisions of section 43A are also not 363). Further the provisions of section 43A are also not 363). Further the provisions of section 43A are also not applicable in the present case as the loans were borrowed applicable in the present case as the loans were borrowed applicable in the present case as the loans were borrowed to acquire the assets from outside India. The increase or acquire the assets from outside India. The increase or acquire the assets from outside India. The increase or decrease in the liability on account of foreign exchange decrease in the liability on account of foreign exchange decrease in the liability on account of foreign exchange fluctuation after the acquisition of assets, will arise at the fluctuation after the acquisition of assets, will arise at the fluctuation after the acquisition of assets, will arise at the time of making payment. In the case of CIT Vs. Tata Iron & time of making payment. In the case of CIT Vs. Tata Iron & time of making payment. In the case of CIT Vs. Tata Iron & Steel Co. Ltd. (231 Steel Co. Ltd. (231 ITR285), it was held by the Hon'ble ITR285), it was held by the Hon'ble Supreme Court that increase of rupee liability due to Supreme Court that increase of rupee liability due to Supreme Court that increase of rupee liability due to devaluation of foreign currency could not be considered as devaluation of foreign currency could not be considered as devaluation of foreign currency could not be considered as an addition to the cost of fixed assets. It was further held an addition to the cost of fixed assets. It was further held an addition to the cost of fixed assets. It was further held that cost of an asset and cost of raising mon that cost of an asset and cost of raising money for purchase ey for purchase of the asset are two different and independent transactions. of the asset are two different and independent transactions. of the asset are two different and independent transactions. The price of the asset cannot change by any event The price of the asset cannot change by any event The price of the asset cannot change by any event subsequent to the acquisition of asset. The mode of payment subsequent to the acquisition of asset. The mode of payment subsequent to the acquisition of asset. The mode of payment or its manner in respect of loan has nothing to do with the or its manner in respect of loan has nothing to do with the or its manner in respect of loan has nothing to do with the cost of the asset.Further in the present case, the foreign he asset.Further in the present case, the foreign he asset.Further in the present case, the foreign exchange fluctuation loss has arisen after the asset has been exchange fluctuation loss has arisen after the asset has been exchange fluctuation loss has arisen after the asset has been put to use. Therefore the same is allowable as a deduction of put to use. Therefore the same is allowable as a deduction of put to use. Therefore the same is allowable as a deduction of interest Us 36(1)(in) of the Act. In view of above facts, I direct interest Us 36(1)(in) of the Act. In view of above facts, I direct interest Us 36(1)(in) of the Act. In view of above facts, I direct the AO to delet the AO to delete the addition of Rs.1,43,79,800/ e the addition of Rs.1,43,79,800/- made by him. This ground of appeal is accordingly allowed. him. This ground of appeal is accordingly allowed. him. This ground of appeal is accordingly allowed.” 14. Before Before Before us, us, us, the the the Ld. Ld. Ld. Departmental Departmental Departmental Representative Representative Representative (DR) (DR) (DR) submitted that identical issue has been restored submitted that identical issue has been restored by the ITAT in ITA by the ITAT in ITA

M/s Everest Industries Ltd. 37 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

No. 715/Mum/2020 and ITA No. 1423/Mu 715/Mum/2020 and ITA No. 1423/Mum/2020 for AY 2008 m/2020 for AY 2008-09 to the file of the Assessing Officer observing as under: to the file of the Assessing Officer observing as under: to the file of the Assessing Officer observing as under:

“18.1 Thus, in our opinion, the decisions of Tribunal relied Thus, in our opinion, the decisions of Tribunal relied Thus, in our opinion, the decisions of Tribunal relied upon by the Ld Counsel of assessee, where ratio of Copper upon by the Ld Counsel of assessee, where ratio of Copper upon by the Ld Counsel of assessee, where ratio of Copper Corporation (supra) has been followed, are of no assistanc Corporation (supra) has been followed, are of no assistanc Corporation (supra) has been followed, are of no assistance. The Cooper corporation (supra) was also distinguished by the The Cooper corporation (supra) was also distinguished by the The Cooper corporation (supra) was also distinguished by the Tribunal in first round of proceedings. As far as other Tribunal in first round of proceedings. As far as other Tribunal in first round of proceedings. As far as other decisions, where the issue of Forex gain or loss has been decisions, where the issue of Forex gain or loss has been decisions, where the issue of Forex gain or loss has been decided on the basis of accounting principles, is considered, decided on the basis of accounting principles, is considered, decided on the basis of accounting principles, is considered, first of all, th first of all, the assessee itself has followed the accounting e assessee itself has followed the accounting principles in operation during the relevant period and treated principles in operation during the relevant period and treated principles in operation during the relevant period and treated the forex loss as item of capital expenditure except small the forex loss as item of capital expenditure except small the forex loss as item of capital expenditure except small amount transferred to FCMITDA, which has been further amount transferred to FCMITDA, which has been further amount transferred to FCMITDA, which has been further written off in the books of accoun written off in the books of account. The claim of the assessee t. The claim of the assessee that those accounting standard were issued for transitory that those accounting standard were issued for transitory that those accounting standard were issued for transitory period and not normally following accounting principles and period and not normally following accounting principles and period and not normally following accounting principles and therefore, forex loss should be allowed following accounting therefore, forex loss should be allowed following accounting therefore, forex loss should be allowed following accounting standard in existence in prior period, is devoid standard in existence in prior period, is devoid of any merit. of any merit. In exactly identical circumstances in the case of Mahindra & In exactly identical circumstances in the case of Mahindra & In exactly identical circumstances in the case of Mahindra & Mahindra Ltd. (supra), the assessee accepted the loss as Mahindra Ltd. (supra), the assessee accepted the loss as Mahindra Ltd. (supra), the assessee accepted the loss as capital expenditure. Further, we are of the view that when capital expenditure. Further, we are of the view that when capital expenditure. Further, we are of the view that when the Hon’ble Supreme Court has already laid down the law on the Hon’ble Supreme Court has already laid down the law on the Hon’ble Supreme Court has already laid down the law on a particular issue then , the plea of the assessee that for the ticular issue then , the plea of the assessee that for the ticular issue then , the plea of the assessee that for the purpose of ascertaining profits and gains the ordinary purpose of ascertaining profits and gains the ordinary purpose of ascertaining profits and gains the ordinary principles of commercial accounting should be applied , so principles of commercial accounting should be applied , so principles of commercial accounting should be applied , so long as they do not conflict with any express provision of the long as they do not conflict with any express provision of the long as they do not conflict with any express provision of the relevant statute [re relevant statute [relying on the decision of the Hon’ble lying on the decision of the Hon’ble supreme Court in the CIT vs UP State Industrial supreme Court in the CIT vs UP State Industrial supreme Court in the CIT vs UP State Industrial Development Corporation (supra) ] is also of no assistance, Development Corporation (supra) ] is also of no assistance, Development Corporation (supra) ] is also of no assistance, accordingly, we reject said contention of the ld. Counsel of accordingly, we reject said contention of the ld. Counsel of accordingly, we reject said contention of the ld. Counsel of the assessee. the assessee. 18.2 When we examine the facts of When we examine the facts of the instant case in the the instant case in the light of the above decisions, we find that assessee has made light of the above decisions, we find that assessee has made light of the above decisions, we find that assessee has made the accounting entries in respect of foreign the accounting entries in respect of foreign the accounting entries in respect of foreign-exchange fluctuation difference to the fixed assets following the fluctuation difference to the fixed assets following the fluctuation difference to the fixed assets following the Ministry of corporate affairs notification for modification Ministry of corporate affairs notification for modification Ministry of corporate affairs notification for modification of accounting standard As accounting standard As-11 and treated the forex loss as 11 and treated the forex loss as capital expenditure. In the ratio of the Hon’ble Supreme Court capital expenditure. In the ratio of the Hon’ble Supreme Court capital expenditure. In the ratio of the Hon’ble Supreme Court in the case of Sutlej Cotton Mills Ltd (supra) , as reproduced in the case of Sutlej Cotton Mills Ltd (supra) , as reproduced in the case of Sutlej Cotton Mills Ltd (supra) , as reproduced above, if the loan is utilised for fixed capital, the forex gain or above, if the loan is utilised for fixed capital, the forex gain or above, if the loan is utilised for fixed capital, the forex gain or

M/s Everest Industries Ltd. 38 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

loss , will be capital in nature. We also note that the Hon’ble s , will be capital in nature. We also note that the Hon’ble s , will be capital in nature. We also note that the Hon’ble Bombay High Court in the case of CIT Vs V S Dempo and Co. Bombay High Court in the case of CIT Vs V S Dempo and Co. Bombay High Court in the case of CIT Vs V S Dempo and Co. Pvt Ltd (1994 ) 206 ITR 291(Bom), relying on the decision of Pvt Ltd (1994 ) 206 ITR 291(Bom), relying on the decision of Pvt Ltd (1994 ) 206 ITR 291(Bom), relying on the decision of Hon’ble Supreme Court in the case Sutlej Cotton Mills Ltd Hon’ble Supreme Court in the case Sutlej Cotton Mills Ltd Hon’ble Supreme Court in the case Sutlej Cotton Mills Ltd (supra) ; the dec (supra) ; the decision of Calcutta High Court in the case of Oil ision of Calcutta High Court in the case of Oil India Co. Ltd Vs CIT (1982) 137 ITR 156 ; decision of Hon’ble India Co. Ltd Vs CIT (1982) 137 ITR 156 ; decision of Hon’ble India Co. Ltd Vs CIT (1982) 137 ITR 156 ; decision of Hon’ble Supreme Court in the case of CIT vs Tata Locomotive and Supreme Court in the case of CIT vs Tata Locomotive and Supreme Court in the case of CIT vs Tata Locomotive and Engineering Co. Ltd (supra) . The ratio of the decision in the Engineering Co. Ltd (supra) . The ratio of the decision in the Engineering Co. Ltd (supra) . The ratio of the decision in the case of CIT Vs V S Dempo an case of CIT Vs V S Dempo and Co. Pvt Ltd (supra) has been d Co. Pvt Ltd (supra) has been discussed by the Tribunal in first round of proceedings. discussed by the Tribunal in first round of proceedings. discussed by the Tribunal in first round of proceedings. 18.3 In the case before the Assessing Officer in second of In the case before the Assessing Officer in second of In the case before the Assessing Officer in second of proceedings, the assessee has provided details of bills and proceedings, the assessee has provided details of bills and proceedings, the assessee has provided details of bills and vouchers in support of purchase of assets of vouchers in support of purchase of assets of ₹ 3 ₹ 30.11 crores out of the loan of out of the loan of ₹ 48.37 corrodes and no details of the ₹ 48.37 corrodes and no details of the balance Rs. 18.26 crores have been submitted. This is balance Rs. 18.26 crores have been submitted. This is balance Rs. 18.26 crores have been submitted. This is second round of proceeding before us. The assessee was second round of proceeding before us. The assessee was second round of proceeding before us. The assessee was required to provide all details before the assessing officer in required to provide all details before the assessing officer in required to provide all details before the assessing officer in second round second round of proceedings still incomplete detils have been of proceedings still incomplete detils have been filed. The ld Counsel of the assessee intimated that complete filed. The ld Counsel of the assessee intimated that complete filed. The ld Counsel of the assessee intimated that complete were provided and still all details are available with the were provided and still all details are available with the were provided and still all details are available with the assessee. Therefore , in facts and circumstances of the case assessee. Therefore , in facts and circumstances of the case assessee. Therefore , in facts and circumstances of the case and the interest of subst and the interest of substantial justice, we feel it appropriate antial justice, we feel it appropriate to restore this issue back to the file of the Assessing Officer to restore this issue back to the file of the Assessing Officer to restore this issue back to the file of the Assessing Officer with the direction to the assessee for providing evidence in with the direction to the assessee for providing evidence in with the direction to the assessee for providing evidence in support as to what amount of the foreign loan ( ECB) has support as to what amount of the foreign loan ( ECB) has support as to what amount of the foreign loan ( ECB) has been utilised for assets indigenou been utilised for assets indigenously and what amount of sly and what amount of loan has been utilised for acquiring assets from outside India loan has been utilised for acquiring assets from outside India loan has been utilised for acquiring assets from outside India , and then the Assessing Officer is directed to decide the , and then the Assessing Officer is directed to decide the , and then the Assessing Officer is directed to decide the issue following the finding of Hon’ble Supreme Court in the issue following the finding of Hon’ble Supreme Court in the issue following the finding of Hon’ble Supreme Court in the case of Sutlej Cotton Mills Ltd (supra), which has case of Sutlej Cotton Mills Ltd (supra), which has case of Sutlej Cotton Mills Ltd (supra), which has been further followed in the case of V S Dempo and Co Ltd (supra), further followed in the case of V S Dempo and Co Ltd (supra), further followed in the case of V S Dempo and Co Ltd (supra), in respect of assets purchased indigenously and as per the in respect of assets purchased indigenously and as per the in respect of assets purchased indigenously and as per the provisions of section 43A in respect of assets purchased from provisions of section 43A in respect of assets purchased from provisions of section 43A in respect of assets purchased from outside India. The ground of the appeal of the assessee, is outside India. The ground of the appeal of the assessee, is outside India. The ground of the appeal of the assessee, is allowed for sta d for statistical purposes.” 15. As far as issue in dispute raised in this ground, t As far as issue in dispute raised in this ground, t As far as issue in dispute raised in this ground, the facts and circumstances of the instant case being identical t circumstances of the instant case being identical to the facts of the o the facts of the case decided by the Tribunal (supra) case decided by the Tribunal (supra) , therefore, following the same therefore, following the same,

M/s Everest Industries Ltd. 39 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

the ground of appeal of the Revenue is allowed for statistical he ground of appeal of the Revenue is allowed for statistical he ground of appeal of the Revenue is allowed for statistical purposes.

“8. Before us, the Ld. Departmental Representative relied ore us, the Ld. Departmental Representative relied ore us, the Ld. Departmental Representative relied on the order of the Assessing Officer and submitted that on the order of the Assessing Officer and submitted that on the order of the Assessing Officer and submitted that provisions of law do not permit for excluding the sales provisions of law do not permit for excluding the sales provisions of law do not permit for excluding the sales incentive for the purpose of book profit from the profit incentive for the purpose of book profit from the profit incentive for the purpose of book profit from the profit computed as Part II and III of Sche computed as Part II and III of Schedule VI of Companies Act, dule VI of Companies Act, 1956. The Ld. counsel of the assessee, on the other hand, 1956. The Ld. counsel of the assessee, on the other hand, 1956. The Ld. counsel of the assessee, on the other hand, submitted that identical issue in the case of PCIT Vs Ankit submitted that identical issue in the case of PCIT Vs Ankit submitted that identical issue in the case of PCIT Vs Ankit Metal & Power Ltd (2019) 416 ITR 591 has been decided in Metal & Power Ltd (2019) 416 ITR 591 has been decided in Metal & Power Ltd (2019) 416 ITR 591 has been decided in favour of the assessee by Hon’ble Calcutta High Court. favour of the assessee by Hon’ble Calcutta High Court. favour of the assessee by Hon’ble Calcutta High Court. He also relied on the decision of the Coordinate bench of the also relied on the decision of the Coordinate bench of the also relied on the decision of the Coordinate bench of the Bombay Tribunal in the case of Ambuja Cement Limited Vs Bombay Tribunal in the case of Ambuja Cement Limited Vs Bombay Tribunal in the case of Ambuja Cement Limited Vs Add CIT (LTU) in ITA No. 5883/Mum/2012 and Prism Add CIT (LTU) in ITA No. 5883/Mum/2012 and Prism Add CIT (LTU) in ITA No. 5883/Mum/2012 and Prism Cement Ltd Vs DCIT in ITA No. 804 and 805/Mum/2018. Cement Ltd Vs DCIT in ITA No. 804 and 805/Mum/2018. Cement Ltd Vs DCIT in ITA No. 804 and 805/Mum/2018. 9. We have heard rival submission of We have heard rival submission of the party on the the party on the issue in dispute and perused the relevant material on record. issue in dispute and perused the relevant material on record. issue in dispute and perused the relevant material on record. However, on perusal of the order of the Ld. CIT(A), we find However, on perusal of the order of the Ld. CIT(A), we find However, on perusal of the order of the Ld. CIT(A), we find that Ld. CIT(A) had adjudicated on the issue that sales that Ld. CIT(A) had adjudicated on the issue that sales that Ld. CIT(A) had adjudicated on the issue that sales-tax incentive received by the assessee under the Aegis of Ne incentive received by the assessee under the Aegis of Ne incentive received by the assessee under the Aegis of New Packages Scheme, 1993 was capital in nature. The issue of Packages Scheme, 1993 was capital in nature. The issue of Packages Scheme, 1993 was capital in nature. The issue of reduction of the same from the profit and loss account for the reduction of the same from the profit and loss account for the reduction of the same from the profit and loss account for the purpose of computation of the book profit has not been purpose of computation of the book profit has not been purpose of computation of the book profit has not been adjudicated by the Ld. CIT(A). But this being purely a legal adjudicated by the Ld. CIT(A). But this being purely a legal adjudicated by the Ld. CIT(A). But this being purely a legal issue and all fac issue and all facts having been reproduced by the Assessing ts having been reproduced by the Assessing Officer, we proceeded to adjudicate in view of no objection of Officer, we proceeded to adjudicate in view of no objection of Officer, we proceeded to adjudicate in view of no objection of both the parties. both the parties.

M/s Everest Industries Ltd. 40 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

9.1 The Hon’ble Calcutta High Court in the case of Ankit The Hon’ble Calcutta High Court in the case of Ankit The Hon’ble Calcutta High Court in the case of Ankit Metal & Power Ltd (supra), has adjudicated the issue as Metal & Power Ltd (supra), has adjudicated the issue as Metal & Power Ltd (supra), has adjudicated the issue as under: “27. In this case since we have already held that in relevant case since we have already held that in relevant case since we have already held that in relevant assessment year 2010 assessment year 2010-11 the incentives 'Interest subsidy' 11 the incentives 'Interest subsidy' and 'Power subsidy' is a 'capital receipt and does not fall and 'Power subsidy' is a 'capital receipt and does not fall and 'Power subsidy' is a 'capital receipt and does not fall within the definition of 'Income' under Section 2(24) of Income within the definition of 'Income' under Section 2(24) of Income within the definition of 'Income' under Section 2(24) of Income Tax Act, 1961 and when a Tax Act, 1961 and when a receipt is not on in the character receipt is not on in the character of income it cannot form part of the book profit under Section of income it cannot form part of the book profit under Section of income it cannot form part of the book profit under Section 115JB of the Act, 1961. In the case of AppolloTyres Lid. 115JB of the Act, 1961. In the case of AppolloTyres Lid. 115JB of the Act, 1961. In the case of AppolloTyres Lid. (supra) the income in question was taxable but was exempt (supra) the income in question was taxable but was exempt (supra) the income in question was taxable but was exempt under a specific provision of the Act as s under a specific provision of the Act as such it was to be uch it was to be included as a part of the book profit. But where a receipt is included as a part of the book profit. But where a receipt is included as a part of the book profit. But where a receipt is not in the nature of income at all it cannot be included in not in the nature of income at all it cannot be included in not in the nature of income at all it cannot be included in book profit for the purpose of computation under Section book profit for the purpose of computation under Section book profit for the purpose of computation under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, 115JB of the Income Tax Act, 1961. For the aforesaid reason, 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the we hold that the interest and power subsidy under the we hold that the interest and power subsidy under the schemes in question would have to be excluded while schemes in question would have to be excluded while schemes in question would have to be excluded while computing book profit under Section 115 JB of the Income computing book profit under Section 115 JB of the Income computing book profit under Section 115 JB of the Income Tax Act, 1961. Tax Act, 1961.” 9.2 Further, the coordinate bench of the Tribunal in the Further, the coordinate bench of the Tribunal in the Further, the coordinate bench of the Tribunal in the case of Ambuja ceme case of Ambuja cements Ltd (supra) after considering the nts Ltd (supra) after considering the decision of the Hon’ble Bombay High Court in the case of decision of the Hon’ble Bombay High Court in the case of decision of the Hon’ble Bombay High Court in the case of Harinagar Sugar Mills ltd (supra) and decision of the Hon’ble Harinagar Sugar Mills ltd (supra) and decision of the Hon’ble Harinagar Sugar Mills ltd (supra) and decision of the Hon’ble Calcutta High Court in the case of Ankit Metals and power Calcutta High Court in the case of Ankit Metals and power Calcutta High Court in the case of Ankit Metals and power Ltd (supra), held as under: Ltd (supra), held as under: “50. Ld. representatives fairly agree that the above issues representatives fairly agree that the above issues representatives fairly agree that the above issues are now covered, in favour of the assessee, by Hon'ble are now covered, in favour of the assessee, by Hon'ble are now covered, in favour of the assessee, by Hon'ble Calcutta High Court's judgment in the case of PCIT Vs Ankit Calcutta High Court's judgment in the case of PCIT Vs Ankit Calcutta High Court's judgment in the case of PCIT Vs Ankit metal & Power Lid 120197 416 ITR 591 (Call. by Hon 'ble metal & Power Lid 120197 416 ITR 591 (Call. by Hon 'ble metal & Power Lid 120197 416 ITR 591 (Call. by Hon 'ble jurisdictional High Court's judgm jurisdictional High Court's judgment in the case of CIT Vs ent in the case of CIT Vs Harinagar Sugar Mills Lid [ITA No 1132 of 2014, dated 4* Harinagar Sugar Mills Lid [ITA No 1132 of 2014, dated 4* Harinagar Sugar Mills Lid [ITA No 1132 of 2014, dated 4* January 2017] and by a coordinate bench decision in the January 2017] and by a coordinate bench decision in the January 2017] and by a coordinate bench decision in the case of ACIT Vs JSW Steel Limited [(2019) 112 taxmann.com case of ACIT Vs JSW Steel Limited [(2019) 112 taxmann.com case of ACIT Vs JSW Steel Limited [(2019) 112 taxmann.com 55 (Mum)]. Learned Departmental Representative, however, 55 (Mum)]. Learned Departmental Representative, however, 55 (Mum)]. Learned Departmental Representative, however, relied upon the stand of the authorities below. lied upon the stand of the authorities below. 51. We find that a coordinate bench of this Tribunal, in JSW We find that a coordinate bench of this Tribunal, in JSW We find that a coordinate bench of this Tribunal, in JSW Ltd's case (supra), has inter alia,observed as follows: Ltd's case (supra), has inter alia,observed as follows: Ltd's case (supra), has inter alia,observed as follows:

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M/s Everest Industries Ltd. 42 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

the Tribunal or Hich Court and came to conclusion that in the Tribunal or Hich Court and came to conclusion that in the Tribunal or Hich Court and came to conclusion that in those cases the capital receipt is in the nature of income, but those cases the capital receipt is in the nature of income, but those cases the capital receipt is in the nature of income, but by a specific provision, the same has been exempted and by a specific provision, the same has been exempted and by a specific provision, the same has been exempted and hence, the came to the conclusion t hence, the came to the conclusion that, once particular receipt hat, once particular receipt is routed through profit and loss account, then it should be is routed through profit and loss account, then it should be is routed through profit and loss account, then it should be part of book profit and cannot be excluded, while arriving at part of book profit and cannot be excluded, while arriving at part of book profit and cannot be excluded, while arriving at book profit u/s 115JB of the Act 1961. book profit u/s 115JB of the Act 1961. 50. In this view of the matter and considering the ratio of 50. In this view of the matter and considering the ratio of 50. In this view of the matter and considering the ratio of case laws discussed hereinabove, we are of the considered laws discussed hereinabove, we are of the considered laws discussed hereinabove, we are of the considered view that when a particular receipt is exempt from tax under view that when a particular receipt is exempt from tax under view that when a particular receipt is exempt from tax under the Income tax law, them the same cannot be considered for the Income tax law, them the same cannot be considered for the Income tax law, them the same cannot be considered for the purpose of computation of book profit w/s 115JB of the the purpose of computation of book profit w/s 115JB of the the purpose of computation of book profit w/s 115JB of the IT.Act 1961. Hence, we d IT.Act 1961. Hence, we direct the Ld. AO to exclude sales tax irect the Ld. AO to exclude sales tax subsidy received by the assessee amounting to Rs. subsidy received by the assessee amounting to Rs. subsidy received by the assessee amounting to Rs. 36,15,49,828/ 36,15,49,828/- from book profits computed w/s 115JB of from book profits computed w/s 115JB of the IT. Act, 1961. the IT. Act, 1961. 52. We see no reasons to take any other view of the matter 52. We see no reasons to take any other view of the matter 52. We see no reasons to take any other view of the matter than the view so taken by the coord than the view so taken by the coordinate bench. Respectfully inate bench. Respectfully following the same, we uphold the plea of the assessee and following the same, we uphold the plea of the assessee and following the same, we uphold the plea of the assessee and direct the Assessing Officer to exclude the sales tax incentive direct the Assessing Officer to exclude the sales tax incentive direct the Assessing Officer to exclude the sales tax incentive subsidy for computing book profit under section 115 JB of subsidy for computing book profit under section 115 JB of subsidy for computing book profit under section 115 JB of the Act. The assessee gets the relief accordingly the Act. The assessee gets the relief accordingly.” 9.3 The issue in the decisions cited by the Assessing The issue in the decisions cited by the Assessing The issue in the decisions cited by the Assessing officer is of capital income under the capital gain, which is officer is of capital income under the capital gain, which is officer is of capital income under the capital gain, which is liable for tax but the capital receipt in the case of the liable for tax but the capital receipt in the case of the liable for tax but the capital receipt in the case of the assessee has been held as not as part of income at all and assessee has been held as not as part of income at all and assessee has been held as not as part of income at all and not liable for tax i not liable for tax in the decision in the case Ankit Metal and n the decision in the case Ankit Metal and Powers ltd. (supra) , which has been followed in the case of Powers ltd. (supra) , which has been followed in the case of Powers ltd. (supra) , which has been followed in the case of Ambuja Cement Limited (supra). The issue in dispute being Ambuja Cement Limited (supra). The issue in dispute being Ambuja Cement Limited (supra). The issue in dispute being squarely covered by the decision of the coordinate bench of squarely covered by the decision of the coordinate bench of squarely covered by the decision of the coordinate bench of the Tribunal (supra), the grounds the Tribunal (supra), the grounds raised by the Revenue are raised by the Revenue are accordingly dismissed. accordingly dismissed.” 17. Since the issue in dispute involved before us is identical Since the issue in dispute involved before us is identical Since the issue in dispute involved before us is identical to issue decided by the Tribunal issue decided by the Tribunal(supra), therefore, following the same, following the same, the ground No. 5 of the Revenue is dismissed. the ground No. 5 of the Revenue is dismissed.

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“15. I have duly considered the submissions of the appellant. 15. I have duly considered the submissions of the appellant. 15. I have duly considered the submissions of the appellant. The issue under consideration is covered in the favour of the The issue under consideration is covered in the favour of the The issue under consideration is covered in the favour of the appellant compan appellant company by the appellate order dated 16.10.2019 y by the appellate order dated 16.10.2019 in appeal No. NSK/CIT(A) in appeal No. NSK/CIT(A)-3/139/2017-18 for AY 2010 18 for AY 2010-11 wherein elaborate discussion was made by the undersigned wherein elaborate discussion was made by the undersigned wherein elaborate discussion was made by the undersigned in para-15 as to why the education cess was an allowable 15 as to why the education cess was an allowable 15 as to why the education cess was an allowable expenditure. Under section 40(a)(ji) of the In expenditure. Under section 40(a)(ji) of the Income Tax Act, any come Tax Act, any sum paid on account of any rate or tax levied on the profits or sum paid on account of any rate or tax levied on the profits or sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a gains of any business or profession or assessed at a gains of any business or profession or assessed at a proportion of or otherwise on the basis of, any such profits or proportion of or otherwise on the basis of, any such profits or proportion of or otherwise on the basis of, any such profits or gains, is not allowable as deduction. As per aforesaid gains, is not allowable as deduction. As per aforesaid gains, is not allowable as deduction. As per aforesaid provision, any tax levied on profits or gains of any business or ovision, any tax levied on profits or gains of any business or ovision, any tax levied on profits or gains of any business or profession in computing the gross total income of a taxpayer, profession in computing the gross total income of a taxpayer, profession in computing the gross total income of a taxpayer, is not an allowable expenditure. While computing Book Profit is not an allowable expenditure. While computing Book Profit is not an allowable expenditure. While computing Book Profit under section 115]B of the Act (for MAT purpose), Explanation under section 115]B of the Act (for MAT purpose), Explanation under section 115]B of the Act (for MAT purpose), Explanation 2 to section 115IB(2) specifically states that for adding income tion 115IB(2) specifically states that for adding income tion 115IB(2) specifically states that for adding income tax paid/payable, income tax shall include inter alia, tax paid/payable, income tax shall include inter alia, tax paid/payable, income tax shall include inter alia, education cess and Secondary & Higher education cess, if education cess and Secondary & Higher education cess, if education cess and Secondary & Higher education cess, if any, as levied by the Central Act. Section 40(a)(ji) states only any, as levied by the Central Act. Section 40(a)(ji) states only any, as levied by the Central Act. Section 40(a)(ji) states only tax whereas section 11 tax whereas section 115IB states that for computing book 5IB states that for computing book profit, tax includes cess as levied by the Central Act. Hence it profit, tax includes cess as levied by the Central Act. Hence it profit, tax includes cess as levied by the Central Act. Hence it could be seen that where the legislature intended to disallow could be seen that where the legislature intended to disallow could be seen that where the legislature intended to disallow cess, it had provided specifically for the same. However in cess, it had provided specifically for the same. However in cess, it had provided specifically for the same. However in case of computation under regular case of computation under regular provisions, the same had provisions, the same had not been mentioned in section 40(a)(in) of the Act. Further not been mentioned in section 40(a)(in) of the Act. Further not been mentioned in section 40(a)(in) of the Act. Further education cess was levied on the amount of income education cess was levied on the amount of income education cess was levied on the amount of income-tax, it was not levied on the profits or gains of any business or not levied on the profits or gains of any business or not levied on the profits or gains of any business or profession. Also it was not assessed at a proportion of profession. Also it was not assessed at a proportion of profession. Also it was not assessed at a proportion of or otherwise on the basis of any such profits or gains. Therefore otherwise on the basis of any such profits or gains. Therefore otherwise on the basis of any such profits or gains. Therefore education cess was not covered by section 40(a)(ji) of the Act. education cess was not covered by section 40(a)(ji) of the Act. education cess was not covered by section 40(a)(ji) of the Act. Under the old Income Tax Act, section 10(4) of the Income Under the old Income Tax Act, section 10(4) of the Income Under the old Income Tax Act, section 10(4) of the Income-tax Act, 1922 stated that any sum paid on account of any cess, Act, 1922 stated that any sum paid on account of any cess, Act, 1922 stated that any sum paid on account of any cess, rate or tax levied on the profits or gains of any business, or tax levied on the profits or gains of any business, or tax levied on the profits or gains of any business, profession or vocation or assessed at a proportion of or profession or vocation or assessed at a proportion of or profession or vocation or assessed at a proportion of or otherwise on the basis of any such profits or gains was not an otherwise on the basis of any such profits or gains was not an otherwise on the basis of any such profits or gains was not an allowable expense. Thus the Legislators specifically added the allowable expense. Thus the Legislators specifically added the allowable expense. Thus the Legislators specifically added the word "cess" in af word "cess" in aforesaid provision of old law whereas same oresaid provision of old law whereas same

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was missing in the present law. The "cess" was not in the was missing in the present law. The "cess" was not in the was missing in the present law. The "cess" was not in the nature of a "tax". While proceeds from collection of tax were nature of a "tax". While proceeds from collection of tax were nature of a "tax". While proceeds from collection of tax were used by the Government for general purposes and running of used by the Government for general purposes and running of used by the Government for general purposes and running of the state of affairs of the country the state of affairs of the country, cess proceeds were , cess proceeds were collected and utilized separately with a specific purpose. As in collected and utilized separately with a specific purpose. As in collected and utilized separately with a specific purpose. As in the case of education cess, the proceeds were not credited to the case of education cess, the proceeds were not credited to the case of education cess, the proceeds were not credited to Consolidated Fund but to a non Consolidated Fund but to a non-lapsable Fund for elementary lapsable Fund for elementary education i.e."Prarambhik Shiksha Kosh" and use education i.e."Prarambhik Shiksha Kosh" and use education i.e."Prarambhik Shiksha Kosh" and used only for that purpose. Reliance was also placed on the decision of that purpose. Reliance was also placed on the decision of that purpose. Reliance was also placed on the decision of Hon'ble Rajasthan High Court in case of Chambal Fertilisers Hon'ble Rajasthan High Court in case of Chambal Fertilisers Hon'ble Rajasthan High Court in case of Chambal Fertilisers and Chemicals Limited Vs. JCIT in ITA No. 52/2018, wherein and Chemicals Limited Vs. JCIT in ITA No. 52/2018, wherein and Chemicals Limited Vs. JCIT in ITA No. 52/2018, wherein it was held that education cess was not a tax, therefore the it was held that education cess was not a tax, therefore the it was held that education cess was not a tax, therefore the same was not required to be disallowed under section s not required to be disallowed under section s not required to be disallowed under section 40(a)(ii), in computing profits and gains from business as part 40(a)(ii), in computing profits and gains from business as part 40(a)(ii), in computing profits and gains from business as part of total income of the taxpayer. The Hon'ble High Court further of total income of the taxpayer. The Hon'ble High Court further of total income of the taxpayer. The Hon'ble High Court further held that education cess cannot be treated at par with tax and held that education cess cannot be treated at par with tax and held that education cess cannot be treated at par with tax and hence it is an allo hence it is an allowable expenditure. It was the only available wable expenditure. It was the only available decision of a High Court on the issue and was binding on the decision of a High Court on the issue and was binding on the decision of a High Court on the issue and was binding on the appellate authorities. While deciding the issue, the High Court appellate authorities. While deciding the issue, the High Court appellate authorities. While deciding the issue, the High Court specifically referred to the CBDT Circular issued in the year specifically referred to the CBDT Circular issued in the year specifically referred to the CBDT Circular issued in the year 1967. It also held that 1967. It also held that CBDT Circulars are binding on the CBDT Circulars are binding on the Department. The issue under consideration is also covered in Department. The issue under consideration is also covered in Department. The issue under consideration is also covered in the favour of the assessee by the decision of Hon'ble Pune the favour of the assessee by the decision of Hon'ble Pune the favour of the assessee by the decision of Hon'ble Pune ITAT rendered in the case of Atlas Copco (India) Pvt. Ltd. Vs. ITAT rendered in the case of Atlas Copco (India) Pvt. Ltd. Vs. ITAT rendered in the case of Atlas Copco (India) Pvt. Ltd. Vs. DCIT in ITA No.732 & 736/Pun/2011 for A DCIT in ITA No.732 & 736/Pun/2011 for A DCIT in ITA No.732 & 736/Pun/2011 for AY 2005-06. Reliance was also placed on the decision of the Hon'ble Apex Reliance was also placed on the decision of the Hon'ble Apex Reliance was also placed on the decision of the Hon'ble Apex Court in the case of Jaipuria Samla Amalgamated Collieries Court in the case of Jaipuria Samla Amalgamated Collieries Court in the case of Jaipuria Samla Amalgamated Collieries (82IT 580) held that section 10(4) of the Income Tax Act, 1922 (82IT 580) held that section 10(4) of the Income Tax Act, 1922 (82IT 580) held that section 10(4) of the Income Tax Act, 1922 (pari materia to section 40(a) (ji) of the Income Tax Act, 196 (pari materia to section 40(a) (ji) of the Income Tax Act, 196 (pari materia to section 40(a) (ji) of the Income Tax Act, 1961) provides only for disallowance of rates and taxes levied on provides only for disallowance of rates and taxes levied on provides only for disallowance of rates and taxes levied on profits or gains of any business or profession computed in profits or gains of any business or profession computed in profits or gains of any business or profession computed in accordance with the provisions of section 10 of Income Tax accordance with the provisions of section 10 of Income Tax accordance with the provisions of section 10 of Income Tax Act, 1922. Since 'education cess' was not levied on profits or Act, 1922. Since 'education cess' was not levied on profits or Act, 1922. Since 'education cess' was not levied on profits or gains of any gains of any business or profession, the same did not fall business or profession, the same did not fall within the purview of section 40(a)(i) of the Act. In view of within the purview of section 40(a)(i) of the Act. In view of within the purview of section 40(a)(i) of the Act. In view of above facts, I direct the AO to delete the addition of Rs. above facts, I direct the AO to delete the addition of Rs. above facts, I direct the AO to delete the addition of Rs. 1,88,093/- made by him. This ground of appeal is accordingly made by him. This ground of appeal is accordingly made by him. This ground of appeal is accordingly allowed.” 19. In view of Explanation Explanation-3 inserted by way of Finance Act 2022 3 inserted by way of Finance Act 2022 w.e.f. 1/4/2005 to section 40(a)(ii) the Act w.e.f. 1/4/2005 to section 40(a)(ii) the Act, the education cess being , the education cess being part of the tax amount, amount, therefore same is not deductible therefore same is not deductible

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expenditure. The Ld. Counsel of the assessee also did not object to expenditure. The Ld. Counsel of the assessee also did not expenditure. The Ld. Counsel of the assessee also did not disallowance of the education cess as deduction ce of the education cess as deduction, accordingly accordingly, the ground of the appeal of the Revenue is allowed. ground of the appeal of the Revenue is allowed.

“9. I have duly considered the submissions of the appellant. 9. I have duly considered the submissions of the appellant. 9. I have duly considered the submissions of the appellant. During the year under reference, the appellant company had During the year under reference, the appellant company had During the year under reference, the appellant company had incurred expenditure in respect of salari incurred expenditure in respect of salaries and wages, es and wages, contributions to provident & other funds, staff welfare contributions to provident & other funds, staff welfare contributions to provident & other funds, staff welfare expenses, consumption of stores and spare parts, cost of expenses, consumption of stores and spare parts, cost of expenses, consumption of stores and spare parts, cost of materials consumed, power and fuel, repairs & maintenance materials consumed, power and fuel, repairs & maintenance materials consumed, power and fuel, repairs & maintenance expenses, rent, rates & taxes, insurance, travelling expenses, expenses, rent, rates & taxes, insurance, travelling expenses, expenses, rent, rates & taxes, insurance, travelling expenses, advertisement & sales promotion expenses, miscellaneous ement & sales promotion expenses, miscellaneous ement & sales promotion expenses, miscellaneous expenses etc. on the new projects namely Somnathpur Works expenses etc. on the new projects namely Somnathpur Works expenses etc. on the new projects namely Somnathpur Works (SW) at Balasore, Orissa and Narmada Works (NW) at Dahej (SW) at Balasore, Orissa and Narmada Works (NW) at Dahej (SW) at Balasore, Orissa and Narmada Works (NW) at Dahej before commencement of commercial production. It was also before commencement of commercial production. It was also before commencement of commercial production. It was also an undisputed fact that both these an undisputed fact that both these new ventures were new ventures were managed from common funds and there was unity of control managed from common funds and there was unity of control managed from common funds and there was unity of control leading to an interconnection, interdependence and interlacing leading to an interconnection, interdependence and interlacing leading to an interconnection, interdependence and interlacing among the various ventures such that it could be said that among the various ventures such that it could be said that among the various ventures such that it could be said that both these projects were only anexpenses were required to b both these projects were only anexpenses were required to b both these projects were only anexpenses were required to be capitalized post capitalized post-completion of said projects. In the books of completion of said projects. In the books of accounts, the aforesaid expenses had been reduced as pre accounts, the aforesaid expenses had been reduced as pre accounts, the aforesaid expenses had been reduced as pre- operative operative operative expenses expenses expenses from from from the the the respective respective respective schedule schedule schedule of of of expenditures and transferred to capital work expenditures and transferred to capital work-in-progress and progress and pre-operative expenditu operative expenditure schedule (Note No.2.33 of notes re schedule (Note No.2.33 of notes forming partof financial stat ents) in the Annual Report. forming partof financial stat ents) in the Annual Report. forming partof financial stat ents) in the Annual Report. However said expenditure was revenuein nature and However said expenditure was revenuein nature and However said expenditure was revenuein nature and therefore in the computation of income, it was claimed as a therefore in the computation of income, it was claimed as a therefore in the computation of income, it was claimed as a revenue expenditure considering the judicial decision revenue expenditure considering the judicial decision revenue expenditure considering the judicial decisions of various High Courts as well as Tribunal. It was consistently various High Courts as well as Tribunal. It was consistently various High Courts as well as Tribunal. It was consistently held in various decisions that pre held in various decisions that pre-operative expenditure operative expenditure incurred on expansion of the existing business of an assessee incurred on expansion of the existing business of an assessee incurred on expansion of the existing business of an assessee was allowable as a revenue expenditure U/s 37(1) of the Act. was allowable as a revenue expenditure U/s 37(1) of the Act. was allowable as a revenue expenditure U/s 37(1) of the Act.

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On careful consideration of facts & circumstances of the consideration of facts & circumstances of the present case, I am inclined to agree with the arguments of the present case, I am inclined to agree with the arguments of the present case, I am inclined to agree with the arguments of the appellant. The fact that the appellant company had The fact that the appellant company had The fact that the appellant company had capitalized the pre capitalized the pre-operative expenditure to the cost of operative expenditure to the cost of fixed assets, is not determinative of fixed assets, is not determinative of the factor whether the factor whether same is allowable or not. same is allowable or not. Where the assessee had set up Where the assessee had set up new business unit or expanded the existing unit, then pre new business unit or expanded the existing unit, then pre new business unit or expanded the existing unit, then pre- operative expenses on revenue account incurred by way of operative expenses on revenue account incurred by way of operative expenses on revenue account incurred by way of salaries & wages, PF and ESI contribution, staff welfare salaries & wages, PF and ESI contribution, staff welfare salaries & wages, PF and ESI contribution, staff welfare expenses, repairs repairs repairs & & & maintenance maintenance maintenance expenses, expenses, expenses, travelling travelling travelling expenses and other administrative expenses are allowable Us expenses and other administrative expenses are allowable Us expenses and other administrative expenses are allowable Us 37 of the Act. In the present case, it is an undisputed fact that 37 of the Act. In the present case, it is an undisputed fact that 37 of the Act. In the present case, it is an undisputed fact that the impugned expenditure was revenue in nature and the impugned expenditure was revenue in nature and the impugned expenditure was revenue in nature and incurred wholly and exclusively for incurred wholly and exclusively for setting up new units or setting up new units or expansion of existing units. These expenses have not These expenses have not expansion of existing units. brought into existence any capital asset or enduring brought into existence any capital asset or enduring brought into existence any capital asset or enduring benefit to the appellant company. benefit to the appellant company. None of the expenses None of the expenses involve construction of structure or renovation, extension Or involve construction of structure or renovation, extension Or involve construction of structure or renovation, extension Or improvement of the asset. The expenses incurred during the ent of the asset. The expenses incurred during the ent of the asset. The expenses incurred during the year are purely revenue in nature and cannot be permitted to year are purely revenue in nature and cannot be permitted to year are purely revenue in nature and cannot be permitted to be deferred under the relevant provisions of the Act. The issue be deferred under the relevant provisions of the Act. The issue be deferred under the relevant provisions of the Act. The issue under consideration is covered in the favour of the assessee under consideration is covered in the favour of the assessee under consideration is covered in the favour of the assessee by the decision of by the decision of Hon'ble Mumbai High Court in the case of Hon'ble Mumbai High Court in the case of Reliance Supply Chain Solutions Ltd. in ITA No.892 of 2014 Reliance Supply Chain Solutions Ltd. in ITA No.892 of 2014 Reliance Supply Chain Solutions Ltd. in ITA No.892 of 2014 dated 05.07.2017. Under similar circumstances, the Hon'ble dated 05.07.2017. Under similar circumstances, the Hon'ble dated 05.07.2017. Under similar circumstances, the Hon'ble Mumbai High Court held that when assessee had incurred Mumbai High Court held that when assessee had incurred Mumbai High Court held that when assessee had incurred expenditure for expansion of its existing expenditure for expansion of its existing business, expenditure business, expenditure incurred in the nature of revenue expenditure could not be incurred in the nature of revenue expenditure could not be incurred in the nature of revenue expenditure could not be disallowed. It was further held that it was not relevant as to disallowed. It was further held that it was not relevant as to disallowed. It was further held that it was not relevant as to how the assessee showed a particular income or expenditure how the assessee showed a particular income or expenditure how the assessee showed a particular income or expenditure in the books of account.In the cited case, both the in the books of account.In the cited case, both the in the books of account.In the cited case, both the Commissioner (Appeals) and the Tribunal had specifically, on ommissioner (Appeals) and the Tribunal had specifically, on ommissioner (Appeals) and the Tribunal had specifically, on appreciation of factual matrix, arrived at a conclusion that the appreciation of factual matrix, arrived at a conclusion that the appreciation of factual matrix, arrived at a conclusion that the expenditures were directly identifiable with the operations expenditures were directly identifiable with the operations expenditures were directly identifiable with the operations and maintenance of the existing stocks i.e. with regard to the and maintenance of the existing stocks i.e. with regard to the and maintenance of the existing stocks i.e. with regard to the payment of salary, travelling and conveyance allowance, of salary, travelling and conveyance allowance, of salary, travelling and conveyance allowance, telephone expenses, professional fees paid, audit fee and telephone expenses, professional fees paid, audit fee and telephone expenses, professional fees paid, audit fee and other miscellaneous expenses. In viewthe other miscellaneous expenses. In viewthe specific finding specific finding of fact fact fact arrived arrived arrived at at at by by by the the the Commissioner Commissioner Commissioner (Appeals) (Appeals) (Appeals) and and and theTribunal, the Hon'ble High Court hel theTribunal, the Hon'ble High Court held the expenditure to be d the expenditure to be revenue expenditure.This issue is also covered in the favour of revenue expenditure.This issue is also covered in the favour of revenue expenditure.This issue is also covered in the favour of the assessee by the decision of Hon'ble Mumbai High Court in the assessee by the decision of Hon'ble Mumbai High Court in the assessee by the decision of Hon'ble Mumbai High Court in the case of CIT Vs. Evergrowth Telecom Ltd. (29 taxmann.com the case of CIT Vs. Evergrowth Telecom Ltd. (29 taxmann.com the case of CIT Vs. Evergrowth Telecom Ltd. (29 taxmann.com

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273) wherein the Hon'ble jurisdictional High Co 273) wherein the Hon'ble jurisdictional High Co 273) wherein the Hon'ble jurisdictional High Court, while considering the issue of expenditure incurred after setting up considering the issue of expenditure incurred after setting up considering the issue of expenditure incurred after setting up of business and before commencement of business held that of business and before commencement of business held that of business and before commencement of business held that the said expenditure was allowable as a deduction U/ 37(1) of the said expenditure was allowable as a deduction U/ 37(1) of the said expenditure was allowable as a deduction U/ 37(1) of the Income Tax Act. In the case of Olive Bar & Kitchen (P.) the Income Tax Act. In the case of Olive Bar & Kitchen (P.) the Income Tax Act. In the case of Olive Bar & Kitchen (P.) Ltd.Vs. DCIT (102 taxmann.com 98), the assessee was d.Vs. DCIT (102 taxmann.com 98), the assessee was d.Vs. DCIT (102 taxmann.com 98), the assessee was engaged in the business of running restaurants and related engaged in the business of running restaurants and related engaged in the business of running restaurants and related activities. During the year under reference, the assessee had activities. During the year under reference, the assessee had activities. During the year under reference, the assessee had expanded its existing business by opening three more expanded its existing business by opening three more expanded its existing business by opening three more restaurants at different places restaurants at different places and treated pre and treated pre-operative expenses incurred under the head, 'pre expenses incurred under the head, 'pre-operative expenses' operative expenses' like salaries and wages, travelling expenses, restaurant rent, like salaries and wages, travelling expenses, restaurant rent, like salaries and wages, travelling expenses, restaurant rent, repairs and maintenance and like other general administrative repairs and maintenance and like other general administrative repairs and maintenance and like other general administrative expenses which were incurred wholly and exclus expenses which were incurred wholly and exclus expenses which were incurred wholly and exclusively in connection with business under the head 'capital work connection with business under the head 'capital work connection with business under the head 'capital work-in- progress' in its books of account. But when it came to progress' in its books of account. But when it came to progress' in its books of account. But when it came to computation of total income, the expenses in the nature of computation of total income, the expenses in the nature of computation of total income, the expenses in the nature of revenue were treated as revenue expenditure and claimed as revenue were treated as revenue expenditure and claimed as revenue were treated as revenue expenditure and claimed as such. The Assessi such. The Assessing Officer disallowed the pre ng Officer disallowed the pre-operative expenses capitalized in the books of account but claimed as expenses capitalized in the books of account but claimed as expenses capitalized in the books of account but claimed as revenue expenditure in computation of the total income. The revenue expenditure in computation of the total income. The revenue expenditure in computation of the total income. The Assessing Officer disallowed pre Assessing Officer disallowed pre-operative expenses on the operative expenses on the ground that a particular expense cann ground that a particular expense cannot have two treatments ot have two treatments i.e. one in the books of account and the other in computation of i.e. one in the books of account and the other in computation of i.e. one in the books of account and the other in computation of total income. According to the Assessing Officer, pre total income. According to the Assessing Officer, pre total income. According to the Assessing Officer, pre-operative expenses can be deducted as per the provisions of section expenses can be deducted as per the provisions of section expenses can be deducted as per the provisions of section 35D(1)(ji) to the extent as indicated therein. 35D(1)(ji) to the extent as indicated therein. On the contrary, On the contrary, the assessee company contended that it was in the business the assessee company contended that it was in the business the assessee company contended that it was in the business of running restaurants and it had commenced its business of running restaurants and it had commenced its business of running restaurants and it had commenced its business during the year under consideration. Though the commercial during the year under consideration. Though the commercial during the year under consideration. Though the commercial operations had not taken place in respect of three new operations had not taken place in respect of three new operations had not taken place in respect of three new restaurants, yet the commencement of the business activities nts, yet the commencement of the business activities nts, yet the commencement of the business activities was not in doubt. It was further contended that all was not in doubt. It was further contended that all was not in doubt. It was further contended that all expenditures incurred in connection with setting up of new expenditures incurred in connection with setting up of new expenditures incurred in connection with setting up of new units which were in the nature of capital expenditure, had units which were in the nature of capital expenditure, had units which were in the nature of capital expenditure, had been debited to capital work been debited to capital work-in-progress. The revenue rogress. The revenue expenditure incurred in connection with a particular unit had expenditure incurred in connection with a particular unit had expenditure incurred in connection with a particular unit had been treated as capital work in progress in its books of been treated as capital work in progress in its books of been treated as capital work in progress in its books of account. But when it came to the computation of total income, account. But when it came to the computation of total income, account. But when it came to the computation of total income, revenue expenditure claimed as deduction under section revenue expenditure claimed as deduction under section revenue expenditure claimed as deduction under section 37(1) of the Act because the assessee hadcommenced business of the Act because the assessee hadcommenced business of the Act because the assessee hadcommenced business activities. On appeal, the Commissioner (Appeals) held that activities. On appeal, the Commissioner (Appeals) held that activities. On appeal, the Commissioner (Appeals) held that although pre although pre-operative expenses were capitalized in books operative expenses were capitalized in books

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under the head 'work under the head 'work-in-progress' but the fact remained that progress' but the fact remained that the said expendi the said expenditure claimed in the statement of total income ture claimed in the statement of total income as revenue expenditure under section 37(1), was purely as revenue expenditure under section 37(1), was purely as revenue expenditure under section 37(1), was purely revenue revenue revenue expenditure expenditure expenditure which which which was was was incurred incurred incurred wholly wholly wholly and and and exclusively in connection with expansion of the existing exclusively in connection with expansion of the existing exclusively in connection with expansion of the existing restaurant business. The management, the control restaurant business. The management, the control restaurant business. The management, the control and the funds utilized were common. Therefore the same could not be funds utilized were common. Therefore the same could not be funds utilized were common. Therefore the same could not be treated as pre treated as pre-operative expenses under the provisions of operative expenses under the provisions of section 35D so as to amortize it over a period of years. On section 35D so as to amortize it over a period of years. On section 35D so as to amortize it over a period of years. On further appeal, the Hon'ble Mumbai Tribunal held that It was further appeal, the Hon'ble Mumbai Tribunal held that It was further appeal, the Hon'ble Mumbai Tribunal held that It was not relevant as to how the assessee showed a particular vant as to how the assessee showed a particular vant as to how the assessee showed a particular income or expenditure in the books of account. Separate income or expenditure in the books of account. Separate income or expenditure in the books of account. Separate computation of income and expenditure would be justified only computation of income and expenditure would be justified only computation of income and expenditure would be justified only when several distinct business were carried on and not when when several distinct business were carried on and not when when several distinct business were carried on and not when the separate business activiti the separate business activities were carried out by same es were carried out by same person and one set of account was maintained for all set of person and one set of account was maintained for all set of person and one set of account was maintained for all set of activities. It was not in dispute that the assessee had activities. It was not in dispute that the assessee had activities. It was not in dispute that the assessee had maintained one set of books of account for its business maintained one set of books of account for its business maintained one set of books of account for its business activity even though it had separate units in different activity even though it had separate units in different activity even though it had separate units in different places. Further it was also not in doubt that pre Further it was also not in doubt that pre-operative expenses operative expenses claimed in statement of total income were in the nature of claimed in statement of total income were in the nature of claimed in statement of total income were in the nature of revenue expenses. Therefore revenue expenses. Therefore revenue expenses. Therefore when when the assessee had when the assessee had the assessee had commenced its business activity in the relevant previous year commenced its business activity in the relevant previous year commenced its business activity in the relevant previous year and also incurre and also incurred certain expenses which were revenue in d certain expenses which were revenue in nature, there was no reason for the AO to treat said nature, there was no reason for the AO to treat said nature, there was no reason for the AO to treat said expenditure as capital expenditure merely for the reason that expenditure as capital expenditure merely for the reason that expenditure as capital expenditure merely for the reason that the assessee had given different treatment for such the assessee had given different treatment for such the assessee had given different treatment for such expenditure in its books of account and statemen expenditure in its books of account and statemen expenditure in its books of account and statement of total income. It was held that the AO had erred in disallowing income. It was held that the AO had erred in disallowing income. It was held that the AO had erred in disallowing deduction claimed towards pre deduction claimed towards pre-operative expenses in the operative expenses in the computation of total income Us 37(1) of the Income computation of total income Us 37(1) of the Income computation of total income Us 37(1) of the Income-tax Act even though said expenditure had been treated as capital even though said expenditure had been treated as capital even though said expenditure had been treated as capital expenditure in b expenditure in books of account. The Hon'ble Madras High ooks of account. The Hon'ble Madras High Court in the case of CIT Vs. Shakti Sugars Ltd. (339 IT 400), Court in the case of CIT Vs. Shakti Sugars Ltd. (339 IT 400), Court in the case of CIT Vs. Shakti Sugars Ltd. (339 IT 400), while considering the issue of deductibility of pre while considering the issue of deductibility of pre while considering the issue of deductibility of pre-operative expenses also held that expenditure on setting up of new unit expenses also held that expenditure on setting up of new unit expenses also held that expenditure on setting up of new unit by way of expansion of existi by way of expansion of existing business was a revenue ng business was a revenue expenditure. The Hon'ble Delhi High Court in the case of Jay expenditure. The Hon'ble Delhi High Court in the case of Jay expenditure. The Hon'ble Delhi High Court in the case of Jay Engineering Works Ltd. Vs. CIT (311 IT 405) held that the Engineering Works Ltd. Vs. CIT (311 IT 405) held that the Engineering Works Ltd. Vs. CIT (311 IT 405) held that the assessee's claim of preoperative expenditure which included assessee's claim of preoperative expenditure which included assessee's claim of preoperative expenditure which included testing charges, salary & perquisites, motor car re testing charges, salary & perquisites, motor car re testing charges, salary & perquisites, motor car repairs, travelling expenses, miscellaneous expenses & travelling expenses, miscellaneous expenses & consultancy fees was allowable as revenue expenditure U/S 370) of the was allowable as revenue expenditure U/S 370) of the was allowable as revenue expenditure U/S 370) of the

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Income TaxAct. The High Court held that the new project Income TaxAct. The High Court held that the new project Income TaxAct. The High Court held that the new project undertaken by the assessee was only an extension of the undertaken by the assessee was only an extension of the undertaken by the assessee was only an extension of the existing business and existing business and therefore the expenditure incurred on therefore the expenditure incurred on the new project constituted revenue expenditure. In the cited the new project constituted revenue expenditure. In the cited the new project constituted revenue expenditure. In the cited case, the assessee was in the business of fans and sewing case, the assessee was in the business of fans and sewing case, the assessee was in the business of fans and sewing machines and expenses incurred on fuel injection equipment machines and expenses incurred on fuel injection equipment machines and expenses incurred on fuel injection equipment (new project) was considered as revenu (new project) was considered as revenue expenses as the e expenses as the same was controlled and managed from common funds and same was controlled and managed from common funds and same was controlled and managed from common funds and two different ventures were also having an interconnection, two different ventures were also having an interconnection, two different ventures were also having an interconnection, interdependence and interlacing. Thereafter the SLP filed by interdependence and interlacing. Thereafter the SLP filed by interdependence and interlacing. Thereafter the SLP filed by the Department against the above decision had been the Department against the above decision had been the Department against the above decision had been dismissed by dismissed by Hon'ble Supreme Court vide its order dated Hon'ble Supreme Court vide its order dated 28.07.2008. The Hon'ble Supreme Court in the case of Taparia 28.07.2008. The Hon'ble Supreme Court in the case of Taparia 28.07.2008. The Hon'ble Supreme Court in the case of Taparia Tools Ltd. (372 IT 605) held that the fact that a different Tools Ltd. (372 IT 605) held that the fact that a different Tools Ltd. (372 IT 605) held that the fact that a different treatment was given in the books of account by an assessee treatment was given in the books of account by an assessee treatment was given in the books of account by an assessee could not be a factor which woul could not be a factor which would bar the assessee from d bar the assessee from claiming the entire expenditure as a deduction. It was further claiming the entire expenditure as a deduction. It was further claiming the entire expenditure as a deduction. It was further held that once a return had been filed in a particular manner, held that once a return had been filed in a particular manner, held that once a return had been filed in a particular manner, the AO was bound to carry out the assessment applying the the AO was bound to carry out the assessment applying the the AO was bound to carry out the assessment applying the provisions of the Act and not to go beyond the r provisions of the Act and not to go beyond the return. There is eturn. There is no estoppel against the statute and the Act enables and no estoppel against the statute and the Act enables and no estoppel against the statute and the Act enables and entitles the assessee to claim the entire expenditure in the entitles the assessee to claim the entire expenditure in the entitles the assessee to claim the entire expenditure in the manner it can be claimed under the law. Respectfully manner it can be claimed under the law. Respectfully manner it can be claimed under the law. Respectfully following the above decisions and facts of the present case, I following the above decisions and facts of the present case, I following the above decisions and facts of the present case, I direct the AO to delete the addition of Rs.4,33,50,999/ the AO to delete the addition of Rs.4,33,50,999/- made the AO to delete the addition of Rs.4,33,50,999/ by him. This ground of appeal is accordingly allowed. by him. This ground of appeal is accordingly allowed. by him. This ground of appeal is accordingly allowed.” 21. Before us the Ld Counsel of the assessee contended that Before us the Ld Counsel of the assessee contended that Before us the Ld Counsel of the assessee contended that those expenses are revenue in expenses are revenue in nature, being salary, wages wages, staff welfare expenses before commence expenses before commencement of commercial production and of commercial production and therefore same should be allowed to the assessee. The Ld. Counsel therefore same should be allowed to the assessee. The Ld. Counsel therefore same should be allowed to the assessee. The Ld. Counsel of the assessee submitted that th of the assessee submitted that those expenses being related to the se expenses being related to the business of the assessee, assessee, therefore same are eligible for allowance therefore same are eligible for allowance once the commercial production has been started. once the commercial production has been started.

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claimed were related to the settin claimed were related to the setting up of the unit or for g up of the unit or for day-to-day expenses for running of business for running of business. According to him expenses had . According to him expenses had been charged in books of account in books of account to capital work in progress, then to capital work in progress, then same should be part of fixed asset and eligible for depreciation only same should be part of fixed asset and eligible for depreciation only same should be part of fixed asset and eligible for depreciation only and not allowableas and not allowableas revenue expenditure, therefore the issue therefore the issue needs to be sent back to the file of the Ld. Assessing Officer for back to the file of the Ld. Assessing Officer for back to the file of the Ld. Assessing Officer for verification.

1 (i) Whether the CIT (A) erred on the facts and in the Whether the CIT (A) erred on the facts and in the Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in deleting an amount circumstances of the case and in law, in deleting an amount circumstances of the case and in law, in deleting an amount

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of Rs. 6,06,77,4301 of Rs. 6,06,77,4301- being disallowance of claim of sales being disallowance of claim of sales tax incentive. tax incentive. (ii) Whether the CIT (A) erred on the facts and in the ) Whether the CIT (A) erred on the facts and in the ) Whether the CIT (A) erred on the facts and in the circumstances circumstances of the case and in law, in holding that Sales of the case and in law, in holding that Sales Tax was embedded in the Sales prices charged by the Tax was embedded in the Sales prices charged by the Tax was embedded in the Sales prices charged by the assessee and the same was in the nature of capital receipt. assessee and the same was in the nature of capital receipt. assessee and the same was in the nature of capital receipt. The Ld. CIT(A) ignored the fact that the assessee was The Ld. CIT(A) ignored the fact that the assessee was The Ld. CIT(A) ignored the fact that the assessee was legally required to collect Sales Tax On the legally required to collect Sales Tax On the Sales made, yet Sales made, yet it had worked out the notional Sales Tax so collected and it had worked out the notional Sales Tax so collected and it had worked out the notional Sales Tax so collected and had claimed the same as capital receipts. had claimed the same as capital receipts. (iii) Whether the CIT (A) erred on the facts and in the i) Whether the CIT (A) erred on the facts and in the i) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in relying on the circumstances of the case and in law, in relying on the circumstances of the case and in law, in relying on the decision of ITAT, Mumbai an decision of ITAT, Mumbai and the decision of Bombay High d the decision of Bombay High Court (ITA No. 1299 of 2008) in the case of Reliance Court (ITA No. 1299 of 2008) in the case of Reliance Court (ITA No. 1299 of 2008) in the case of Reliance Industries Industries Industries Limited, Limited, Limited, even even even though though though subsequent subsequent subsequent to to to the the the Departmental appeal against the Order of High Court, the Departmental appeal against the Order of High Court, the Departmental appeal against the Order of High Court, the issue has been remitted back to the Bombay High Court to issue has been remitted back to the Bombay High Court to issue has been remitted back to the Bombay High Court to decide afresh and the same is still pending for adjudication. resh and the same is still pending for adjudication. resh and the same is still pending for adjudication. 2. (i) Whether the CIT (A) erred on facts and in the (i) Whether the CIT (A) erred on facts and in the (i) Whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the circumstances of the case and in law in holding that the circumstances of the case and in law in holding that the excise duty of Rs. 55,57,89,360/ excise duty of Rs. 55,57,89,360/- stated to be collected by stated to be collected by the assessee was capital in natur the assessee was capital in nature without any evidence e without any evidence placed on record to establish that the said amount was placed on record to establish that the said amount was placed on record to establish that the said amount was actually collected on account of excise duty. actually collected on account of excise duty. (ii) Without prejudice to the ground at (i (ii) Without prejudice to the ground at (i) above, whether the ) above, whether the CIT (A) erred on facts and in the circumstances of the case CIT (A) erred on facts and in the circumstances of the case CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. and in law in holding that the excise duty of Rs. and in law in holding that the excise duty of Rs. 55,57,89,360/ 55,57,89,360/- collected by the assessee was not revenue collected by the assessee was not revenue in nature despite the fact that the same was collected by in nature despite the fact that the same was collected by in nature despite the fact that the same was collected by the assessee on goods which were exempted from levy of ee on goods which were exempted from levy of ee on goods which were exempted from levy of any any any duty duty duty as as as per per per the the the Central Central Central Excise Excise Excise Department's Department's Department's Notification No. 50/2002 Notification No. 50/2002-CE dated 10.06.2003. (iii) Whether the CIT (A) erred on facts and in the i) Whether the CIT (A) erred on facts and in the i) Whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the circumstances of the case and in law in holding that the circumstances of the case and in law in holding that the excise duty of Rs. 55,57,89,360/ uty of Rs. 55,57,89,360/- collected by the assessee collected by the assessee was capital in nature by comparing the scheme of was capital in nature by comparing the scheme of was capital in nature by comparing the scheme of exemption under which the claim was made by the exemption under which the claim was made by the exemption under which the claim was made by the assessee by such other schemes wherein the mode of assessee by such other schemes wherein the mode of assessee by such other schemes wherein the mode of

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incentive was in the nature of refund/reimbursement or incentive was in the nature of refund/reimbursement or incentive was in the nature of refund/reimbursement or subsidy. 3. (i) Whether the CIT (A) erred on the facts and in the (i) Whether the CIT (A) erred on the facts and in the (i) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in not following circumstances of the case and in law, in not following circumstances of the case and in law, in not following precedent in the decision of hon'ble ITAT vide order dated precedent in the decision of hon'ble ITAT vide order dated precedent in the decision of hon'ble ITAT vide order dated 31.01.2018 in assessee's own case for A. Y. 2009 31.01.2018 in assessee's own case for A. Y. 2009 31.01.2018 in assessee's own case for A. Y. 2009-10 wherein hon'ble ITAT reje wherein hon'ble ITAT rejected the grounds raised by the cted the grounds raised by the assessee in respect of Education Cess. assessee in respect of Education Cess. (ii) Whether the CIT (A) erred On the facts and in the ) Whether the CIT (A) erred On the facts and in the ) Whether the CIT (A) erred On the facts and in the circumstances of the case and in law, to appreciate that fact circumstances of the case and in law, to appreciate that fact circumstances of the case and in law, to appreciate that fact that the education cess has been levied under Finance Act that the education cess has been levied under Finance Act that the education cess has been levied under Finance Act as an item to increase income tax and it has been held to be to increase income tax and it has been held to be to increase income tax and it has been held to be part of "income tax" by Hon'ble Calcutta High Court in the part of "income tax" by Hon'ble Calcutta High Court in the part of "income tax" by Hon'ble Calcutta High Court in the case of Srei Infrastructure Finance Ltd. case of Srei Infrastructure Finance Ltd. 4. (i) Whether the CIT (A) erred on the facts and in the (i) Whether the CIT (A) erred on the facts and in the (i) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directin circumstances of the case and in law, in directing the AO to g the AO to exclude Sales Tax incentive, Excise Duty Exemption and exclude Sales Tax incentive, Excise Duty Exemption and exclude Sales Tax incentive, Excise Duty Exemption and profits on sale of assets, while computing the book profits profits on sale of assets, while computing the book profits profits on sale of assets, while computing the book profits u/s 115JB of the Act, without appreciating that they have u/s 115JB of the Act, without appreciating that they have u/s 115JB of the Act, without appreciating that they have not been specifically excluded in Explanation 1 to section not been specifically excluded in Explanation 1 to section not been specifically excluded in Explanation 1 to section 115]B of the Act. (ii) Whether the CIT (A) erred on the facts and in the i) Whether the CIT (A) erred on the facts and in the i) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO to circumstances of the case and in law, in directing the AO to circumstances of the case and in law, in directing the AO to exclude Sales Tax incentive and Excise Duty Exemption and exclude Sales Tax incentive and Excise Duty Exemption and exclude Sales Tax incentive and Excise Duty Exemption and profits on sale of assets, while computing the book profits profits on sale of assets, while computing the book profits profits on sale of assets, while computing the book profits u/s 115JB of the u/s 115JB of the Act despite the fact that no adjustment Act despite the fact that no adjustment other than the ones mentioned in Sec.115JB is permissible other than the ones mentioned in Sec.115JB is permissible other than the ones mentioned in Sec.115JB is permissible as held by the Supreme Court in the case of Apollo Tyres as held by the Supreme Court in the case of Apollo Tyres as held by the Supreme Court in the case of Apollo Tyres Ltd. (255 IT 273) Ltd. (255 IT 273) 25. The issue in dispute involved in ground No The issue in dispute involved in ground Nos. 1 and 2 of the . 1 and 2 of the appeal of the Revenue nue are covered by our finding while adjudicating are covered by our finding while adjudicating ground No. 1 and 2 of the appeal of the Revenue for assessment ground No. 1 and 2 of the appeal of the Revenue for assessment ground No. 1 and 2 of the appeal of the Revenue for assessment year 2014-15 and therefore, to have consist 15 and therefore, to have consistency in our decision in our decision, following our finding in assessment year 2014 following our finding in assessment year 2014-15, the ground No. 1 15, the ground No. 1 and 2 of the appeal of the Revenue are accordingly dismissed. e appeal of the Revenue are accordingly dismissed. e appeal of the Revenue are accordingly dismissed.

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27.1 The Ld. CIT(A) has allowed the claim of exclusion of sales tax The Ld. CIT(A) has allowed the claim of exclusion of sales tax The Ld. CIT(A) has allowed the claim of exclusion of sales tax incentives and excise duty incentives and excise duty exemption while computing book profit while computing book profit u/s 115JB of the Act observing as under: u/s 115JB of the Act observing as under:

“11.1. While adjudicating ground no.3 11.1. While adjudicating ground no.3 on sales tax incentive on sales tax incentive and ground no.4 on excise duty exemption, it has been held and ground no.4 on excise duty exemption, it has been held and ground no.4 on excise duty exemption, it has been held that they are capital in nature and hence, is exempt. While that they are capital in nature and hence, is exempt. While that they are capital in nature and hence, is exempt. While computing book profit u/s 115JB, the sales tax incentive computing book profit u/s 115JB, the sales tax incentive computing book profit u/s 115JB, the sales tax incentive and excise duty exemption should thus be excluded while and excise duty exemption should thus be excluded while and excise duty exemption should thus be excluded while computing book profits us 115JB. The CIT (A) (3), Nasik in omputing book profits us 115JB. The CIT (A) (3), Nasik in omputing book profits us 115JB. The CIT (A) (3), Nasik in his Order dated 16.10.2019 has also held the same view his Order dated 16.10.2019 has also held the same view his Order dated 16.10.2019 has also held the same view when he has adjudicated that "The capital receipts which when he has adjudicated that "The capital receipts which when he has adjudicated that "The capital receipts which do not have any element of income or profit embedded do not have any element of income or profit embedded do not have any element of income or profit embedded therein are neither chargeable to therein are neither chargeable to tax under the Income Tax tax under the Income Tax Act nor can be included in the profit and loss account Act nor can be included in the profit and loss account Act nor can be included in the profit and loss account prepared under Para prepared under Para-ll and Para-Ill of Schedule Ill of Schedule-VI of the Companies Act. The Hon'ble Supreme Court has held in the Companies Act. The Hon'ble Supreme Court has held in the Companies Act. The Hon'ble Supreme Court has held in the case of Indo Rama Synthetics (1) Ltd. Vs.CIT (330 IT 363) case of Indo Rama Synthetics (1) Ltd. Vs.CIT (330 IT 363) case of Indo Rama Synthetics (1) Ltd. Vs.CIT (330 IT 363) that object of MAT provisions is to bring out the real profits at object of MAT provisions is to bring out the real profits at object of MAT provisions is to bring out the real profits of the company. The similar view was taken by the Hon'ble of the company. The similar view was taken by the Hon'ble of the company. The similar view was taken by the Hon'ble Mumbai ITAT in the case of Hitkari Fibres Ltd. Vs. JCIT (90 Mumbai ITAT in the case of Hitkari Fibres Ltd. Vs. JCIT (90 Mumbai ITAT in the case of Hitkari Fibres Ltd. Vs. JCIT (90 ITD 654). If the capital receipts are included in the ITD 654). If the capital receipts are included in the ITD 654). If the capital receipts are included in the computation of MAT, the computation of MAT, the object of introduction of section object of introduction of section 115JA/115JB would be defeated. The above exclusion is 115JA/115JB would be defeated. The above exclusion is 115JA/115JB would be defeated. The above exclusion is also permissible in view of decision of also permissible in view of decision of Hon’ble Apex Court in Apex Court in

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the case of Apollo Tyres (255 (TR 273) wherein it was held the case of Apollo Tyres (255 (TR 273) wherein it was held the case of Apollo Tyres (255 (TR 273) wherein it was held that the AO has no powers to rework the book p that the AO has no powers to rework the book profits if the rofits if the same have been computed in accordance with Par same have been computed in accordance with Par same have been computed in accordance with PartlI and Part II of Schedule of Schedule-VI Of the CompaniesAct. In the case of Of the CompaniesAct. In the case of ACIT Vs. Shree Cement Ltd. (2012 ACIT Vs. Shree Cement Ltd. (2012-TIOL-02-ITAT-Jaipur was Jaipur was held that Sales Tax Incentive was required to be excluded held that Sales Tax Incentive was required to be excluded held that Sales Tax Incentive was required to be excluded while computin while computing the books profits uls 115JB since the same g the books profits uls 115JB since the same was in the nature of capital receipt.Similarly the Hon'ble was in the nature of capital receipt.Similarly the Hon'ble was in the nature of capital receipt.Similarly the Hon'ble Mumbai Tribunal in the case of ITO Vs. Frigsales (India) Ltd. Mumbai Tribunal in the case of ITO Vs. Frigsales (India) Ltd. Mumbai Tribunal in the case of ITO Vs. Frigsales (India) Ltd. (4 SOT 376) held that he capital gain on sale of depreciable (4 SOT 376) held that he capital gain on sale of depreciable (4 SOT 376) held that he capital gain on sale of depreciable asset was exempt us 50, could asset was exempt us 50, could not be taxed as income not be taxed as income under the provision of section 115JA. Similar view was under the provision of section 115JA. Similar view was under the provision of section 115JA. Similar view was taken by the Hon'ble Mumbai ITAT in the case of ITO Vs. taken by the Hon'ble Mumbai ITAT in the case of ITO Vs. taken by the Hon'ble Mumbai ITAT in the case of ITO Vs. Suraj Jewellary (India) Ltd. (21 SOT 79). It was held by the Suraj Jewellary (India) Ltd. (21 SOT 79). It was held by the Suraj Jewellary (India) Ltd. (21 SOT 79). It was held by the Hon'ble Mumbai ITAT in the case of Shivalik Venture (P.) Hon'ble Mumbai ITAT in the case of Shivalik Venture (P.) Hon'ble Mumbai ITAT in the case of Shivalik Venture (P.) Ltd. Vs. DCIT (60 taxmann.com 314) that an item of receipt . Vs. DCIT (60 taxmann.com 314) that an item of receipt . Vs. DCIT (60 taxmann.com 314) that an item of receipt which does not fall under the definition of income at all, will which does not fall under the definition of income at all, will which does not fall under the definition of income at all, will be outside the purview of computation provisions of the Act be outside the purview of computation provisions of the Act be outside the purview of computation provisions of the Act and hence it cannot be included in the 'book profits' us and hence it cannot be included in the 'book profits' us and hence it cannot be included in the 'book profits' us 115JB of the Act." 115JB of the Act." This Ground is thus allowed.” 27.2 The claim of exclusion of profit The claim of exclusion of profit on sale of fixed assets sale of fixed assets amounting to Rs.1,56,439/ amounting to Rs.1,56,439/- while computing book profit while computing book profit, has been allowed by the Ld. CIT(A) observing as under: allowed by the Ld. CIT(A) observing as under:

“12.1 It is seen that this issue has been adjudicated in 12.1 It is seen that this issue has been adjudicated in 12.1 It is seen that this issue has been adjudicated in favour of the Appellant byCIT(A) favour of the Appellant byCIT(A)-3, Nashik for A.Y. 2011 3, Nashik for A.Y. 2011-12. The Appellant has, during the year, received profit sale of The Appellant has, during the year, received profit sale of The Appellant has, during the year, received profit sale of fixed assets of Rs. 1,56,439/ fixed assets of Rs. 1,56,439/- which has been added by which has been added by the AO while computing t the AO while computing the book profits u/s 115JB. The he book profits u/s 115JB. The capital receipts which do not have any element of income or capital receipts which do not have any element of income or capital receipts which do not have any element of income or profit are not chargeable to tax under the Income Tax Act profit are not chargeable to tax under the Income Tax Act profit are not chargeable to tax under the Income Tax Act nor can they be included in the P&L Account, prepared nor can they be included in the P&L Account, prepared nor can they be included in the P&L Account, prepared under Part-ll and Part ll and Part-IlI of Schedule-VI of the Comp VI of the Companies Act. From the submissions of the Appellant, It is seen that Act. From the submissions of the Appellant, It is seen that Act. From the submissions of the Appellant, It is seen that the profit on sale of fixed assets has not been included in the profit on sale of fixed assets has not been included in the profit on sale of fixed assets has not been included in the P&L Account prepared under the Companies Act. The the P&L Account prepared under the Companies Act. The the P&L Account prepared under the Companies Act. The Hon'ble Supreme Court, in the case of Indo Rama Hon'ble Supreme Court, in the case of Indo Rama Hon'ble Supreme Court, in the case of Indo Rama Synthetics(1) Ltd vs CIT (33 Synthetics(1) Ltd vs CIT (330 ITR 363), has held that the 0 ITR 363), has held that the object of MAT Provisions is to bring out the real profits of the object of MAT Provisions is to bring out the real profits of the object of MAT Provisions is to bring out the real profits of the

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company. This has also been followed by the Hon'ble ITAT company. This has also been followed by the Hon'ble ITAT company. This has also been followed by the Hon'ble ITAT Mumbai in the case of Hitkari Fibers Ltd. VS JCIT (90 ITD Mumbai in the case of Hitkari Fibers Ltd. VS JCIT (90 ITD Mumbai in the case of Hitkari Fibers Ltd. VS JCIT (90 ITD 654). The Hon'ble Apex Court in the case of Ap 654). The Hon'ble Apex Court in the case of Ap 654). The Hon'ble Apex Court in the case of Apollo Tyres (255 IT 273) held that the AO has no powers to rework the (255 IT 273) held that the AO has no powers to rework the (255 IT 273) held that the AO has no powers to rework the book profits, if the same has been computed in accordance book profits, if the same has been computed in accordance book profits, if the same has been computed in accordance with Part-ll and Part ll and Part-Ill of Schedule-VI of the Companies Act. VI of the Companies Act. That the capital gain on sale of depreciable assets which That the capital gain on sale of depreciable assets which That the capital gain on sale of depreciable assets which were exempt us 50 could not be taxed as income under the mpt us 50 could not be taxed as income under the mpt us 50 could not be taxed as income under the provisions of Section 115JA has been held by Hon'ble provisions of Section 115JA has been held by Hon'ble provisions of Section 115JA has been held by Hon'ble Mumbai Tribunal in the case of ITO vs Frigsales (India) Ltd Mumbai Tribunal in the case of ITO vs Frigsales (India) Ltd Mumbai Tribunal in the case of ITO vs Frigsales (India) Ltd (4 SOT 376). This has also been held in the case of ITO vs (4 SOT 376). This has also been held in the case of ITO vs (4 SOT 376). This has also been held in the case of ITO vs Suraj Jewellery (India) Ltd. (21 SO Suraj Jewellery (India) Ltd. (21 SOT 79) by the Hon'ble T 79) by the Hon'ble Mumbai ITAT. In the case of Shivalik Venture Pvt. Ltd. vs Mumbai ITAT. In the case of Shivalik Venture Pvt. Ltd. vs Mumbai ITAT. In the case of Shivalik Venture Pvt. Ltd. vs DCIT (60 taxmann.com 314), the Hon'ble Mumbai ITAT has DCIT (60 taxmann.com 314), the Hon'ble Mumbai ITAT has DCIT (60 taxmann.com 314), the Hon'ble Mumbai ITAT has held that an item of receipt held that an item of receipt which does not fall under the purview of income at all, outside the purview ofcomputation purview of income at all, outside the purview ofcomputation purview of income at all, outside the purview ofcomputation provisions of the Act, cannot be included in the book profits visions of the Act, cannot be included in the book profits visions of the Act, cannot be included in the book profits us Considering the judicial pronouncements on the issue and Considering the judicial pronouncements on the issue and Considering the judicial pronouncements on the issue and the decision of theCIT(A) the decision of theCIT(A)-3, Nashik, the profit on sale of 3, Nashik, the profit on sale of fixed assets of Rs. 1,56,439/ fixed assets of Rs. 1,56,439/- added to the book profit u/s added to the book profit u/s 115JB is deleted. 115JB is deleted.” 28. We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. dispute and perused the relevant material on record. dispute and perused the relevant material on record.

28.1 Before us, the Ld. Counsel submitted that Tribunal in I Before us, the Ld. Counsel submitted that Tribunal in I Before us, the Ld. Counsel submitted that Tribunal in ITA No. 7792/Mum/2019 7792/Mum/2019 7792/Mum/2019 along along along with with with ITA ITA ITA No. No. No. 655/Mum/2020 655/Mum/2020 655/Mum/2020 for for for assessment year 2011 11-12 has allowed the claim of the assessee claim of the assessee u/s 115JB of the Act ,observing as under: observing as under:

“20. The AO disallowed the exclusion of sales tax 20. The AO disallowed the exclusion of sales tax 20. The AO disallowed the exclusion of sales tax incentives, excise duty exemption and exclusion of profits incentives, excise duty exemption and exclusion of profits incentives, excise duty exemption and exclusion of profits on sale of assets of Rs.7,01,07,115/ on sale of assets of Rs.7,01,07,115/-, Rs.25,39,40,496/ , Rs.25,39,40,496/- and Rs.6,93,30,203/ Rs.6,93,30,203/- respectively while computing the respectively while computing the book profit under section 115JB of the Act. However, the Ld. book profit under section 115JB of the Act. However, the Ld. book profit under section 115JB of the Act. However, the Ld. CIT(A) has allowed the same by following his earlier years CIT(A) has allowed the same by following his earlier years CIT(A) has allowed the same by following his earlier years order by returning following findings: order by returning following findings:

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“23. In the seventeenth, eighteenth and “23. In the seventeenth, eighteenth and nineteenth nineteenth ground of appeal, the appellant has challenged the ground of appeal, the appellant has challenged the ground of appeal, the appellant has challenged the action of the AO in not allowing exclusion of Sales action of the AO in not allowing exclusion of Sales action of the AO in not allowing exclusion of Sales Tax Incentive amounting to Rs.7,01,07,115/-, Excise Tax Incentive amounting to Rs.7,01,07,115/ Tax Incentive amounting to Rs.7,01,07,115/ Duty Exemption of Rs.25,39,40,496/ Duty Exemption of Rs.25,39,40,496/- and profits on and profits on the the the sale sale sale of of of fixed fixed fixed assets assets assets amounting amounting amounting to to to Rs.6,93,30,203/ s.6,93,30,203/- while computing book profits U/s while computing book profits U/s 115JB of the Act. Since the undersigned has held in 115JB of the Act. Since the undersigned has held in 115JB of the Act. Since the undersigned has held in the preceding paragraphs that Sales Tax Incentive of the preceding paragraphs that Sales Tax Incentive of the preceding paragraphs that Sales Tax Incentive of Rs.7,01,07,115/ Rs.7,01,07,115/- and Excise Duty Exemption of and Excise Duty Exemption of Rs.25,39,40,496/ Rs.25,39,40,496/- were capital receipts and not were capital receipts and not liable t liable to tax, therefore the AO is directed to exclude o tax, therefore the AO is directed to exclude the above amounts while computing book profits U/S the above amounts while computing book profits U/S the above amounts while computing book profits U/S 115JB. Similarly the AO is directed to exclude profits 115JB. Similarly the AO is directed to exclude profits 115JB. Similarly the AO is directed to exclude profits of Rs.6,93,30,203/ of Rs.6,93,30,203/- on sale of fixed assets while on sale of fixed assets while computing book profits U/s 115JB. The capital computing book profits U/s 115JB. The capital computing book profits U/s 115JB. The capital receipt receipts which do nothave any element of income or s which do nothave any element of income or profit embedded therein are neither chargeable to tax profit embedded therein are neither chargeable to tax profit embedded therein are neither chargeable to tax under the Income Tax Act nor can be included in the under the Income Tax Act nor can be included in the under the Income Tax Act nor can be included in the profit & loss account prepared under Part profit & loss account prepared under Part-II and Part II and Part- III of ScheduleVI of the Companies Act. The Hon'ble III of ScheduleVI of the Companies Act. The Hon'ble III of ScheduleVI of the Companies Act. The Hon'ble Supreme Court has held in the case of Indo Rama Supreme Court has held in the case of Indo Rama Supreme Court has held in the case of Indo Rama Synthetics (I) Ltd. Vs. CIT (330 ITR 363) that object of Synthetics (I) Ltd. Vs. CIT (330 ITR 363) that object of Synthetics (I) Ltd. Vs. CIT (330 ITR 363) that object of MAT provisions is to bring out the real profits of the MAT provisions is to bring out the real profits of the MAT provisions is to bring out the real profits of the company. The similar view was taken by the Hon'ble company. The similar view was taken by the Hon'ble company. The similar view was taken by the Hon'ble Mumbai ITAT in the case of Hitkari Fibres Ltd. Vs. Mumbai ITAT in the case of Hitkari Fibres Ltd Mumbai ITAT in the case of Hitkari Fibres Ltd JCIT (90 ITD 654). If the capital receipts are included JCIT (90 ITD 654). If the capital receipts are included JCIT (90 ITD 654). If the capital receipts are included in the computation of MAT, the object of introduction in the computation of MAT, the object of introduction in the computation of MAT, the object of introduction of section 115JA/115JB would be defeated. The of section 115JA/115JB would be defeated. The of section 115JA/115JB would be defeated. The above exclusion is also permissible in view of above exclusion is also permissible in view of above exclusion is also permissible in view of decision of Hon'ble Apex Court in the case of Apollo decision of Hon'ble Apex Court in the case of A decision of Hon'ble Apex Court in the case of A Tyres (255 ITR 273) wherein it was held that the AO Tyres (255 ITR 273) wherein it was held that the AO Tyres (255 ITR 273) wherein it was held that the AO has no powers to rework the book profits if the same has no powers to rework the book profits if the same has no powers to rework the book profits if the same have been computed in accordance with Part-Il and have been computed in accordance with Part have been computed in accordance with Part Part- III of Schedule VI of the Companies Act. In the III of Schedule VI of the Companies Act. In the III of Schedule VI of the Companies Act. In the case of ACIT Vs. Shree Cement Ltd. (2012 TIOL-02- case of ACIT Vs. Shree Cement Ltd. (2012 case of ACIT Vs. Shree Cement Ltd. (2012 ITAT Jaipur), it was held that Sales Tax Incentive ITAT Jaipur), it was held that Sales Tax Incentive ITAT Jaipur), it was held that Sales Tax Incentive was required to be excluded while computing the was required to be excluded while computing the was required to be excluded while computing the book profits U/s 115JB since the same was in the book profits U/s 115JB since the same was in the book profits U/s 115JB since the same was in the nature of capital receipt. Similarly the Hon'ble nature of capital receipt. Similarly the Hon'ble nature of capital receipt. Similarly the Hon'ble Mumbai Tribunal in the case of ITO Vs. Frigsales Mumbai Tribunal in the case of ITO Vs. Frigsales Mumbai Tribunal in the case of ITO Vs. Frigsales (India) Ltd. (4 SOT 376) held that the capital gain on ndia) Ltd. (4 SOT 376) held that the capital gain on ndia) Ltd. (4 SOT 376) held that the capital gain on sale of depreciable asset which was exempt U/S 50, sale of depreciable asset which was exempt U/S 50, sale of depreciable asset which was exempt U/S 50,

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could not be taxed as income under the provision of could not be taxed as income under the provision of could not be taxed as income under the provision of section 115JA. Similar view was taken by the Hon'ble section 115JA. Similar view was taken by the Hon'ble section 115JA. Similar view was taken by the Hon'ble Mumbai ITAT in the case of ITO Vs. Suraj Jewellery Mumbai ITAT in the case of ITO Vs. Suraj Jewell Mumbai ITAT in the case of ITO Vs. Suraj Jewell (India) Ltd. (21 SOT 79). These grounds of appeal are (India) Ltd. (21 SOT 79). These grounds of appeal are (India) Ltd. (21 SOT 79). These grounds of appeal are accordingly allowed.” accordingly allowed.” 21. The Ld. CIT(A) has also passed the order following the 21. The Ld. CIT(A) has also passed the order following the 21. The Ld. CIT(A) has also passed the order following the decision rendered by co decision rendered by co-ordinate Bench of the Tribunal in ordinate Bench of the Tribunal in case of ACIT Vs. Shree Cement Ltd. (2012 TIOL case of ACIT Vs. Shree Cement Ltd. (2012 TIOL case of ACIT Vs. Shree Cement Ltd. (2012 TIOL-02-ITAT Jaipur) wherein it is held that sales tax incentive and excise r) wherein it is held that sales tax incentive and excise r) wherein it is held that sales tax incentive and excise duty exemption are required to be excluded while computing duty exemption are required to be excluded while computing duty exemption are required to be excluded while computing the book profit under section 115JB of the Act as the same the book profit under section 115JB of the Act as the same the book profit under section 115JB of the Act as the same was in the nature of capital receipt. Moreover, object of the was in the nature of capital receipt. Moreover, object of the was in the nature of capital receipt. Moreover, object of the MAT provisions is MAT provisions is to bring out the real profit of the to bring out the real profit of the company. Hon’ble Supreme Court in case of Indo Rama company. Hon’ble Supreme Court in case of Indo Rama company. Hon’ble Supreme Court in case of Indo Rama Synthetics (I) Ltd. vs. CIT 330 ITR 363 also held that object Synthetics (I) Ltd. vs. CIT 330 ITR 363 also held that object Synthetics (I) Ltd. vs. CIT 330 ITR 363 also held that object of MAT provisions is to bring out the real profits of the of MAT provisions is to bring out the real profits of the of MAT provisions is to bring out the real profits of the company. So in case we include the capital recei company. So in case we include the capital recei company. So in case we include the capital receipts in computation of MAT the very purpose of section 115JA and computation of MAT the very purpose of section 115JA and computation of MAT the very purpose of section 115JA and 115JB would be defeated. 115JB would be defeated. 22. We are of the considered view that when a receipt is not 22. We are of the considered view that when a receipt is not 22. We are of the considered view that when a receipt is not in the nature of income it is not to be formed part of the in the nature of income it is not to be formed part of the in the nature of income it is not to be formed part of the taxable profit and as such sales tax incentive taxable profit and as such sales tax incentive and excise and excise duty exemption and profit on sale of fixed assets are not duty exemption and profit on sale of fixed assets are not duty exemption and profit on sale of fixed assets are not chargeable to tax, hence rightly ordered to be excluded from chargeable to tax, hence rightly ordered to be excluded from chargeable to tax, hence rightly ordered to be excluded from computing the book profit under section 115JB of the Act by computing the book profit under section 115JB of the Act by computing the book profit under section 115JB of the Act by the Ld. CIT(A). So we find no illegality or perversity in the the Ld. CIT(A). So we find no illegality or perversity in the the Ld. CIT(A). So we find no illegality or perversity in the impugned order passed by the Ld. CIT(A). Hence, grounds gned order passed by the Ld. CIT(A). Hence, grounds gned order passed by the Ld. CIT(A). Hence, grounds No.5(1) & 5(ii) are determined against the Revenue. No.5(1) & 5(ii) are determined against the Revenue. No.5(1) & 5(ii) are determined against the Revenue.” 28.2 The issue in dispute before us being identical to the issue The issue in dispute before us being identical to the issue The issue in dispute before us being identical to the issue decided by the Tribunal (supra) therefore decided by the Tribunal (supra) therefore, respectfully following the respectfully following the same the, ground No. 4 of the appeal of the Revenue is accordingly No. 4 of the appeal of the Revenue is accordingly No. 4 of the appeal of the Revenue is accordingly dismissed.

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1(a) That on the facts and in the circumstances o That on the facts and in the circumstances of the case, f the case, the Ld. Commissioner of Income Tax (Appeals) (here the Ld. Commissioner of Income Tax (Appeals) (here the Ld. Commissioner of Income Tax (Appeals) (here-in-after referred to as 'Ld. CIT(Appeals) was not justified & grossly referred to as 'Ld. CIT(Appeals) was not justified & grossly referred to as 'Ld. CIT(Appeals) was not justified & grossly erred in confirming the action of the A.O. in initiating the erred in confirming the action of the A.O. in initiating the erred in confirming the action of the A.O. in initiating the reassessment reassessment reassessment proceedings proceedings proceedings u/s u/s u/s 147/148 147/148 147/148 without without without appreciating the appreciating the fact that the same has been done in utter fact that the same has been done in utter disregard of the express provisions of the Act. disregard of the express provisions of the Act. (b) That on the facts and in the circumstances of the case, That on the facts and in the circumstances of the case, That on the facts and in the circumstances of the case, the Ld.CIT(Appeals) erred in not holding that the order u/s the Ld.CIT(Appeals) erred in not holding that the order u/s the Ld.CIT(Appeals) erred in not holding that the order u/s 143(3) r.w.s 147 dated 04 143(3) r.w.s 147 dated 04-12-2019 passed by AO 2019 passed by AO is unjustified, unjustified, unjustified, erroneous erroneous erroneous and and and needs needs needs to to to be be be summarily summarily summarily cancelled. 2. That on the facts and in the circumstances of the case That on the facts and in the circumstances of the case That on the facts and in the circumstances of the case and without prejudice to ground no. 1,Ld. CIT(Appeals)was and without prejudice to ground no. 1,Ld. CIT(Appeals)was and without prejudice to ground no. 1,Ld. CIT(Appeals)was not justified & grossly erred in confirming disallowance in not justified & grossly erred in confirming disallowance in not justified & grossly erred in confirming disallowance in respect of provi respect of provision for leave encashment debited to Profit & sion for leave encashment debited to Profit & Loss Accountamounting to Rs. 87,38,136/ Loss Accountamounting to Rs. 87,38,136/- in computing in computing total incomeunder the normal provisions of the Act. total incomeunder the normal provisions of the Act. total incomeunder the normal provisions of the Act. 3. That on the facts and in the circumstances of the That on the facts and in the circumstances of the That on the facts and in the circumstances of the caseand without prejudice to ground no. 1, the Ld. caseand without prejudice to ground no. 1, the Ld. caseand without prejudice to ground no. 1, the Ld. CIT(Appeals) was not justified & grossly erred in confirming CIT(Appeals) was not justified & grossly erred in confirming CIT(Appeals) was not justified & grossly erred in confirming the action of the A.O. ofadding back provision for doubtful the action of the A.O. ofadding back provision for doubtful the action of the A.O. ofadding back provision for doubtful debts amounting to Rs. 1,72,61,202/ debts amounting to Rs. 1,72,61,202/- in computing book in computing book profit u/s 115]B of the Act. profit u/s 115]B of the Act. 4. That on the facts and in the circumstances of th That on the facts and in the circumstances of the case, That on the facts and in the circumstances of th the Ld.CIT(Appeals) was not justified &rather grossly erred the Ld.CIT(Appeals) was not justified &rather grossly erred the Ld.CIT(Appeals) was not justified &rather grossly erred in not allowing claim for exclusion of write back of Provision in not allowing claim for exclusion of write back of Provision in not allowing claim for exclusion of write back of Provision for bad and doubtful debts amounting to Rs. 20,21,975/ for bad and doubtful debts amounting to Rs. 20,21,975/ for bad and doubtful debts amounting to Rs. 20,21,975/-, inspite of the fact that the appellant has already offered the inspite of the fact that the appellant has already offered the inspite of the fact that the appellant has already offered the same while computing while computing book profit u/s 115]B in AY 2012 book profit u/s 115]B in AY 2012-13. 30. The ground No The ground Nos. 1(a) and (b) of the appeal of the assessee . 1(a) and (b) of the appeal of the assessee relate to validity of the reassessment proceedings u/s 147 of the relate to validity of the reassessment proceedings u/s 147 of the relate to validity of the reassessment proceedings u/s 147 of the Act. The brief facts qua the issue in dispute are that brief facts qua the issue in dispute are that brief facts qua the issue in dispute are that second revised return of income filed by the assessee income filed by the assessee on 31/3/2017 declaring loss on 31/3/2017 declaring loss of Rs. Rs.21,82,30,460/ of Rs. Rs.21,82,30,460/- under normal provisions of the Act and under normal provisions of the Act and

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book loss u/s 115JB at Rs. ( book loss u/s 115JB at Rs. (-) 13,35,80, 146/-, was processed u/s was processed u/s 143(1) of the Act on 30.10.2017. Subsequently, the assessee filed 143(1) of the Act on 30.10.2017. Subsequently, the assessee 143(1) of the Act on 30.10.2017. Subsequently, the assessee revised computation of income on 28/03/2018 reducing total loss reducing total loss under under normal normal provisions provisions fromRs.21,82,30,460/ from 21,82,30,460/- to Rs.21,15,23,775/-. The details of same reproduced in assessment The details of same reproduced in assessment The details of same reproduced in assessment order are extracted as under: order are extracted as under:

“2. Thereafter, the assessee 2. Thereafter, the assessee has filed revised computation of has filed revised computation of income be filing letter dated 28.03.2018 wherein the assessee income be filing letter dated 28.03.2018 wherein the assessee income be filing letter dated 28.03.2018 wherein the assessee has reduced the claim of depreciation at Rs. 67.06.682 has reduced the claim of depreciation at Rs. 67.06.682 has reduced the claim of depreciation at Rs. 67.06.682 - In the last - revised return filed on 31.03.2017, the assessee has revised return filed on 31.03.2017, the assessee has revised return filed on 31.03.2017, the assessee has claimed total depreciation of Rs. ed total depreciation of Rs.30,99,15,538 as against 99,15,538 as against which, in the revised computation submitted on 28.03.2018 which, in the revised computation submitted on 28.03.2018 which, in the revised computation submitted on 28.03.2018 the the the assessee assessee assessee has has has claimed claimed claimed total total total depreciation depreciation depr of of Rs.30,32,08.856/ 30,32,08.856/-. Thus, the claim of depreciation was . Thus, the claim of depreciation was reduced by Rs. 67.06.682 which has resulted into decrease in reduced by Rs. 67.06.682 which has resulted into decrease in reduced by Rs. 67.06.682 which has resulted into decrease in loss claimed loss claimed in return of income filed on 31.03.2017 The total .2017 The total loss claimed in the revised return filed on 31.03.2017 was Rs. oss claimed in the revised return filed on 31.03.2017 was Rs. oss claimed in the revised return filed on 31.03.2017 was Rs. 21.82.30.458 21.82.30.458- as against which in the resist comp which in the resist computation submitted on 28.03.2018, submitted on 28.03.2018, the assessee has claimed total loss the assessee has claimed total loss of Rs. 21.15.23.775/ of Rs. 21.15.23.775/- Further in the revised computation of in the revised computation of income submitted on 28.03.2018. the assessee has made income submitted on 28.03.2018. the assessee has made income submitted on 28.03.2018. the assessee has made additional: disallowance w/s 41(1) at Rs. 5.96.47,741/ : disallowance w/s 41(1) at Rs. 5.96.47,741/ : disallowance w/s 41(1) at Rs. 5.96.47,741/- as per the tax audit report and further claimed deduction account per the tax audit report and further claimed deduction account per the tax audit report and further claimed deduction account of liabilities written back and credited to Pr of liabilities written back and credited to Profit and Loss ofit and Loss account of Rs. 6.01.289 9 against the claim of Rs. 4,81,238/ account of Rs. 6.01.289 9 against the claim of Rs. 4,81,238/ account of Rs. 6.01.289 9 against the claim of Rs. 4,81,238/- made in last revised return filed on 31.03.2017. The above made in last revised return filed on 31.03.2017. The above made in last revised return filed on 31.03.2017. The above slam deduction and allowances made by the assessee in the slam deduction and allowances made by the assessee in the slam deduction and allowances made by the assessee in the revised computation of income revised computation of income submittedon 28.03.2018 are 28.03.2018 are not accepted as the same are ma cepted as the same are made after the processing of de after the processing of return of income and also after the expiry of one year from the of income and also after the expiry of one year from the of income and also after the expiry of one year from the end of the relevant assessment year and therefore these end of the relevant assessment year and therefore these end of the relevant assessment year and therefore these revised clan are not allowable as per the provisions of sections revised clan are not allowable as per the provisions of sections revised clan are not allowable as per the provisions of sections 139(5).” 30.1Thereafter notice u/s 148 of the Act was issued on 30.01.2019 fter notice u/s 148 of the Act was issued on 30.01.2019 fter notice u/s 148 of the Act was issued on 30.01.2019 on the ground that in assessments of earlier and subsequent years on the ground that in assessments of earlier and subse on the ground that in assessments of earlier and subse

M/s Everest Industries Ltd. 60 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

certain additions/ disallowances for Sales tax Incentive, excise duty certain additions/ disallowances for Sales tax Incentive, excise duty certain additions/ disallowances for Sales tax Incentive, excise duty exemption etc., were made rejecting the claims of the assessee, exemption etc., were made rejecting the claims of the assessee, exemption etc., were made rejecting the claims of the assessee, therefore, same need to be made in the year under consideration. therefore, same need to be made in the year under consideration. therefore, same need to be made in the year under consideration. The reassessment proceedings were completed on 07.03.2019. reassessment proceedings were completed on 07.03.2019. reassessment proceedings were completed on 07.03.2019. Before the Ld. CIT(A) the assessee submitted that the reassessment Before the Ld. CIT(A) the assessee submitted that the reassessment Before the Ld. CIT(A) the assessee submitted that the reassessment proceedings were mere change of opinion mere change of opinion. The Ld. CIT(A) rejected he Ld. CIT(A) rejected the contention of the assessee observing as under: the contention of the assessee observing as under:

“6.2 In this case, the return was processed and intimation 6.2 In this case, the return was processed and intimation 6.2 In this case, the return was processed and intimation us 143(1) of the Act was issued on 30.10.2017. Notice us us 143(1) of the Act was issued on 30.10.2017. Notice us us 143(1) of the Act was issued on 30.10.2017. Notice us 148 of the Act was issued on 30.01.2019 The appellant has 148 of the Act was issued on 30.01.2019 The appellant has 148 of the Act was issued on 30.01.2019 The appellant has stated that the reassessment proceedings initiated are mere hat the reassessment proceedings initiated are mere hat the reassessment proceedings initiated are mere change of opinion and thus notice needs to be quashed. No change of opinion and thus notice needs to be quashed. No change of opinion and thus notice needs to be quashed. No scrutiny proceedings u/s 143(3) of the Act was conducted scrutiny proceedings u/s 143(3) of the Act was conducted scrutiny proceedings u/s 143(3) of the Act was conducted for the instant Assessment Year, hence the question of for the instant Assessment Year, hence the question of for the instant Assessment Year, hence the question of "change of opinion " as alleged by "change of opinion " as alleged by the Appellant does not the Appellant does not arise as no opinion was" formed" by the AO. It is however arise as no opinion was" formed" by the AO. It is however arise as no opinion was" formed" by the AO. It is however seen that the reasons for reopening the case was to seen that the reasons for reopening the case was to seen that the reasons for reopening the case was to examine the issue of sales tax incentive, excise exemption, examine the issue of sales tax incentive, excise exemption, examine the issue of sales tax incentive, excise exemption, education cess, provision of leave encashment, profit on education cess, provision of leave encashment, profit on education cess, provision of leave encashment, profit on sale of fixed assets and provision for doubtful debts on the of fixed assets and provision for doubtful debts on the of fixed assets and provision for doubtful debts on the basis of disallowances made in the earlier years ie. for AY. basis of disallowances made in the earlier years ie. for AY. basis of disallowances made in the earlier years ie. for AY. 2012-13, 2013 13, 2013-14, 2014-15 and 2016-17. Under these 17. Under these circumstance, the AO had reason to believe that income had circumstance, the AO had reason to believe that income had circumstance, the AO had reason to believe that income had escaped assessment Hence, thi escaped assessment Hence, this ground of appeal is s ground of appeal is dismissed and reopening is upheld. dismissed and reopening is upheld.” 31. Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that there was no tangible material to reopen the assessment and the there was no tangible material to reopen the assessment and the there was no tangible material to reopen the assessment and the assessment has been reopened merely on the basis of the assessment has been reopened merely on the basis of the assessment has been reopened merely on the basis of the assessment orders for earlier and subsequent years. He submitted for earlier and subsequent years. He submitted for earlier and subsequent years. He submitted that the information in respect of grounds for which assessment that the information in respect of grounds for which assessment that the information in respect of grounds for which assessment has been reopened were already available with the Assessing Officer has been reopened were already available with the Assessing Officer has been reopened were already available with the Assessing Officer and therefore, he was not justified in reopening the assessment. In and therefore, he was not justified in reopening the assessment and therefore, he was not justified in reopening the assessment

M/s Everest Industries Ltd. 61 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

support of contention, the Ld. Counsel of the assessee relied on the of contention, the Ld. Counsel of the assessee relied on the of contention, the Ld. Counsel of the assessee relied on the decision of the Hon’ble Delhi High Court in the case of CIT v. decision of the Hon’ble Delhi High Court in the case of decision of the Hon’ble Delhi High Court in the case of Orient Craft Ltd. (2013) 354 ITR 536 (Del) 2013) 354 ITR 536 (Del) and decision of the and decision of the Tribunal in the case of Navajbai Ratan Tata Trust v. ACIT 196 Navajbai Ratan Tata Trust v. ACIT 196 Tribunal in the case of ITD 18932.

32.The Ld. DR on the other hand, submitted that the assessment The Ld. DR on the other hand, submitted that the assessment The Ld. DR on the other hand, submitted that the assessment orders for earlier and subsequent for earlier and subsequent years could be could be said to be a tangible material to form tangible material to form the reasons to believe that income escaped assessment. In support of n support of contention, he relied on the decision of he relied on the decision of Hon’ble High Court of Bombay in Rabo India Finance Ltd. v. Rabo India Finance Ltd. v. the Hon’ble High Court of DCIT 225 Taxman 92 (Bombay). DCIT 225 Taxman 92 (Bombay).

“15. In the present case the reasons disclose that the 15. In the present case the reasons disclose that the 15. In the present case the reasons disclose that the Assessing Officer reached the belief that there was Assessing Officer reached the belief that there was Assessing Officer reached the belief that there was escapement of income "on going through the return of escapement of income "on going through the return of escapement of income "on going through the return of income filed by the assessee after he accepted the return income filed by the assessee after he accepted the return income filed by the assessee after he accepted the return under Section 143(1) without scrutiny, under Section 143(1) without scrutiny, and nothing more. and nothing more. This is nothing but a review of the earlier proceedings and This is nothing but a review of the earlier proceedings and This is nothing but a review of the earlier proceedings and

M/s Everest Industries Ltd. 62 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

an abuse of power by the Assessing Officer, both strongly an abuse of power by the Assessing Officer, both strongly an abuse of power by the Assessing Officer, both strongly deprecated by the Supreme Court in Kelvinator of India Lid. deprecated by the Supreme Court in Kelvinator of India Lid. deprecated by the Supreme Court in Kelvinator of India Lid. (supra). The reasons recorded by the Assessing Officer in (supra). The reasons recorded by the Assessing Officer in (supra). The reasons recorded by the Assessing Officer in the present case do confirm our apprehension about the e present case do confirm our apprehension about the e present case do confirm our apprehension about the harm that a less strict interpretation of the words "reason to harm that a less strict interpretation of the words "reason to harm that a less strict interpretation of the words "reason to believe" vis-à à-vis an intimation issued under section 143(1) vis an intimation issued under section 143(1) can cause to the tax regime. There is no whisper in the can cause to the tax regime. There is no whisper in the can cause to the tax regime. There is no whisper in the reasons recorded, of an reasons recorded, of any tangible material which came to y tangible material which came to the possession of the assessing officer subsequent to the the possession of the assessing officer subsequent to the the possession of the assessing officer subsequent to the issue of the intimation. It reflects an arbitrary exercise of issue of the intimation. It reflects an arbitrary exercise of issue of the intimation. It reflects an arbitrary exercise of the power conferred under section 147. the power conferred under section 147.” 33.1 Further, the Ld. Counsel of the assessee has relied on th Further, the Ld. Counsel of the assessee has relied on th Further, the Ld. Counsel of the assessee has relied on the decision of the Bombay Bench Tribunal in the case of Navajbai decision of the Bombay Bench Tribunal in the case of decision of the Bombay Bench Tribunal in the case of Ratan Tata Trust v. ACIT Ratan Tata Trust v. ACIT(supra). The relevant para of the decision . The relevant para of the decision relied upon of the assessee is reproduced as under: relied upon of the assessee is reproduced as under:

M/s Everest Industries Ltd. 63 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

can initiate reassessment can initiate reassessment proceedings only if he has reason proceedings only if he has reason to believe that any income chargeable to tax has escaped to believe that any income chargeable to tax has escaped to believe that any income chargeable to tax has escaped assessment. assessment. assessment. The The The courts courts courts have have have interpreted interpreted interpreted that that that the the the term'reason to believe' doesn't mean subjective belief of the term'reason to believe' doesn't mean subjective belief of the term'reason to believe' doesn't mean subjective belief of the Assessing Officer and the same should be based on some Assessing Officer and the same should be based on some Assessing Officer and the same should be based on some material which has come to the knowledge of the Assessing material which has come to the knowledge of the Assessing material which has come to the knowledge of the Assessing Officer before initiating proceedings under section 147 of Officer before initiating proceedings under section 147 of Officer before initiating proceedings under section 147 of the Act. While rejecting the objections raised by the the Act. While rejecting the objections raised by the the Act. While rejecting the objections raised by the assessee against initiation of reassessment proceedings, assessee against initiation of reassessment proceedings, assessee against initiation of reassessment proceedings, the Assessing Officer vide the Assessing Officer vide order dated 2-12-2014 held that 2014 held that since the return was not selected for scrutiny, therefore, no since the return was not selected for scrutiny, therefore, no since the return was not selected for scrutiny, therefore, no details were called and thus no opinion was formed on any details were called and thus no opinion was formed on any details were called and thus no opinion was formed on any of the aspect on which the reassessment has been initiated of the aspect on which the reassessment has been initiated of the aspect on which the reassessment has been initiated in the present case. Though, it is true that, in the present case. Though, it is true that, in the present in the present case, as the return of income filed by the assessee was case, as the return of income filed by the assessee was case, as the return of income filed by the assessee was processed under section 143(1) of the Act and thus no processed under section 143(1) of the Act and thus no processed under section 143(1) of the Act and thus no scrutiny assessment was carried out, therefore, the scrutiny assessment was carried out, therefore, the scrutiny assessment was carried out, therefore, the impugned reassessment proceedings cannot be questioned impugned reassessment proceedings cannot be questioned impugned reassessment proceedings cannot be questioned on the ground of'change on the ground of'change of opinion' by the Assessing Officer. of opinion' by the Assessing Officer. However, non However, non-selection of the case for scrutiny does not in selection of the case for scrutiny does not in any manner belittle/reduce the significance and meaning of any manner belittle/reduce the significance and meaning of any manner belittle/reduce the significance and meaning of the term 'reason to believe, which is of paramount the term 'reason to believe, which is of paramount the term 'reason to believe, which is of paramount importance for initiating proceedings under sec importance for initiating proceedings under section 147 of tion 147 of the Act and, as been held in various decisions, reason to the Act and, as been held in various decisions, reason to the Act and, as been held in various decisions, reason to believe that income has escaped assessment should be believe that income has escaped assessment should be believe that income has escaped assessment should be based on some new or tangible material.Such a requirement based on some new or tangible material.Such a requirement based on some new or tangible material.Such a requirement also rules out the possibility of initiation of reassessment also rules out the possibility of initiation of reassessment also rules out the possibility of initiation of reassessment proceedings on proceedings only on the basis of suspicion without any ly on the basis of suspicion without any material being available with the Assessing Officer. material being available with the Assessing Officer. material being available with the Assessing Officer.” 33.2. On the contrary in the decision relied upon the Ld. DR in the On the contrary in the decision relied upon the Ld. DR in the On the contrary in the decision relied upon the Ld. DR in the case of Rabo India Finance Ltd. v. DCIT Rabo India Finance Ltd. v. DCIT (supra), the Hon’ble he Hon’ble High Court has held that assessment can be reopened on the basis of the Court has held that assessment can be reopened on the basis of the Court has held that assessment can be reopened on the basis of the assessment orders of the earlier or subsequent years. The relevant of the earlier or subsequent years. The relevant of the earlier or subsequent years. The relevant finding of the Hon’ble High Court is reproduced as under: finding of the Hon’ble High Court is reproduced as under: finding of the Hon’ble High Court is reproduced as under:

M/s Everest Industries Ltd. 64 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

"Considering the facts and circumstances of the case, and "Considering the facts and circumstances of the case, and "Considering the facts and circumstances of the case, and the assessee's submissions and documents furnished, the the assessee's submissions and documents furnished, the the assessee's submissions and documents furnished, the value of the international transactions with the value of the international transactions with the associated associated enterprises, with regards to the Arm's length price is not enterprises, with regards to the Arm's length price is not enterprises, with regards to the Arm's length price is not being disturbed." being disturbed." Similarly, the order of the Assessing Officer under Section Similarly, the order of the Assessing Officer under Section Similarly, the order of the Assessing Officer under Section 143(3) for Assessment Year 2006 143(3) for Assessment Year 2006-07 contains absolutely no 07 contains absolutely no evaluation or consideration whatsoever in respect evaluation or consideration whatsoever in respect evaluation or consideration whatsoever in respect of the issues on the basis of which the assessment has been issues on the basis of which the assessment has been issues on the basis of which the assessment has been sought to be reopened. During the course of the assessment sought to be reopened. During the course of the assessment sought to be reopened. During the course of the assessment proceedings for Assessment Year 2007 proceedings for Assessment Year 2007-08, an order of 08, an order of assessment came to be passed on 24 November 2010. assessment came to be passed on 24 November 2010. assessment came to be passed on 24 November 2010. During the course of the order of During the course of the order of assessment, the Assessing assessment, the Assessing Officer on the basis of material in his possession came to Officer on the basis of material in his possession came to Officer on the basis of material in his possession came to the conclusion that the assessee had failed to demonstrate the conclusion that the assessee had failed to demonstrate the conclusion that the assessee had failed to demonstrate the nature of the services or support received, the necessity the nature of the services or support received, the necessity the nature of the services or support received, the necessity of the said services, that the payments were made of the said services, that the payments were made of the said services, that the payments were made for commercial reasons of business exigency, as a result of commercial reasons of business exigency, as a result of commercial reasons of business exigency, as a result of which the expenses were inadmissible under Section 37(1). which the expenses were inadmissible under Section 37(1). which the expenses were inadmissible under Section 37(1). At this stage, the Court is not concerned with the At this stage, the Court is not concerned with the At this stage, the Court is not concerned with the correctness of that determination, since the only issue is as correctness of that determination, since the only issue is as correctness of that determination, since the only issue is as to whether the material w to whether the material which emerged during the course of hich emerged during the course of the assessment proceedings for Assessment Year 2007 the assessment proceedings for Assessment Year 2007 the assessment proceedings for Assessment Year 2007-08 and the order of assessment could furnish tangible material and the order of assessment could furnish tangible material and the order of assessment could furnish tangible material on the basis of which the assessment for Assessment Year on the basis of which the assessment for Assessment Year on the basis of which the assessment for Assessment Year 2006-07 could be reopened.Having regard to the law 07 could be reopened.Having regard to the law as 07 could be reopened.Having regard to the law expounded by the Supreme Court in the several judgments expounded by the Supreme Court in the several judgments expounded by the Supreme Court in the several judgments which we have noted earlier, we have come to the which we have noted earlier, we have come to the which we have noted earlier, we have come to the conclusion that the assessment for Assessment Year 2006 conclusion that the assessment for Assessment Year 2006 conclusion that the assessment for Assessment Year 2006- 07 could legitimately be reopened on the basis of the 07 could legitimately be reopened on the basis of the 07 could legitimately be reopened on the basis of the material which came before the Assess material which came before the Assessing Officer during the ing Officer during the course of the assessment proceedings for Assessment Year course of the assessment proceedings for Assessment Year course of the assessment proceedings for Assessment Year 2007-08.” 34. In view of the above discussion, it is relevant to In view of the above discussion, it is relevant to In view of the above discussion, it is relevant to reproduce reasons recorded by the Assessing Officer by the Assessing Officer in the case of the in the case of the assessee, as under:

M/s Everest Industries Ltd. 65 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

“Reasons for reopening of Reasons for reopening of the assessment in the case of the assessment in the case of M/s Everest Industries s Everest Industries Ltd. for A.Y 2015:16 u/s 147 of the u/s 147 of the Act The assessee Company is engaged in the business of The assessee Company is engaged in the business of The assessee Company is engaged in the business of manufacturing of Asbestos Cement Sheets and accessories manufacturing of Asbestos Cement Sheets and accessories manufacturing of Asbestos Cement Sheets and accessories and Pre-Engineering Buitding pr Engineering Buitding products. The assessee oducts. The assessee company has filed its original return of income for A Y2015 company has filed its original return of income for A Y2015 company has filed its original return of income for A Y2015- 16 16 16 on on on 23.11.2015 23.11.2015 23.11.2015 declaring declaring declaring total total total loss loss loss of of of Rs Rs Rs 12,31,11,7947Subsequently, the assessee company has 12,31,11,7947Subsequently, the assessee company has 12,31,11,7947Subsequently, the assessee company has revised its return of income for AY.2015 revised its return of income for AY.2015-16 on 25.11.2016 16 on 25.11.2016 and on 31.03.2017 and and on 31.03.2017 and finally declaring total loss ofRs. finally declaring total loss ofRs. 21,82,30,459/ 21,82,30,459/ 2. On perusal of case record it is noticed that the 2. On perusal of case record it is noticed that the 2. On perusal of case record it is noticed that the assessients in this casewere completed for A.Y. 2012 assessients in this casewere completed for A.Y. 2012 assessients in this casewere completed for A.Y. 2012-13. A.Y 2013-14, A.Y. 2014 14, A.Y. 2014-15 and AY. 206-17 wherein 17 wherein additions on account of leave encashment, addito additions on account of leave encashment, addito additions on account of leave encashment, additonal aspreciation, excise duty exemption, education cess, sales aspreciation, excise duty exemption, education cess, sales aspreciation, excise duty exemption, education cess, sales tax incentives, provision for doubtful debts, profit on sale of tax incentives, provision for doubtful debts, profit on sale of tax incentives, provision for doubtful debts, profit on sale of fixed assets, etc were made after disallowing the claims of fixed assets, etc were made after disallowing the claims of fixed assets, etc were made after disallowing the claims of the assessee on this issues, as discussed in detail in the the assessee on this issues, as discussed in detail in the the assessee on this issues, as discussed in detail in the respective assessment orders. The aesessment for A.Y. assessment orders. The aesessment for A.Y. assessment orders. The aesessment for A.Y. 2015-16 was not made ufs 143(3) as the case of the 16 was not made ufs 143(3) as the case of the 16 was not made ufs 143(3) as the case of the assessee was not selected for scrutiny under CASS assessee was not selected for scrutiny under CASS assessee was not selected for scrutiny under CASS (Computer Aided Scrutiny Selection. On verification of the (Computer Aided Scrutiny Selection. On verification of the (Computer Aided Scrutiny Selection. On verification of the returns of income (Original as well as Revised) for returns of income (Original as well as Revised) for returns of income (Original as well as Revised) for AY. 2015-16 and the information available on record, it is seen 16 and the information available on record, it is seen 16 and the information available on record, it is seen that, for this year, the assessee has made variousclaims of that, for this year, the assessee has made variousclaims of that, for this year, the assessee has made variousclaims of deductions from the business profit on account of leave deductions from the business profit on account of leave deductions from the business profit on account of leave encashment, encashment, encashment, additional additional additional depreciation, depreciation, depreciation, excise excise excise duty duty duty exemption, education cess, exemption, education cess, sales tax incentives, provision sales tax incentives, provision for doubtful debts, profit on sale of fixed assets, etc while for doubtful debts, profit on sale of fixed assets, etc while for doubtful debts, profit on sale of fixed assets, etc while working out the taxable income as per normal provisions of working out the taxable income as per normal provisions of working out the taxable income as per normal provisions of Income-tax and as per the provisions of Sec. 115JB under tax and as per the provisions of Sec. 115JB under tax and as per the provisions of Sec. 115JB under MA'. The details of such claims made by the as MA'. The details of such claims made by the as MA'. The details of such claims made by the assessee for A.Y. 2015-16 are as under. 16 are as under. Sr. No. Description Amount 1. Excise exemption claimed as capital receipt Excise exemption claimed as capital receipt 55,57,89,360 2. Sales Tax incentives claimed as capital receipt Sales Tax incentives claimed as capital receipt Sales Tax incentives claimed as capital receipt 6,06,77,430 3. Claim of Education Cess Claim of Education Cess 39,81,425 4. Provision of leave encashment Provision of leave encashment 1,53,73,154 5. Profit on sale of Fixed Assets Profit on sale of Fixed Assets 1,56,439

M/s Everest Industries Ltd. 66 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

M/s Everest Industries Ltd. 67 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

From the above discussion, it is established that, it is a From the above discussion, it is established that, it is a From the above discussion, it is established that, it is a clear case of escapement of income which is chargeable to clear case of escapement of income which is chargeable to clear case of escapement of income which is chargeable to tax and the assessee tax and the assessee has understated it's income and has has understated it's income and has claimed excessive loss, deductions, allowances, etc in the claimed excessive loss, deductions, allowances, etc in the claimed excessive loss, deductions, allowances, etc in the return of income. return of income. 4; Considering the above facts and circumstances, I have 4; Considering the above facts and circumstances, I have 4; Considering the above facts and circumstances, I have reason to believe that income chargeable to tax to the extent reason to believe that income chargeable to tax to the extent reason to believe that income chargeable to tax to the extent of Rs. 65,32,39,010/ of Rs. 65,32,39,010/- has escaped assessment for AY as escaped assessment for AY 2015-16 within the meaning of provisions of section 147 of 16 within the meaning of provisions of section 147 of 16 within the meaning of provisions of section 147 of the Income Tax Act, 1961. the Income Tax Act, 1961. 5. In this case a return of income was filed for the year 5. In this case a return of income was filed for the year 5. In this case a return of income was filed for the year under consideration and regular assessment u/s 143(3) under consideration and regular assessment u/s 143(3) under consideration and regular assessment u/s 143(3) was not made. Therefore, this was not made. Therefore, this case is covered as per Clause case is covered as per Clause (b) of Explanation 2 to Section 147 of the Income Tax Act, (b) of Explanation 2 to Section 147 of the Income Tax Act, (b) of Explanation 2 to Section 147 of the Income Tax Act, which reads as under : which reads as under : "Explanation 2 "Explanation 2 - for the purposes of this section, the for the purposes of this section, the following shall also be deemed to be cases where income following shall also be deemed to be cases where income following shall also be deemed to be cases where income chargeable to tax has escaped ass chargeable to tax has escaped assessment,namely essment,namely (a) -------------------------- -------------------------- (b) Where a return of income has been furnished by the (b) Where a return of income has been furnished by the (b) Where a return of income has been furnished by the assessee but no assessment has been made and it is assessee but no assessment has been made and it is assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has noticed by the Assessing Officer that the assessee has noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive l understated the income or has claimed excessive l understated the income or has claimed excessive loss, deduction, allowance or relief in the return;" deduction, allowance or relief in the return;" 6. It is evident from the above discussion that in this case, 6. It is evident from the above discussion that in this case, 6. It is evident from the above discussion that in this case, for A.Y. 2015 for A.Y. 2015-16, the issues under consideration were never 16, the issues under consideration were never examined during the course of processing of return of examined during the course of processing of return of examined during the course of processing of return of income: It is important to h income: It is important to highlight here that facts relevant ighlight here that facts relevant on the above issues may be embedded in annual report, on the above issues may be embedded in annual report, on the above issues may be embedded in annual report, audited P & L A/c, balance sheet and books of account in audited P & L A/c, balance sheet and books of account in audited P & L A/c, balance sheet and books of account in such a manner that it would require due diligence by the A0 such a manner that it would require due diligence by the A0 such a manner that it would require due diligence by the A0 to extract these information. to extract these information. 7. In this case less 7. In this case less than four vears have elapsed from the than four vears have elapsed from the end of assessment year under consideration i.e. A.Y. 2015 end of assessment year under consideration i.e. A.Y. 2015 end of assessment year under consideration i.e. A.Y. 2015- 16. Hence sanction to issue notice us 148 has been 16. Hence sanction to issue notice us 148 has been 16. Hence sanction to issue notice us 148 has been requested from Additional Commissioner of Income Tax as requested from Additional Commissioner of Income Tax as requested from Additional Commissioner of Income Tax as per the provisions of section 151(2) of the Act. per the provisions of section 151(2) of the Act.”

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was not pressed. Accordingly, the ground of appeal of the assessee was not pressed. Accordingly, the ground of appeal of the assessee was not pressed. Accordingly, the ground of appeal of the assessee is dismissed.

13.1 Clause 'c' to Explanation 1 of Section 115JB of the I.T. 13.1 Clause 'c' to Explanation 1 of Section 115JB of the I.T. 13.1 Clause 'c' to Explanation 1 of Section 115JB of the I.T. Act, 1961 is as Act, 1961 is as under: "The amount or amounts set aside to provisions made for "The amount or amounts set aside to provisions made for "The amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities meeting liabilities, other than ascertained liabilities meeting liabilities, other than ascertained liabilities or;" An analysis of the said provision shows that 'book profit' An analysis of the said provision shows that 'book profit' An analysis of the said provision shows that 'book profit' means the profit as shown in the profit and loss account of means the profit as shown in the profit and loss account of means the profit as shown in the profit and loss account of the the the relevant relevant relevant assessment assessment assessment year year year prepared prepared prepared under under under the the the Companies Act and the same has to be reduced by the Companies Act and the same has to be reduced by the Companies Act and the same has to be reduced by the amount set aside to provisions amount set aside to provisions made for meeting liabilities made for meeting liabilities other than ascertained liabilities. other than ascertained liabilities. As per the decision of the Hon'ble Supreme Court in the As per the decision of the Hon'ble Supreme Court in the As per the decision of the Hon'ble Supreme Court in the case of Apollo Tyres the Assessing Officer has no power to case of Apollo Tyres the Assessing Officer has no power to case of Apollo Tyres the Assessing Officer has no power to tinker with the profit/loss declared for Company Law tinker with the profit/loss declared for Company Law tinker with the profit/loss declared for Company Law

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purposes and the 'book purposes and the 'book profit' shown therein has to be profit' shown therein has to be taken as the base for making adjustment u/s 115JB. taken as the base for making adjustment u/s 115JB. taken as the base for making adjustment u/s 115JB. As per Clause 'c' to Explanation 1 of Section 115JB addition As per Clause 'c' to Explanation 1 of Section 115JB addition As per Clause 'c' to Explanation 1 of Section 115JB addition to the book profit can be made only when the provision to the book profit can be made only when the provision to the book profit can be made only when the provision made for liabilities is not an ascertained liabilities. T made for liabilities is not an ascertained liabilities. T made for liabilities is not an ascertained liabilities. The AO has added the gross provision for doubtful debts of Rs. has added the gross provision for doubtful debts of Rs. has added the gross provision for doubtful debts of Rs. 1,72,61,202/ 1,72,61,202/-. A perusal of the relevant extract of the . A perusal of the relevant extract of the Annual Report for F.Y. Annual Report for F.Y. 2014-15 filed as Annexure 15 filed as Annexure-70 in Page No. 948 of the written 70 in Page No. 948 of the written submission of the Appellant shows that under the head submission of the Appellant shows that under the head submission of the Appellant shows that under the head 'other expenses' the following expenses are reflected: other expenses' the following expenses are reflected: other expenses' the following expenses are reflected: p-Provisions for doubtful trade and other receivables (net) Provisions for doubtful trade and other receivables (net) Provisions for doubtful trade and other receivables (net) 172.61 (Rs. In lakhs) 172.61 (Rs. In lakhs) Hence it is seen that the provision for doubtful debts of Rs. Hence it is seen that the provision for doubtful debts of Rs. Hence it is seen that the provision for doubtful debts of Rs. 172.61 lakhshave been created which is an unascertained 172.61 lakhshave been created which is an unascertained 172.61 lakhshave been created which is an unascertained liability. Sub ability. Sub-clause 'c' empowers AO to increase the book clause 'c' empowers AO to increase the book profit only to the extent of unascertained liabilities which in profit only to the extent of unascertained liabilities which in profit only to the extent of unascertained liabilities which in the case of the Appellant as per its Audited Financial the case of the Appellant as per its Audited Financial the case of the Appellant as per its Audited Financial Statement is Provisions for doubtful trade and other Statement is Provisions for doubtful trade and other Statement is Provisions for doubtful trade and other receivables (net) 172.61 (R receivables (net) 172.61 (Rs. In lakhs). Following the s. In lakhs). Following the decision of the third member, Hon'ble Vice President, decision of the third member, Hon'ble Vice President, decision of the third member, Hon'ble Vice President, Hyderabad in the case of M/s Sadan Power Distributin Co. Hyderabad in the case of M/s Sadan Power Distributin Co. Hyderabad in the case of M/s Sadan Power Distributin Co. of Andra Pradesh Ltd. vs DCIT. I uphold the addition of Rs. of Andra Pradesh Ltd. vs DCIT. I uphold the addition of Rs. of Andra Pradesh Ltd. vs DCIT. I uphold the addition of Rs. 172.61 Lakhs made by the AO. This Ground of Appeal is 172.61 Lakhs made by the AO. This Ground of Appeal is 172.61 Lakhs made by the AO. This Ground of Appeal is Dismissed.” 38. Before us, the assessee Before us, the assessee submitteda chart containing working chart containing working out of closing balance of debtors in the balance sheet amounting to out of closing balance of debtors in the balance sheet amounting to out of closing balance of debtors in the balance sheet amounting to Rs.2,07,00,044/-, a a detailed break up of which detailed break up of which is provided as under:

Particulars Amount Amount Remarks Ground No. Opening as on 01 April 59,09,801 59,09,801 2014 Provision created during 1,72,61,202 1,72,61,202 During the previous year relevant to During the previous year relevant to Ground No. 3 AY the year instant assessment year i.e. AY 2015 instant assessment year i.e. AY 2015-16, 2015-16 theassessee has created provision for theassessee has created provision for doubtful debts of Rs. 1,72,61,202/- and the same is debited to Profit and Loss ebited to Profit and Loss

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Account. The assessee has not added Account. The assessee has not added back back provision provision for for doubtful doubtful debts debts debited to P/L A/c while computing of debited to P/L A/c while computing of Book Profit u/s 115JB on the contention Book Profit u/s 115JB on the contention that since the aforesaid provision had that since the aforesaid provision had been netted off with debtors in the been netted off with debtors in the Balance Sheet, the same represents Sheet, the same represents actual write off and hence clause (i) in actual write off and hence clause (i) in Explanation 1 to Sec. 115JB shall not be Explanation 1 to Sec. 115JB shall not be attracted. Written off against the 20,21,975 20,21,975 The assessee has added provision for The assessee has added provision for Ground No. 4 AY debtors during the year doubtful debts under MAT provisions. oubtful debts under MAT provisions. 2015-16 of AY 2012-13 In view of the aforesaid facts, the In view of the aforesaid facts, the assessee shall be entitled for claim write shall be entitled for claim write back of provision for doubtful debts back of provision for doubtful debts amounting amounting to to Rs. Rs. 20,21,975/-, 20,21,975/ pertaining to AY 2012-13 as it has 13 as it has already added the provision for doubtful already added the provision for doubtful debt created in AY. 2012-13 while 13 while computing Book Profit u/s 115JB else computing Book Profit u/s 115JB else the same e will will result result in in double double disallowance. Written off against the 4,48,984 4,48,984 The assessee has not added provision for The assessee has not added provision for debtors during the year doubtful debts under MAT provisions doubtful debts under MAT provisions of AY 2014-15 which has been accepted in order u/s which has been accepted in order u/s 143(3). Out of the amount of provision created Out of the amount of provision created in AY 2014-15 38,87,826, only 4,48,984 15 38,87,826, only 4,48,984 have been written off in current AY. Closing balance as on 2,07,00,044 2,07,00,044 31 March, 2015 38.1 Before us, the LD. Counsel of the assessee relied on the Before us, the LD. Counsel of the assessee relied on the Before us, the LD. Counsel of the assessee relied on the decision of the Hon’ble Supreme Court in the case of Vijaya Bank Hon’ble Supreme Court in the case of Vijaya Bank Hon’ble Supreme Court in the case of Vijaya Bank Ltd. v. CIT (supra). The Ld. Counsel further referred to the decision Ltd. v. CIT (supra). The Ld. Counsel further referred to the decision Ltd. v. CIT (supra). The Ld. Counsel further referred to the decision of the Mumbai Tribunal in the case of Tainwala Chemicals & Tainwala Chemicals & of the Mumbai Tribunal in the case of Plastics India Ltd. v. ACIT ( Plastics India Ltd. v. ACIT (2011) (47 SOT 169) (47 SOT 169)and decision of bunal in the case of DCIT v. SSPL Properties SSPL Properties the Kolkata Tribunal in the case of Management Pvt. Ltd. ITA No. 2074/Kol/2019 Management Pvt. Ltd. ITA No. 2074/Kol/2019 and submitted that clause (c ) as well as clause (i) of as well as clause (i) of explanation to explanation to section 115JB (2 ) of the Act are not applicable over t (2 ) of the Act are not applicable over the provisions for doubtful he provisions for doubtful debt if same is reduce reduced from the debtors account. The Ld. Counsel from the debtors account. The Ld. Counsel

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further submitted that Hon’ble Bombay High Court in the case of further submitted that Hon’ble Bombay High Court in the case of further submitted that Hon’ble Bombay High Court in the case of CIT v. Tainwala Chemicals & Plastic India Ltd. (2013) 215 Taxman CIT v. Tainwala Chemicals & Plastic India Ltd. (2013) CIT v. Tainwala Chemicals & Plastic India Ltd. (2013) 153 has upheld the finding of the Tribunal. as upheld the finding of the Tribunal.

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amounted to write off and the assessee was entitled for deduction to write off and the assessee was entitled for deduction to write off and the assessee was entitled for deduction under section 36(1)(vii ) of the Act. under section 36(1)(vii ) of the Act. The relevant finding of the Hon’ble The relevant finding of the Hon’ble Supreme court is reproduced as under: Supreme court is reproduced as under:

“However, as stated However, as stated by the Tribunal, in the present by the Tribunal, in the present case, besides debiting the Profit and Loss Account case, besides debiting the Profit and Loss Account case, besides debiting the Profit and Loss Account and creating a provision for bad and doubtful debt, and creating a provision for bad and doubtful debt, and creating a provision for bad and doubtful debt, the the assessee-Bank assessee Bank had had correspondingly/simultaneously obliterated the said correspondingly/simultaneously obliterated the said correspondingly/simultaneously obliterated the said provision provision provision from from from it's it's it's accounts accounts accounts by by by reducing reducing reducing the the the corresponding orresponding orresponding amount amount amount from from from Loans Loans Loans and and and Advances/debtors on the asset side of the Balance Advances/debtors on the asset side of the Balance Advances/debtors on the asset side of the Balance Sheet and, consequently, at the end of the year, the Sheet and, consequently, at the end of the year, the Sheet and, consequently, at the end of the year, the figure in the loans and advances or the debtors on figure in the loans and advances or the debtors on figure in the loans and advances or the debtors on the asset side of the Balance Sheet was shown as the asset side of the Balance Sheet was shown as the asset side of the Balance Sheet was shown as net of the provisi net of the provision "for impugned bad debt". In the on "for impugned bad debt". In the judgement of the Gujarat High Court in the case of judgement of the Gujarat High Court in the case of judgement of the Gujarat High Court in the case of Vithaldas H. Dhanjibhai Bardanwala [supra], a mere Vithaldas H. Dhanjibhai Bardanwala [supra], a mere Vithaldas H. Dhanjibhai Bardanwala [supra], a mere debit to the Profit and Loss Account was sufficient to debit to the Profit and Loss Account was sufficient to debit to the Profit and Loss Account was sufficient to constitute actual write off whereas, after the constitute actual write off constitute actual write off whereas, after the whereas, after the Explanation, the Explanation, the assessee(s) is now required not only assessee(s) is now required not only to to to debit debit debit the the the Profit Profit Profit and and and Loss Loss Loss Account Account Account but but but simultaneously also reduce loans and advances or simultaneously also reduce loans and advances or simultaneously also reduce loans and advances or the debtors from the asset side of the Balance Sheet the debtors from the asset side of the Balance Sheet the debtors from the asset side of the Balance Sheet to the extent of the corresponding amount so that, at to the extent of the corresponding amount so that, at to the extent of the corresponding amount so that, at the end of the year, t the end of the year, the amount of loans and he amount of loans and advances/debtors is shown as net of provisions for advances/debtors is shown as net of provisions for advances/debtors is shown as net of provisions for impugned bad debt. This aspect is lost sight of by the impugned bad debt. This aspect is lost sight of by the impugned bad debt. This aspect is lost sight of by the High Court in it's impugned judgement. In the High Court in it's impugned judgement. In the High Court in it's impugned judgement. In the circumstances, we hold, on the first question, that the circumstances, we hold, on the first question, that the circumstances, we hold, on the first question, that the assessee was entitled to assessee was entitled to the benefit of deduction the benefit of deduction under Section 36(1)(vii) of 1961 Act as there was an of 1961 Act as there was an actual write off by the assessee in it's Books, as actual write off by the assessee in it's Books, as actual write off by the assessee in it's Books, as indicated above. indicated above.” 40.1 The Tribunal in the case of Tainwala The Tribunal in the case of Tainwala Chemicals and Plastics Chemicals and Plastics India Ltd (supra) on the issue of addition for provision of bad and India Ltd (supra) on the issue of addition for provision of bad and India Ltd (supra) on the issue of addition for provision of bad and doubtful debt held as under: doubtful debt held as under:

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“41. We have considered the rival submissions 41. We have considered the rival submissions 41. We have considered the rival submissions carefully. We find that a controversy was going carefully. We find that a controversy was going carefully. We find that a controversy was going whether provision for doubtful debt was whether provision for doubtful debt was against any against any ascertained liability or a diminution of asset and ascertained liability or a diminution of asset and ascertained liability or a diminution of asset and whether same could be added back to the profits whether same could be added back to the profits whether same could be added back to the profits under section 115JB. The controversy was settled by under section 115JB. The controversy was settled by under section 115JB. The controversy was settled by the Hon'ble Supreme Court in the case of in the case the Hon'ble Supreme Court in the case of in the case the Hon'ble Supreme Court in the case of in the case of CIT v. HCL Comnet Systems & Services of CIT v. HCL Comnet Systems & Services Lid. (2008] Lid. (2008] 305 ITR 409 / 174 Taxman 118 by holding that 305 ITR 409 / 174 Taxman 118 by holding that 305 ITR 409 / 174 Taxman 118 by holding that provision for doubtful debt is a provision against provision for doubtful debt is a provision against provision for doubtful debt is a provision against diminution of the asset and, therefore, same could not diminution of the asset and, therefore, same could not diminution of the asset and, therefore, same could not be added back to the book profits. However, be added back to the book profits. However, be added back to the book profits. However, Parliament inserted clause (i) to section 115JB by Parliament inserted clause (i) to section 115JB b Parliament inserted clause (i) to section 115JB b which even the provision of diminution in the assets which even the provision of diminution in the assets which even the provision of diminution in the assets was also required to be added to the book profits. was also required to be added to the book profits. was also required to be added to the book profits. Therefore, it was a mere case of provision for doubtful Therefore, it was a mere case of provision for doubtful Therefore, it was a mere case of provision for doubtful debt, then it is required to be added back to the book debt, then it is required to be added back to the book debt, then it is required to be added back to the book profits. However, while deciding the assessee's profits. However, while deciding the as profits. However, while deciding the as appeal the issue regarding claim for bad debt also appeal the issue regarding claim for bad debt also appeal the issue regarding claim for bad debt also came up for consideration before the Tribunal and by came up for consideration before the Tribunal and by came up for consideration before the Tribunal and by following the decision of the Hon'ble Supreme Court in following the decision of the Hon'ble Supreme Court in following the decision of the Hon'ble Supreme Court in the case of Vijaya Bank (supra) we have already held the case of Vijaya Bank (supra) we have already held the case of Vijaya Bank (supra) we have already held that the claim for bad debt is allo that the claim for bad debt is allowable. Once such wable. Once such claim is allowable as such, then there is no question claim is allowable as such, then there is no question claim is allowable as such, then there is no question of adding back the same to the book profits. In view of adding back the same to the book profits. In view of adding back the same to the book profits. In view of this discussion, we confirm the order of the Id. of this discussion, we confirm the order of the Id. of this discussion, we confirm the order of the Id. CIT(A). CIT(A).” 40.2 Thus, the Tribunal upheld the deletion of provision of bad and Thus, the Tribunal upheld the deletion of provision of bad and Thus, the Tribunal upheld the deletion of provision of bad and doubtful debt u/s 15JB of the Act mainly for the reason that under doubtful debt u/s 15JB of the Act mainly for the reason that under doubtful debt u/s 15JB of the Act mainly for the reason that under regular provisions of the Act said entry has been held as actual regular provisions of the Act said entry has been held as actual regular provisions of the Act said entry has been held as actual write off. The relevant finding of the Tribunal write off. The relevant finding of the Tribunal in relation t in relation to claim of said provision as actual write off u/s 36(1)(vii) is reproduced as said provision as actual write off u/s 36(1)(vii) is reproduced as said provision as actual write off u/s 36(1)(vii) is reproduced as under:

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before the AO, whereas before the CIT(A) this before the AO, whereas before the CIT(A) this before the AO, whereas before the CIT(A) this provisions was shown to be against Tainwala provisions was shown to be against Tainwala provisions was shown to be against Tainwala Holdings Pvt. Ltd. We find that the ld. CIT(A) has Holdings Pvt. Ltd. We find that the ld. CIT(A) has Holdings Pvt. Ltd. We find that the ld. CIT(A) has reproduced ground No.6 in para reproduced ground No.6 in para-7 which reads as 7 which reads as under: under: " Ground 6 " Ground 6 - Bad Debts Written off The AO erred in en off The AO erred in disallowing the provision made for doubtful recovery disallowing the provision made for doubtful recovery disallowing the provision made for doubtful recovery of loan given to Tainwala Holdings Private Limited on of loan given to Tainwala Holdings Private Limited on of loan given to Tainwala Holdings Private Limited on the alleged ground that the said loan given to this the alleged ground that the said loan given to this the alleged ground that the said loan given to this company are not declared as income in earlier years company are not declared as income in earlier years company are not declared as income in earlier years so this amount cannot so this amount cannot be allowed as deduction be allowed as deduction u/s.36(1)(vii) of the Act. u/s.36(1)(vii) of the Act. In this regard it is respectfully submitted that loan In this regard it is respectfully submitted that loan In this regard it is respectfully submitted that loan given to Tainwala Holdings Private Limited out of the given to Tainwala Holdings Private Limited out of the given to Tainwala Holdings Private Limited out of the surplus funds of the appellant, which were already surplus funds of the appellant, which were already surplus funds of the appellant, which were already offered to tax in the earlier years. Therefore, the offered to tax in the earlier years. Therefore offered to tax in the earlier years. Therefore contention of the AO that the loan given to company is contention of the AO that the loan given to company is contention of the AO that the loan given to company is not declared as income, is not correct. not declared as income, is not correct. Further, it is to be noted that the provision is made Further, it is to be noted that the provision is made Further, it is to be noted that the provision is made after considering weak financial position of the after considering weak financial position of the after considering weak financial position of the Tainwala Holdings Private Limited. This is clearly Tainwala Holdings Private Limited. This is clearly Tainwala Holdings Private Limited. This is clearly loss of fund of the appellant and therefore, allowable oss of fund of the appellant and therefore, allowable oss of fund of the appellant and therefore, allowable as deduction u/s.36(1)(vii) of the Act. as deduction u/s.36(1)(vii) of the Act. The appellant humbly prays that the proper and The appellant humbly prays that the proper and The appellant humbly prays that the proper and appropriate relief be allowed in the appeal to meet appropriate relief be allowed in the appeal to meet appropriate relief be allowed in the appeal to meet the ends of justice as being aggrieved by the the ends of justice as being aggrieved by the the ends of justice as being aggrieved by the assessment made, assessment made, the appellant is constrained to file the appellant is constrained to file this appeal." this appeal." 33. From the above it is clear that provision for . From the above it is clear that provision for . From the above it is clear that provision for doubtful debt seems to be only against Tainwala doubtful debt seems to be only against Tainwala doubtful debt seems to be only against Tainwala Holdings Pvt. Ltd. However since a doubt Holdings Pvt. Ltd. However since a doubt has been raised, therefore, we remit the matter back to the file raised, therefore, we remit the matter back to the file raised, therefore, we remit the matter back to the file of the AO for verification of the name against whom f the AO for verification of the name against whom f the AO for verification of the name against whom the provision for doubtful debt has been claimed. The the provision for doubtful debt has been claimed. The the provision for doubtful debt has been claimed. The second objection that since assessee is not a NBFC, second objection that since assessee is not a NBFC, second objection that since assessee is not a NBFC, therefore, it cannot be said that assessee company therefore, it cannot be said that assessee company therefore, it cannot be said that assessee company was engaged in the business of granting loans. It was engaged in the business of granting loans. I was engaged in the business of granting loans. I was pointed out by the Ld.counsel of the assessee was pointed out by the Ld.counsel of the assessee was pointed out by the Ld.counsel of the assessee

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that whenever assessee company has surplus funds that whenever assessee company has surplus funds that whenever assessee company has surplus funds they were lent as inter corporate deposits and this they were lent as inter corporate deposits and this they were lent as inter corporate deposits and this fact becomes clear from page fact becomes clear from page-17 of the paper book 17 of the paper book wherein interest has been accounted for. This fact wherein interest has been accounted for. This fact wherein interest has been accounted for. This fact can be further verified from assessment order for A.Y n be further verified from assessment order for A.Y n be further verified from assessment order for A.Y 1995-96, copy of which has been filed at pages 53 to 96, copy of which has been filed at pages 53 to 96, copy of which has been filed at pages 53 to 57 of the paper book wherein interest from loans 57 of the paper book wherein interest from loans 57 of the paper book wherein interest from loans amounting to Rs.33,00,238/ amounting to Rs.33,00,238/- has been assessed as has been assessed as business income. Similarly, in A.Y 1996 business income. Similarly, in A.Y 1996-97 from the 97 from the assessment order, copy of which is placed at pages ssessment order, copy of which is placed at pages ssessment order, copy of which is placed at pages 75 to 78 of the paper book wherein while dealing 75 to 78 of the paper book wherein while dealing 75 to 78 of the paper book wherein while dealing with the issue of deduction u/s.80IA against interest with the issue of deduction u/s.80IA against interest with the issue of deduction u/s.80IA against interest income it has been clearly mentioned that assessee income it has been clearly mentioned that assessee income it has been clearly mentioned that assessee has earned interest income of Rs.30,68,014/- and it has earned interest income of Rs.30,68,014/ has earned interest income of Rs.30,68,014/ has been observed that no deduction u/s.80IA was has been observed that no deduction u/s.80IA was has been observed that no deduction u/s.80IA was available. But it clearly shows that assessee's available. But it clearly shows that assessee's available. But it clearly shows that assessee's interest income has been clearly assessed as interest income has been clearly assessed as interest income has been clearly assessed as business income. Thus, it is clear that whenever business income. Thus, it is clear that whenever business income. Thus, it is clear that whenever assessee has earned income from giving money to assessee has earned income from giving money to assessee has earned income from giving money to inter corporate d inter corporate deposits same has been offered as eposits same has been offered as business income and has been assessed also as business income and has been assessed also as business income and has been assessed also as business business business income. income. income. The The The Ld.DR Ld.DR Ld.DR in in in the the the written written written submissions had also relied on the decision of the submissions had also relied on the decision of the submissions had also relied on the decision of the Bombay Bench of the Tribunal in the case of M/s. Bombay Bench of the Tribunal in the case of M/s. Bombay Bench of the Tribunal in the case of M/s. Maini Shipping Pvt. Ltd. in I.T.A.N Maini Shipping Pvt. Ltd. in I.T.A.Nos.2687/M/08 and os.2687/M/08 and 2718/M/07 and 3531/M/07. In that case it was 2718/M/07 and 3531/M/07. In that case it was 2718/M/07 and 3531/M/07. In that case it was clearly found that interest has been clearly found that interest has been charged only charged only from two parties and, therefore, lending of money from two parties and, therefore, lending of money from two parties and, therefore, lending of money could not be considered as business of the assessee. could not be considered as business of the assessee. could not be considered as business of the assessee. Whereas in the case before us, interest has been Whereas in the case before us, interest h Whereas in the case before us, interest h charged from all the parties. Moreover, in the case of charged from all the parties. Moreover, in the case of charged from all the parties. Moreover, in the case of M/s.Maini Shipping Pvt. Ltd.I.T.A.No.2687/M/07 M/s.Maini Shipping Pvt. Ltd.I.T.A.No.2687/M/07 M/s.Maini Shipping Pvt. Ltd.I.T.A.No.2687/M/07 [supra] it was also observed that there was no [supra] it was also observed that there was no [supra] it was also observed that there was no discussion regarding charging of interest income as discussion regarding charging of interest income as discussion regarding charging of interest income as business income and business income and section 143[3] order was [3] order was available only for one year, whereas in the case available only for one year, whereas in the case available only for one year, whereas in the case before us before us section 143[3] orders are available for [3] orders are available for A.Yrs.1995 A.Yrs.1995-96 and 1996-97 and also there is 97 and also there is discussion discussion re regarding garding interest interest income income while while adjudicating the issue for deduction u/s.80IA. Thus, adjudicating the issue for deduction u/s.80IA. Thus, adjudicating the issue for deduction u/s.80IA. Thus, those decisions are clearly distinguishable and we those decisions are clearly distinguishable and we those decisions are clearly distinguishable and we hold that once assessee has lent the surplus money hold that once assessee has lent the surplus money hold that once assessee has lent the surplus money and offered the interest income as business income, and offered the interest income as business income, and offered the interest income as business income,

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then the activity o then the activity of lending the money has to be f lending the money has to be treated as business activity. In any case, if this claim treated as business activity. In any case, if this claim treated as business activity. In any case, if this claim cannot be allowed as bad debt, same has to be cannot be allowed as bad debt, same has to be cannot be allowed as bad debt, same has to be allowed as business loss because money was lent allowed as business loss because money was lent allowed as business loss because money was lent during the course of business for earning income. during the course of business for earning income. during the course of business for earning income. This view is further supp This view is further supported by the decision of the orted by the decision of the Special Bench of the Tribunal in the case of Dy. CIT Special Bench of the Tribunal in the case of Dy. CIT Special Bench of the Tribunal in the case of Dy. CIT vs. vs. vs. Shri Shri Shri Shreyas Shreyas Shreyas S.Morakhia S.Morakhia S.Morakhia I.T.A.No.3374/Mum/2004 dated 16th July, 2010. In I.T.A.No.3374/Mum/2004 dated 16th July, 2010. In I.T.A.No.3374/Mum/2004 dated 16th July, 2010. In this case vide para this case vide para-32 it was held as under [210 ITR 32 it was held as under [210 ITR 1] in which it was held as under: 1] in which it was held as under: "32. Keepi "32. Keeping in view all the facts of the case and the ng in view all the facts of the case and the legal position emanating from the various judicial legal position emanating from the various judicial legal position emanating from the various judicial pronouncements as discussed above, we are of the pronouncements as discussed above, we are of the pronouncements as discussed above, we are of the view that the amount receivable by the assessee, view that the amount receivable by the assessee, view that the amount receivable by the assessee, who is a share broker, from his clients against the who is a share broker, from his clients against the who is a share broker, from his clients against the transactio transactions of purchase of shares on their behalf ns of purchase of shares on their behalf constitutes debt which is a trading debt. The constitutes debt which is a trading debt. The constitutes debt which is a trading debt. The brokerage/commission income arising from such brokerage/commission income arising from such brokerage/commission income arising from such transactions very much forms part of the said debt transactions very much forms part of the said debt transactions very much forms part of the said debt and when the amount of such brokerage/commission and when the amount of such brokerage/commission and when the amount of such brokerage/commission has been taken into acc has been taken into account in computation of income ount in computation of income of the assessee of the relevant previous year or any of the assessee of the relevant previous year or any of the assessee of the relevant previous year or any earlier year, it satisfies the condition stipulated earlier year, it satisfies the condition stipulated earlier year, it satisfies the condition stipulated in section 36(2)(i) section 36(2)(i) and the assessee is entitled to and the assessee is entitled to deduction u/s.36(1 deduction u/s.36(1)(vii) by way of bad debts after )(vii) by way of bad debts after having written of the said debts from his books of having written of the said debts from his books of having written of the said debts from his books of account as account as irrecoverable. We, therefore, answer the irrecoverable. We, therefore, answer the question referred to this Special Bench in the question referred to this Special Bench in the question referred to this Special Bench in the affirmative that is in favour of the assessee." affirmative that is in favour of the assessee." affirmative that is in favour of the assessee." 34. The third objection i . The third objection is that the amount was really s that the amount was really not reduced from the debtor on the assets side of the not reduced from the debtor on the assets side of the not reduced from the debtor on the assets side of the balance balance-sheet and in this regard the Ld.DR had filed sheet and in this regard the Ld.DR had filed a copy of the Annual Report. However, we find that a copy of the Annual Report. However, we find that a copy of the Annual Report. However, we find that the portion of the report which has been filed by the the portion of the report which has been filed by the the portion of the report which has been filed by the Ld.DR is a copy Ld.DR is a copy of the Schedule-O which consists of O which consists of "Significant Accounting Policies and Notes Forming "Significant Accounting Policies and Notes Forming "Significant Accounting Policies and Notes Forming Part of the Account for the year ended 31st March, Part of the Account for the year ended 31st March, Part of the Account for the year ended 31st March, 2004", therefore, it is not the part of the balance sheet 2004", therefore, it is not the part of the balance sheet 2004", therefore, it is not the part of the balance sheet as such. as such. Under Companies Act every company is every company is required to file certain statistical information, e.g., required to file certain statistical information, e.g., required to file certain statistical information, e.g.,

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production capacity, quantitative details of stock etc. production capacity, quantitative details of stock etc. production capacity, quantitative details of stock etc. Similarly, in the case of loans extended to the Similarly, in the case of loans extended to the Similarly, in the case of loans extended to the companies within the same group, every company companies within the same group, every company companies within the same group, every company has to dis has to disclose the amount outstanding at the end of close the amount outstanding at the end of the year, maximum amount outstanding during the the year, maximum amount outstanding during the the year, maximum amount outstanding during the year, number of shares held in such companies and year, number of shares held in such companies and year, number of shares held in such companies and maximum numbers of shares held in such companies, maximum numbers of shares held in such companies, maximum numbers of shares held in such companies, so this part of the schedule basically deals with the so this part of the schedule basically deals with the so this part of the schedule basically deals with the statistical statistical information information in in compliance compliance with with the the requirement of the requirement of the Companies Act. Whereas actual . Whereas actual schedule of loans and advances is schedule I schedule of loans and advances is schedule I schedule of loans and advances is schedule I wherein the loan amount has been shown after wherein the loan amount has been shown after wherein the loan amount has been shown after reducing the provision for do reducing the provision for doubtful debts. 35. The Hon'ble Bombay High Court in the case . The Hon'ble Bombay High Court in the case . The Hon'ble Bombay High Court in the case of CIT vs. General Insurance Corporation Ltd CIT vs. General Insurance Corporation Ltd. [254 CIT vs. General Insurance Corporation Ltd ITR 204] wherein one of the issue was that if a debt ITR 204] wherein one of the issue was that if a debt ITR 204] wherein one of the issue was that if a debt has been written off then what would be the has been written off then what would be has been written off then what would be procedure for writing off of the debt. The Hon'ble court procedure for writing off of the debt. The Hon'ble court procedure for writing off of the debt. The Hon'ble court analysed the concept of analysed the concept of writing off and made the writing off and made the following observations at page 209 of the report following observations at page 209 of the report following observations at page 209 of the report which read as under: which read as under: "In the case of Jwala Prasad Tiwari [1953] 24 ITR "In the case of Jwala Prasad Tiwari [1953] 24 ITR "In the case of Jwala Prasad Tiwari [1953] 24 ITR 537, the Bombay High Court 537, the Bombay High Court had held that the had held that the expression "writing off" is a technical term used by expression "writing off" is a technical term used by expression "writing off" is a technical term used by the auditors. That, there are two methods of dealing the auditors. That, there are two methods of dealing the auditors. That, there are two methods of dealing with a debt which has been written off in the books of with a debt which has been written off in the books of with a debt which has been written off in the books of account, viz., by giving corresponding credit to the account, viz., by giving corresponding credit to the account, viz., by giving corresponding credit to the debtor's account or by debtor's account or by giving corresponding credit to giving corresponding credit to the bad and doubtful debts account. The first method the bad and doubtful debts account. The first method the bad and doubtful debts account. The first method is only employed where it is desired to close the is only employed where it is desired to close the is only employed where it is desired to close the account of the debtor. The second method is account of the debtor. The second method is account of the debtor. The second method is employed where there are some chances of recovery. employed where there are some chances of recovery. employed where there are some chances of recovery. That, when we talk of "writ That, when we talk of "writing off", we are not ing off", we are not concerned with the credit to be given to an account. concerned with the credit to be given to an account. concerned with the credit to be given to an account. That, "writing off" means raising a debit entry. This That, "writing off" means raising a debit entry. This That, "writing off" means raising a debit entry. This can only be to the debit of the profit and loss account. can only be to the debit of the profit and loss account. can only be to the debit of the profit and loss account. That, this is the only debit which can be raised as a That, this is the only debit which can be raised as a That, this is the only debit which can be raised as a result of writing result of writing off a bad debt. To the same effect is off a bad debt. To the same effect is the judgment of the Gujarat High Court in the case of the judgment of the Gujarat High Court in the case of the judgment of the Gujarat High Court in the case of Sarangpur Cotton Mfg. Co. Ltd. [1983] 143 ITR 166. Sarangpur Cotton Mfg. Co. Ltd. [1983] 143 ITR 166. Sarangpur Cotton Mfg. Co. Ltd. [1983] 143 ITR 166. In the case of In the case of Vithaldas H. Dhanjibhai Bardanwala Vithaldas H. Dhanjibhai Bardanwala

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v. CIT v. CIT [1981] 130 ITR 95, the Division Bench of the 81] 130 ITR 95, the Division Bench of the Gujarat High Court has held that under section Gujarat High Court has held that under Gujarat High Court has held that under 36 of the Act, before any claim for allowance for a of the Act, before any claim for allowance for a of the Act, before any claim for allowance for a bad debt is held established by the Assessing Officer, bad debt is held established by the Assessing Officer, bad debt is held established by the Assessing Officer, it must it must appear that the concerned bad debt was appear that the concerned bad debt was written off as irrecoverable in the account books of written off as irrecoverable in the account books of written off as irrecoverable in the account books of the assessee. This requirement is a condition for the the assessee. This requirement is a condition for the the assessee. This requirement is a condition for the grant of claim for bad debt allowance. To that extent, grant of claim for bad debt allowance. To that extent, grant of claim for bad debt allowance. To that extent, there is a departure from the earlier Act. However, so there is a departure from the earlier Act. However, so there is a departure from the earlier Act. However, so far as the exact requirement of the writing off is far as the exact requirement of the writing off is far as the exact requirement of the writing off is concerned, the language used in the concerned, the language used in the Indian Income Indian Income- tax Act tax Act, 1922 and the 1961 Act is identical. If the , 1922 and the 1961 Act is identical. If the debit entries posted by the assessee indicate that debit entries posted by the assessee indicate that debit entries posted by the assessee indicate that bad debt has been written off as irrecoverable in the ad debt has been written off as irrecoverable in the ad debt has been written off as irrecoverable in the accounts of the assessee, then the statutory condition accounts of the assessee, then the statutory condition accounts of the assessee, then the statutory condition stands fully complied with. That, if the assessee has stands fully complied with. That, if the assessee has stands fully complied with. That, if the assessee has posted entries in the profit and loss account and the posted entries in the profit and loss account and the posted entries in the profit and loss account and the corresponding entries are posted in the bad debt corresponding entries are posted in the corresponding entries are posted in the reserve account, it would be sufficient compliance reserve account, it would be sufficient compliance reserve account, it would be sufficient compliance with the provisions of the statutory requirement for with the provisions of the statutory requirement for with the provisions of the statutory requirement for writing off as irrecoverable the concerned debt in the writing off as irrecoverable the concerned debt in the writing off as irrecoverable the concerned debt in the books of the assessee. These judgments squarely books of the assessee. These judgments squarely books of the assessee. These judgments squarely apply to the facts of our case. In the p apply to the facts of our case. In the present matter, resent matter, the assessee has posted entries in the profit and loss the assessee has posted entries in the profit and loss the assessee has posted entries in the profit and loss account and has made corresponding entries in the account and has made corresponding entries in the account and has made corresponding entries in the bad debt reserve account. There bad debt reserve account. There- fore, there is fore, there is compliance with compliance with section 36(1)(vii). It may be noted t may be noted that prior to April 1, 1989, this statutory requirement that prior to April 1, 1989, this statutory requirement that prior to April 1, 1989, this statutory requirement existed under existed under section 36(2)(i). That entry has been . That entry has been shifted and brought to shifted and brought to section 36(1)(vii). Therefore, to . Therefore, to the extent of the exact requirement of writing off of the extent of the exact requirement of writing off of the extent of the exact requirement of writing off of the concerned debt as irrecoverable, the law remains the concerned debt as irrecoverable, the law remains the concerned debt as irrecoverable, the law remains the same even after April 1, 1989. Hence, there is the same even after April 1, 1989. Hence, there is the same even after April 1, 1989. Hence, there is compliance with compliance with section 36(1)(vii). Rule 5(a) of the . Rule 5(a) of the First Schedule, inter alia, lays down that where any First Schedule, inter alia, lays down that where any First Schedule, inter alia, lays down that where any expenditure or allowance is debited to the profit and expenditure or allowance is debited to the profit and expenditure or allowance is debited to the profit and loss account by way of reserve which is not loss account by way of reserve which is not loss account by way of reserve which is not admissible under the provisions of admissible under the provisions of section 36(1) section 36(1), then the amount shall be added back in computing then the amount shall be added back in computing then the amount shall be added back in computing the profits of the business. However, in the present the profits of the business. However, in the present the profits of the business. However, in the present case, as stated hereinabove, there is full compliance case, as stated hereinabove, there is full compliance case, as stated hereinabove, there is full compliance with section 36(1)(vi section 36(1)(vii). The manner of writing off is as . The manner of writing off is as per the statutory requirement. The Department has per the statutory requirement. The Department has per the statutory requirement. The Department has

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not raised the not raised the relevant factual dispute as to whether relevant factual dispute as to whether the debt has not become irrecoverable. the debt has not become irrecoverable. Recently, the Hon'ble Supreme Court has dealt with Recently, the Hon'ble Supreme Court has dealt with Recently, the Hon'ble Supreme Court has dealt with this matter in the case of this matter in the case of Vijaya Bank vs. CIT Vijaya Bank vs. CIT [322 ITR 166]. In that case it was observed as under: ITR 166]. In that case it was observed as under: ITR 166]. In that case it was observed as under: "Though a mere debit to the profit and loss account "Though a mere debit to the profit and loss account "Though a mere debit to the profit and loss account would constitute a provision for a bad and doubtful would constitute a provision for a bad and doubtful would constitute a provision for a bad and doubtful debt, yet that would not debt, yet that would not constitute actual write off. constitute actual write off. But where besides debiting the profit and loss But where besides debiting the profit and loss But where besides debiting the profit and loss account and creating a provision for bad and doubtful account and creating a provision for bad and doubtful account and creating a provision for bad and doubtful debt, debt, debt, the the the assessee assessee assessee has has has correspondingly/simultaneously obliterated the said correspondingly/simultaneously obliterated the said correspondingly/simultaneously obliterated the said provision provision provision from from from its its its accounts accounts accounts by by by reducing reducing reducing the the the corresp corresponding onding amount amount from from loans loans and and advances/debtors on the assets side of the balance- advances/debtors on the assets side of the balance advances/debtors on the assets side of the balance sheet, and, consequently at the end of the year, the sheet, and, consequently at the end of the year, the sheet, and, consequently at the end of the year, the figure in the loans and advances or the debtors on figure in the loans and advances or the debtors on figure in the loans and advances or the debtors on the assets side of the balance the assets side of the balance-sheet is shown as net sheet is shown as net of the provision fo of the provision for "impugned bad debt", the r "impugned bad debt", the assessee will be entitled to the benefit of deduction assessee will be entitled to the benefit of deduction assessee will be entitled to the benefit of deduction under section 36(1)(vii), as there is an actual write off , as there is an actual write off by the assessee in his books. Disallowance cannot be by the assessee in his books. Disallowance cannot be by the assessee in his books. Disallowance cannot be made on an ap made on an apprehension that if the assessee failed prehension that if the assessee failed to close each and every individual account of its to close each and every individual account of its to close each and every individual account of its debtor, it may result in the assessee claiming debtor, it may result in the assessee claiming debtor, it may result in the assessee claiming deduction twice over. deduction twice over. Held, on the facts, that the assessee was entitled to Held, on the facts, that the assessee was entitled to Held, on the facts, that the assessee was entitled to the deduction claimed because : (i) the head office the deduction claimed because : (i) the head the deduction claimed because : (i) the head accounts of the assessee clearly indicated that on accounts of the assessee clearly indicated that on accounts of the assessee clearly indicated that on repayment in subsequent years the amounts were repayment in subsequent years the amounts were repayment in subsequent years the amounts were duly offered for tax ; (ii) that under accountancy duly offered for tax ; (ii) that under accountancy duly offered for tax ; (ii) that under accountancy practice the accounts of the rural branches had to practice the accounts of the rural branches had to practice the accounts of the rural branches had to tally with the accounts of the head office, and if the tally with the accounts of the head office, and tally with the accounts of the head office, and amount repaid in subsequent years is not credited to amount repaid in subsequent years is not credited to amount repaid in subsequent years is not credited to the profit and loss account of the head office and if the profit and loss account of the head office and if the profit and loss account of the head office and if the repaid amount in subsequent years is not the repaid amount in subsequent years is not the repaid amount in subsequent years is not credited to the profit and loss account of the head credited to the profit and loss account of the head credited to the profit and loss account of the head office, which was what mattered ultimately, then office, which was what mattered ultimately, t office, which was what mattered ultimately, t there would be a mismatch between the rural branch there would be a mismatch between the rural branch there would be a mismatch between the rural branch accounts and the head office accounts ; (iii) in any accounts and the head office accounts ; (iii) in any accounts and the head office accounts ; (iii) in any

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event under event under section 41(4), where deduction had been , where deduction had been allowed in respect of a bad debt or a part thereof allowed in respect of a bad debt or a part th allowed in respect of a bad debt or a part th under section 36(1)(vii) then then if if the the amount amount subsequently recovered on any such debt is greater subsequently recovered on any such debt is greater subsequently recovered on any such debt is greater than the difference between the debt and the amount than the difference between the debt and the amount than the difference between the debt and the amount so allowed, the excess is deemed to be profits and so allowed, the excess is deemed to be profits and so allowed, the excess is deemed to be profits and gains of business, and accordingly chargeable to tax ains of business, and accordingly chargeable to tax ains of business, and accordingly chargeable to tax as the income of the previous year in which it is as the income of the previous year in which it is as the income of the previous year in which it is recovered ; and the Income recovered ; and the Income-tax Officer is sufficiently tax Officer is sufficiently empowered to tax such subsequent repayments empowered to tax such subsequent repayments empowered to tax such subsequent repayments under section 41(4)." Thus, from the above it is clear that once a provision Thus, from the above it is clear that once a provision Thus, from the above it is clear that once a provision of doubtful debt has been debited in the profit & loss of doubtful debt has been debited in the profit & loss of doubtful debt has been debited in the profit & loss account and the corresponding provision has been account and the corresponding provision has been account and the corresponding provision has been credited or reduced from the debtor's account on the credited or reduced from the debtor's account on the credited or reduced from the debtor's account on the assets side of the balance assets side of the balance-sheet, then this would sheet, then this would amount to writing off. In the case before us, the amount to writing off. In the case before us, the amount to writing off. In the case before us, the assessee company has debited the assessee company has debited the provision of provision of doubtful debt to the profit & loss account and doubtful debt to the profit & loss account and doubtful debt to the profit & loss account and correspondingly has reduced the assets by reducing correspondingly has reduced the assets by reducing correspondingly has reduced the assets by reducing the amount of unsecured loans outstand the amount of unsecured loans outstanding and thus ing and thus would amount to writing off of the loan. Accordingly, would amount to writing off of the loan. Accordingly, would amount to writing off of the loan. Accordingly, assessee would become entitled to the claim of bad assessee would become entitled to the claim of bad assessee would become entitled to the claim of bad debt. One more objection was raised that the debtor debt. One more objection was raised that the debtor debt. One more objection was raised that the debtor company has stated in its Annual Report that they company has stated in its Annual Report that they company has stated in its Annual Report that they were regular in making repayments, t were regular in making repayments, therefore, such herefore, such write off cannot be treated as bona fide write off. write off cannot be treated as bona fide write off. write off cannot be treated as bona fide write off. However, it was clearly pointed out before us that However, it was clearly pointed out before us that However, it was clearly pointed out before us that this observation was also made by the debtor this observation was also made by the debtor this observation was also made by the debtor company whereas the fact remains that no payments company whereas the fact remains that no payments company whereas the fact remains that no payments were received in 2000 were received in 2000-01 and, in fact, asse 01 and, in fact, assessee had stopped charging interest after A.Y 1997 stopped charging interest after A.Y 1997-98 because 98 because the financial position of the debtor company had the financial position of the debtor company had the financial position of the debtor company had become bad. When assessee company had not become bad. When assessee company had not become bad. When assessee company had not received any amount for the last three years and received any amount for the last three years and received any amount for the last three years and even no interest charged, then if assessee company even no interest charged, then if assessee company even no interest charged, then if assessee company after ascertaining the amount as irrecoverable has r ascertaining the amount as irrecoverable has r ascertaining the amount as irrecoverable has written off the balance amount, then it cannot be said written off the balance amount, then it cannot be said written off the balance amount, then it cannot be said that the same is not bona fide. Therefore, we find no that the same is not bona fide. Therefore, we find no that the same is not bona fide. Therefore, we find no force in this objection. The Ld.DR had also mentioned force in this objection. The Ld.DR had also mentioned force in this objection. The Ld.DR had also mentioned that in penalty proceedings assessee has taken a that in penalty proceedings assessee has taken that in penalty proceedings assessee has taken plea that this amount was not claimed as bad debt plea that this amount was not claimed as bad debt plea that this amount was not claimed as bad debt

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but was only a provision for doubtful debt. As pointed but was only a provision for doubtful debt. As pointed but was only a provision for doubtful debt. As pointed out by the Ld.counsel of the assessee first of all it is out by the Ld.counsel of the assessee first of all it is out by the Ld.counsel of the assessee first of all it is settled that assessment proceedings are totally settled that assessment proceedings are totally settled that assessment proceedings are totally separate and independent from penalty proceedings separate and independent from penalty proce separate and independent from penalty proce and in any case the representation regarding penalty and in any case the representation regarding penalty and in any case the representation regarding penalty was made on 26 was made on 26-12-2006 whereas the decision of the 2006 whereas the decision of the Hon'ble Supreme Court in the case of Hon'ble Supreme Court in the case of Vijaya Bank Vijaya Bank vs. CIT vs. CIT [supra] was rendered on 15th April, [supra] was rendered on 15th April, 2010 which means at that which means at that point of time there was a doubt point of time there was a doubt whether the provision for doubtful debt could also be whether the provision for doubtful debt could also be whether the provision for doubtful debt could also be considered as claim for bad debts because actual considered as claim for bad debts because actual considered as claim for bad debts because actual writing off of the debt was not there and this position writing off of the debt was not there and this position writing off of the debt was not there and this position got settled only in 2010 by the Hon'ble Supreme got settled only in 2010 by the Hon'ble got settled only in 2010 by the Hon'ble Court. 36. The issue regarding writing off of part of the debt . The issue regarding writing off of part of the debt . The issue regarding writing off of part of the debt came up for consideration before the Hon'ble Delhi came up for consideration before the Hon'ble Delhi came up for consideration before the Hon'ble Delhi High Court in the case of High Court in the case of CIT vs. Realest Builders CIT vs. Realest Builders And Services Ltd And Services Ltd. [308 ITR 246]. In that case the facts . In that case the facts involved were as under: involved were as under: "For the assessment year 2001 "For the assessment year 2001-02, the Assessing 02, the Assessing Officer disallowed the deduction claimed by the Officer disallowed the deduction claimed by the Officer disallowed the deduction claimed by the assessee in respect of bad debts written off. The assessee in respect of bad debts written off. The assessee in respect of bad debts written off. The debtor company suffered a heavy loss due to a fire debtor company suffered a heavy loss due to a fire debtor company suffered a heavy loss due to a fire which brok which broke out in its factory. The board of directors e out in its factory. The board of directors of the assessee company took a business decision of the assessee company took a business decision of the assessee company took a business decision and passed a resolution on March, 2001, to write off and passed a resolution on March, 2001, to write off and passed a resolution on March, 2001, to write off the debts to the extent they were not recoverable. A the debts to the extent they were not recoverable. A the debts to the extent they were not recoverable. A compromise deed was also executed on 14th May, compromise deed was also executed on 14th May, compromise deed was also executed on 14th May, 2001, wit 2001, with the assessee company. The Commissioner h the assessee company. The Commissioner (Appeals) deleted the (Appeals) deleted the (Appeals) deleted the additions made by additions made by additions made by the the the Assessing Officer and recorded the findings (i) that Assessing Officer and recorded the findings (i) that Assessing Officer and recorded the findings (i) that the assessee was in the business of money lending the assessee was in the business of money lending the assessee was in the business of money lending there is no question of the principal amount written there is no question of the principal amount written there is no question of the principal amount written off to be treat off to be treated as capital in nature and (ii) that the assessee had written off the amount in (ii) that the assessee had written off the amount in (ii) that the assessee had written off the amount in the books of account during the relevant previous the books of account during the relevant previous the books of account during the relevant previous year, the compromise for write off was only a year, the compromise for write off was only a year, the compromise for write off was only a formality. The Tribunal upheld the order of the formality. The Tribunal upheld the order of the formality. The Tribunal upheld the order of the Commissioner (Appeals) that the Commissioner (Appeals) that the bad debts written bad debts written off in the books of account of the assessee had to be off in the books of account of the assessee had to be off in the books of account of the assessee had to be

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allowed as deduction under allowed as deduction under section 36(1)(vii) section 36(1)(vii) of the Income Income-tax Act, 1961." On the above facts, it was held as under: On the above facts, it was held as under: "Held, dismiss "Held, dismissing the appeal, that the assessee did ing the appeal, that the assessee did not have to establish the bad debt and he has to not have to establish the bad debt and he has to not have to establish the bad debt and he has to merely indicate that the bad debt was written off in merely indicate that the bad debt was written off in merely indicate that the bad debt was written off in its books in the year in question. The plea that the its books in the year in question. The plea that the its books in the year in question. The plea that the assessee was not in the business of money-lending assessee was not in the business of money assessee was not in the business of money could nto be could nto be raised in appeal, particularly, when the raised in appeal, particularly, when the Commissioner (Appeals) had given a clear finding to Commissioner (Appeals) had given a clear finding to Commissioner (Appeals) had given a clear finding to the contrary. There was no infirmity in the order of the contrary. There was no infirmity in the order of the contrary. There was no infirmity in the order of the Tribunal." the Tribunal." Thus, it is clear that even when a part of the debt is Thus, it is clear that even when a part of the debt is Thus, it is clear that even when a part of the debt is written off, same can be allowed as clai written off, same can be allowed as claim for bad m for bad debt. In view of this detailed discussion, we set aside debt. In view of this detailed discussion, we set aside debt. In view of this detailed discussion, we set aside the order of the ld. CIT(A) and directed the AO to the order of the ld. CIT(A) and directed the AO to the order of the ld. CIT(A) and directed the AO to allow the claim for bad debt. allow the claim for bad debt.” 40.3 Before the Hon’ble the Hon’ble Bombay high Court, the Revenue raised , the Revenue raised following question of law raising this following question of law raising this issue:

“(k) Whether, on the facts and circumstances of the (k) Whether, on the facts and circumstances of the (k) Whether, on the facts and circumstances of the case, the Tribunal was justified in upholding the case, the Tribunal was justified in upholding the case, the Tribunal was justified in upholding the decision of the CIT (A), in deleting the addition on decision of the CIT (A), in deleting the addition on decision of the CIT (A), in deleting the addition on account of provision for doubtful debts to the book account of provision for doubtful debts to the book account of provision for doubtful debts to the book profit under Section 115JB of the Act without profit under Section 115JB of the Act without profit under Section 115JB of the Act without appreciating that the disallowance / addition on reciating that the disallowance / addition on reciating that the disallowance / addition on account of diminution in the value of assets is account of diminution in the value of assets is account of diminution in the value of assets is mandatory in view of Explanation (I) to Section 115JB mandatory in view of Explanation (I) to Section 115JB mandatory in view of Explanation (I) to Section 115JB of the Act ? of the Act ?” 40.4 The Hon’ble High Court also in view of holding the reducing of The Hon’ble High Court also in view of holding the reducing of The Hon’ble High Court also in view of holding the reducing of debtors account from the b debtors account from the balance sheet by amount of provision for alance sheet by amount of provision for bad and doubtful debt as actual write off under regular provisions, bad and doubtful debt as actual write off under regular provisions bad and doubtful debt as actual write off under regular provisions dismissed the question raised by the revenue. dismissed the question raised by the revenue.

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40.5 In the case of DCIT Vs SSPL Property Management p Ltd ( ITA 40.5 In the case of DCIT Vs SSPL Property Management p Ltd ( ITA 40.5 In the case of DCIT Vs SSPL Property Management p Ltd ( ITA No.2074/Kol/2019) also the issue of No.2074/Kol/2019) also the issue of provision of ba provision of bad and doubtful debt u/s 115JB has been decided relying on the decision in the debt u/s 115JB has been decided relying on the decision in the debt u/s 115JB has been decided relying on the decision in the case of Vijay Bank Ltd (supra), which we have observed above as case of Vijay Bank Ltd (supra), which we have observed above as case of Vijay Bank Ltd (supra), which we have observed above as related to section 36(1)(vii) of the Act, whereas in the case issue related to section 36(1)(vii) of the Act, whereas in the case related to section 36(1)(vii) of the Act, whereas in the case before us is whether the provi whether the provision for bad and doubtful debt is an sion for bad and doubtful debt is an unascertained liability and/ or provision for diminution in value of unascertained liability and/ or provision for diminution in value of unascertained liability and/ or provision for diminution in value of asset.

40.6 However in in the instant case before us there is no factual However in in the instant case before us there is no factual However in in the instant case before us there is no factual finding whether the claim for deduction of said provision for finding whether the claim for deduction of said provision for finding whether the claim for deduction of said provision for doubtful debt as actually written off u/s 36(1)(vii) was raised by the as actually written off u/s 36(1)(vii) was raised by the as actually written off u/s 36(1)(vii) was raised by the assessee before the lower authorities, and thus the ratio of the before the lower authorities, and thus the ratio of the before the lower authorities, and thus the ratio of the decisions relied upon by the assessee relied upon by the assessee are distinguishable on facts. distinguishable on facts.

40.7 As far as facts of the assessee are far as facts of the assessee are concerned, in the profit and in the profit and loss account the assessee has debited the sum loss account the assessee has debited the sum under reference under reference as provision for bad and doubtful debt. The provision for bad and doubtful debt. The provisions provisions of section 115JB refers to the adjustment if any to be made to the profit 115JB refers to the adjustment if any to be made to the 115JB refers to the adjustment if any to be made to the declared in books ofaccount as per the profit declared in books ofaccount as per the profit and loss account and loss account. The relevant Explanation xplanation-I to section 115JB(2) of the Act is to section 115JB(2) of the Act is reproduced as under: reproduced as under:

“Explanation 1. Explanation 1.—For the purposes of this section, For the purposes of this section, "book profit" means the profit as shown in the profit as shown in the "book profit" means the statement of profit and loss statement of profit and loss for the relevant for the relevant previous year previous year prepared under sub-section (2), as section (2), as increased by increased by—

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(a) the amount of income (a) the amount of income-tax paid or payable, and tax paid or payable, and the provision therefor; or the provision therefor; or (b) the amounts carried to any reserves, by (b) the amounts carried to any reserves, by (b) the amounts carried to any reserves, by whatever name called, other than a reserve specified whatever name called, other than a reserve specified whatever name called, other than a reserve specified section 33AC; or under (c) the amount or amounts set aside to the amount or amounts set aside to the amount or amounts set aside to provisions made for meeting liabilities, other provisions made for meeting liabilities, other provisions made for meeting liabilities, other than ascertained liabilities; than ascertained liabilities; or (d) the amount by way of provi (d) the amount by way of provision for losses of sion for losses of subsidiary companies; or subsidiary companies; or (e) the amount or amounts of dividends paid or (e) the amount or amounts of dividends paid or (e) the amount or amounts of dividends paid or proposed ; or proposed ; or (f) the amount or amounts of expenditure relatable to (f) the amount or amounts of expenditure relatable to (f) the amount or amounts of expenditure relatable to any income to which section 10 (other than the any income to which (other than the provisions contained in clause (38) thereof) or section provisions contained in clause (38) thereof) or provisions contained in clause (38) thereof) or 11 or section 12 apply; or (fa) the amount or amounts of expenditure relatable to (fa) the amount or amounts of expenditure relatable to (fa) the amount or amounts of expenditure relatable to income, being share of the assessee in the income of income, being share of the assessee in the income of income, being share of the assessee in the income of an association of persons or body of individuals, on an association of persons or body of individuals, on an association of persons or body of individuals, on which no income which no income-tax is payable in accordance w tax is payable in accordance with the provisions of the provisions of section 86; or (fb) the amount or amounts of expenditure relatable to (fb) the amount or amounts of expenditure relatable to (fb) the amount or amounts of expenditure relatable to income accruing or arising to an assessee, being a income accruing or arising to an assessee, being a income accruing or arising to an assessee, being a foreign company, from, foreign company, from,— (A) the capital gains arising on transactions in (A) the capital gains arising on transactions in (A) the capital gains arising on transactions in securities; or securities; or (B) the interest, royalty or fees for technical services (B) the interest, royalty or fees for technical services (B) the interest, royalty or fees for technical services chargeable to tax at the rate or rates specified in chargeable to tax at the rate or rates specified in chargeable to tax at the rate or rates specified in Chapter XII, Chapter XII, if the income if the income-tax payable thereon in accordance with tax payable thereon in accordance with the provisions the provisions of this Act, other than the provisions of of this Act, other than the provisions of this Chapter, is at a rate less than the rate specified this Chapter, is at a rate less than the rate specified this Chapter, is at a rate less than the rate specified in sub in sub-section (1); or

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(fc) the amount representing notional loss on transfer (fc) the amount representing notional loss on transfer (fc) the amount representing notional loss on transfer of a capital asset, being share of a special purpose of a capital asset, being share of a special purpose of a capital asset, being share of a special purpose vehicle, to a business tru vehicle, to a business trust in exchange of units st in exchange of units allotted by the trust referred to in clause (xvii) allotted by the trust referred to in clause (xvii) allotted by the trust referred to in clause (xvii) of section 47 section 47 or the amount representing notional or the amount representing notional loss resulting from any change in carryin loss resulting from any change in carrying amount of g amount of said units or the amount of loss on transfer of units said units or the amount of loss on transfer of units said units or the amount of loss on transfer of units referred to in clause (xvii) of referred to in clause (xvii) of section 47; or (fd) the amount or amounts of expenditure relatable to (fd) the amount or amounts of expenditure relatable t (fd) the amount or amounts of expenditure relatable t income by way of royalty in respect of patent income by way of royalty in respect of patent income by way of royalty in respect of patent chargeable to tax under chargeable to tax under section 115BBF; or ; or (g) the amount of depreciation, (g) the amount of depreciation, (h) the amount of deferred tax and the provision (h) the amount of deferred tax and the provision (h) the amount of deferred tax and the provision therefor, therefor, (i) the amount or amounts set aside as (i) the amount or amounts set aside as (i) the amount or amounts set aside as provision for diminution in the value of any provision for diminution in the value of any provision for diminution in the value of any asset, asset, (j) the amount standing in revaluation reserve (j) the amount standing in revaluation reserve (j) the amount standing in revaluation reserve relating to revalued asset on the retirement or relating to revalued asset on the retirement or relating to revalued asset on the retirement or dispos disposal of such asset, (k) the amount of gain on transfer of units referred to (k) the amount of gain on transfer of units referred to (k) the amount of gain on transfer of units referred to in clause (xvii) of in clause (xvii) of section 47 computed by taking into computed by taking into account the cost of the shares excha account the cost of the shares exchanged with units nged with units referred to in the said clause or the carrying amount referred to in the said clause or the carrying amount referred to in the said clause or the carrying amount of the shares at the time of exchange where such of the shares at the time of exchange where such of the shares at the time of exchange where such shares are carried at a value other than the cost shares are carried at a value other than the cost shares are carried at a value other than the cost through statement of profit and loss, as the case may through statement of profit and loss, as the case may through statement of profit and loss, as the case may be;” 40.8 In our opinion In our opinion what is relevant for the purpose of section relevant for the purpose of section 115JB of the Act is book profit prepared in accordance with the 115JB of the Act is book profit prepared in accordance with the 115JB of the Act is book profit prepared in accordance with the provisions of the Company Act, Company Act, 2013 as mentioned in section mentioned in section 115JB(2) as increased by the items mentioned in Explanation (a) 115JB(2) as increased by the items mentioned in Explanation (a) 115JB(2) as increased by the items mentioned in Explanation (a) to(k). How the entries have bee to(k). How the entries have been made in Balance sheet, may be n made in Balance sheet, may be

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relevant for deciding the issue under section 36(1)(vii) of the Act relevant for deciding the issue under section 36(1)(vii) of the Act relevant for deciding the issue under section 36(1)(vii) of the Act and if there is finding on that issue that provision for bad and and if there is finding on that issue that provision for bad and and if there is finding on that issue that provision for bad and doubtful debt is no longer a doubtful debt is no longer an unascertained liability, then no unascertained liability, then no addition could be made und addition could be made under section 115JB of the Act. But unless er section 115JB of the Act. But unless there is such a finding under regular provisions of section 36(1)(vii finding under regular provisions of section 36(1)(vii finding under regular provisions of section 36(1)(vii) of the Act, the provision for doubtful debt being also in the nature of the provision for doubtful debt being also in the nature of the provision for doubtful debt being also in the nature of diminution in value of diminution in value of asset, it also attractsexplana nation (i) of the section 115JB of the Act. ion 115JB of the Act. Therefore, under the facts and nder the facts and circumstances, we uphold the finding of ld CIT(A) on the issue in circumstances, we uphold the finding of ld CIT(A) on the issue in circumstances, we uphold the finding of ld CIT(A) on the issue in dispute. The ground of the appeal of the assessee is accordingly dispute. The ground of the appeal of the assessee is accordingly dispute. The ground of the appeal of the assessee is accordingly dismissed.

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M/s Everest Industries Ltd. 89 ITA Nos. 652, 1424, 719 & 720/Mum/2020 ITA Nos. 652, 1424, 719 & 720/Mum/2020

89,08,462/- out of provision for doubtful debt created out of provision for doubtful debt created during the instant year while computing book profit us115]B during the instant year while computing book profit us115]B during the instant year while computing book profit us115]B of the Act. 2(c) That on the facts and in the circumstances of the case, That on the facts and in the circumstances of the case, That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified & ra the Ld. CIT (Appeals) was not justified & rather grossly ther grossly erred in not allowing claim of adiustment of Provision for erred in not allowing claim of adiustment of Provision for erred in not allowing claim of adiustment of Provision for doubtful doubtful doubtful debt debt debt against against against debtors debtors debtors amounting amounting amounting to to to Rs. Rs. Rs. 1,72,61,202/ 1,72,61,202/- which were created in AY 2015-16 inspite of 16 inspite of the fact that the claim of aforesaid provision in the vear of the fact that the claim of aforesaid provision in the vear of the fact that the claim of aforesaid provision in the vear of its creation has its creation has been disallowed by Ld. CIT (Appeals)while been disallowed by Ld. CIT (Appeals)while computing book profit us 115]B. computing book profit us 115]B. 44. Before us, the Ld. Counsel of the assessee has not pressed Before us, the Ld. Counsel of the assessee has not pressed Before us, the Ld. Counsel of the assessee has not pressed ground No. 1 of the appeal of the assessee 1 of the appeal of the assessee, which , which relates to disallowance of leave leave encashment, therefore, same is dismi therefore, same is dismissed as infructuous.

45 The ground No. 2 The ground No. 2(a) of the appeal of the assessee of the appeal of the assessee is related non-exclusion of provision of provision of bad and doubtful debts doubtful debts under section 115JB, which being identical to the ground No. 3 raised in being identical to the ground No. 3 raised in being identical to the ground No. 3 raised in assessment year 2015 2015-16 and therefore, same is decided mutatis is decided mutatis mutandis. Regarding ground 2b and 2c of the mutandis. Regarding ground 2b and 2c of the appeal, Ld. appeal, Ld. Counsel of the assessee provided detail of the working doubtful debts as provided detail of the working doubtful debts as provided detail of the working doubtful debts as under:

Particulars Amount Amount Remarks Ground No. Opening as on 01 April 2,07,00,044 2,07,00,044 2015 Provision created during 3,24,52,000 3,24,52,000 i) During the previous year relevant to i) During the previous year relevant to Ground No. 2(a) the year instant assessment year i.e. AY 2016 instant assessment year i.e. AY 2016-17, AY 2016-17 the assessee has created provision for the assessee has created provision for doubtful debts of Rs. 3,26,47,692/- ¡ii) Rs. 1,95,692/- has been written back has been written back to doubtful debt expense a/c and net nd net amount of Rs. 3,24,52,000/- has been has been debited in P & La/c. Provision Written off 34,38,842 34,38,842 The assessee has not added provision for The assessee has not added provision for Ground No. 4 AY against the debtors doubtful debts under MAT provisions doubtful debts under MAT provisions 2015-16

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during the year of AY which has been accepted in order w/s h has been accepted in order w/s 2014-15 143(3). Hence, write back not allowable 143(3). Hence, write back not allowable in this AY. Provision Written off 1,72,61,202 1,72,61,202 The assessee has not added provision for The assessee has not added provision for Ground No. 2(b) against the debtors doubtful debts under MAT provisions er MAT provisions AY 2016-17 during the year of AY which has been added in order u/s has been added in order u/s 2015-16 143(3). The addition of provision for doubtful The addition of provision for doubtful debts created during AY 2015-16 has 16 has been upheld by Ld. CIT(Appeals) vide been upheld by Ld. CIT(Appeals) vide order dated 04-12-2019 [Refer Page 50 2019 [Refer Page 50- 58 at page 57 of PB J. In case this 58 at page 57 of PB J. In case this addition is not deleted by your goodself, s not deleted by your goodself, then the assessee is entitled to write then the assessee is entitled to write back of aforesaid provision of Rs. back of aforesaid provision of Rs. 1,72,61,202/- else the same will result else the same will result in double disallowance. Provision written off 89,08,462 89,08,462 The assessee has not added provision for The assessee has not added provision for Ground No. 2(c) against the debtors doubtful debts under MAT provisions doubtful debts under MAT provisions AY 2016-17 during the year of AY which Ground N has been added in which Ground N has been added in 2016-17 order u/s 143(3). Similarly, in case addition of provision Similarly, in case addition of provision for doubtful debts created during AY for doubtful debts created during AY 2016-17 and upheld by Ld. CIT(Appeals) CIT(Appeals) is not deleted by your goodself, then the is not deleted by your goodself, then the assessee is entitled to write back of assessee is entitled to write back of aforesaid provision of Rs. 89,08,462/ aforesaid provision of Rs. 89,08,462/- else the same will result in double else the same will result in double disallowance. Closing balance as on 2,07,00,0 2,07,00,044 31 March, 2015 46. We find that identical issue has been dismissed by us in We find that identical issue has been dismissed by us in We find that identical issue has been dismissed by us in assessment year 2015 assessment year 2015-16 and therefore, this ground of the appeal 16 and therefore, this ground of the appeal is also dismissed.

Order pronounced in the open Court on nounced in the open Court on 30/06/2023. /06/2023.

Sd/ Sd/- Sd/- (ABY T VARKEY ABY T VARKEY) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai;

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Dated: 30/06/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai