DY CIT CC 1(4), MUMBAI vs. M/S ULTRATECH CEMENT LTD , MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “J”, MUMBAI

BEFORE SHRI ABY T VARKEY, HON’BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER

ITA NO. 465/MUM/2020 (A.Y: 2015-16) M/s. UltraTech Cement Limited v. DCIT, Central Circle-1(4) Ahura Centre, ‘B’ Wing 2nd Floor Room No. 902, 9th Floor Mahakali Caves Road Pratishtha Bhavan, Old CGO Annexe Maharishi Karve Road Andheri (E), Mumbai- 400093 Mumbai- 400020 PAN: AAACL6442L (Appellant) (Respondent)

ITA NO. 931/MUM/2020 (A.Y: 2015-16) DCIT, Central Circle-1(4) v. M/s. UltraTech Cement Limited Room No. 902, 9th Floor Ahura Centre, ‘B’ Wing 2nd Floor Mahakali Caves Road Pratishtha Bhavan, Old CGO Annexe Maharishi Karve Road Andheri (E), Mumbai- 400093 Mumbai- 400020 PAN: AAACL6442L (Appellant) (Respondent)

Assessee Represented by : Shri Nitesh Joshi Department Represented by : Shri. Manoj Kumar

Date of conclusion of Hearing : 21.02.2023 Date of Pronouncement : 12.05.2023

ITA NO. 465 & 931/MUM/2020 (A.Y: 2015-16) UltraTech Cement Limited

O R D E R PER S. RIFAUR RAHMAN (AM)

ITA.NO. 465/MUM/2020 (A.Y. 2015-16) – ASSESSEE APPEAL

“1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) (CIT(A)] has erred in upholding the disallowance u/s 80IA amounting to Rs.85,56,77,589/- for Rail Systems and Rs 81, 97,07,578/- for Power Plants 2. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in holding that in respect of the Rail Systems and Power Plants transferred from Samruddhi Cement Limited to the appellant Company pursuant to the Scheme of amalgamation, the deduction is not allowable as per the provisions of section 80IA(12A) of the Income Tax Act, 1961 (IT Act). 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the addition on account of notional commission chargeable in respect of the Corporate Guarantee provided by the appellant Company to the bankers for providing loan to the Associated Enterprises of the appellant Company. He erred in confirming the notional charge at the rate of 0.5% of total corporate guarantee provided disregarding the fact that the assessee has not charged and could not have charged any commission on the corporate guarantee so provided. 4. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in denying the claim of

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investment allowance amounting to Rs 64,77,21,366/- u/s 32AC in respect of capital work in progress of plant and machinery which were installed during the financial year 2014-15 5 On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the disallowance of depreciation u/s 32 of the IT Act amounting to Rs.35,17,817/- in respect of capital assets acquired and used for the purpose of corporate social responsibility 6. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not allowing full credit of TDS/TCS claimed on the basis of certificates filed by the appellant Company. Additional Grounds of appeal 7. On the facts and in the circumstances of the case and in law, the appellant Company prays that the Assessing Officer be directed to allow deduction in respect of education cess paid on the amount of income-tax paid during the year. 8. On the facts and in the circumstances of the case and in law, the appellant Company prays that the Assessing Officer be directed to allow deduction in respect of education cess paid on the amount of dividend distribution tax as per section 115-0 paid during the year.

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ITA NO. 465 & 931/MUM/2020 (A.Y: 2015-16) UltraTech Cement Limited 5. Considered the rival submissions and material placed on record, we observe that as the said additional grounds are legal grounds, wherein, the facts are on record and facts do not require fresh investigation, following the decision of Hon’ble Supreme Court in the case of National Thermal Power Co., Limited v. CIT 229 ITR 383 (SC), we admit the said additional grounds of appeal.

 Deduction under section 80-IA of the Act is available to an undertaking, or an enterprise and not to the owner  Sub-section (12) is a disabling provision and the insertion of sub-section (12A) merely negates the effect of such disabling provision

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 Deduction under section 80-IA is allowable to the appellant as per the Scheme of Amalgamation approved by the High Court  Sub-section (12) only made explicit that was implicit - Withdrawal of sub- section (12) by sub-section (12A) does not take away what is implicit  CBDT Circular 3 of 2008 not binding, since it enlarges scope beyond what is provided in sub-section (12A). Further, the requirement stated in the said Circular are fulfilled in the case of the appellant”

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i. The assessee is a subsidiary of Grasim Industries Limited (Grasim) with the promoter holding of more than 60%. ii. During the financial year 2010-11, as per the Scheme of Amalgamation duly approved by the Hon’ble High Courts of Bombay and Gujarat, Samruddhi Cement Ltd. (SCL) was amalgamated with the assessee w.e.f. 01.07.2010 (appointed date). The amalgamating company, viz. SCL was a 100% subsidiary of Grasim. iii. Pursuant to the sanction of the Scheme by the High Courts and upon coming into effect of the Scheme of Amalgamation from the appointed date, all the estate, assets, properties, rights, claims, title, interest and authorities including accretions and appurtenances comprised in the undertaking of SCL stood transferred to and vested in UTCL, as a going concern. iv. The abovementioned rights, properties, estates etc. of SCL included Rail undertakings and power plants for which SCL had been claiming tax holiday u/s 80IA. v. Upon amalgamation of SCL and vesting of its Railway undertakings at Rawan - District Raipur, at Hotgi - District Sholapur, at Shambhupura - District Chittorgarh, and at Dodaballarpur - District Bangalore, into the assessee, the assessee Company claimed a deduction of Rs.82,61,81,708/- u/s 80-IA of the IT Act (as tabulated below) for the period 1st July 2010 to 31st March 2011: Sr. Particulars Amount No. (Rs.) I Profit of Rail System at Rawan in the State of 22,84,90,927/- Chattisgarh II Profit of Rail System at Hotgi in the State of 20,86,13,104/- Maharashtra III Profit of Rail System at Shambhupura in the State of 29,66,96,837/- Rajasthan IV Profit of Rail System at Dodaballapur in the State of 9,23,80,840/- Karnataka Total 82,61,81,708/- vi. Similarly, the assessee Company also claimed deduction of Rs.18,91,43,054/- u/s 80IA of the IT Act (as tabulated below) with respect to its power generating eligible undertakings which were acquired from SCL: Sr. Undertakings Amount (Rs.) No. I Thermal Power Plant at Reddipallayam in 5,21,57,858/- the State of Tamil Nadu II Thermal Power Plant at Malkhed in the 11,97,45,646/- State of Karnataka III. Thermal Power Plant at Rawan in the 1,72,39,550/- State of Chattisgarh Total 18,91,43,054/-

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that the change in ownership has no impact on the availability of deduction in the hands of the successor company. References were made to various decisions discussing availability of similar claims u/s. 80J / Section 84 of the 1922 Act etc. to draw home his point that the benefit of tax holiday remains with the undertaking although the ownership of the same may change hands. We will deal with these references subsequently in this order. 29. According to the Ld AO as well as Ld CIT(A), sub-section (12) of section 80IA of the IT Act, which was inserted by the Finance Act, 1999, with effect from 1st April 2000 was an enabling provision and facilitated the successor to claim the benefit of the tax holiday in the year of reorganisation and thereafter. The Ld AR of the assessee on the other hand, argued that sub-section (12) merely made it explicit what was implicit u/s. 80IA of the IT Act. It, however, made subtle change by providing that in the year of reorganisation, the deduction, which is attached to the undertaking, would not be available to the predecessor company, but such deduction will be available to the successor company. 30. According to the Ld AR of the assessee, sub-section (12) was introduced merely with the intention to put to rest the divergent views taken by the authorities on this issue. It was also pointed out that sub-section (12) to section 80IA did not confer any new right to an assessee to claim the deduction. Sub-section (12) merely clarified that the successor company shall be eligible to claim the deduction for the residual period which according to the AR of the assessee was statutorily vested as per section 80IA(1) of the IT Act. 31. The Ld AO as well as Ld CIT(A) are of the view that with the introduction of sub-section (12A), since the provisions of sub-section (12) shall not apply to the undertakings or enterprises which are transferred in the scheme of amalgamation or demerger after 31-3-2007, the statute has disabled the enabling provision enshrined in sub-section (12) of Section 80IA of the IT Act. 32. The Ld AR of the assessee on the other hand, as aforementioned, argued that sub-section (12) of section 80IA did not create any new right of tax holiday to the successor entity at the first place. Thus, insertion of sub- section (12A) in section 80IA of the IT Act, which merely disabled the applicability of sub-section (12), cannot be construed as withdrawal of right to claim the deduction by the successor. 33. The Ld AR of the assessee further argued that sub-section (12A) was introduced merely to neutralise the abnormalities brought into the statue by sub-section (12) of section 80IA. According to Ld AR of the assessee following anomalies had arisen on account of introduction of sub-section (12) in section 80IA of the IT Act: “i. In cases of amalgamation / demerger which are effective on a day other than beginning of a financial year, the predecessor company has

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no right to claim any deduction despite the income for such period is reported by such predecessor company. ii. A strict application of sub-section (12A) read with sub-section (12) in case of demerger would disentitle the demerged entity from claiming deduction with respect to other eligible undertakings even when only one or few eligible undertakings are transferred under the demerger process.” 34. According to the Ld AR of the assessee, the intent of introduction of sub-section (12A) was never to deny the deduction to the eligible undertakings but it merely restored the position of law as it was before insertion of sub-section (12) in section 80IA. This is clear from the wordings used in sub-section (12A) viz: the provisions of sub-section (12) shall not apply to any undertaking or enterprise which is transferred in a scheme of amalgamation or demerger after 31-3-2007

i. Interpretation of sub-sections (12) & (12A) leads to unjust and discriminatory result in so far as the successor company in case of amalgamation/ demerger would not be eligible for the deduction, whereas a purchaser of unit or a successor pursuant to dissolution/slump sale, conversion of proprietorship /firm into company etc. shall be able to claim the tax holiday. Therefore, the AR submitted that an interpretation which

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leads to absurd consequences and results in discrimination should be avoided.

ii. Sub-section (12) applies only to an “undertaking” and not to an “enterprise”, therefore sub-section (12A) which negates the applicability of sub-section (12) will not apply to rail systems which are regarded as “enterprise” for the purpose of section 80-IA(4)(i).

iii. Sub-section (12) of section 80IA presupposes that the amalgamating Company/ demerging entity is claiming deduction at the time of reorganisation. As such, the provisions of sub-section (12A) cannot be construed to deny benefit in respect of those undertakings which started claiming deduction only after the date of amalgamation.

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Grievance of both parties revolve around eligibility of tax holiday claim for units acquired by the assessee Company from SCL pursuant to the Scheme of amalgamation.

“[1] Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of the section, be allowed, in computing the total income of the assessee, deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years”.

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

(a)…

(b)…

(c)…

…………

Explanation – For the purposes of this clause, “infrastructure facility” means –

(a) a road including toll road, a bridge or a rail system

(b) ….

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………..

(i) ....

(ii) ….

(iii) An undertaking which,-

(a) is set up in any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2017;

(b) …

(c) …”

“15. … It is not the manufacture or production of articles by the company but the manufacture or production by the undertaking, which is different from the company, that is contemplated under the sub-section. A company may own or run many undertakings some of which may be entitled to the benefit of Section 84 and others may not be so entitled. It is not, therefore, possible to equate the undertaking with the company. When a company owns more than one undertaking the application, of Section 84 has to be with respect to the particular undertaking and not to the company in general…”

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“13. Insofar as the objection of the revenue that there had been change in the name of pattern of shareholding it does not make any difference as it is a well settled rule of law that benefit under Section 80IA of the Act is available to an undertaking and not to the assessee since the undertaking continues to carrying on its business without any reconstruction of business already in existence.”

“11. The Tribunal in the present case has come to the conclusion that where a running business is transferred lock, stock and barrel by one assessee to another assessee the principle of reconstruction, splitting up and transfer of plant and machinery cannot be applied. According to the Tribunal the benefit of Section 10A attaches to the undertaking and not to the assessee which owns the undertaking. The benefit of Section 10A was held to have attached itself to the STP unit of the software division which was owned by IOCL till 19 October 1994 and it was owned by the assessee subsequent to that date. What is material, according to the Tribunal, is not who owns the undertaking but whether the undertaking is entitled to the benefit available under Section 10A…”

“(12) Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger –

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

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

i. If an undertaking entitled to the deduction, owned by any Indian company,

ii. is transferred before expiry of the specified period,

iii. the transfer is to another Indian company, pursuant to amalgamation or demerger, then:

iv. in the year of amalgamation or demerger, the amalgamating or the demerged company (‘predecessor co’) would not be entitled to the deduction; and

v. the provisions of the section would apply to the amalgamated or the resulting company (‘successor co’), as if the amalgamation or demerger had not taken place.

“86. With growing liberalisation of the economy has come the need for industrial restructuring so that companies can focus better on their core activities. The corporate sector has been voicing the need for a flexible fiscal policy for regulating business reorganisations. In response to this

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need, I propose a comprehensive set of amendments to the Income tax Act to make such business reorganisations fully tax neutral.

...

The Memorandum further explained as under:

"The business and economic development of the country has thrown up the need for rationalisation of laws relating to business reorganisations for restructuring of production system and a better utilisation of resources which have become necessary with a view to enable the Indian industry to rearrange itself to become globally competitive. It was in this background that tax concessions to conversion of firms into companies were provided ..., which were widely welcomed. With the same end in view, a number of provisions have been conceived for the entire gamut of business reorganisations.

...

(a) demergers should be tax neutral and should not attract any additional liability to tax.

(b) in demergers, tax benefits and concessions are available to any undertaking should be available to the said undertaking on its transfer to the resulting company.

...".

With a view to neutralise the tax effects, the Finance Act, 1999, inter alia, carried out amendments in sections 35A, 35AB, 35ABB, 35D, 35E of the IT Act.

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demerger and slump sale. Relevant portion of the Circular is extracted below:

“56.1 The business and economic environment of the country has thrown up the need for simplification and rationalisation of laws relating to business re-organization, for rationalisation of the production system and better utilization of resources which have become necessary with a view to enabling the Indian industry to restructure itself to become globally competitive. It was in this background that the tax concessions to conversion of firms into companies or proprietary concern into companies were provided in Finance (No.2) Act, 1998 and were widely welcomed. Following this up, the Act has carried out a number of amendments for the entire gamut of business reorganisation. These include rationalisation of the existing provisions relating to amalgamation of companies, new provisions relating to demerger of companies and sale or transfer of business as a going concern through slump sale. 56.2 Amalgamation in relation to the companies has been defined under the existing provisions of the Income-tax Act to mean the merger of one or more companies with another company or the merger of two or more companies to form one company. There are a number of provisions in the Income-tax Act having bearing on amalgamation. Demerger is relatively a new phenomenon in the Indian corporate sector. A demerger is a reorganization of a company where all the existing assets and liabilities are divided into one or more additional entities leading to resulting companies. While there are no specific provisions under the Companies Act governing demergers, some transactions of this nature do take place through schemes of compromise or arrangement under sections 391 to 394 of the Companies Act and these are sanctioned by the High Courts. A slump sale is a form of reorganization where an undertaking or a division is transferred from one person to another for a lump sum consideration without values being assigned to the individual assets and liabilities transferred. 56.3 Extensive amendments in the Income-tax Act have been carried out on the basis of the following broad principles: a) The restructuring shall not attract additional liabilities to tax and also not result in the withdrawal of relief and concessions available to the existing unit. b) The tax benefits and concessions available to an undertaking of a company shall continue to be available to the undertaking on transfer of the same while concessions and benefits that are available to the transferor company as an entity and not to the undertaking of the company proposed to be transferred, should remain with the transferor company. c) Tax benefits to such business reorganizations should be limited to the transfer of business as a going concern and not to the transfer of

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specific assets which would amount to sale of assets and not a business reorganization. The Act has substituted section 80I-A by sections 80-IA and 80-IB of the Income-tax Act. The substituted section 80-IA, inter alia, in sub-section (12) provides that where any undertaking of an Indian company entitled to the deduction under this section is transferred to another Indian company in a scheme of amalgamation or demerger before the expiry of the specified period, the deduction shall be availed by the amalgamated company or the resulting company. Identical provision has been enacted in sub-section (12) of section 80-IB in regard to deduction available under that section in the case of an amalgamation or demerger” (emphasis supplied) 55. The memorandum explains that the purpose of introducing sub-section (12) was to make the business reorganisations such as amalgamation and demerger tax neutral. A question, therefore, arises is to understand what was the position prior to insertion of sub-section (12)? In other words, prior of insertion of sub-section (12), whether the taxpayers were allowed or were they denied the benefit of tax holiday, if the undertaking were transferred by one taxpayer to another. 56. The issue about eligibility to claim tax holiday/deduction of the eligible undertaking by a successor, (not necessarily in the context of 80IA but other similar tax holiday provisions) had arisen number of times for adjudication before the Courts prior to insertion of sub-section (12) in section 80IA of the IT Act. We observe that the Courts have taken a consistent view that the deduction was allowable for the residual period to the successor company. 57. In CIT vs. Silical Metallurgic Ltd (324 ITR 29), the facts before Hon’ble Madras High Court were as follows: there were three units at different places being new industrial undertakings eligible for deduction under the applicable provisions. They belonged to different companies assessed separately. The companies were amalgamated into one and the amalgamated company continued to carry on the business of the undertakings. It claimed the deduction of tax holiday for all the eligible undertakings. The AO disallowed the deduction on the ground that it did not set up the aforesaid units and there was no provision in the Act for granting the benefit of deduction to the amalgamated company. The Ld CIT(A) and the Tribunal upheld the claim of the taxpayer. The Hon’ble Madras High Court confirmed the decision of the Tribunal and observed as follows: “A reading of the provision of sections 80HH and 80-I of the Act, it is clear that the same has been incorporated to encourage the new industrial undertaking on fulfilment of certain conditions mentioned therein. If the conditions mentioned in the sections are complied with by the

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assessee, the benefit extended by the provisions has to be granted to the assessee. The amalgamation of one company with the other company cannot be regarded as a splitting up or reconstruction or by a transfer of a new business of the plant and machinery of the old business. With reference to the Companies Act, the amalgamation was also for the benefit of the two companies, i.e., amalgamating and amalgamated company and in the public interest and also in the interest of the shareholders. Viewed from any angle amalgamation cannot be regarded as a splitting up of the company for the purpose of negativing the claim under the Income-tax Act, which has been statutorily conferred on the company, if such companies fulfil the conditions stipulated therein. Hence, we are of the view that the order of the Tribunal granting the benefit of sections 80HH and 80-I to the assessee-company cannot be stated to be illegal or against the statutory provisions. A similar view has been taken by the Bombay High Court in the case of CIT v. Dandeli Ferro Alloys P. Ltd. [1995] ITR 1, in which the Bombay High Court held that the facts on record clearly established that the amalgamated company was already incorporated and formed and had come into existence on March, 1973 and had become an industrial undertaking carrying on industrial and commercial activities on and from June 20, 1973, i.e., prior to the amalgamation of the amalgamating company with the amalgamated company, which had become effective from October 31, 1973. The amalgamated company was not formed by the splitting up, or the reconstruction, of a business already in existence. Therefore, the Tribunal was right in holding that the assessee company was entitled to relief under sections 80J and 80HH of the Act”. 58. The CBDT had also accepted the above legal position with regard to deduction under section 84 of Income Tax Act, 1922 (Section 80J of Income- tax Act, 1961), way back in 1963 and clarified the matter vide Letter: F No 15/5/63-IT (A-I), dated 13 December 1963, which reads as under: "The Board agree the benefit of section 84 attaches to the undertaking and not to the owner, thereof. The successor will be entitled to the benefit for the unexpired period of five years provided the undertaking is taken over as a running concern". 59. The Board set out two principles (prima facie, independent of one another or the later dependent on the primary and the first principle): i. The deduction attaches to the undertaking and not to the owner; and ii. A successor would be entitled to the deduction, for the residual period, if the undertaking is transferred as a running concern

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as a going concern, is to be allowed to an undertaking. The said undertaking being succeeded by a partnership firm, would not disentitle the succeeding person, the benefit of deduction under the aforesaid section. We find support from the ratio laid down in the under mentioned judgment replied upon by the assessee." 10. The interpretation placed by the Tribunal on the provisions of Section 80-IC(4)(i) of the Act being in consonance with law, no fault arises in the view taken by the Tribunal. No ground to interfere with the order of the Tribunal has been made out. Therefore, no substantial question of law arises in this appeal. Accordingly, the present appeal is dismissed.” 62. The issue relating to availability of deduction under section 80J for the unexpired period in case of amalgamation has also been examined by the Hon’ble Bombay High Court in case of Tyresoles Concessionaire (P.) Ltd [1995] 81 Taxman 279. Relevant findings of the High Court while deciding the issue in favour of the assessee were as follows: “10. So far as the next question is concerned, we find that the amalgamated company claimed relief under section 80J for the period from 1-1-1975 to 31-3-1975. This relief was refused by the ITO on the ground of non-fulfilment of the conditions of section 80J(5). So far as the fulfilment of the conditions of section 80J(5) is concerned, we find that there is a clear and categorical finding of the Tribunal that all the conditions were fulfilled. The only question to be decided is whether having regard to the provision of section 80J, the assessee-company is entitled to claim development rebate for the balance period of 5 years. We have carefully perused the provisions of section 80J. Relief under that section is available only to those industrial undertakings which fulfil all the conditions specified in sub-section (4) thereof, the relevant conditions for the present purpose being conditions (i) and (ii). … On a careful perusal of the provisions of section 80J as a whole and the clear and categorical finding of the Tribunal that the assessee-company has fulfilled all the conditions of section 80J, we are of the clear opinion that the assessee- company (amalgamated company) is entitled to relief under section 80J for the balance of the period of 5 years in terms of section 80J.” 63. The crux of all the above decisions fortify that prior to insertion of sub- section (12) in section 80IA / 80IAB of the IT Act, the deduction was allowed to the successor entity to which the undertaking was transferred. We are, therefore, not persuaded to accept the contention of the Revenue that sub- section (12) of section 80IA was an enabling provisions which entitled the successor entity to claim the benefit relating to undertaking transferred in the scheme of amalgamation /demerger. The deduction was available to the successor even prior to insertion of sub-section (12) and pursuant to the provisions of sub-section (1) r.w.s. sub-section (4) of section 80IA of the IT Act.

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(12A) was inserted by the Finance Act, 2007 w.e.f. 01.04.2008. It reads as follows: "(12A) Nothing containing sub-section (12) shall apply to an enterprise or undertaking which is transferred in the scheme of amalgamation or demerger on or after the 1st day of April, 2007". 77. Notes on clauses to the Finance Act, 2007 explains it as follows: “It is proposed to insert sub-section (12A) so as to provide that nothing contained in sub-section (12) shall apply to any undertaking or enterprise which is transferred in a scheme of amalgamation or demerger on or after the 1st day of April, 2007”.

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used in sub-section (12) had another defect. It can be explained with the help of an example: Suppose an entity had 3 eligible undertaking on which tax holiday was claimed and one out of the three was demerged to another entity. By virtue of clause (a) of sub-section (12) which specifies that no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes places, even the other two undertakings which remains with the demerged company could be denied the benefit of tax holiday when only one undertaking is determined. We are, therefore, of the view that the legislature, in all its wisdom, has neutralised the disability enshrined in sub- section (12) by inserting sub-section (12A) in section 80IA of the IT Act. 84. We now refer to the contention of the DR where he has relied on the contents of the Circular No. 3 of 2008 dated 12 March 2008 issued by CBDTto explain the provisions of newly inserted section 80IA(12A). The circular provided as under: “35. Tax benefit u/s 80IA not available to undertaking / enterprise of Indian companies undergoing amalgamation or demerger after 31.03.2007 35.1 Sub-section (12) of section 80-IA provides that where any undertaking of an Indian company which is entitled to the deduction under the said section is transferred before the expiry of the period specified therein, to another Indian company in a scheme of amalgamation or demerger, the provisions of the said section 80-IA shall apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place. The main intention in providing benefit u/s 80-IA had been to provide incentive to those who had taken initial investment and entrepreneur risk. Hence, it was felt that there was no justification for passing on the benefit to someone who had not taken these risks and had only acquired the eligible undertaking much later when the risks had reduced. Hence, a new sub-section (12A) has been inserted in section 80-IA so as to provide that the provisions of sub- section (12) shall not apply to any undertaking or enterprise which is transferred in a scheme of amalgamation or demerger after 31.03.2007. Thus, if an undertaking or an enterprise is transferred in a scheme of amalgamation or demerger after 31.03.2007, the benefits of deduction u/s 80-IA will not be available to the amalgamated or demerged undertaking or enterprise. The content of this circular will supersede whatever contrary has been stated, on this issue, in any other circular, issued by the Central Board of Direct Taxes earlier. (Emphasis supplied) 35.2 Applicability – this amendment will take effect from 01.04.2008 and will accordingly apply in relation to the assessment year 2008-09 and subsequent years.”

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are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law.” 90. We also place reliance on the decision of the Allahabad High Court in a case Shivangee Crafts Limited vs. State of UP. A writ petition was filed by assessee in reference to UP Trade Tax Act, 1948, wherein the Court has held that till such time as a clarification or amendment by the Legislature or by Ordinance is not incorporated in the statute, no notification or circular of the Department can override the statutory provisions of the Act. It would not be permissible to read words into the statute, which prima facie is very plain and straight. 91. Even if one has to assume that the real intent of insertion of sub- section 12(A) was to accord incentive to those who had made initial investment and taken entrepreneurial risk, then also deduction under section 80IA cannot be denied to the successor taxpayer entities since successor entities would pay due and fair consideration for the value of the undertakings taken over, which includes the price for assumption of full risk of investment and operations. In other words, the entrepreneurial risk of the undertaking would also travel with the undertaking and the new owner of the undertaking would also bear the same risk as the original investor. The original investor will recover the price from the new investor in respect of the higher risk which he would have assumed at the initial stage. 92. Further, even if this intention is considered as relevant, such claim cannot be denied in case of amalgamation and demerger since: i. In case of demerger, there may not be any change in ownership of the entity. The same shareholders or atleast three fourth in the value of shares of the demerged company become the shareholders of the resulting company. ii. Similarly, in the case of amalgamation, the shareholders of the amalgamating company or atleast three fourth in the value of shares, become shareholders of the successor/amalgamated company along with the existing shareholders of the predecessor company. Thus, in both the situations, there is no change in the risk bearing entities or at least the majority of initial investor continue to bear the risk as they become shareholder of the successor entity. Thus, even on this count it is difficult to accept the contents of Circular no.3 of 2008 which clarified that sub-section (12A) was inserted to disentitle the successor entity the benefit of tax holiday since the entrepreneurial risk gets transferred from the original investor in the scheme of amalgamation or demerger.

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approved by the Hon'ble High Court having in mind the larger public interest, cannot be disturbed by the revenue. We concur with the view taken by the coordinate Bench to hold that since the scheme of amalgamation was approved by the Hon'ble High Court only after ensuring that the same is not prejudicial to the interests of its members or to the public interest, the same cannot be challenged by the Revenue subsequent to the approval. If at all, they could have raised the objection when the Court had sought their comments on the scheme. 97. In view of the above discussion, we hold that sub-section (12A) of section 80IA of the IT Act, merely neutralises applicability of sub-section (12) and does not disentitle the successor entities to claim deduction in accordance with section 80IA of the IT Act. Accordingly, AO is directed to allow the deduction as claimed by the assessee with respect to eligible units acquired from SCL. Accordingly, Ground no.1 of the assessee is allowed.”

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“203 Ground nos.6 to 11 of the appeal relate to addition made by the AO regarding Corporate Guarantee commission in pursuant to the order passed by the TPO. 204 Unlike AY 2011-12 and AY 2012-13, the order passed by the TPO is based on the reference made by the AO subsequent to the proceedings initiated u/s. 153C r.w.s. 153A of the IT Act. Accordingly, the TPO order passed is pursuant to the valid proceedings. We are, therefore, adjudicating the grounds raised by the Revenue on this issue on merits of the matter. 205 During financial year 2010-11 (AY 2011-12), the assessee had acquired stakes in Star Cement LLC., Middle East, through its wholly owned subsidiary in Dubai, viz., UltraTech Cement Middle East Investment Limited (UCMEIL). For the purpose of overseas acquisition, the assessee Company had given corporate guarantee to the bankers of its Associated Enterprises (AEs) for providing loan to the AE for the purpose of capital commitments and working capital facility availed by them. 206 The assessee had out of abundant caution offered an amount of Rs.5,79,80,032/-.in its return of income as corporate guarantee commission although nothing was recovered as corporate guarantee commission from its AE’s. A claim was made in the return by way of notes as well as during assessment proceeding that nothing should be taxed towards corporate

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guarantee commission and amount offered for addition should be deleted 207 The Ld AO added as notional income an amount of Rs.25,41,59,209/- being commission chargeable on the Corporate Guarantee provided by the assessee Company to the bankers for providing loan to the AEs of the assessee Company. The LD CIT(A), however, deleted the addition on the ground that the provision of guarantee cannot be considered to be an international transaction as it had no impact on the profits, income or assets of the assessee company. Reliance was placed on the decision of earlier years wherein LD CIT(A) had relied upon the decision of Coordinate Bench of this Tribunal in case of Videocon Industries Limited vs. ACIT ITA No. 6662/Mum/2012. 208 The AR of the assessee submitted that as part of the assessee Company’s expansion plan and foraying into business outside India, the assessee Company had acquired stakes in Star Cement LLC., Middle East, through its wholly owned subsidiary in Dubai, viz., UltraTech Cement Middle East Investment Limited (UCMEIL) 209 The assessee was of the view that no guarantee fees/ commission was chargeable from its Associated Enterprises (‘AEs’) in respect of aforesaid corporate guarantees, since it is in the nature of shareholder’s activity of the Assessee. 210 The Ld AR of the assessee also contended that the corporate guarantee transaction has no bearing on the profits, income, losses or assets of the assessee hence it will be outside the ambit of transfer pricing provisions as it is not an international transaction within the meaning of section 92B of the Act. 211 On the other hand, the Ld DR submitted that no third-party would provide guarantee without compensation and accordingly, an adjustment for the corporate guarantee provided by the assessee was warranted. 212 We have taken into consideration the contentions advanced by the Ld counsels for both the parties, perused the orders of the lower authorities and the material available on record, and also taken note of the judicial pronouncements pressed into service by them in order to drive home their respective contentions in context of the aforesaid issue in question. As far as the contention of the AR that provision of corporate guarantee is not an international transaction, we are not convinced with it. A reading of Explanation– 1(c) of section 92B of the Act, makes it clear that the provision of

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any kind of guarantee will come within the ambit of international transaction under section 92B of the Act. 213 Further, this issue also stands covered by the decision of the Hon’ble jurisdictional Bombay High Court’s judgment in the case of CIT vs Everest Kento Cylinders Ltd [(2015) 58 taxmann.com 152 (Bom)], wherein the High Court had upheld determination of arm’s length price at 0.5% by observing as follows: “In the matter of guarantee commission, the adjustment made by the TPO were based on instances restricted to the commercial banks providing guarantees and did not contemplate the issue of a Corporate Guarantee. No doubt these are contracts of guarantee, however, when they are Commercial banks that issue bank guarantees which are treated as the blood of commerce being easily encashable in the event of default, and if the bank guarantee had to be obtained from Commercial Banks, the higher commission could have been justified. In the present case, it is assessee company that is issuing Corporate Guarantee to the effect that if the subsidiary AE does not repay loan availed of it from ICICI, then in such event, the assessee would make good the amount and repay the loan. The considerations which applied for issuance of a Corporate guarantee are distinct and separate from that of bank guarantee and accordingly we are of the view that commission charged cannot be called in question, in the manner TPO has done. In our view the comparison is not as between like transactions but the comparisons are between guarantees issued by the commercial banks as against a Corporate Guarantee issued by holding company for the benefit of its AE, a subsidiary company.” 214 The adequacy of the ALP of corporate guarantee fee at 0.5% can also safely be gathered by drawing support from the following judicial pronouncements: - Aditya Birla Minacs Worldwide Ltd. vs. JCIT (2016) 47 CCH 760 (Mum Tribunal) - Godrej Household Products Ltd. vs. Addl. CIT 41 taxmann.com 386 (Mum Tribunal) - Nimbus Communications Limited vs. Addl. CIT (2014) 149 ITD 0508 (Mum Tribunal) - Hindalco Industries Ltd. vs. Addl. CIT (62 taxmann.com 181) (Mum Tribunal)

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- Manugraph India Ltd. vs. DCIT (2015) 43 CCH 348 (Mum Tribunal) - Prolific Corporation Ltd. Vs. DCIT (55 taxmann.com) (Hyd. Tribunal) - Thomas Cook (India) Limited (2016) 47 CCH 0162 (Mum Tribunal) 215 We see no reasons to take any other view of the matter than the view so taken by Hon’ble jurisdictional High Court and coordinate Benches and therefore we reject the determination of arm’s length price reduced to Nil by the Ld CIT(A) and direct the AO to adopt 0.5% as an arm’s length consideration for the corporate guarantee issued by the assessee in favour of its AEs. 216 The grounds raised by the Revenue and the CO filed by the assessee are disposed off accordingly.”

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claimed in respect of the assets which are eligible for depreciation at the rate of 100 per cent but installed and put to use for less than 180 days and hence depreciation was claimed to the extent of only 50% of its actual cost during the FY 2013-14. 227. The AO rejected the claim of the assessee on the following grounds: “i. The word “and” signifies that both acquisition and installation of assets should be after 31/03/2013 and not merely the installation ii. The assets which are eligible for 100% depreciation even though put to use for less than 180 days are not eligible for investment allowance in view of provisions of section 32AC(4)(v).” 228. On further appeal, the LD CIT(A) has upheld the order of the AO with regard to deduction claimed in respect of cost of components of plant or machinery lying as Capital Work In Progress (CWIP) as on 1 April 2013 amounting to 248,65,65,041/- but allowed the claim amounting to Rs. 8,32,42,289/- with respect to assets which were eligible for depreciation at the rate of 100 per cent but installed and put to use for less than 180 days and hence claimed at 50%. The dispute therefore relates to only value of component of plant and machinery lying in capital work in progress as on 1st April 2013. 229. The learned AR submitted that assessee is entitled to deduction under section 32AC of the Act as: i. The term ‘plant’ has to be read in the manner in which it is generally understood and accordingly, a plant can be said to have been acquired on or after 1st April 2013 since it came into existence only after all the machinery and components were assembled and commissioned together. The plant was brought into existence from the components lying in CWIP only after 1st April 2013 when it was assembled and installed. Thus, according to the AR of the assessee, plants were acquired and installed after 1st April 2013. ii. The word “acquired and installed” has to be interpreted as “acquired or installed” since it is impossible to acquire and also install any plant or machinery valuing Rs.100 crores or more in a span of one year. Such a situation is not

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intended by the legislature and therefore the word “and” has to be read as “or” to arrive at the intended consequences. 230 The provisions of section 32AC is reproduced below for better understanding of the issue: “32AC. (1) Where an assessee, being a company, engaged in the business of manufacture or production of any article or thing, acquires and installs new asset after the 31st day of March, 2013 but before the 1st day of April, 2015 and the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees, then, there shall be allowed a deduction,- for the assessment year commencing on the 1st day of April, 2014, of a sum equal to fifteen per cent of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but before the 1st day of April, 2014, if the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees; and for the assessment year commencing on the 1st day of April, 2015, of a sum equal to fifteen per cent of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but before the 1st day of April, 2015, as reduced by the amount of deduction allowed, if any, under clause (a). (1A) Where an assessee, being a company, engaged in the business of manufacture or production of any article or thing, acquires and installs new assets and the amount of actual cost of such new assets acquired and installed during any previous year exceeds twenty-five crore rupees, then, there shall be allowed a deduction of a sum equal to fifteen per cent of the actual cost of such new assets for the assessment year relevant to that previous year: Provided that no deduction under this sub-section shall be allowed for the assessment year commencing on the 1st day of April, 2015 to the assessee, which is eligible to claim deduction under sub-section (1) for the said assessment year. (1B) No deduction under sub-section (1A) shall be allowed for any assessment year commencing on or after the 1st day of April, 2018………………………….”

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231 The intention behind introduction of section 32AC can be discerned from the speech of the Hon’ble Finance Minister while presenting the Finance Bill 2013, wherein the Hon’ble Minister stated as under: “New Investments 59. To attract new investment and to quicken the implementation of projects, I propose to introduce an investment allowance for new high value investments. A company investing `100 crore or more in plant and machinery during the period 1.4.2013 to 31.3.2015 will be entitled to deduct an investment allowance of 15 percent of the investment. This will be in addition to the current rates of depreciation. There will be enormous spill-over benefits to small and medium enterprises.” Thus, the intention behind introduction of section 32AC and provide investment allowance was to attract new investment as well as to quicken the implementation of projects. 232 The explanation regarding introduction of this new section in the Memorandum explaining the provisions of the Finance Bill, 2013 was stated under the head “Measures to Promote Socio- Economic Growth” and the opening portion of the relevant clause of the Memorandum read as under: “Incentive for acquisition and installation of new plant or machinery by manufacturing company” In order to encourage substantial investment in plant and machinery, it is proposed to insert a new section 32AC in the income tax Act….” [clause 5]. 233 It is also worth noting that section 32AC was further amended by Finance Act, 2014 whereby subsection (1A) was introduced with effect from 1 April 2015. The relevant extract of the budget Speech 2014 in respect of such amendment is reproduced below: “198. The manufacturing sector is of paramount importance for the growth of our economy. This sector has multiplier effect on creation of jobs. Last year, an incentive in the form of investment allowance to a manufacturing company that invests more than Rs.100 Crore in plant and machinery during the period from 01.04.2013 to 31.03.2015 was announced. Considering the need to incentivize smaller entrepreneurs, I propose

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to provide investment allowance at the rate of 15 percent to a manufacturing company that invests more than Rs.25 Crore in any year in new plant and machinery. This benefit will be available for three years i.e. for investments up to 31.03.2017. The Scheme announced last year will continue to operate in parallel till 31.03.2015.” 234 The memorandum explaining the provision of Finance (No.2) Bill, 2014 in respect of the aforesaid amendment stated as under:- “FINANCE (No. 2) BILL, 2014 PROVISIONS RELATING TO DIRECT TAXES Investment Allowance to a Manufacturing Company In order to encourage the companies engaged in the business of manufacture or production of an article or thing to invest substantial amount in acquisition and installation of new plant and machinery, Finance Act, 2013 inserted section 32AC in the Act to provide that where an assessee, being a company, is engaged in the business of manufacture of an article or thing and invests a sum of more than Rs.100 crore in new assets (plant and machinery) during the period beginning from 1st April, 2013 and ending on 31st March, 2015, then the assessee shall be allowed a deduction of 15% of cost of new assets for assessment years 2014-15 and 2015-16. As growth of the manufacturing sector is crucial for employment generation and development of an economy, it is proposed to extend the deduction available under section 32AC of the Act for investment made in plant and machinery up to 31.03.2017. Further, in order to simplify the existing provisions of section 32AC of the Act and also to make medium size investments in plant and machinery eligible for deduction, it is also proposed that the deduction under section 32AC of the Act shall be allowed if the company on or after 1st April, 2014 invests more than Rs.25 crore in plant and machinery in a previous year. It is also proposed that the assessee who is eligible to claim deduction under the existing combined threshold limit of Rs.100 crores for investment made in previous years 2013-14 and 2014-15 shall continue to be eligible to claim deduction under the existing provisions contained

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in sub-section (1) of section 32AC even if its investment in the year 2014-15 is below the proposed new threshold limit of investment of Rs. 25 crores during the previous year. [Clause 11]” 235 The Finance Minister’s Speech and the Explanatory Memorandum, at the time of introduction of the incentive in 2013 as well as while extending the benefit w.e.f. 1 April, 2015, stressed on the term “investment” in new “plant” or “machinery”. The intention was to give impetus to the manufacturing sector making substantial investment including in the stalled projects. 236 The term ‘acquire’ used in section 32AC has to be read in conjunction with the term ‘assets’, i.e. ‘plant’ or ‘machinery’, and not in isolation. A new ‘plant’ or ‘machinery’ can be said to have been acquired when the individual components of the plants are aggregated and installed together so that the resulting equipment takes the character of ‘plant’ or ‘machinery’ as is generally understood. “Acquisition” of plant or machinery cannot be read to mean mere purchase/ ownership/ possession of individual items or components of a plant or machinery. Restricting the meaning of acquisition of plant or machinery to mere purchase of individual components of ‘plant’ in piecemeal, which are accounted under the head ‘Capital Work-in-Progress’ will give absurd results not intended by the legislature. 237 The assessee is the largest cement manufacturer in the country having plants across various location in India. Huge plant and machineries are required for the manufacturing of cement. These plants are in the nature of complex machineries. Various components purchased by the assessee are to be assembled and commissioned together which takes substantial amount of time given the complexity, size and nature of the machinery/ project/ plant required for the business. The sheer size of various plants/ machineries constructed and put to use during the year is evident from the fact that as on 1 April 2013, the capital work-in-progress of the assessee was Rs.1,657 crores and to convert them into plant, additional purchase of individual components worth Rs.635 crores was made during the year. Unless and until the machinery are assembled and commissioned together, the plant does not come into existence. Therefore, the meaning of word “acquisition” will have to be considered in light of the nature of various plants the assessee was constructing. The plant is acquired only when all the components of machinery are assembled and commissioned together.

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238 In this regard it is worth noting the first proviso to sub- section (1A) of section 32AC. It is provided that where installation of the new assets are in a year other than the year of acquisition, the deduction under this sub-section shall be allowed in the year in which new assets are installed. This amendment was brought by the Finance Act, 2016. We are of the view that the intention of the legislature was to cure the discrepancy in the provision and to obviate the unintended hardship faced by the taxpayers in completing both the condition of “acquisition” and “installation” in the same year. Therefore, such proviso being curative in nature must apply retrospectively. 239 An analogy can also be drawn from the second proviso to section 32(1) which restricts the claim of depreciation to 50% in case of assets “acquired during the previous year” and “put to use” for a period of less than 180 days in that previous year. The provisions of second proviso are reproduced as under: “Provided further that where an asset referred to in clause (i) or clause (ii) or clause (iia) or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this sub-section in respect of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (i) or clause (ii) or clause (iia), as the case may be”. 240 For the purpose of second proviso to section 32, the plant is considered as “acquired” only after all the machines and components are assembled and commissioned together and the plant is ready for use. The Revenue has never allowed depreciation on any individual component of plant/machineries acquired before the previous year since the process of assembling and commissioning was completed during the year. The claim of depreciation commences only from the day the plant is fully installed including on the value of component lying in capital work in progress but capitalised as plant and machinery on completion of installation. Thus, the meaning of the term “acquired” used in section 32 is considered as fulfilled only when the plant / machinery is “installed”. The language used in section 32AC being similar to the language used in second proviso to section 32(1), we must give the same interpretation.

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241 We further note that the issue relating to availability of additional depreciation under section 32(1)(iia) wherein the phrase used is “acquired and installed after the 31st day of March” has been subject matter of litigation. The Coordinate Bench of this Tribunal in the case of Euro Pratik Ispat Pvt. Ltd. vs. ACIT (ITA No. 1682/Mum/2011) has observed as under : “In our opinion machinery was installed in the AY under appeal, though acquisition of the P&M had started in earlier year AY. Till a machine is not assembled in a manner that it could be used to manufacture, it cannot be held that it had been installed. Mere purchasing or shifting it to factory premises is not enough. Assessee had claimed additional depreciation @ 10%, as the P&M had worked for a period less than one year. It is a common phenomenon that in big projects, installation of machinery takes very long time because of the sheer volume of the work to be carried out. If an assesse is not successful in installing P&M in one year and carries forward the installation work in subsequent year / years it cannot be denied any benefit on the ground that it had acquired the P&M in earlier year. The intent of the legislature was to attract investment, so in our opinion the section can be termed as benevolent provision. In the case under consideration production started from 01.01.2006. Before that fabrication and completion of P& M was going on. Treatment given by the assesse in the books of accounts to the P&M was in accordance with the Accounting Standards (AS) and the AO has not denied the fact that the assessee was following AS. Therefore, in our opinion, assesse was entitled to claim additional depreciation @10%.” 242 Again, the Coordinate Bench of this Tribunal in the case of JCIT vs. Lotus Energy (India) Ltd [2016] 68 taxmann.com 364 upheld the view of the taxpayer to allow additional depreciation in the year of installation. It was observed as under: “10. We have heard the rival contentions and also perused the material available on record. We have observed that Section 32(1)(iia) of the Act was amended by Finance Act, 2005. It is stated in the Memorandum to the Finance Bill 2005 that the provisions are amended in order to encourage new investment, the initial depreciation on new machinery and plant was proposed to be increased to 20 per cent from the existing level of 15 percent and consequently the initial depreciation will

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be available to all new plant and machineries except those referred to in the proviso to the clause (iia) of section 32 of the Act. The requirement of creating a minimum increase of 10 percent in installed capacity for availing the initial depreciation is also proposed to be eliminated. We have also observed that section 32(1)(iia) of the Act stipulates that new machinery and plant should be acquired and installed after 31-3-2005 by an tax-payer and a further sum equal to twenty percent of the actual cost of such machinery or plant shall be allowed as deduction. Provisions of Section 32(1)(ii) of the Act are a piece of beneficial legislation being incentive provision is a piece of beneficial legislation is to be liberally construed to grant the benefit to the tax-payer to fulfill the mandate of legislation which is to promote investment in business of manufacturing or production of any article or thing or in the business of generation or generation or distribution of power, rather than in the manner which may frustrate the object. Reference can be drawn to the following observations of Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188 (SC): “The provision in a taxing statute granting incentives for promoting growth and development should be construed liberally; since the provision for promoting economic growth has to be interpreted liberally, restrictions on it too has to be construed so as to advance the objective of the provisions and not to frustrate it.” “The words used u/s 32(1)(iia) of the Act are ‘acquired and installed’ after 31st day of March 2005. The assessee company did purchased new machineries and plant prior to 31-03-2005 as well after 31-03-2005 for the coke production plant being set up by the assessee company but the installation of the entire new plant and machineries as an integrated activity for setting up industrial project for coke production plant which started in financial year 2004-05 were completed after 31- 03- 2005 and commercial production of the new coke production plant being set up by the assessee company started in April 2005 i.e. in financial year 2005-06 when the new coke production plant set up by the assessee company became operational, which is an admitted position by the Revenue. The assessee company was incorporated on 2nd September 2004 i.e. in the financial year 2004-05, and was engaged in setting up new industrial unit being coke production plant for the

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setting up of which new plant and machineries were acquired by the assessee company starting from financial year 2004-05, which process of acquiring plant and machineries also continued in the financial year 2005-06 as an integrated activity with the sole and common objective for setting up new industrial unit of coke production plant and finally concluded with the completion of installation of the said new plant and machineries in April 2005 and commencement of the commercial production of LAM coke in April 2005 i.e. financial year 2005-06 when new coke production plant became operational. Once a new industrial project is initiated by an enterprise to be set up, then the entire composite plant and machineries which are acquired and installed are an integrated activities as the said plant and machineries can only function when they are integrated together as per technical requirements and specifications which can there-after lead to successful commissioning of the project to produce or manufacture the desired products/articles. The plant and machineries so acquired cannot be visualized and seen in the individual and itemized context as they are in-capable of production or manufacture of desired products/articles unless these itemized plant and machineries are integrated together as per technical requirements and specifications to achieve the manufacturing or production of desired products. Since, the assessee company was engaged in setting up new coke production plant which activity of setting up new industrial unit started in financial year 2004 - 05 and concluded in financial year 2005-06, the entire set of new machineries and plant were acquired by the assessee company as an integrated activity with the sole and common objective towards the setting up of new coke production plant which was carried out in financial year 2004-05 and in financial year 2005-06, with the installation of said new plant and machineries getting completed in April 2005 with the commencement of commercial production of LAM coke in April 2005 when the said new plant became operational and acquisition of said machineries and plant cannot be seen and visualized in itemized manner as unless these new plant and machineries are integrated together they will not achieve the desired results. The assessee company has finally installed the entire new plant and machineries in April 2005 i.e. after 31-3-2005 and assessee company is entitled to the benefit u/s 32(1)(iia) of the Act for

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claiming additional depreciation in the impugned assessment year because what is relevant is that new machineries and plant which were acquired before 31- 03-2005 and also post 31-03-2005 were all purchased as an integrated activity connected with the common and sole objective directed towards activity of the assessee company to set up new coke production plant which become operational in financial year 2005-06 with completion of installation of these new plant and machineries in April 2005 when all these machineries and plant were put to use after installation with start of commencement of commercial production of LAM coke in April 2005 when the new coke production plant become operational and their acquisition which concluded in financial year 2005-06 is to be seen in composite manner rather than in itemized manner as in an itemized capacity said new plant and machineries are not capable of producing the desired articles/products being LAM coke. It is pertinent to mention that on perusal of the Balance Sheet for financial year 2004-05 and 2005-06 (placed in paper book) will reveal that the assessee company has purchased new plant and machinery in financial year 2004-05 which is undisputed and the same was shown in the Balance Sheet as at 31- 03-2005 under the head 'Capital Work in Progress' and the same was capitalized in financial year 2005- 06 along with those new plant and machineries which were acquired in financial year 2005-06 and the assessee company has not claimed any depreciation in the financial year 2004-05 on these new plant and machineries so acquired in financial year 2004- 05. Thus, acquisition of the entire set of new machineries and plant whether acquired prior to or post 31-03-2005 was an integrated event in the chain of activity undertaken with common and sole goal of setting up new coke production plant by the assessee company which process got completed in April 2005 i.e. financial year 2005-06 with the completion of installation of the entire new machineries and plant as composite, so acquired by the assessee company whether pre or post 31-03-2005 with the commencement of the production of coke production plant becoming operational in April 2005. We find that the conditions as stipulated u/s 32(1)(iia) of the Act are duly complied with by the assessee company and the assessee company cannot be denied the benefit of the claim of additional depreciation merely because new plant and machinery was acquired

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partly prior to 31-3-2005 and partly post 31-03-2005 as the entire activity of acquisition of new plant and machinery was an integrated and composite activity in the chain of events with the common and sole objective of setting up new coke production plant by the assessee company, as the installation of new machinery and plant which started in financial year 2004-05 got completed after 31-3-2005 with the commencement of commercial production starting in financial year 2005-06 i.e. post 31-03-2005 with the plant becoming operational. Thus, in our considered view, the assessee company is entitled for claim of additional depreciation u/s 32(1)(iia) of the Act amounting to Rs.83,55,387/- during the assessment year 2006-07.” 243 The Hon’ble Gujarat High Court in the case of PCIT vs. IDMC Ltd. [2017] 393 ITR 441 also took a similar view on the issue and has observed as under: “Applying law laid down by the Supreme Court in various decisions to the facts of the case on hand, if the submission on behalf of the revenue is accepted, it will lead to an absurd and unjust result and the purpose and object of granting the additional depreciation will be frustrated. If the contention on behalf of the revenue is accepted, in that case, the assessee shall never get the additional depreciation as provided under section 32(1)(iia). In the facts and circumstances of the case, the twin conditions of the acquired and installed shall never be satisfied in a year and therefore, the assessee shall never get any depreciation. The purpose and object of granting additional depreciation under section 32(1)(iia) is to encourage the industries by permitting the assessee setting up the new undertaking/ installation of new plant and machinery and to give a boost to the manufacturing sector by allowing additional depreciation deduction. Thus, as rightly held by the Tribunal the provisions of section 32(1)(iia) are required to be interpreted reasonably and purposively as the strict and literal reading of section 32(1)(iia) would lead to an absurd result denying the additional depreciation to the assessee though admittedly the assessee has installed new plant and machinery. Under the circumstances, no error has been committed by the Tribunal in allowing the additional depreciation at the rate of 20 per cent on the

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plant and machinery installed by the assessee after 31- 3-2005 i.e. the year under consideration.” 244 As can be noted, the Hon’ble Gujarat High Court and the Hon’ble Bench of Coordinate Bench of this Tribunal have consistently taken a view that the twin condition of “acquired and installed” have to be read in the manner to give it a meaningful, reasonable and purposive interpretation. The twin condition can be said to have been satisfied on the day these huge plant and machineries are installed and become useful for production. Since, the language of section 32AC is similar to the language used in section 32(1)(iia), the ratio laid down in the above cases squarely applies to the facts of the instant case in the context of section 32AC. 245 The AR of the assessee also contended that if a strict interpretation is adopted for the word “and” used in the term “acquired and installed”, to understand it in its normal grammatical sense, i.e. a conjunctive, then there may be a large number of instances where the assessee, even after making required investment in plant and machinery, would not be able to claim deduction under section 32AC of the Act. The assessee may invest in designs, plans, drawings, bottles, books, etc. which are considered as “plant” for the purpose of section 32 of the Act. If the interpretation of the Revenue is accepted that only plant acquired and installed is eligible for deduction under section 32AC of the Act then, it would lead to absurd results as the aforesaid assets which have been considered by the Supreme Court and the High Courts falling within the meaning of “plant” would not be eligible for deduction under section 32AC of the Act since the aforesaid assets are incapable of installation. Designs, plans, drawings, bottles, books, etc. by their very nature are not required to be installed and on their acquisition, they are ready to be put to use. Therefore, a manufacturer who is acquiring designs, drawings, plans which are considered as plant and machinery for the type of business they are in, will not be eligible to claim deduction under section 32AC since according to the Revenue the designs, drawing, plans are not installed by the assessee. 246 It is fairly well settled law that where the word "and" as is understood leads to unintended results, then it should be interpreted to mean “or”. The Supreme Court in the case of CIT vs. Ram Kishan Dass 413 ITR 337 (2019) SC has held: “Secondly, the alternate construction of the proviso is that the expression "and for any good and sufficient reason" should be read to mean "or for any good and

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sufficient reason". As a matter of statutory interpretation, it is well settled that the expression "and" can in a given context be read as "or" (see in this context Ishwar Singh Bindra v. State of UP AIR 1968 SC 1450). This submission was opposed on behalf of the assessees by urging that in the context of sub-section (2A), it has been held by this Court in Sahara India (Firm), Lucknow (supra) that the word "and" is used in the conjunctive sense. Undoubtedly the expression "and" in subsection (2A) has been held to the conjunctive, while delineating the circumstances on the basis of which an opinion can be arrived at by the assessing officer. This would not necessarily furnish an index to how the expression "and" in the proviso to subsection (2C) should be construed. The interpretation of the expression must be based on the context in which it is used. In the proviso to sub-section (2C), the expression "and" is used in connection with the grant of an extension of time and not in the context of the formation of an opinion for ordering a special audit.” 247 We are, therefore, inclined to accept the contention of the AR of the assessee that the words “acquired and installed” have to be read as “acquired or installed” to give effect to the intention of the legislature. 248 We refer to the decision in the case of Jupiter Radios vs. DCIT [2017] 88 taxmann.com 93 (Delhi) relied upon by the DR during the course of hearing. We have gone through the case but find no relevance to the issue before us. The Hon’ble Delhi High Court in that case was concerned with the issue relating to availability of development rebate/ allowance under section 32A/ 34(3) the language in which are not pari materia with the provisions of section 32AC of the Act. Secondly, the Court was not at all concerned with the interpretation of the words “acquired and installed” and the question before the High Court was whether the partnership firm can continue to claim deduction under section 34A/ 34(3) of the Act if the plant and machinery is given to a partner on his retirement from the firm during the statutory holding period of 8 years. Therefore, the aforesaid decision is not relevant to decide the issued involved in the present appeal. 249 In view of the above we have no hesitation to hold that the assessee is entitled to deduction u/s 32AC of the Act on the value

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of cost of components of plant or machinery lying as CWIP as on 1 April 2013 but installed during the financial year 2013-14. We therefore direct the AO to allow deduction as investment allowance u/s 32AC of the IT Act.”

“Allowance of depreciation on CSR assets 2. As per section 135 of the Companies Act, 2013 every company having networth of Rs.500 crore or more or turnover of Rs.1000 crore or more or a net profit of Rs.5 crore or more is under an obligation to spend in every financial year atleast 2% of the average net profits of the company made during the three immediately preceding financial years in pursuance of its CSR policy. Pursuant thereto, during the year under consideration the assessee had spent an aggregate amount of Rs.39.12 crores including an amount of Rs.3.31 crores (claimed IT depreciation amounting to Rs. 35.17 lakhs) in respect of buildings, furniture, equipments including life saving medical equipments, vehicles and computers predominantly for schools and hospitals.3. The assessee has been predominately engaged in the business of manufacture of Cement and cement related products. In this regard, it has manufacturing facilities at various locations, most of which are at

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distant places. With a view to provide education and medical facilities to its employees and their family members, it generally supports the schools and the hospitals in the local areas where its manufacturing facilities are located. In fact, in most cases, the institutions are run by trusts and other institutions within the group. This gesture of supporting the educational and medical needs of the local community also enables smooth carrying on of its business. The support by way of capital assets has been given as a part of this policy. Since, these payments were admittedly capital in nature the assessee claims deduction in respect thereof by way of depreciation in its return of income. To complete the narration of facts it is brought to your attention that revenue expenditure incurred under the CSR policy has been suo moto disallowed based on Explanation 2 below section 37(1) of the Income-tax Act (the Act). 4. The AO and the CIT(A) have relied upon Explanation 2 below section 37(1) of the Act as reflecting the legislative intent for denying the claim for deduction by way of depreciation on the CSR assets. Apart therefrom, it is also alleged that use of the assets by the assessee for the purposes of its business has not been shown. In this regard your attention is invited to paragraph 5.1 at pages 2- 3 of the assessment order and paragraphs 2021 at pages 17-18 of the CIT(A)'s order. 5. The Assessee's submissions in respect of the above, each of which is in the alternative and without prejudice to any others is as stated hereafter:- a. Section 37(1) read with Explanation 2 thereof reads as under- "37 (l) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession " Explanation 2.—For the removal of doubts, it is hereby declared that for the purposes of sub-section (l), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession.

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Hence, a bare perusal of the aforesaid provision shows that Explanation 2 comes into application only for the purposes of section 37(1). That the said section applies to any expenditure not being of the nature as described in sections 30 to 36 and in the nature of capital expenditure 6. Therefore, for application of the said Explanation i. there should be an expenditure; and ii. such expenditure should not be of the nature described in sections 30 to 36 or in the nature of capital expenditure. In the present case, it is submitted that, deduction by way of depreciation is not an expenditure. Further, assuming without admitting that it is regarded as an expenditure, it is covered by both the exclusions as depreciation is a deduction described in section 32 and the payment for acquisition of capital assets is admittedly a capital expenditure. 7. It is well settled by now that depreciation is an allowance allowed while computing income and cannot be regarded as expenditure. In this regard, attention is invited to a. The Judgment of the Hon'ble Apex Court in the case of Nectar Beverages Pvt. Ltd. v. DCIT 314 ITR 314, wherein the assessee a manufacturer of soft drinks had purchased bottles and crates in respect of which 100% depreciation was claimed in the year they were acquired as cost of each of the item was less than Rs.5,000. During the year under consideration, the assessee had sold the bottles and crates on which 100% depreciation had been claimed in the past. The assessing officer invoked the provisions of section 41(1) to assess the sale proceeds. The requirement in section 41(1) of the Act is that initially an allowance or deduction ought to have been allowed in respect of loss, expenditure or trading liability incurred by the assessee and subsequently during any previous year the assessee has obtained either in cash or in any manner whatsoever any amount in respect of such loss or expenditure or some benefit in respect of such trading liability. There was no dispute that deduction earlier allowed could not be regarded as loss or trading liability. The Revenue's submission before the Court as per paragraph 10 at page 319 of the report was notwithstanding the deletion of section 41(2), since the assessee had obtained the benefit of depreciation in the earlier years as allowance or deduction in respect of expenditure incurred by it when it bought bottles and crates, on recoupment in the

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assessment years in question, such recoupment was liable to be taxed as deemed income under section 41 (l). " Rejecting this contention of the Revenue, the Court observed in paragraph 11 at pages 319-320 of the report "The entire controversy, therefore, stands resolved if one understands the meaning of 'balancing charge'. Where any allowance or deduction had earlier been made in respect of any loss, expenditure or trading liability and subsequently the assessee has obtained or realized any amount towards such loss, expenditure or trading liability, section 41 (l) deems such realization/recoupment as the assessee's incomefor the year in which it is realized. Section 41(2), as it stood at the material time, stated that if in respect of any plant and machinery, any depreciation had been allowed and subsequently such plant and machinery was sold, discarded or destroyed, the assessee might get some value either as a result of sale or insurance or from salvage or compensation thereabout. The necessity to keep section 41(2) as a provision in addition to section 41(1) arose from the fact that, in its very nature, depreciation is neither a loss, nor an expenditure, nor a trading liability, referred to in section 41(1). The depreciation recovered on sale of the capital asset was includible in the total income as balancing charge only under section 41 (2). That concept wasforeign to the scheme ofsection 41 (l). " (emphasis supplied). b. The Delhi High Court in the case of PCIT v. Central Warehousing Corporation 399 ITR 212 was concerned with an issue whether the income exempt from tax under section 10(29) of the Act is to be computed after excluding depreciation as part of the expenditure. After referring to the judgments of the Hon'ble Apex Court in the cases of Nectar Beverages Pvt. Ltd. (supra) and CIT v. Anand Theatres 244 ITR 192 the Court observed in paragraph 9 at page 215 of the report "The Court is satisfied that neither the Commissioner of Income-tax (Appeals) nor the Income-tax Appellate Tribunal has committed any legal error in concluding that for the purposes of section 10(29) of the Act 'depreciation' is not an expense but allowance. C. Further, while considering the disallowance provision of section 40(a)(i) of the Act, the Karnataka High Court in the case of PCIT v. Tally Solutions Pvt. Ltd. in 4301TR527 has observed in paragraph 10 at page 532 of the report "Thus, section 40 refers to the outgoing amount chargeable under this Act and subject to TDS under Chapter XVII-B. The deduction under section 32 is not in respect of the amount paid or payable which is subjected to deduction of tax at source ; but is a statutory deduction on an asset which is otherwise eligible for deduction of depreciation. Section 40(a)(i) and (ia) of the Act provides for disallowance only in

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respect of expenditure, which is revenue in nature, therefore, the provision does not apply to a case ofthe assessee whose claim isfor depreciation, which is not in the nature of expenditure but an allowance. The depreciation is not an outgoing expenditure and therefore, provisions of section 40(a)(i) and (ia) of the Act are not applicable. In the absence of any requirement of law for making deduction of tax out of expenditure, which has been capitalized and no amount was claimed as revenue expenditure, no disallowance under section 40(a)(i) and (ia) of the Act would be made. It is also pertinent to note that depreciation is a statutory deduction available to the assessee on a asset, which is wholly or partly owned by the assessee and usedfor business or profession. The depreciation is an allowance and not an expenditure, loss or trading liability. " (emphasis supplied). d. In the course of hearing of the present appeal, the Hon'ble Bench had raised an issue that depreciation would fall within the opening part of section 37(1) as an expenditure and hence, dehors the exclusion provided in the said sub-section, it would fall within Explanation 2 thereof. Based on aforesaid discussion, it is with respect submitted that, depreciation cannot be regarded as an expenditure and hence cannot fall within the first part of section 37(1) of the Act. 8. In the alternative and without prejudice to the above, it is submitted that assuming that the Tribunal is of the opinion that depreciation is in the nature of expenditure, it is submitted that a bare perusal of section 37(1) shows that expenditure of the nature described in sections 30 to 36 or being in the nature of capital expenditure has to be excluded. In the present case, there is no dispute that the payments made by the assessee in respect of buildings, furniture, equipment, vehicle or computer would be in the nature of capital expenditure. In any event, depreciation thereon, would be covered by section 32. Since, the said payment is covered by two independent exclusions provided in section 37(1) of the Act, Explanation 2 thereto has no application to such payment. 9. With respect to the general legislative intent as expressed in Explanation 2 to section 37(1), it is submitted that, the bar for claiming deduction in respect of payment towards CSR is applicable only to expenditure covered by section 37(1) of the Act. In the absence of a similar restriction in section 32 of the Act, reading of such restriction in the said section would not be permissible in law. In this regard, reference is invited to the Orders of the Tribunal in the cases of First American (India) Pvt. Ltd. v. ACIT (Exhibit- 1) hereto and Sling Media Pvt. Ltd. v. DCIT 194 ITD 1 (Bang.) and

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Infinera India (P.) Ltd. v.JCIT 194 ITD 463 (Chen.) (Exhibit- 1) where deduction under section 80G of the Act has been allowed in respect of payments made towards CSR. 10 Lastly, with respect to the fulfilment of the requirement relating to user of the assets for purposes of business, reliance is placed on judgment of the jurisdictional High Court in the case of Mahindra and Mahindra Ltd. v. CIT 261 ITR 501, wherein, donation to an educational society running a school in which the children of the employees studied has been held to be a business expenditure incurred predominantly for staff welfare. This view has been again followed in the case of the same assessee as reported in 284 ITR 679. Apart from the benefit to the employees, it is also essential that the assessee maintains its goodwill in the local region, where its manufacturing facility exists for its smooth functioning. This gesture of supporting the schools and hospitals therefore is for the purposes of its business. In this regard reliance is further placed on judgment of the Hon' ble jurisdictional High Court in CIT v. Indian Rayon and Industries Ltd. 336 ITR 479 and PCIT v. Indian Oil Corporation Ltd. being Order dated 11.02.2019 in Income Tax Appeal No. 1765 of 2016 and the Madras High Court in CIT v. Madras Refineries Ltd.266 ITR 170. Based thereon, it is urged that the capital assets used to support the schools and the hospitals in the facts of the present case has been used for the purposes of its business.”

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ITA NO. 465 & 931/MUM/2020 (A.Y: 2015-16) UltraTech Cement Limited is operates) as per the CSR policies. It clearly explains that the assessee has obligation to spend as per CSR policy. It is not an option or voluntary contribution towards welfare of the employees or other beneficiaries connected with the company. It was submitted before us that the assessee generally supports the schools and hospitals in the local areas where its manufacturing facilities are located. This gesture of supporting the local community may help the assessee but it is not obligation imposed by any statute. Accordingly, the assessee on its own disallowed the revenue expenditures u/s 37(1) of the Act but claims only the depreciation claimed u/s 32 towards the capital expenditure. It was argued that the explanation 2 to section 37(1) deals only with the section 37 and not any other sections like section 30 to 36. It was submitted that the section 32 deals with allowance not deduction. It was submitted that the revenue authorities has rejected the plea of the assessee by observing that the assets were not shown to be utilized in the business of the assessee. In our considered view, the above submissions are misconceived and the CSR obligations are not allowable expenditures and CSR obligations are determined @2% of the average declared profit, that means the eligible assessee has to spend the CSR amount out of the declared profit and it is appropriation of the declared

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ITA NO. 465 & 931/MUM/2020 (A.Y: 2015-16) UltraTech Cement Limited profit. Hence the section 135 of Companies Act and Income Tax Act is clear that these expenses are not allowable expenditure. The argument of the assessee that the explanation 2 applies only to section 37 is not proper. The other sections are deal with the specific expenditures incurred solely and exclusively for the purpose of business. The section 37 is residual section and any expenditures incurred for solely and exclusively for the purpose of business and any capital or personal expenditures has to excluded. The CSR expenditures are obligation on the assessee which is below the line appropriation of profit, has to be considered similar to personal commitment on the profits of the entity. Therefore, any expenditures incurred by the entity towards CSR obligation cannot be claimed as business expenditure or allowance. Therefore, the plea that explanation 2 has no application to section 32, accordingly, rejected and the assessee has to explain how the capital expenditure incurred are utilized in the assessee’s business. In absence of the same, the assessee has no right to claim depreciation.

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22.1 Even in the decision Tally Solutions (supra), it was held that depreciation is a statutory deduction available to the assessee on an asset, which is wholly or partly owned by the assessee and used for business or profession. The depreciation is an allowance and not an expenditure, loss or trading liability. Therefore, to claim depreciation, it has to be used and owned by the assessee. In the given case, it is an obligation under CSR rules, therefore, it is not owned by the assessee and not utilized by the assessee. Therefore, in our view this case also distinguishable. Further, Ld AR by relying on the decision of other ITAT benches which held that the CSR expenses incurred are allowable deduction u/s 80G. The above decisions are distinguishable for the reason that it is claimed u/s 80G not u/s 32. The expenditure is not towards any donation and CSR obligation cannot be categorized as donations.

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ITA NO. 465 & 931/MUM/2020 (A.Y: 2015-16) UltraTech Cement Limited 23. Coming to the decision of Mahindra and Mahindra Ltd (supra), we observe that the respective assessee has incurred certain capital expenditures towards school and hospitals, which benefits the employees and local communities. It is important to note these expenditures were incurred by the assessee voluntarily and not under any obligation like CSR. These decisions are prior to introduction of mandatory CSR u/s 135 of Companies Act. Therefore, even though, there may be chance of employees of the assessee may have taken advantage but the assets are not belongs to the assesse and not utilized for the purpose of business. The claim of deduction u/s 80G are totally different to claim of deduction u/s 32. Hence, we are inclined to dismiss the ground raised by the assessee. Accordingly, Ground No. 5 is dismissed.

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brought to our notice Para No. 118 to 127 of the order. Copy of the order is placed on record.

“118 Ground no.4 filed by the assessee is with respect to short grant of TDS / TCS credit claimed by the assessee on the basis of certificates available with the assessee. 119 The learned AR of the assessee submitted that it claimed credit towards TDS / TCS on the basis of entries appearing in Form 26AS and also on the basis of original TDS certificates available with them. The claim of credit was, however, restricted by the AO only to the extent of entries appearing in Form 26AS. The AR of the assessee also submitted that it produced copies of the TDS / TCS certificates before the AO on sample basis and was willing to furnish all the TDS / TCS certificates with respect to its claim made in the ROI. 120 It was further submitted that some of the TDS/ TCS certificate are issued in the name of amalgamating company (i.e. SCL/ Grasim Industries). Due to the amalgamation during the year under consideration, some of these TDS/ TCS certificates were issued by the parties in the name of the erstwhile entity.

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121 It was confirmed that neither Grasim Industries nor SCL has claimed any credit of such TDS or TCS in its return of income for any year. The AR also referred to clause 11(d) at page no. 27 of the Scheme of Amalgamation, wherein it has been mentioned that all taxes paid/ payable by the Transferor Company (including TDS) shall be deemed to be paid by the Transferee Company. Accordingly, credit in respect of TDS/ TCS deposited in the name of the amalgamating company ought to be allowed to the assessee as it is rightfully claimed and allowable. 122 Our attention was invited to the decision of coordinate Bench of Ahmedabad Tribunal in case of Adani Gas Ltd. vs. ACIT (ITA No. 2241/Ahd/2011) wherein it has been observed as under: “13. … We conclude accordingly that once the demerged gas distribution undertaking no more exists w.e.f. 01- 01-2007 coming to be the appointed day, the assessee- resulting company is entitled for all the pro rata adjustments of TDS, advance tax and MAT credits as per law; to be utilized in former’s account. The net result of our above discussion is that assessee’s arguments in principle are accepted in view of clauses of the above stated demerger scheme, sections 391 to 394 of the Companies Act, Section 2(19AA) of the Income Tax Act and the case law discussed hereinabove. We direct the Assessing Officer to compute pro rata quantification of the demerged undertaking MAT, TDS and advance tax credits as per law after affording adequate opportunity of hearing.”. 123 We have heard the rival submissions. The controversy relates to denial of credit of TDS / TCS since the entries are not appearing in Form 26AS. We refer to the decision of Delhi High Court in a PIL moved by the Hon’ble Court on its Own motion vs Commissioner of Income Tax [2013(352) ITR 273]. The Hon’ble Court issued a mandamus directing the CBDT to issue directions to give credit of unmatched and mismatched TDS certificates. Pursuant to the said decision of the Delhi High Court, the CBDT has issued instruction No.5 of 2013, dated 8.7.2013 directing that where the assessee approaches the assessing officer with requisite details and particulars in the form of TDS certificate as an evidence against any mismatch amount, the assessing officer would verify whether or not the deductor had made payment of the TDS in the government account and, in the event, the payment had been made, credit of the same would be given to the assessee.

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124 We also refer to the decision of Allahabad High Court in Civil Misc Writ Petition (Tax) No.657 of 2013 Rakesh Kumar Gupta Vs. Union of India and another, wherein the High Court has held that assessee cannot be denied credit for TDS on the ground of Form 26AS mismatch, since the mismatching is not attributable to the assessee and the fault solely lay with the deductor. 125 We also refer to the decision of Coordinate Bench of this Tribunal in the case of LSG Sky Chef (India) (P.) Ltd. [2014] 45 taxmann.com 256, wherein the taxpayer assessee had claimed credit in respect of TDS on the basis of TDS certificates available with it which were submitted to the AO. However, the AO denied credit of TDS to the extent of entries not appearing in Form 26AS. In this regard, the Hon’ble Tribunal held as under: “4.3 … In our view, though Form 26AS (r/w r.31AB and ss. 203AA and 206C (5)) represents a part of a wholesome procedure designed by the Revenue for accounting of TDS (and TCS), the burden of proving as to why the said Form (Statement) does not reflect the details of the entire tax deducted at source for and on behalf of a deductee cannot be placed on an assessee- deductee. The assessee, by furnishing the TDS certificate/s bearing the full details of the tax deducted at source, credit for which is being claimed, has in our view discharged the primary onus on it toward claiming credit in its respect. He, accordingly, cannot be burdened any further in the matter. The Revenue is fully entitled to conduct proper verification in the matter and satisfy itself with regard to the veracity of the assessee's claim/s, but cannot deny the assessee credit in respect of TDS without specifying any infirmity in its claim/s. Form 26AS is a statement generated at the end of the Revenue, and the assessee cannot be in any manner held responsible for any discrepancy therein or for the non-matching of TDS reflected therein with the assessee's claim/s. Where so, no doubt a matter of concern, is one which is to be investigated and pursued by the Revenue, which is suitably armed by law therefor. The plea that the deductor may have specified a wrong TAN, so that the TDS may stand reflected in the account of another deductee, is no reason or ground for not allowing credit for the TDS in the hands of the proper deductee. The

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onus for the purpose lies squarely at the door of the Revenue. 4.4. ….. the Revenue is obliged to grant the assessee credit for the TDS of which he is able to satisfactorily prove to the A.O. the factum of deduction of tax at source and its deposit to the credit of the central government, subject of-course to the conditions of sections 198 and 199. The A.O. is accordingly directed to allow the assessee credit for the impugned shortfall, subject to the said verification/s and condition/s. We decide accordingly.” 126. We are, therefore, of the view that credit for TDS / TCS should be allowed to the assessee on the basis of TDS/ TCS certificates available although no entry for the same appears in Form 26AS. The mismatch cannot be attributed to the assessee as it has no control over Form 26AS. 127 Accordingly, we direct the AO to grant credit of TDS / TCS credit for certificates produced by the assessee including the certificates which may be in name of Grasim / SCL. The AO can satisfy himself to the effect that the claim in respect of the said certificates are not made by the Grasim / SCL in their ROI. This ground is remitted back to Ld AO and accordingly it is allowed for statistical purpose.”

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ITA.No. 931/Mum/2020 (A.Y. 2015-16) – Revenue Appeal

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1,01,55,572/- without appreciating that the AO has rightly recorded reasons before invoking Rule 8D and on the same issue, in the case of the assessee, the revenue has filed appeal in the Hon'ble Bombay High Court for A.Y.-2009-10 and 2010-11." 6. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in allowing the disallowance of Rs.1,01,55,572/- made u/s 14A of the Act r.w.r. 8D and directing the AO too exclude the disallowance from the computation u/s, 115JB by relying upon the decision of Hon'ble ITAT, Delhi in the case of M/s. Vireet Investments Pvt. Ltd., without appreciating the fact that the Revenue has not accepted the said decision on merit and filed an appeal before Hon'ble High Court" 7. "On the facts and in the circumstances of the case and in law, the Ld. CITIA) erred, in allowing disallowance of Rs.4,88,70,727/- on account of ESOP" 8. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred, in allowing disallowance of Rs. 4,88,70,727/- on account of ESOP scheme without appreciating that in the case of the assessee, the issue is pending in the Hon'ble Bombay High Court for A.Y.-2008- 09," 9. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred, in allowing disallowance of Rs. 2,97,74,011/- on account of additional employee compensation cost under ESOP" 10. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred, in allowing disallowance of Rs. 2,97,74,011/- on account of additional employee compensation cost under ESOP without appreciating that in the case of the assessee, the issue is pending in the Hon'ble Bombay High Court for A. Y. 2008-09". 11. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in deleting the disallowance of Rs. 130,06,87,640/ on account of additional Spill Over Depreciation without appreciating the fact that r the Id. CIT(A) has disallowed the similar claim in assessee's own case for A.Y.2011-12 and therefore, on this issue the Revenue has not accepted the decision of Id. CIT(A) in the assessee's own case and has filed an appeals before Hon'ble ITAT for A. Ys. 2013-14and 2014-15." 12. "On the facts and circumstances of the case and in law the Ld CIT(A) erred in allowing additional spill over depreciation of Rs. 130.06.87,640/ without appreciating that there is no explicit

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provision in the IT Act to allow such additional spill over depreciation". 13. "On the facts and circumstances of the case and in law the Ld. CIT(A) erred in directing the AO to carry out factual verification of assessee having actually incurred the expenses for the purpose and decide on eligible amount of deduction without appreciating the fact that amount approved by DSIR is binding on AO for allowing deduction u/s. 35(2AB) of the Income Tax Act. 14. "On the facts and circumstances of the case and in law the Ld. CIT(A) erred in directing the AO to rework the computation under section 115JB on account of non inclusion of interest u/s 244A in the computation of book profit u/s 115JB of the income tax act without appreciating the fact that exclusion of interest income on refund is not explicitly provided under explanation 1 to subsection 2 of section 115JB. 15. "Whether on the facts and circumstances of the case and in law, the CIT(A) is correct in directing to restrict the TP adjustment of corporate guarantee fee to 0.50% as against of 1.50% charged by the TPO without discussing the facts of the case and deciding the issue on the merits of the case? 16. "Whether on the facts and circumstances of the case and in law, the CIT(A) is correct in relying on decisions in the cases of ACIT(LTU)-2, Mumbai Vs. Glenmark Pharmaceuticals Ltd in ITA No 1654(Mum) of 2016 for A.Y 2010-11 dated 01.02.2019 and the decision in the case of DCIICCF-101), Mumbai Vs. Rolta India Ltd, in ITA No.882(Mum) of 2017 for AY 2012 13 dated 07.09.2018 in arriving the 0.50% rate of corporate guarantee fees for AY 2015- 16, which is in violation of provisions of Rule 108(4) of IT Rules as the determinants of corporate guarantee fee like the credit rating, interest rate and FAR analysis etc., differ case to case and year on year and so a rate arrived at in a particular case and for particular assessment year cannot be blindly adopted in every case and in every assessment year which also violates Rule 108(4) of the IT. Rules? 17. "Whether on the facts and circumstances of the case and in law, the CITIA) is correct in relying on decisions in the cases of DCTTCC) 1(1), Mumbai Va. Rolta India Ltd. in ITA No 882(Mum) of 2017 for AY 2012 13 dated 07.09.2018which in turn based on the judgment in the case of Everest Kanto Cylinders Ltd (EKC) of Hon'ble ITAT Mumbai (34 Taxmann.com 19 (Mum Tribunal) dated 23.11.2012 and decision of Hon'ble Bombay High Court (ITA No. 1165 of 2013 dated 08.05.2015 for AY 2007-08) without

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appreciating certain important facts having bearing on the benchmarking such as: i. The quotation obtained by the Everest Kanto Cylinders Ltd, India (EKC India) was in respect of transaction of a guarantee obtained by the Indian entity having strong financials and asset base and not in respect of Everest Kento Dubai the foreign entity with weaker financial strength and thereby impacting the comparability in view of difference in credit rating of entities which admittedly form basis for guarantee rates/ quotations ii. and not appreciating the fact that the EKC rulings(34 Taxmann.com 19 (Mum Tribunal) dated 23.11.2012 and ITA No. 1165 of 2013 dated 08.05.2015 for AY 2007-08) ignored the fact that entity obtaining loan in foreign jurisdiction for which EKC India stood as guarantor had lower credit rating. iii. That the starting point for benchmarking in the case of EKC was obtaining of bank guarantee quote by the EKC India, which was used for benchmarking corporate guarantee and therefore, it was not appropriate to hold that bank guarantee and corporate guarantee are different (m) iv. That decision in the case of Everest Kanto Cylinders Ltd., cannot be standard for every assessee as benchmarking for different assessee's is a factual exercise dependent upon number of factors including credit rating, financial strength, country of AB, attendant risks etc. (m) v. That recently the Hon'ble ITAT Kolkata in the case of DCIT Vs. National Energy ITA No 986 and 987/Kol/17 has held that the decision in Everest Kanto Cylinders Ltd cannot be a standard for every case. vi. That the Tribunal failed to fully appreciate that (in) the corporate guarantee Transaction acts as important function for the AEs consequently enabling the AEs to rise funds generally at a favourable rates and enhance their asset base simultaneously exposing the guarantor to risk in

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the event of failure of AE to repay or service loan which is always contingent in nature. 18. Whether on the facts and circumstances of the case and in law, the CIT(A) is correct in holding that the fee for the guarantee issued by the assessee for the loans availed by the AE from banks should be charged at 0.50%, without realizing the fact that the transfer pricing study is highly facts-based and it differs from case to case and that all the factors in Rule 10B have to be considered for every case and every year independently and that a rate decided in a different case for different set of facts and for different year cannot be adopted as such to the instant assessee, which would be violative of the specific provisions in Rule 10B? 19. "Whether on the facts and circumstances of the case and in law, the CIT(A) is correct in arriving at the ad hoc rate of 0.50%, without adopting any of the methods prescribed in Section 92C which is violation of law? 20. "Whether on the facts and circumstances of the case and in law, the CIT(A) is correct in restricting the quantum of Guarantee Commission charged by TPO to only Rs. 13,58,77,199/- as against the ALP guarantee commission of Rs.40,76,31,598/- on the total amount of loans guaranteed of Rs.2789.10 Crores? 21. "Whether on the facts and circumstances of the case and in law, the CIT(A) is correct in failing to recognize the 21 facts of the case that the assessee has given corporate guarantee to its AES, thereby exposing itself to a 'lending business' risk as well as the 'single customer' risk by not at all charging fee for such guarantee which the assessee would have done, had it stood guarantee to any third party in uncontrolled conditions as in section 92F(ii)? 22. "Whether on the facts and circumstances of the case and in law, the CIT(A) is correct in failing to see that AE had no credit- worthiness and financial capacity to service its own loan and in such a situation assessee standing guarantee for the loan, it had to be remunerated at arm's length as per section 92F(u)? 23. "Whether on the facts and circumstances of the case and in law, the CIT(A) is correct in failing to recognize the fact that the assessee has not charged any guarantee fees and also not discharged its onus and has not provided any comparable to benchmark the transaction and as a result, the TPO is forced to benchmark the transaction based on average bank guarantee rate with an appropriate downward adjustment as held by the ITAT in Glenmark Pharmaceuticals Ltd. in ITA No.5031/Mumbai/2012?

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Bench in assessee’s own case for the A.Y.2004-05 in ITA.No.7476 & 7647/Mum/2007 and Coordinate Bench vide order dated 20.08.2009 has considered and adjudicated the issue in favour of the assessee and he brought to our notice Para No. 4 to 6 of the order. Copy of the order is placed on record.

“4 Ground no.2 for both the years i.e AY 2004-05 & 05-06 relates to in not treating the sales tax exemption benefit of ₹.122.66 crores and ₹.136.37 crores as capital receipts respectively. 4.1 It was submitted by the ld counsel of the assessee that the AO disallowed the claim of the assessee by not accepting the contention of the assessee that these are capital receipts. The CIT(A) confirmed the action of the AO by following the decision of the Tribunal in the case of Bajaj Auto Ltd., in 90 ITD 153. It was submitted that now this issue has been decided by the Special Bench in the case of Reliance Industries in 88 ITD 273. It was further submitted that the decision of the Special Bench has been affirmed by the Hon'ble Bombay High Court in appeal no.1299 of 2008 dated 15.4.2009. Copy of the order of the High Court was also filed. On the other hand, the ld DR placed reliance on the orders of the authorities blow

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2014-15 respectively, vide order dated 14.12.2021 the Coordinate Bench observed as under: -

“5. Ground nos. 1 and 2 of the Revenue’s appeal relate to the claim of the assessee in treating the sales tax exemption benefit received, amounting to Rs.19,99,06,000/- as capital receipts not liable to tax. Ground no.1 of the assessee’s cross objection is connected with this claim. 6. This issue has been subject matter of appeal in the assessee’s own case from AY 2004-05 onwards and has been decided in favour of the assessee from AY 2004-05 onwards. The latest order on this issue is for AY 2010-11 in ITA No. 7614/Mum/2014 and 7631/Mum/2014 dated 5 April 2017 wherein the Coordinate bench has followed the decisions in earlier years and allowed the plea of the assessee. The Coordinate Bench held as under: “99. We have considered rival contentions and carefully gone through the orders of the authorities below as well as the order passed by the Tribunal in assessee’s own case in the A.Y.2004-05 to 2006-07. We found that exactly similar issue was considered in detail by the Tribunal and after discussing various judicial pronouncements held that subsidy so received by the assessee was capital in nature, therefore not liable to tax as revenue receipt.” “100. The facts and circumstances during the years under consideration i.e., 2009-10 & 2010-11 are exactly same, therefore, respectfully following the series of the order of the Tribunal in assessee’s own case, we do not find any infirmity in the order of LD CIT(A) for holding that subsidy was capital in nature therefore, not liable to tax as revenue receipt.” 7. The facts and circumstances during the year under consideration remain the same and hence following the series of the orders of Coordinate Bench of this Tribunal for earlier years in assessee’s own case, we confirm the order of the LD CIT(A) and dismiss this ground raised by the Revenue.”

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ITA NO. 465 & 931/MUM/2020 (A.Y: 2015-16) UltraTech Cement Limited 37. Since the issue is exactly similar in this appeal and grounds as well as the facts are also identical, respectfully following the above decision in assessee’s own case for the A.Y. 2011-12 to 2014-15, we dismiss the grounds raised by the revenue.

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“13 Regarding the issue in respect to deduction u/s 80IA on profit of Rail System at Hirmi, the AO rejected the claim on the ground that the Rail System is not a profit centre but it is a cost centre and that the Rail System is not an independent unit but it is 100% depending on the Cement unit. Detailed submissions filed by the assessee which are reproduced in the assessment order was not found satisfactory to the AO. Detailed submissions were again filed before the CIT(A). It was explained that the company had established a cement plant in Hirmi. The nearest available Railway Siding was at a distance of around 15 km from the plant. To facilitate inward and outward movement of goods, the assessee developed infrastructure facility of Rail System which was made operative in 1999. The assessee company duly entered into an agreement with the Railways, which is a part of Government of India. It was submitted that there was option available u/s 801A with the assessee to claim deduction for any of 10 consecutive years at its own choice. The assessee has opted for claiming the deduction from AY 04-05 onwards. It was submitted that the income offered for tax by the assessee includes income from Rail System and that certificate of M/s Sharp & Tannan, CA in Form No. 10CCB certifying the correctness of the aforesaid claim was duly submitted to the AO. 13.1 It was further submitted that the Rail System is a profit centre. The Rail System is engaged in business of providing transportation facility to the cement plant, profit of which is embedded in the profit of the assessee company as a whole. It was submitted that by developing this infrastructure facility, there has been saving in transportation cost and overall profits of the company have increased due to such savings. It was submitted that the mere fact that it does not raise an invoice from its Railway unit to its cement unit cannot govern the tax implication of the

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profits derived by the Rail System. In support of its contention that treatment of a transaction in books of account cannot govern the tax statement, reliance was placed on the decisions of the Supreme Court in the case of Kadernath Jute Mfg Co Ltd 82 ITR 362; in the case of Tuticorin Alkali Chemicals Ltd in 227 ITR 172; in the case of Godhra Electricity Co in 91 Taxman 91, in the case of Bokaro Steel Ltd in 263 ITR 315 and in the case of Sutlej Cotton Mills Itd in 116 ITR I and submitted that it would be totally incorrect to say that an assessee who raises internal invoices would be entitled to benefit of sec. 801A and an assessee who does not raise internal invoices would not be entitled to such benefit. 13.2 The assessee further submitted that scc. 801A (8) itself contemplates a situation where goods or services are transferred by an eligible undertaking to non eligible undertaking and vice versa. In such cases, deduction is to be called based on the market value of such goods or services. It was further submitted that the section itself envisages situation of captive consumption. Reliance was placed on the decisions reported in 59 ITR 514 (Guj) and 254 ITR 187 Bom). Further reliance was also placed on the decision of the Supreme Court in the case of Tata Iron and Steel co Ltd in 48 ITR 123 and stated that in that case, the assessee was engaged in the business of extraction of iron ore and manufacturing of iron and steel there from. The final product sold by the company was the finished iron and steel. Under some statute, a cess was leviable on the annual net profits derived from the mines. It was contended that since no iron ore extracted is sold to an outsider, no profits could be said to have been derived from the extracting activities. This argument was advanced based on the principle that a person cannot be make profits out of himself. The Supreme Court negative this argument and held that, despite captive consumption of iron ore, certain profits can be regarded as having derived from the extraction activities. The Supreme Court ruled in favour of bifurcating the total profits into two activities, namely, the extraction activity and the manufacturing activity. It was therefore, submitted that in view of the above, it is not correct to say that the assessee does not carn any profits from its Rail System merely because the Rail System is used for the captive purposes of the cement plant. 13.4 It was further submitted that the Board circular no.733 dated 3.1.1996 states that deduction u/s 80IA is applicable to an infrastructure facility meant for development of Rail System. It was contended that the AO has categorically stated in para 5.2.3 of his

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order that rail system was developed by L&T and was inherited by the assessee out of demerger. It was further submitted that in a demerger all the property of the undertaking is necessarily transferred by the demerged company to the resulting company, therefore, it is immaterial whether the Rail System was developed by L&T Ltd or by the resulting company i.e. the assessee. Further, it was submitted that the facility of Rail System consists of all that is required to carry on the ay activity in an organized and systematic manner. The activity of Rail System is real and substantial and it is carried on with said purpose, namely transportation of goods from one place to another and thereby augmenting profits of the company as a whole by saving transportation cost which it would have otherwise incurred. It was further submitted that the profits derived from the Rail System are clearly arising out of the business of developing operating and maintaining the Rail System. 13.5 It was further submitted that substantial investment has been made in developing the Railway system. There is an agreement with the Railways for operating and maintaining the Rail System. It employs required personnel directly or through the railway authorities and it bearing the salary cost relating thereto. It was submitted that the rail system is developed on the basis of entirely different technology and employs different equipment and machinery from those applied by the cement unit for cement production. It was further submitted that the rail system is not formed by splitting up or reconstruction of a business already in existence or by the transfer to a new business of machinery previously used for any purpose. It was therefore, argued that the rail system is not a part of the cement unit but is an independent unit. It was further submitted that the conditions specified in sec. 80IA(4)(i) in respect of an infrastructure facility are fully satisfied in the present case. The rail system is owned by the assessee company which is a company registered in India. The assessee has entered into an agreement with the Railways for operating and maintaining the new infrastructure facility. It has started operating and maintenance the infrastructure facility after 1.4.1995. 14 After considering the submissions and perusing the material on record, the CIT(A) was satisfied with the explanation of the assessee and taking into consideration the various case laws, held that the assessee is eligible for deduction u/s 801A in respect of profits from Rail system. Accordingly, the AO was directed to allow deduction u/s 80IA. Now, the department is in appeal here before the Tribunal.

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15 The Id DR on the other hand placed reliance on the order of the AO and the other hand, the Id counsel of the assessee placed reliance on the order of the CIT(A). Attention of the Bench was drawn on para 5.2 of the order of the AO and then on the provisions of sec. 80IA sub. clause 2 and sub lake 3&4. It was further explained that the assessee can avail benefit deduction u/s 80IA in 10 years of his choice out of 15 years period. The provisions are very clear. Attention of the Bench was also drawn on the copy of the agreement placed at page 93 of the paper book. It was further submitted that all the conditions of sec 80IA have been fulfilled. Reliance was placed on the decision reported in 40 ITR 123. It was submitted that the CIT(A) has discussed the issue extensively and the findings of the Id CIT(A) remained uncontroverted. Therefore, the order of the CIT(A) is liable to be confirmed in this regard. 16. We have heard the rival submissions and considered them carefully. We have also perused the various material placed on record on which our attentions were drawn. After taking into consideration, we find that the CIT(A) has dealt with the aspect in detail. Contention raised before the CIT(A) on behalf of the assessee were not found incorrect or false. Conditions of sec. 80IA have been fulfilled by the assessee. Thereafter, the CIT(A) came to the conclusion that the assessee is eligible for deduction u/s 80IA. The findings of the Id CIT(A) are given in para 3.10 are as under: 3.10 After perusal of the facts of the case, findings given by the AO and submissions made by the appellant, I find that the only issues in this case is whether the appellant is eligible for deduction u/s 80IA in respect of profits derived from the rail system. There is no dispute that the appellant (i) is a company (ii) has developed the rail system and (iii) it has entered into an agreement for operation and maintenance of the rail system with the Railways i.e. the Government. Thus, all the three conditions required to be fulfilled as per sec. 80IA(4)(i) have been satisfied by the appellant. Moreover Rail system is defined in Explanation to sec 80IA(4)() as an infrastructure facility. Further separate books of account are being maintained by the appellant. The mere fact that internal invoices are not raised does not mean that the rail system is not a profit center. It is also found that all the doubts raised by the AO in the assessment order have been fully explained by the appellant ie the AO has himself stated in the assessment order that the rail system was developed by L&T Lid, which has been inherited by the appellant as a result of the demerger

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and Circular no.733 dated 3.1.1996 categorically stated that benefit of sec 80IA is applicable to development of rail system and there is no gain saying the fact that the appellant has developed the rail system and is operating and maintaining the same. After perusal of the facts as sell as the judicial pronouncements quoted above it is therefore held that the appellant is eligible for deduction u/s 80IA in respect of profits from Rail System. In view of the same, the AO is directed to allow deduction/s 80IA of Rs. 15,64,33,576/-" 17 As stated above, neither the findings of the ld CIT(A) could be controverted by the ld DR nor any other material was brought on record to establish otherwise. Therefore, in view of the uncontroverted reasoning given by the Id CIT(A) we confirm his ruder on this issue also.”

“8. Ground nos.3 and 4 of the revenue are concerned with the allowability of deduction under section 80IA in respect of the rail undertakings set up by the assessee. Ground no.2 of the assessee’s cross objection is connected with this claim. 9. This issue was also subject matter of appeal in all the earlier years. The coordinate Bench of this tribunal in AY 2010-11 (ITA No. 7614/Mum/2014 and 7631/Mum/2014) has vide order dated 5.04.2017 analysed the issue in great detail and allowed the claim of the assessee. It has been held that the Rail undertakings are infrastructure facilities and eligible for deduction u/s.80IA of the Act. The Coordinate Bench held as under: “96. In view of the above discussions and respectfully following the order of the Tribunal in assessee’s own case for A.Y. 2004-05 to 2008-09, we do not find any merit in the action of the Revenue authorities declining the claim of deduction under section 80IA(4). Accordingly, AO is directed to allow the deduction as

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ITA NO. 465 & 931/MUM/2020 (A.Y: 2015-16) UltraTech Cement Limited claimed by the assessee with respect to its rail system. We direct accordingly.” 10. Since the facts and circumstances with regard to this claim of the assessee remain same in this year, following the orders of Coordinate Bench in assessee’s own case for earlier assessment years, especially for AY 2010-11, we uphold the action of the LD CIT(A) and dismiss this ground raised by the Revenue.”

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“31. This issue has been discussed at length by us in ITA No. 8143/M/10 and 7502/M/10 for A.Y. 2007-08 wherein we have directed the AO to verify from the cash flow statements whether the investments in the units have been made out of own funds or borrowed capital and then decide whether the proportionate interest has to be disallowed. In so far as other disallowance of expenditure is concerned, no doubt Rule 8D is very much applicable for the year under consideration. But at the same time it is incumbent upon the AO to first show fallacies in the computation of disallowances made by the assessee with regard to the books of accounts. We therefore, restore this issue back to the files of the AO with the direction that so far as disallowance of interest is concerned, follow the findings of A.Y. 2007-08 and in respect of the disallowance of other expenditure is concerned, we find that the assessee has computed the disallowance as under: a)Full salary of an executive - Rs.1,51,041/- who was partly looking after the activity of investment in Mutual Fund b)50% salary of an executive - Rs. 2,24,880/- who was only partly looking after the activity of investment in Mutual Fund c)Payment made to - Rs. 1,45,810/- consultant for outsourcing of a person for the working relating to investment activity The Total disallowances - Rs. 5,21,731/- computed by the assessee comes to

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In addition to this, we find that as an abundant caution the assessee has also disallowed interest on whole of cash credit amounting to Rs. 44,93,553/-. Thus the total disallowance made by the assessee comes to Rs. 50,15,284/-. 32. In our considerate view, the disallowances made by the assessee in respect of other expenditure (other than interest) is reasonable and therefore no further disallowance is called for. The AO is directed to only verify the disallowability of proportionate interest after close verification of the cash flow chart. Ground No. 1 is partly allowed for statistical purpose.”

“11. Ground no. 5 raised by the Revenue relate to relief allowed by the LD CIT(A) by deleting the additions made by the AO u/s.14A of the IT Act. The assessee in its return of income had, u/s.14A of the IT Act, offered for disallowance an amount of Rs.71,50,186/- as indirect expenses incurred for earning exempt income. The AO, however, applied Rule 8D(2)(iii) and computed the disallowance at Rs.4,14,78,764/-. Ground no.5 of the assessee’s cross objection is connected with this claim 12. This issue is also covered in favour of the assessee in its own case by the orders of coordinate bench of this Tribunal for AY 2007-08 to AY 2010-11, wherein the coordinate bench has accepted the assessee’s plea that the amount suo moto offered for disallowance is appropriate and without pointing out any defect in the workings of the assessee, no further disallowance can be made by the AO. The observation of the coordinate bench in AY 2010-11 is reproduced below: “104. We had carefully gone through the order of the authorities below as well as the order passed by the Tribunal in assessee's own case for the AY 2007-08 and 2008-09 wherein the Tribunal has restricted the disallowance under Rule 8D(iii) to the extent of amount offered by the assessee as attributable to earning of

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exempt income. During the year under consideration, we found that assessee has offered expenses on Cost to Company basis of employees, executives and staff those were looking after the profit on investment in the mutual funds amounting to Rs 43,31.541/ Assessee has also offered expenditure indirectly attributable to these employees amounting to Rs. 12,09,391/- thus, total disallowance offered by the assessee amounts to Rs 55.40,932/- which appears to be reasonable looking to the nature of the exempt income vis-a-vis nature of expenses so incurred for earning the same. Respectfully following the decision of the Tribunal in assessee's own case, we restrict the disallowance under Rule 8D(2)(iii) to the extent of Rs 55,40,932/-. Following the same reasoning, we direct AO to restrict disallowance under Rule 8D(2)(iii) to the extent of Rs.64,30,155/- as offered by assessee in the AY 2010-11. We direct accordingly.” 13. It is also noted that for AY 2008-09, on the same issue, the Revenue had approached the Bombay High Court against the order of the Tribunal. The Hon’ble Bombay High Court dismissed the appeal filed by the Revenue vide order dated 14.02.2017 in ITA No.1401 of 2014 and observed as under: “No fault can be found with the impugned order of the Tribunal holding that the Assessing Officer should show fallacies in the computation of disallowance done by the respondent assessee. Thus, there is no reason to discard the disallowance done by the respondent assessee.” “So far as the claim with regard to the disallowance made in respect of the other expenditure (other than interest which has been restored to the Assessing Officer to find out the source of funds in the investment made), the impugned order has held it to be reasonable and calling for no further disallowance. This finding of the Tribunal is a finding of fact and the same has not been shown to us to be perverse in any manner.” 14 Further, the Hon’ble Supreme Court has also dismissed the Revenue’s Special Leave Petition (SLP No. 19601/2018) vide order dated 9th July 2018 for AY 2008-09 and upheld the order of the Hon’ble Bombay High Court. 15. We have carefully gone through the order of the AO. He has not pointed out any errors in the amount of disallowance offered by the assessee u/s.14A of the IT Act. The facts in the present case

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ITA NO. 465 & 931/MUM/2020 (A.Y: 2015-16) UltraTech Cement Limited are similar to the facts in the earlier years. For the year under consideration, the disallowance offered by the assessee is in respect of salary cost of the employees looking after the investment activities amounting to Rs.58,84,137 and the indirect cost amounting to Rs.12,66,049 relating to such employees. Therefore, following the decision of Coordinate Bench of this Tribunal in assessee’s own case for earlier year and the Bombay High Court’s ruling for AY 2008-09 against which the SLP filed by the Revenue has been rejected by the Hon’ble Apex Court, we hold that total disallowance for the purpose of section 14A should be restricted to the amount suo moto offered by the assessee i.e. Rs.71,50,186 and accordingly dismiss the ground raised by the Revenue in this regard..”

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assessee and he brought to our notice Para No. 33 to 36 of the order. Copy of the order is placed on record.

“33. Ground No. 2 relates to the disallowance of a sum of Rs.77,27,928/- in respect of Employee Stock Option expenses. 34. During the course of the scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has debited employee compensation expenses of Rs. 2,44,55,470/- in respect of issue of stock option to the “Deferred Employees Compensation Expenses Account” by giving credit to the “Employees Stock Option Outstanding”. The AO further noticed that out of the aforesaid expenses, amount of Rs. 77,27,928/- has been amortized for the year under consideration. The assessee was asked to explain as to why the above expenses may not be disallowed as the liability to incur the same has not been ascertained as well as the expenses incurred relates to issue of share capital. 34.1. The assessee filed a detailed reply vide letter dt. 27.12.2010 and explained that as per the Securities Exchange Board of India (SEBI) Guidelines on Employee Stock Option Scheme (ESOP), accounting in respect of options granted during any accounting period, the accounting value of the options shall be treated as another form of employee compensation in the financial statement of the company. It was further explained that SEBI Regulations mandate that the difference between the market prices and the price at which the option is exercised by the employees to be amortized on a straight line basis over the vesting period. The explanation of the assessee did not find any favour from the AO

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who was of the firm belief that stock option is similar to that of public issue of shares thus the expenses incurred are for the increase of the share capital base of the company. The AO also rejected the claim that allotment of shares under ESOP scheme as per SEBI regulations. The AO observed that compliance of SEBI regulations does not alter the character of share capital. The AO disallowed the entire expenditures concluding that the expenses related to issue or expansion of share capital is expenses of capital in nature. 35. Aggrieved by this, the assessee carried the matter before the Ld. CIT(A). The Ld. CIT(A) has considered this grievance of the assessee at para-7 on page-29 of his order. It was the claim of the assessee that the employees stock option expenses was a allowable expenditure which has been debited by following well recognized principle of accounting . After considering the facts and the submissions, the Ld. CIT(A) observed that ESOP is nothing but benefit or income forgone by the assessee therefore, such action cannot be considered as an expenditure allowable under the I.T. Act. The Ld. CIT(A) further relied upon the decision of the Tribunal in the case of VIP Industries Ltd. VS DCIT (2010-TIOL-654- ITAT- Mum) and held that since the assessee had not incurred any expenditure but had merely received lesser amount of premium, the same could not amount to expenditure within the meaning of Sec. 37 of the Act. 36. Aggrieved by this, the assessee is before us. The Ld. Counsel for the assessee strongly relied upon the decision of the Special Bench of Bangalore in the case of Biocon Ltd. VS DCIT in ITA No. 368/Bang/2010. The ld. Counsel also relied upon the decision of Chennai Bench in ITA No. 1384/Mds/2004 in the case of DCIT Vs PVP Ventures Ltd. It is the say of the Ld. Counsel that the Special Bench has allowed the expenditure in respect of ESOP wherein the Special Bench has considered at length the SEBI guidelines. In our considerate view, the allowability of the claim of the assessee has to be considered afresh in the light of the findings of the Special Bench (supra). We therefore, restore this issue back to the files of the AO. The AO is directed to consider the claim of the assessee in the light of the decision of the Special Bench of ITAT in the case of Biocon Ltd (supra) after making necessary verification and after giving a reasonable opportunity of being heard to the assessee. Ground No. 2 is allowed for statistical purpose.”

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2014-15 respectively vide order dated 14.12.2021 the Coordinate Bench observed as under: -

“265 Ground no. 7 and 8 of the appeal relate to claim of expenses on account of Employee Stock Option Scheme. Ground nos.5 and 6 of the assessee’s cross objection is connected with this claim 266 This issue has been subject matter of appeal in assessee’s own case for AY 2008-09. The Tribunal in AY 2008-09 had remanded back the issue to the AO with a limited direction to allow the appeal if the facts of the assessee matched with the facts in the case of Biocon Ltd. [251 ITR (Trib.) 602]. The relevant para of the Hon’ble Tribunal order is reproduced hereunder: “36. …. In our considerate view, the allowability of the claim of the assessee has to be considered afresh in the light of the findings of the Special Bench (supra). We therefore restore this issue back to the files of the AO. The AO is directed to consider the claim of the assessee in the light of the decision of the Special Bench of ITAT in the case of Biocon Ltd (supra) after making necessary verification and after giving a reasonable opportunity of being heard to the assessee. Ground No. 2 is allowed for statistical purpose.” 267 The facts and circumstances during the year under consideration remain the same. Respectfully following the order in the assessee’s own case for earlier year, we do not find any infirmity in order of the LD CIT(A) and accordingly dismiss the ground raised by the revenue. We direct the AO to allow the claim of the assessee if the facts of the assessee matches with the facts in the case of Biocon Ltd. We may add here that the case of Biocon has been now upheld by the Hon’ble Karanataka High Court in 131 taxmann.com 187.”

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ITA NO. 465 & 931/MUM/2020 (A.Y: 2015-16) UltraTech Cement Limited in assessee’s own case for the A.Y. 2011-12 to 2014-15, we dismiss the grounds raised by the revenue.

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respectively vide order dated 14.12.2021 decided the issue in favour of the assessee. While holding so, the Coordinate Bench held as under: -

“98. Ground no.2 of the assessee relate to disallowance of additional depreciation under section 32(1)(iia) of the IT Act in respect to assets installed during the FY 2009-10 (i.e. AY 2010-11) and are used for a period less than 180 days in that year (spill over depreciation). 99. The Ld CIT(A) upheld the action of the AO and has held as under: “It can be seen that there is no explicit provision like section 32(2) to deal with depreciation that cannot be claimed due to statutory restriction. The restriction to 10 % (one half of 20 %) arose as a result of not using the asset on which additional depreciation is claimed more than 180 days. What has not been claimed gets absorbed to closing WDV and for next year depreciation is claimed on the opening WDV. There is no provision in law to cull out a specific portion out of opening WDV and claim the same in the next year in a manner not prescribed by law. Whatever legal arguments are given, in absence of specific provision in law, the claim is inadmissible. From the submission made before me citing judicial decisions, it is not clear whether the Courts/ITAT has ordered allowing 10% of preceding years depreciation not claimed + depreciation on basis of opening WDV or depreciation after including the spill over depreciation in Opening WDV. The restriction to 50% was made in Finance Act 2002 and clearly objects of amendment brought about by Finance Act mentions " Such further sum shall be deductible from the written down value of the assets. The legislative intent gets defeated besides resulting in allowance of an ineligible deduction if the claim is admitted. In view of foregoing decisions, I uphold the decision of the Assessing Officer. He shall however work out depreciation for the year corresponding to correct opening WDV.” 100. The assessee, in its original return filed u/s 139(1), claimed an amount of Rs.24,12,51,789/- towards additional depreciation u/s. 32(1)(iia) of the IT Act. The above depreciation was in respect of assets installed in FY 2009-10 (relevant to AY 2010-11) but used for less than 180 days during that year.

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11:- We may only indicate that during the course of the arguments, our attention was drawn to the “Memorandum explaining the provisions in Finance Bill, 2015” whereby, the aforementioned amendment was brought about. 11.1:- The relevant part of the memorandum is extracted hereafter:“ …. To remove the discrimination in the matter of allowing additional depreciation on plant or machinery used for less than 180 days and used for 180 days or more, it is proposed to provide that the balance 50 per cent of the additional depreciation on new plant or machinery acquired and used for less than 180 days which has not been allowed in the year of acquisition and installation of such plant or machinery, shall be allowed in the immediately succeeding previous year. This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.” 11.2:- A perusal of the extract of the memorandum relied upon would show that the legislature recognized the fact that the manner in which the Revenue chose to interpret the provision, as it stood prior to its amendment would lead to discrimination, in respect of plant and machinery, which was used for less than 180 days, as against that, which was used for 180 days or more. 11.3:- In our opinion, as indicated above, the amendment is clarificatory in nature and not prospective, as is sought to be contended by the Revenue. The memorandum cannot be read in the manner, in which, the Revenue has sought to read it, which is, that the amendment brought in would apply only prospectively. 11.4:- We are, clearly, of the view that the memorandum, which is sought to be relied upon by the Revenue, only clarifies as to how the unamended provision had to be read all along. 11.5:- In any event, in so far as the Court is concerned, it has to go by the plain language of the unamended provision, and then, come to a conclusion in the matter. As alluded to above, our view, is that, upon a plain

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reading of the unamended provision, it could not be said that the assessee could not claim balance depreciation in the assessment year, which follows the assessment year, in which, the machinery had been bought and used, albeit, for less than 180 days.” 105. The above decision of the Madras High Court has been followed by the jurisdictional Bombay High Court in the case of Pr. CIT v/s Godrej Industries Ltd. [ITA 511 of 2016]. The 50% of the balance additional depreciation claim has been allowed by the Hon’ble High Court in the succeeding AY where the asset was purchased and put to use for less than 180 days. The Hon’ble Bombay High Court also relied on the decision rendered by the Karnataka High Court in Rittal India Pvt. Ltd. (380 ITR 423) and Madras High Court ruling in T.P. Textiles Pvt. Ltd. (supra), to hold that amendment made vide insertion of third proviso to Sec.32(1)(ii) w.e.f. April 1, 2016 (which allows claim in succeeding year), is clarificatory in nature and would apply to all pending cases. 106. We also find that the Coordinate Bench of this Tribunal in the case of Grasim Bhiwani Textiles Limited vs ACIT (ITA 790 & 791/Mum/2014), has also allowed the claim of spill over depreciation observing as under: “6. The issue under consideration is also squarely covered by the order of coordinated bench in the case SIL Investment Ltd., 73 DTR 0233, wherein it was held that additional depreciation, which was restricted in the year of purchase to the extent of 50% on the plea of machinery having been put to use for a period of less than 180 days, the balance of additional depreciation is required to be allowed in the succeeding year. In view of the above, we do not find any merit for disallowing assessee’s claim for depreciation.” 107. Considering above views of different High Courts and Tribunal and respectfully following decision of the Hon’ble jurisdictional High court in the case of Pr.CIT vs. Godrej Industries Ltd. (supra) on this issue, we allow the appeal of the assessee and accordingly direct the assessing officer to delete this addition.”

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ITA NO. 465 & 931/MUM/2020 (A.Y: 2015-16) UltraTech Cement Limited in assessee’s own case for the A.Y. 2011-12 to 2014-15, we dismiss the grounds raised by the revenue.

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respectively, vide order dated 14.12.2021 decided the issue in favour of the assessee. While holding so, the Coordinate Bench held as under: -

“108. Ground no.3 of the appeal relate to denial of claim by the AO under section 35(2AB) in respect of R&D expenses incurred by the assessee amounting to Rs. 7,50,139/-, on the basis of report received from Department of Scientific and Industrial Research (DSIR). 109. The assessee has in-house Research and Development facilities at three locations, Khor (MP), Kharia Khangar (Rajashthan) and Taloja (Maharashtra) which are approved by the DSIR and entitled to deduction u/s 35(2AB) of the IT Act. During the year the assessee claimed revenue expenditure amounting to Rs.2,02,93,591/- under section 35(2AB) of the IT Act. The AO disallowed the claim to the extent of Rs.7,50,139 on the ground that DSIR has not approved the said expenditure in a report submitted by it to the tax officer in Form 3CL. The LD CIT(A) confirmed the above disallowance. 110. The AR of the assessee submitted that as per section 35(2AB) of the IT Act, the DSIR is only empowered to approve the R&D facility. For the year under consideration there was no provision mandating the DSIR to approve the expenditure. It was further submitted that once the R & D facility is approved by the prescribed authority, i.e. DSIR by issuing Form No.3CM, the expenses incurred by the assessee have to be allowed u/s 35(2AB) of the IT Act. It was also submitted that Rule 6(7A) of the Income Tax Rules, 1962 was amended much later to provide that DSIR shall furnish a report in Form 3CL quantifying the expenditure allowable on in-house R&D facility. 111. The DR, on the other hand, apart from relying on the order of the lower authorities, submitted that the amendment to Rule 6(7A) of the IT Rules by Finance Act, 2016 with effect from 01.07.2016 is only procedural and the same is applicable to the relevant assessment year. 112. We have heard the rival contentions and perused the material on record. To understand the controversy, it’s important to examine the requirements of Section 35(2AB)(1) which reads as under : "(2AB)(1) Where a company engaged in the business of bio- technology or in any business of manufacture or production of any

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article or thing, not being an article or thing specified in the list of the Eleventh Schedule incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of a sum equal to one and two times of the expenditure so incurred." 113. It is clear from the provisions of section 35(2AB) that once R&D facility is approved by the DSIR, the expenses incurred by the assessee have to be allowed. If the law wanted the expenditure to be approved by the prescribed authority, same would have been expressly provided in the section. 114. The Bangalore Tribunal in case of Natural Remedies Pvt. Ltd. vs. ACIT (2021) 61 CCH 0005 has held that for the period prior to the Income Tax (Tenth Amendment) Rules, 2016, with effect from 01.07.2016, which amended Rule 6(7A) of the IT Rules, deduction u/s 35(2AB) of the IT Act has to be allowed on the basis of the expenditure as recorded by the assessee in the books of account. Relevant finding of the Tribunal is reproduced below: “8.5 In view of the aforesaid reasoning and in the light of judicial pronouncements, cited supra, we hold that in the present case since the deduction is with reference to assessment year 2016-2017 (where the law applicable is the 1st day of April, 2016), which is prior to the Income Tax (Tenth Amendment) Rules, 2016, with effect from 01.07.2016 of Rule 6(7A) of the I.T.Rules, deduction u/s 35(2AB) of the I.T.Act has to be allowed on the basis of the expenditure as recorded by the assessee in the books of account. Admittedly, the Assessing Officer has not disputed the correctness of the claim of expenditure incurred on Scientific Research. The contention of the DR that the amendment to Rule 6(7A) is procedural cannot be accepted, since the amended rule stipulates a condition that apart from approval of in-house R & D facility of assessee, the expenditure also has to be quantified by the prescribed authority for weighted deduction u/s 35(2AB) of the I.T.Act. Therefore, the amended Rule 6(7A) effect the substantive right of the assessee and cannot be termed merely as procedural. Moreover, the co-ordinate Bench of Bangalore Tribunal in case of M/s.Mahindra Electric Mobility Ltd. v. ACIT (supra) and M/s.Indfrag Limited v. ACIT (supra) have clearly held that prior to 01.07.2016 Form 3CL has no legal sanctity and it is only w.e.f. 01.07.2016 with the amendment to Rule 6(7A) of the I.T.Rules, that the

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quantification of weighted deduction u/s 35(2AB) of the I.T.Act has significance. Therefore, we hold that the deduction u/s 35(2AB) of the I.T.Act be granted as claimed by the assessee instead of restricting it to the quantum of claim as mentioned in .Form No.3CL by the prescribed authority. It is ordered accordingly.” 115. As can be noted above, the Tribunal relied on another decision of the same Bench in the case of M/s Mahindra Electric Mobility Ltd. vs ACIT [ITA No.641/Bang/2017 - order dated 14.09.2018] wherein it was observed as under: "20. From the above discussion it is clear that prior to 1.7.2016 Form 3CL had no legal sanctity and it is only w.e.f 1.7.2016 with the amendment to Rule 6(7A)(b) of the Rules, that the quantification of the weighted deduction u/s.35(2AB) of the Act has significance. In the present case there is no difficulty about the quantum of deduction u/s.35(2AB) of the Act, because the AO allowed 100% of the expenditure as deduction u/s.35(2AB)(1)(i) of the Act, as expenditure on scientific research. Deduction u/s.35(1)(i) and Sec.35(2AB) of the Act are similar except that the deduction u/s.35(2AB) is allowed as weighted deduction at 200% of the expenditure while deduction u/s.35(1)(i) is allowed only at 100%. The conditions for allowing deduction u/s.35(1)(i) of the Act and under Sec.35(2AB) of the Act are identical with the only difference being that the Assessee claiming deduction u/s.35(2AB) of the Act should be engaged in manufacture of certain articles or things. It is not in dispute that the Assessee is engaged in business to which Sec.35(2AB) of the Act applied. The other condition required to be fulfilled for claiming deduction u/s.35(2AB) of the Act is that the research and development facility should be approved by the prescribed authority. The prescribed authority is the Secretary, Department of Scientific Industrial Research, Govt. Of India (DSIR). It is not in dispute that the Assessee in the present case obtained approval in Form No.3CM as required by Rule 6 (5A) of the Rules. In these facts and circumstances and in the light of the judicial precedents on the issue, we are of the view that the deduction u/s.35(2AB) of the Act ought to have been allowed as weighted deduction at 200% of the expenditure as claimed by the Assessee and ought not to have been restricted to 100% of the expenditure

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incurred on scientific research. We hold and direct accordingly and allow the appeal of the Assessee." 116. Similar view has been taken by various other Tribunals in the following cases: i. M/s.Indfrag Limited v. ACIT [ITA No.98/Bang/2018 - order dated 30.07.2020] ii. M/s.Sun Pharmaceutical Industries Ltd. v. Pr.CIT, reported in (2017) 162 ITD 484 (Ahmedabad Trib.) – This has been subsequently confirmed by Hon’ble Gujarat High Court iii. Cummins India Limited v. DCIT [ITA No.309/Pun/2014 - order dated 15.05.2018] 117. The AO in the present case has not disputed the correctness of the claim made by the assessee. In view of the above discussions and judicial precedents on this issue, we hold that the claim of the assessee must be granted as made in its return of income. It cannot be restricted to the extent of claim as approved in Form No.3CL by DSIR since there was no such requirement either under the Act or in the Rules for the assessment year 2011- 12. We accordingly allow the appeal of the assessee Company on this ground and direct the AO to delete the disallowance in this regard.”

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“Increase of book profits by the interest income on income- tax refund. 11. During the year under consideration, the Assessee company received refund for assessment years 2011-12 and 2012-13 including interest under section 244A of the Act, in view of processing of its return of income under section 143(1) of the Act (see the details thereof in paragraph 11.1 at page 33 of its Paper book). 12. The assessee has been following the accounting policy of recognizing the income on account of interest on income tax refund only when it is reasonably sure of its accrual i.e., in case the order of the appellate authorities is in its favour and there is reasonable surety that such interest will not be withdrawn. In the present case, since the interest had arisen in view of processing of the return under section 143(1) of the Act and the return of income had been selected for scrutiny, the assessee did not credit the interest on such income tax refund in its profit and loss account. The same was however offered to tax under normal provision of the Act since the same is taxable on receipt basis. In its books of account the said interest was shown as a liability and not credited to the Profit and loss account. 13. While computing its book profits under section 115JB of the Act, the AO had increased the same by treating the said amount as an income (see paragraph 7.1 at page 94 of the assessment order). The said adjustment to book profits stands deleted by the CIT(A) (see paragraphs 22 to 24 at pages 19-20 of the appellate order). 14. The Assessee submits that as per Explanation 1 below section 115JB(2) the starting point for computation of book profit is

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ITA NO. 465 & 931/MUM/2020 (A.Y: 2015-16) UltraTech Cement Limited the profit as shown in the statement of Profit and loss as increased/reduced by such adjustments as have been specified. It is not open to the Revenue to make an adjustment beyond those specified in the Explanation. In this regard, reliance is placed on judgment of the Hon'ble Apex Court in Apollo Tyres Ltd. v. CIT 255 ITR 273 and CIT v. HCL Comet Systems and Services Ltd. 305 ITR 409. Since, in the present case, the amount by way of interest on income-tax refund has been treated as a liability in the Balance sheet and not credited to the Profit and loss account, it is not open to the Revenue to increase its book profits by the said amount in the absence of any specific adjustment in Explanation 1 applying to its case.”

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ITA NO. 465 & 931/MUM/2020 (A.Y: 2015-16) UltraTech Cement Limited Accordingly, we do not see any reason to disturb the same and hence, the ground raised by the revenue is dismissed.

Order pronounced in the open court on 12th May, 2023

Sd/- Sd/- (ABY T. VARKEY) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 12/05/2023 Giridhar, Sr.PS

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Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum

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