ANUH PHARMA LIMITED ,MUMBAI vs. PRINCIPAL COMMISSIONER OF INCOME TAX, CIRCLE -5, MUMBAI

ORDER PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against revisional order dated 19.03.2025 passed by the Ld. Principal Commissioner of Income-tax, Mumbai – 5 [in short the Ld. ‘PCIT’] under section 263 of the Income-tax Act, 1961 ( in short the ‘Act’ ) for assessment year 2020-21, raising following grounds:

1.0 That on the facts and in the circumstances of the case, the impugned order passed u/s 263 is grossly arbitrary and bad in law in relation to the issues raised and adjudicated therein and law in relation to the issues raised and adjudicated therein and law in relation to the issues raised and adjudicated therein and needs to be summarily deleted. needs to be summarily deleted. 1.1 That on the facts and in the circumstances o 1.1 That on the facts and in the circumstances of the case, the f the case, the Ld. PCIT was not justified and grossly erred in initiating Ld. PCIT was not justified and grossly erred in initiating Ld. PCIT was not justified and grossly erred in initiating proceedings u/s 263 of the Act without appreciating the fact that proceedings u/s 263 of the Act without appreciating the fact that proceedings u/s 263 of the Act without appreciating the fact that the order u/s 143(3) passed by the Ld. AO was neither erroneous the order u/s 143(3) passed by the Ld. AO was neither erroneous the order u/s 143(3) passed by the Ld. AO was neither erroneous nor prejudicial to interests of the Revenue and the nor prejudicial to interests of the Revenue and the nor prejudicial to interests of the Revenue and therefore the proceedings are bad in law. proceedings are bad in law. 2.0 That, on the facts and in the circumstances of the case, and 2.0 That, on the facts and in the circumstances of the case, and 2.0 That, on the facts and in the circumstances of the case, and without prejudice to above, the Ld. PCIT was not justified and without prejudice to above, the Ld. PCIT was not justified and without prejudice to above, the Ld. PCIT was not justified and grossly erred in holding that, the assessee has wrongly claimed grossly erred in holding that, the assessee has wrongly claimed grossly erred in holding that, the assessee has wrongly claimed deduction u/s 80G on CSR deduction u/s 80G on CSR expenses without appreciating the expenses without appreciating the fact that the claim was fully justified and in fact that the claim was fully justified and in-line with the line with the prevailing provisions of the law, which had been duly examined prevailing provisions of the law, which had been duly examined prevailing provisions of the law, which had been duly examined by the Ld AO in assessment proceedings. by the Ld AO in assessment proceedings. 3.0 That on the facts and in the circumstances of the case 3.0 That on the facts and in the circumstances of the case 3.0 That on the facts and in the circumstances of the case and without prejudice to Ground above, the Ld. PCIT was not justified without prejudice to Ground above, the Ld. PCIT was not justified without prejudice to Ground above, the Ld. PCIT was not justified and grossly erred in holding that, the assessee has wrongly and grossly erred in holding that, the assessee has wrongly and grossly erred in holding that, the assessee has wrongly claimed deduction u/s 80 claimed deduction u/s 80-IA(4)(iv) without appreciating the fact IA(4)(iv) without appreciating the fact that the claim was fully justified and in that the claim was fully justified and in-line with the prev line with the prevailing provisions of the law, which had been duly examined by the Ld provisions of the law, which had been duly examined by the Ld provisions of the law, which had been duly examined by the Ld AO in assessment proceedings. AO in assessment proceedings. 4.0 That on the facts and in the circumstances of the case, the 4.0 That on the facts and in the circumstances of the case, the 4.0 That on the facts and in the circumstances of the case, the Ld. PCIT was not justified and grossly erred in holding that, the Ld. PCIT was not justified and grossly erred in holding that, the Ld. PCIT was not justified and grossly erred in holding that, the assessee has wrongly claime assessee has wrongly claimed deduction without appreciating d deduction without appreciating that, the claim of deduction has been duly allowed by various that, the claim of deduction has been duly allowed by various that, the claim of deduction has been duly allowed by various judicial precedents on the same facts which had been duly judicial precedents on the same facts which had been duly judicial precedents on the same facts which had been duly considered by the Ld AO in assessment considered by the Ld AO in assessment proceedings.

2.1 Subsequently, the Ld. PCIT called for the record and after Subsequently, the Ld. PCIT called for the record and after Subsequently, the Ld. PCIT called for the record and after examination, he was examination, he was of the view that on two specific issues, the two specific issues, the assessment order was erroneous in so far as prejudicial to the order was erroneous in so far as prejudicial to the order was erroneous in so far as prejudicial to the interest of Revenue. interest of Revenue. Firstly, deduction u/s 80IA deduction u/s 80IA amounting to Rs.1,62,14,945/- claimed on claimed on cooling tower for generating cool cooling tower for generating cooling effect was erroneously claimed by the assessee. Secondly, the effect was erroneously claimed by the assessee. effect was erroneously claimed by the assessee. assessee had debited Rs.30,20,8 assessee had debited Rs.30,20,800/- under the head ‘Corporate under the head ‘Corporate Social Responsibility (CSR) ’ activities in the profit and loss account ’ activities in the profit and loss account and disallowed the said expenses and disallowed the said expenses while the computing while the computing of income under the head profit and gains of business under the head profit and gains of business, however against the however against the said expenditure assessee claimed deduction u/s 80G of the Act said expenditure assessee claimed deduction u/s 80G of the Act said expenditure assessee claimed deduction u/s 80G of the Act amounting to Rs.18,29,265/ amounting to Rs.18,29,265/-, which was not allowable which was not allowable in accordance with law accordance with law .

2.2 The Ld. PCIT also noted that the inqui The Ld. PCIT also noted that the inquiry on these two issues, on these two issues, which ought to have been carried out in the facts and which ought to have been carried out in the facts and which ought to have been carried out in the facts and circumstances of case and in law case and in law , but had not been carried out by not been carried out by the Assessing Officer. the Assessing Officer.

2.3 Accordingly, the learned PCIT issued a show cause notice Accordingly, the learned PCIT issued a show cause notice Accordingly, the learned PCIT issued a show cause notice under section 263 of the A under section 263 of the Act requiring the assessee to explain as to ct requiring the assessee to explain as to why the assessment order should not be treated as erroneous in so why the assessment order should not be treated as erroneous in so why the assessment order should not be treated as erroneous in so far as it is prejudicial to the interests of the Revenue. Upon due far as it is prejudicial to the interests of the Revenue. Upon due far as it is prejudicial to the interests of the Revenue. Upon due consideration of the submissions advanced on behalf of the consideration of the submissions advanced on behalf of the consideration of the submissions advanced on behalf of the assessee, the learned assessee, the learned PCIT held that the claim of deduction under PCIT held that the claim of deduction under section 80IA of the Act had been erroneously allowed, both on section 80IA of the Act had been erroneously allowed, both on section 80IA of the Act had been erroneously allowed, both on account of absence of inquiry as well as on account of incorrect account of absence of inquiry as well as on account of incorrect account of absence of inquiry as well as on account of incorrect application of law. Likewise, with respect to the deduction claimed application of law. Likewise, with respect to the deduction claimed application of law. Likewise, with respect to the deduction claimed under section 80G of the Act amounting to Rs.18,19,265/ G of the Act amounting to Rs.18,19,265/-, the G of the Act amounting to Rs.18,19,265/ learned PCIT recorded that the Assessing Officer had failed to learned PCIT recorded that the Assessing Officer had failed to learned PCIT recorded that the Assessing Officer had failed to conduct any inquiry and that the allowance of the deduction was conduct any inquiry and that the allowance of the deduction was conduct any inquiry and that the allowance of the deduction was based on an erroneous interpretation of the statutory provision. based on an erroneous interpretation of the statutory provision. based on an erroneous interpretation of the statutory provision.

5.1 The Ld. counsel for the assessee referred to Paper Book page The Ld. counsel for the assessee referred to Paper Book page The Ld. counsel for the assessee referred to Paper Book page 28 to 31, which is a notice dated 31.01.2022 issued u/s 142(1) of 28 to 31, which is a notice dated 31.01.2022 issued u/s 142(1 28 to 31, which is a notice dated 31.01.2022 issued u/s 142(1 the Act. The Ld. counsel referred to the page 30 wherein a query the Act. The Ld. counsel referred to the page 30 wherein a query the Act. The Ld. counsel referred to the page 30 wherein a query asking the assessee to establish the genuineness of the deduction asking the assessee to establish the genuineness of the deduction asking the assessee to establish the genuineness of the deduction claimed has been made. I made. In response the assessee vide letter dated n response the assessee vide letter dated 01.03.2022 explained about the deduction u/s 80IA claimed and its 01.03.2022 explained about the deduction u/s 80IA clai 01.03.2022 explained about the deduction u/s 80IA clai eligibility under the provisions of the Act. Further, the Ld. counsel eligibility under the provisions of the Act. Further, the Ld. counsel eligibility under the provisions of the Act. Further, the Ld. counsel referred to Paper Book page 48 which is a query issued by the referred to Paper Book page 48 which is a query issued by the referred to Paper Book page 48 which is a query issued by the Assessing Officer through through notice u/s 142(1) of the Act dated notice u/s 142(1) of the Act dated 20.07.2022 asking the assessee to provide details of plant and 20.07.2022 asking the assessee to provide details o 20.07.2022 asking the assessee to provide details o machinery of the power undertaking along with copy of the bills machinery of the power undertaking along with copy of the bills machinery of the power undertaking along with copy of the bills raised by undertaking for consumption of cooling power. Before us, raised by undertaking for consumption of cooling power. Before us, raised by undertaking for consumption of cooling power. Before us, the Ld. counsel for the assessee referred to Paper Book page 49 to the Ld. counsel for the assessee referred to Paper Book page 49 to the Ld. counsel for the assessee referred to Paper Book page 49 to 53 which comprises note on the eligibility of 53 which comprises note on the eligibility of power generated power generated through cooling tower. cooling tower.

5.2 Regarding the CSR CSR expenses claimed as donation as donation u/s 80G of the Act, the Ld. counsel referred to Paper Book page 54 which is a the Act, the Ld. counsel referred to Paper Book page 54 which is a the Act, the Ld. counsel referred to Paper Book page 54 which is a show cause notice dated 20.09.2022 issued by the assessment unit show cause notice dated 20.09.2022 issued by the assessment unit show cause notice dated 20.09.2022 issued by the assessment unit asking the assessee as asking the assessee as why the deduction claimed u/s 80G of the why the deduction claimed u/s 80G of the Act be disallowed in the light of legislative intent behind section Act be disallowed in the light of legislative intent behind section Act be disallowed in the light of legislative intent behind section 80G of the Act. The Ld. counsel referred to Paper Book page 52 to 80G of the Act. The Ld. counsel referred to Paper Book page 52 to 80G of the Act. The Ld. counsel referred to Paper Book page 52 to 61 of the Paper Book containing detailed reply for justification of 61 of the Paper Book containing detailed reply for 61 of the Paper Book containing detailed reply for deduction u/s 80G of the Act 80G of the Act relying on the various decisions of the relying on the various decisions of the coordinate benches of coordinate benches of Tribunal.

5.3 In the light of the above n the light of the above discussion, the Ld. counsel for the , the Ld. counsel for the assessee submitted that Assessing Officer has carried out all the assessee submitted that Assessing Officer has carried out all the assessee submitted that Assessing Officer has carried out all the necessary inquiries which ought to necessary inquiries which ought to have been carried out in the carried out in the facts and circumstances in the case of the assessee and therefore, facts and circumstances in the case of the assessee and therefore, facts and circumstances in the case of the assessee and therefore, the clause (a) of Explanation 2 to section 263 of the Act cannot be clause (a) of Explanation 2 to section 263 of the Act cannot be clause (a) of Explanation 2 to section 263 of the Act cannot be invoked in the case of the assessee. T ed in the case of the assessee. The Ld. counsel referred to the he Ld. counsel referred to the decision of the Hon’bl decision of the Hon’ble Supreme Court in the case of e Supreme Court in the case of V-con Integrate Solutions Pvt. Ltd. (2025) 173 taxmann.com 774 (SC) Integrate Solutions Pvt. Ltd. (2025) 173 taxmann.com 774 (SC) Integrate Solutions Pvt. Ltd. (2025) 173 taxmann.com 774 (SC) wherein it is held that the assessee does not have control over the wherein it is held that the assessee does not have control over the wherein it is held that the assessee does not have control over the pen of the Assessing Officer and once, the Assessing Officer carried of the Assessing Officer and once, the Assessing Officer carried of the Assessing Officer and once, the Assessing Officer carried out the investigation but does not make any addition it can be out the investigation but does not make any addition it can be out the investigation but does not make any addition it can be taken that he accepted the plea and stand of the assessee. The Ld. taken that he accepted the plea and stand of the assessee. The Ld. taken that he accepted the plea and stand of the assessee. The Ld. counsel also relied on the decision Hon’ble counsel also relied on the decision Hon’ble High Court of Raj Court of Rajasthan in the case of Commissioner of Income of Commissioner of Income-tax Kota v. Deepak Real tax Kota v. Deepak Real Estate Developers Pvt. Ltd. Estate Developers Pvt. Ltd. reported in (2014) 52 taxmann.com 75, reported in (2014) 52 taxmann.com 75, wherein it is held that the Assessing Officer having examined wherein it is held that the Assessing Officer having examined wherein it is held that the Assessing Officer having examined relevant material on record passed assessment order in case of relevant material on record passed assessment order in case relevant material on record passed assessment order in case assessee, the Ld. PCIT without rejecting those documents could not assessee, the Ld. PCIT without rejecting those documents could not assessee, the Ld. PCIT without rejecting those documents could not pass an revisional order setting aside assessment with a direction to pass an revisional order setting aside assessment with a direction to pass an revisional order setting aside assessment with a direction to Assessing Officer to examine material available on record afresh. Assessing Officer to examine material available on record afresh. Assessing Officer to examine material available on record afresh.

5.4 Per contra, the Ld. DR re Per contra, the Ld. DR referred to the assessment order and sment order and submitted that the case was selected for scrutiny on various submitted that the case was selected for scrutiny on various submitted that the case was selected for scrutiny on various grounds inter-alia (i) for (i) for verification of certain relief verification of certain relief or losses; (ii) stock valuation; (iii) weighted deduction for expenditure on scientific weighted deduction for expenditure on scientific weighted deduction for expenditure on scientific research; and (iv) deduction in r deduction in respect of industrial undertaking espect of industrial undertaking u/s 80IA of the Act. He submitted that in the assessment order u/s 80IA of the Act. He submitted that in the assessment order u/s 80IA of the Act. He submitted that in the assessment order passed u/s 143(3) of the Act dated 23.09.2022, the Ld. Assessing passed u/s 143(3) of the Act dated 23.09.2022, the Ld. Assessing passed u/s 143(3) of the Act dated 23.09.2022, the Ld. Assessing Officer have dealt the issue of claim of other deduction under Officer have dealt the issue of claim of other deduction under Officer have dealt the issue of claim of other deduction under Schedule BP of Rs.1,02,50,713/ Schedule BP of Rs.1,02,50,713/- on pages 2 to 17 wherein he on pages 2 to 17 wherein he disallowed disallowed the the claim claim of of deduction deduction of cess cess amounting amounting to to Rs.24,16,777/-. On another issue of stock valuation, the Assessing another issue of stock valuation, the Assessing another issue of stock valuation, the Assessing Officer accepted the submission of the assessee and noted that no Officer accepted the submission of the assessee and noted that no Officer accepted the submission of the assessee and noted that no adverse interference had been drawn. O e interference had been drawn. On the issue of weighted the issue of weighted deduction u/s 35(2AB) of the Act deduction u/s 35(2AB) of the Act for in-house research and house research and development, the Assessing Officer after considering submission of development, the Assessing Officer after considering submission of development, the Assessing Officer after considering submission of the assessee allowed the weighted deduction of Rs.2,88,83,000/- the assessee allowed the weighted deduction of Rs.2,88,83,000/ the assessee allowed the weighted deduction of Rs.2,88,83,000/ out of claim of Rs.3,03,90,498/ out of claim of Rs.3,03,90,498/- and disallowed excess amount of disallowed excess amount of Rs.5,03,000/-. On the issue of taxability of business n the issue of taxability of business n the issue of taxability of business liability written off u/s 41 of the Act also, the Assessing Officer accepted the off u/s 41 of the Act also, the Assessing Officer accepted the off u/s 41 of the Act also, the Assessing Officer accepted the submission of the assessee and duly recorded in the assessment submission of the assessee and duly recorded in the assessment submission of the assessee and duly recorded in the assessment order that no adverse interfer order that no adverse interference had been drawn.

5.6 The ld DR emphasized that o The ld DR emphasized that on the issue of deduction claimed the issue of deduction claimed for industrial undertaking also the Assessing Officer considered the for industrial undertaking also the Assessing Officer considered the for industrial undertaking also the Assessing Officer considered the submission of the assessee and held that no adverse inference was submission of the assessee and held that no adverse inference was submission of the assessee and held that no adverse inference was drawn. The Ld. DR accordingly submi drawn. The Ld. DR accordingly submitted that the Assessing Officer tted that the Assessing Officer recorded complete submission of the assessee in the assessment recorded complete submission of the assessee in the assessment recorded complete submission of the assessee in the assessment order. But the submission dated 16.08.2023 order. But the submission dated 16.08.2023, which has been , which has been claimed by the assessee as filed before the AO, claimed by the assessee as filed before the AO, on the issue of on the issue of eligibility of ‘cooling tower cooling tower’ and ‘power generation wer generation facility’ has neither been recorded been recorded or noted in the assessment order nor there is in the assessment order nor there is any reference of the said letter any reference of the said letter in his order. Further, the Ld. DR . Further, the Ld. DR submitted submitted submitted that that that no no no evidence evidence evidence in in in support support support in in in the the the form form form of of of acknowledgement of uploading acknowledgement of uploading electronically of such reply such reply dated 16.08.2023 before the before the ‘faceless assessment unit’ has been filed by has been filed by the assessee and therefore, it cannot be established that assessee the assessee and therefore, it cannot be established that asse the assessee and therefore, it cannot be established that asse had filed said detail details justifying the deduction on cool justifying the deduction on cooling tower plant. Therefore, the Assessing plant. Therefore, the Assessing Officer has failed in carry carrying out the inquiry which ought to have been carried out inquiry which ought to have been carried out in the case. As in the case. As process of cooling only involved variation in the thermal ing only involved variation in the thermal ing only involved variation in the thermal temperature and does not amount to production of the power which temperature and does not amount to production of the p temperature and does not amount to production of the p in common parlance is in common parlance is the electricity, the AO was required to make icity, the AO was required to make enquiry on this issue from the assessee. enquiry on this issue from the assessee.

5.7 Regarding the issue of deduction u/s 80G also Regarding the issue of deduction u/s 80G also Regarding the issue of deduction u/s 80G also, the Ld. DR submitted that the Assessing Officer has failed to carry out inquiry submitted that the Assessing Officer has failed to carry out inquiry submitted that the Assessing Officer has failed to carry out inquiry as how the deduction was as how the deduction was falling in the definition of a donation in definition of a donation in the nature of voluntarily payment. T nature of voluntarily payment. The Ld. DR submitted that he Ld. DR submitted that assessee has incurred CSR expenses under the mandatory assessee has incurred CSR expenses under the mandatory assessee has incurred CSR expenses under the mandatory provisions of the Companies Act, 2013 and therefore, same looses provisions of the Companies Act, 2013 and therefore, same looses provisions of the Companies Act, 2013 and therefore, same looses the character of voluntariness required as prim the character of voluntariness required as primary condition for ary condition for donation u/s 80G of the Act. ion u/s 80G of the Act.

We have carefully considered the rival submissions and 6. We have carefully considered the rival submissions and We have carefully considered the rival submissions and perused the material placed on record. The controversy to be perused the material placed on record. The controversy to be perused the material placed on record. The controversy to be adjudicated is whether the assessment order can be said to be adjudicated is whether the assessment order can be said to be adjudicated is whether the assessment order can be said to be “erroneous in so far as it “erroneous in so far as it is prejudicial to the interests of the is prejudicial to the interests of the Revenue” within the meaning of section 263 of the Act, for want of Revenue” within the meaning of section 263 of the Act, for want of Revenue” within the meaning of section 263 of the Act, for want of inquiry by the Assessing Officer, as contemplated in clause (a) of inquiry by the Assessing Officer, as contemplated in clause (a) of inquiry by the Assessing Officer, as contemplated in clause (a) of Explanation 2 to section 263. Explanation 2 to section 263.

6.1 As far as issue of deduction u/s 80IA of the Act As far as issue of deduction u/s 80IA of the Act As far as issue of deduction u/s 80IA of the Act is concerned admittedly the notice u/s 142(1) of the Act dated 31.01.2022 was admittedly the notice u/s 142(1) of the Act dated 31.01.2022 was admittedly the notice u/s 142(1) of the Act dated 31.01.2022 was issued and reply of the same is also on the record. The relevant issued and reply of the same is also on the record. The relevant issued and reply of the same is also on the record. The relevant query and reply is reproduced as under: query and reply is reproduced as under:

“ Query: 5. You have claimed deduction under section 80 5. You have claimed deduction under section 80 5. You have claimed deduction under section 80-1/80- 1A/80-IB/80- -IC which is significantly high vis-is turnover of is turnover of the undertaking. Please estabalish the genuineness of the undertaking. Please estabalish the genuineness of the undertaking. Please estabalish the genuineness of deduction claimed. claimed. Reply: 6.0 Deduction u/s 80IA of the Act: 6.0 Deduction u/s 80IA of the Act: 6.1 The Company is a listed company engaged in the business of 6.1 The Company is a listed company engaged in the business of 6.1 The Company is a listed company engaged in the business of manufacture of bulk drugs manufacture of bulk drugs and pharmaceutical formulations and and pharmaceutical formulations and trading in pharmaceutical products and in trading in pharmaceutical products and in-house Research and house Research and Development facility. The assessee from AY 2019 Development facility. The assessee from AY 2019-20 onwards 20 onwards has started claiming deduction u/s 80IA on the power generated has started claiming deduction u/s 80IA on the power generated has started claiming deduction u/s 80IA on the power generated in form of cooling power. in form of cooling power. 6.2 In this regard, the assessee would like to submit as under: regard, the assessee would like to submit as under: regard, the assessee would like to submit as under: i. Details of the working of section 801A deduction is attached as i. Details of the working of section 801A deduction is attached as i. Details of the working of section 801A deduction is attached as Annexure – 18. 18. ii. Audited Accounts of the undertaking is attached as Annexure ii. Audited Accounts of the undertaking is attached as Annexure ii. Audited Accounts of the undertaking is attached as Annexure – 19. iii. Form 10CCB uploaded certified by the CA is iii. Form 10CCB uploaded certified by the CA is attached as attached as Annexure – 20. 20. iv. It would be relevant to note that, for claiming section 80IA iv. It would be relevant to note that, for claiming section 80IA iv. It would be relevant to note that, for claiming section 80IA deduction on power, there is no condition for taking any prior deduction on power, there is no condition for taking any prior deduction on power, there is no condition for taking any prior approval from the government authorities, without prejudice to approval from the government authorities, without prejudice to approval from the government authorities, without prejudice to the same and as required by your goods the same and as required by your goodself the relevant copies of elf the relevant copies of the approval plan of the government authorities are attached as the approval plan of the government authorities are attached as the approval plan of the government authorities are attached as Annexure - 21 for your goodself ready reference. 21 for your goodself ready reference. v. The address of undertaking is E . The address of undertaking is E-17/3, E17-4, MIDC, Tarapur, 4, MIDC, Tarapur, Boisar, Maharashtra 401506. Boisar, Maharashtra 401506. vi. The assessee is not b vi. The assessee is not being set-up in special economic zone up in special economic zone (SEZ). The asses (SEZ). The asses vii. The power in form the cooling power i.e. Tonnes of vii. The power in form the cooling power i.e. Tonnes of vii. The power in form the cooling power i.e. Tonnes of Refrigeration (TR) is being captively consumed by the other Refrigeration (TR) is being captively consumed by the other Refrigeration (TR) is being captively consumed by the other manufacturing units. manufacturing units. viii. The assessee has stated claiming the deduction from the viii. The assessee has stated claiming the deduction from the viii. The assessee has stated claiming the deduction from the earlier AY and the captioned AY is not the initial assessment lier AY and the captioned AY is not the initial assessment lier AY and the captioned AY is not the initial assessment year, thus there is no purchase of asset in the current AY. year, thus there is no purchase of asset in the current AY. year, thus there is no purchase of asset in the current AY. 6.3 Further, the section prescribes certain other conditions which 6.3 Further, the section prescribes certain other conditions which 6.3 Further, the section prescribes certain other conditions which are as follows are as follows- Condition: The undertaking should not be formed by way Condition: The undertaking should not be formed by way Condition: The undertaking should not be formed by way of splitting up or reconstruction of a business already in existence. splitting up or reconstruction of a business already in existence. splitting up or reconstruction of a business already in existence. Compliance: In the present case, the Assessee had started Compliance: In the present case, the Assessee had started Compliance: In the present case, the Assessee had started altogether new undertakings which are independent and altogether new undertakings which are independent and altogether new undertakings which are independent and separate from each other. Hence this condition is fulfilled. separate from each other. Hence this condition is fulfilled. separate from each other. Hence this condition is fulfilled. Condition: It is not formed by the transfer to a new business of t is not formed by the transfer to a new business of t is not formed by the transfer to a new business of machinery or plant previously used for any other purpose. machinery or plant previously used for any other purpose. machinery or plant previously used for any other purpose. Compliance: In the present case, the new plant and machinery Compliance: In the present case, the new plant and machinery Compliance: In the present case, the new plant and machinery has been purchased by the Assessee and no plant or machinery has been purchased by the Assessee and no plant or machinery has been purchased by the Assessee and no plant or machinery are transferred from ex are transferred from existing business to new business. Hence, isting business to new business. Hence, this condition is also fulfilled. this condition is also fulfilled. Condition: No deduction is admissible under section 801A unless Condition: No deduction is admissible under section 801A unless Condition: No deduction is admissible under section 801A unless the accounts of the undertakings for which deduction is claimed the accounts of the undertakings for which deduction is claimed the accounts of the undertakings for which deduction is claimed are audited by an accountant and the assessee furnish are audited by an accountant and the assessee furnish are audited by an accountant and the assessee furnishes, along with his return of income, the report of such audit in the Form with his return of income, the report of such audit in the Form with his return of income, the report of such audit in the Form 10CCB duly signed and verified by such accountant 10CCB duly signed and verified by such accountant Compliance: The Assessee has claimed deduction u/s 80IA in Compliance: The Assessee has claimed deduction u/s 80IA in Compliance: The Assessee has claimed deduction u/s 80IA in return of income and also filed audit report in Form 10CCB along return of income and also filed audit report in Form 10CCB along return of income and also filed audit report in Form 10CCB along with return of income. Hence, the said condition is duly complied urn of income. Hence, the said condition is duly complied urn of income. Hence, the said condition is duly complied with. 6.4 Based on above and following the principle of consistency, 6.4 Based on above and following the principle of consistency, 6.4 Based on above and following the principle of consistency, the Assessee request your goodself to grant deduction u/s 80IA the Assessee request your goodself to grant deduction u/s 80IA the Assessee request your goodself to grant deduction u/s 80IA of the Act in respect of profits and gains derived by an of the Act in respect of profits and gains derived by an of the Act in respect of profits and gains derived by an undertakings engaged in generation of ngs engaged in generation of various power. power.” 6.2 It is not in dispute that the assessee, in response to notice It is not in dispute that the assessee, in response to notice It is not in dispute that the assessee, in response to notice under section 142(1), furnished certain replies and documents under section 142(1), furnished certain replies and documents under section 142(1), furnished certain replies and documents asserting its eligibility for deduction under section 80IA of the Act asserting its eligibility for deduction under section 80IA of the Act asserting its eligibility for deduction under section 80IA of the Act on account of generation of “cooling power” from the cooling tower. on account of generation of “cooling power” from the cooling t on account of generation of “cooling power” from the cooling t However, there is a dispute However, there is a dispute between parties regarding regarding submitting or filing of reply in response in response to notice u/s 142(1) of the Act dated 1) of the Act dated 20.09.2022. The assessee has claimed that following reply was filed he assessee has claimed that following reply was filed he assessee has claimed that following reply was filed before the Assessing Officer before the Assessing Officer:

Annexure 8(ii) Submission bmission bmission on on on claiming claiming claiming 801A 801A 801A deduction deduction deduction on on on Power Power Power generated from Cooling Tower generated from Cooling Tower 1.0 Anuh Pharma Limited (Company) is manufactures of bulk Anuh Pharma Limited (Company) is manufactures of bulk Anuh Pharma Limited (Company) is manufactures of bulk drugs. The Company has in Tarapur. Company has installed drugs. The Company has in Tarapur. Company has installed drugs. The Company has in Tarapur. Company has installed Cooling Tower at plant which generates cooling power. Further, Cooling Tower at plant which generates cooling power. Further, Cooling Tower at plant which generates cooling power. Further, Cooling Power or Refrigeration Power is measured in Tonnes of Cooling Power or Refrigeration Power is measured in Tonnes of Cooling Power or Refrigeration Power is measured in Tonnes of Refrigeration (TR). As per the scientific formula 1 Ton of Refrigeration (TR). As per the scientific formula 1 Ton of Refrigeration (TR). As per the scientific formula 1 Ton of Refrigeration (TR) power which is equal to 3.51 Kilo Watts of Refrigeration (TR) power which is equal to 3.51 Kilo Watts of Refrigeration (TR) power which is equal to 3.51 Kilo Watts of Power / electricity. Power / electricity. 1.1 From perusal of the above it could be seen that From perusal of the above it could be seen that deduction u/s deduction u/s 80IA is available in respect of profit from the business of 80IA is available in respect of profit from the business of 80IA is available in respect of profit from the business of generation of "power". Thus, the TR which also in the form of generation of "power". Thus, the TR which also in the form of generation of "power". Thus, the TR which also in the form of power is eligible for the section 801A deduction. The word power power is eligible for the section 801A deduction. The word power power is eligible for the section 801A deduction. The word power in Income-tax Act implies source of energy. tax Act implies source of energy. 1.2 Power has been defined to mean "mechanical or electrical as been defined to mean "mechanical or electrical as been defined to mean "mechanical or electrical energy or any form of energy or force available for application to energy or any form of energy or force available for application to energy or any form of energy or force available for application to work (as that of gravitation, running water, wind, steam, work (as that of gravitation, running water, wind, steam, work (as that of gravitation, running water, wind, steam, electricity)." It is also held that terms 'Power' and 'Energy' are electricity)." It is also held that terms 'Power' and 'Energy' are electricity)." It is also held that terms 'Power' and 'Energy' are synonymous and synonymous and they can be in several forms, steam, they can be in several forms, steam, mechanical, electrical, wind. mechanical, electrical, wind. 1.3 Reliance is placed on the decision of Apex Court in the case of Reliance is placed on the decision of Apex Court in the case of Reliance is placed on the decision of Apex Court in the case of CIT-vs.- Tanfac Industries Ltd (SLP No. 18537 of 2009) (copy of Tanfac Industries Ltd (SLP No. 18537 of 2009) (copy of Tanfac Industries Ltd (SLP No. 18537 of 2009) (copy of the decision is attached as Exhibit the decision is attached as Exhibit - A) wherein it was A) wherein it was held that steam is also form of power and assessee is entitled to deduction steam is also form of power and assessee is entitled to deduction steam is also form of power and assessee is entitled to deduction u/s 80-IA on the same. The rationale of eligibility of section 80IA IA on the same. The rationale of eligibility of section 80IA IA on the same. The rationale of eligibility of section 80IA deduction on steam and cooling power is similar and Courts are deduction on steam and cooling power is similar and Courts are deduction on steam and cooling power is similar and Courts are taking consistent views on the same. taking consistent views on the same. 1.4 Reference is invited on Hon'ble Jurisdictional Tribunal in the Reference is invited on Hon'ble Jurisdictional Tribunal in the Reference is invited on Hon'ble Jurisdictional Tribunal in the case of Saf Yeast Company Private Limited v. DCIT (ITA No. case of Saf Yeast Company Private Limited v. DCIT (ITA No. case of Saf Yeast Company Private Limited v. DCIT (ITA No. 1635/Mum/2015, Date of order 24 1635/Mum/2015, Date of order 24-11-2017) wherein relying on 2017) wherein relying on Apex Court decision in the case of Tanfac Industries (supra) Apex Court decision in the case of Tanfac Industries (supra) Apex Court decision in the case of Tanfac Industries (supra) Tribunal also held that, power generating by Cooling Tower falls held that, power generating by Cooling Tower falls in the definition of Power and eligible for 80IA deduction. in the definition of Power and eligible for 80IA deduction. in the definition of Power and eligible for 80IA deduction. Following were the important aspects highlighted by Tribunal in Following were the important aspects highlighted by Tribunal in Following were the important aspects highlighted by Tribunal in allowing deduction: allowing deduction: i. Tribunal referred to the CIT (A) observations that the te i. Tribunal referred to the CIT (A) observations that the te i. Tribunal referred to the CIT (A) observations that the term 'Power' has not been defined to mean electrical power to the 'Power' has not been defined to mean electrical power to the 'Power' has not been defined to mean electrical power to the exclusion of other forms of power and the term has to be exclusion of other forms of power and the term has to be exclusion of other forms of power and the term has to be understood in its natural meaning. Tribunal further stated that understood in its natural meaning. Tribunal further stated that understood in its natural meaning. Tribunal further stated that legislature has clearly provided benefit of deduction u/s 80 legislature has clearly provided benefit of deduction u/s 80 legislature has clearly provided benefit of deduction u/s 80-IA of the Act for generation of any form of power generated by an Act for generation of any form of power generated by an Act for generation of any form of power generated by an undertaking. ii. Just like steam, cooling power/Refrigeration power is also a ii. Just like steam, cooling power/Refrigeration power is also a ii. Just like steam, cooling power/Refrigeration power is also a form of power. The power generated by the Cooling Tower is form of power. The power generated by the Cooling Tower is form of power. The power generated by the Cooling Tower is known as Refrigeration Power or Cooling Power. Cooling or known as Refrigeration Power or Cooling Power. Cooling or known as Refrigeration Power or Cooling Power. Cooling or Refrigeration Power, as the name suggests, is used in reducing geration Power, as the name suggests, is used in reducing geration Power, as the name suggests, is used in reducing the temperature of an object, whether solid, liquid or gaseous. the temperature of an object, whether solid, liquid or gaseous. the temperature of an object, whether solid, liquid or gaseous. iii. The temperature of the water is reduced by passing air iii. The temperature of the water is reduced by passing air iii. The temperature of the water is reduced by passing air through the apparatus, i.e. the 'Cooling Tower' in sufficient through the apparatus, i.e. the 'Cooling Tower' in sufficient through the apparatus, i.e. the 'Cooling Tower' in sufficient volumes, at a temperature cooler than that of the incoming hot a temperature cooler than that of the incoming hot a temperature cooler than that of the incoming hot water such that the particles of water are enveloped by the air water such that the particles of water are enveloped by the air water such that the particles of water are enveloped by the air and there is a transfer of heat from the water to the air. The air and there is a transfer of heat from the water to the air. The air and there is a transfer of heat from the water to the air. The air then exits the chamber at a temperature higher than its then exits the chamber at a temperature higher than its then exits the chamber at a temperature higher than its temperature at the temperature at the point of entry and the water exits the point of entry and the water exits the apparatus at a temperature lower than its original temperature. apparatus at a temperature lower than its original temperature. apparatus at a temperature lower than its original temperature. In other words, air acts as the refrigerant to cool the temperature In other words, air acts as the refrigerant to cool the temperature In other words, air acts as the refrigerant to cool the temperature of water. Cooling Power or Refrigeration Power is measured in of water. Cooling Power or Refrigeration Power is measured in of water. Cooling Power or Refrigeration Power is measured in Tonnes of Refrigeratio Tonnes of Refrigeration (TR). Further, electricity has direct n (TR). Further, electricity has direct relationship with the TR. relationship with the TR. iv. It was also held that one Ton of Refrigeration (TR) which is iv. It was also held that one Ton of Refrigeration (TR) which is iv. It was also held that one Ton of Refrigeration (TR) which is equal to 3.51 Kilo Watts of Power. equal to 3.51 Kilo Watts of Power. 1.5 In view of the above, the power generated in form of TR from 1.5 In view of the above, the power generated in form of TR from 1.5 In view of the above, the power generated in form of TR from the cooling tower shall the cooling tower shall be eligible for 80IA deduction.

1.6 Since 1 TR = 3.51 Kilo Watts of Power. Thus, total TR 1.6 Since 1 TR = 3.51 Kilo Watts of Power. Thus, total TR 1.6 Since 1 TR = 3.51 Kilo Watts of Power. Thus, total TR generated shall be converted into KWH and applying the rate of generated shall be converted into KWH and applying the rate of generated shall be converted into KWH and applying the rate of electricity, market value of TR generated is arrived. The said electricity, market value of TR generated is arrived. The said electricity, market value of TR generated is arrived. The said rationale has been allowed by courts. On rationale has been allowed by courts. On the above legal the above legal proposition, the company has maintained seperate records of the proposition, the company has maintained seperate records of the proposition, the company has maintained seperate records of the undertaking based on which it has also obtained government undertaking based on which it has also obtained government undertaking based on which it has also obtained government recognised energy auditor report. recognised energy auditor report. 1.7 Based on above, the assessee request your goodself to grant 1.7 Based on above, the assessee request your goodself to grant 1.7 Based on above, the assessee request your goodself to grant deduction u/s 80IA deduction u/s 80IA of the Act in respect of profits and gains of the Act in respect of profits and gains derived derived derived by by by an an an undertakings undertakings undertakings engaged engaged engaged in in in generation generation generation power.” of various power. 6.3 But the Assessing Officer did not make any reference of sai But the Assessing Officer did not make any reference of sai But the Assessing Officer did not make any reference of said reply in his assessment order. reply in his assessment order. The assessee also cou The assessee also could not place on record any evidence of acknowledgement showing that the above record any evidence of acknowledgement showing that the above record any evidence of acknowledgement showing that the above reply relied upon was electronically filed before the faceless reply relied upon was electronically filed before the faceless reply relied upon was electronically filed before the faceless assessment unit. Further, without prejudice to the above Further, without prejudice to the above observation, it is well settled that the mere filing of written it is well settled that the mere filing of written it is well settled that the mere filing of written submissions by the assessee does not submissions by the assessee does not ipso facto establish that the establish that the Assessing Officer carried out the inquiry mandated by law, which Assessing Officer carried out the inquiry mandated by law Assessing Officer carried out the inquiry mandated by law ought to have been ought to have been carried out in the facts and circumstances of in the facts and circumstances of the case.

6.4 The section 80IA The section 80IA(1) of the Act prescribe eligibility of hundred (1) of the Act prescribe eligibility of hundred percent deduction of profit and gains derived by an undertaking percent deduction of profit and gains derived by an undertaking percent deduction of profit and gains derived by an undertaking engaged in business referred in sub in business referred in sub- section (4) of the section. The section (4) of the section. The . The clause (i) of the sub section (4) provides a list of business sub section (4) provides a list of businesses. The clause (i) of the subsection subsection subsection refers refers refers to to to business business business of of of development, development, development, operation, maintenance of infrastructure facility. The clause (ii) of the maintenance of infrastructure facility. The clause (ii) of the maintenance of infrastructure facility. The clause (ii) of the telecommunication subsection refers to business of subsection refers to business of providing telecommunication services. The clause (iii) refers to development, operation , services. The clause (iii) refers to development, o services. The clause (iii) refers to development, o maintenance of Industrial Park, Special Economic zone. The clause of Industrial Park, Special Economic zone. The clause of Industrial Park, Special Economic zone. The clause (iv) refers to generation, transmission, distribution etc of power. (iv) refers to generation, transmission, distribution etc of power. (iv) refers to generation, transmission, distribution etc of power. This is the clause which has been invoked by the assessee for claim This is the clause which has been invoked by the assessee for claim This is the clause which has been invoked by the assessee for claim of of of deduction deduction deduction u/s u/s u/s 80IA 80IA 80IA of of of the the the Act. Act. Act. Therefore Therefore, Therefore for better understanding, we feel it appropriate to reproduced as under: understanding, we feel it appropriate to reproduced as under: understanding, we feel it appropriate to reproduced as under:

(iv) an 85[undertaking] which, [undertaking] which,- (a) is set up in any part of India for the generation or generation and is set up in any part of India for the generation or generation and is set up in any part of India for the generation or generation and distribution of power if it begins distribution of power if it begins to generate power at any time to generate power at any time during the period beginning on the 1st day of April, 1993 and during the period beginning on the 1st day of April, 1993 and during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, ending on the 31st day of March,86[2017]; (b) starts transmission or distribution by laying a network of new starts transmission or distribution by laying a network of new starts transmission or distribution by laying a network of new transmission or transmission or distribution lines at any time during the period distribution lines at any time during the period beginning on the 1st day of April, 1999 and ending on the 31st beginning on the 1st day of April, 1999 and ending on the 31st beginning on the 1st day of April, 1999 and ending on the 31st day of March, day of March,86[2017]: Provided Provided that that the deduction under the deduction under this section this section to an to an 87[undertaking] under sub [undertaking] under sub-clause (b) shall be allowed only in clause (b) shall be allowed only in relation to the profits derived from laying of such network of new relation to the profits derived from laying of such network of new relation to the profits derived from laying of such network of new lines for transmission or distribution; lines for transmission or distribution; 88[(c) undertake undertakes 89 substantial renovation and modernisation of the substantial renovation and modernisation of the existing network of transmission or distribution lines at any time existing network of transmission or distribution lines at any time existing network of transmission or distribution lines at any time during the period beginning on the 1st day of April, 2004 and during the period beginning on the 1st day of April, 2004 and during the period beginning on the 1st day of April, 2004 and ending on the 31st day of March, ending on the 31st day of March, 90[2017]. Explanation. Explanation.-For the purposes of this sub-clause, “substantial clause, “substantial renovation and modernisation” means an increase in the plant renovation and modernisation” means an increase in the plant renovation and modernisation” means an increase in the plant and machinery in the network of transmission or distribution and machinery in the network of transmission or distribution and machinery in the network of transmission or distribution lines by at least fifty per lines by at least fifty per cent of the book value of such plant and cent of the book value of such plant and machinery as on the 1st day of April, 2004;] machinery as on the 1st day of April, 2004;] 6.5 On a plain reading of n a plain reading of entire clause together clause together, it refers to business of generation or distribution of “power” in the conventional business of generation or distribution of “power” in the conventional business of generation or distribution of “power” in the conventional sense of electricity, which can be sense of electricity, which can be transmitted and distributed transmitted and distributed through a network. In the case, the assessee does not fall under In the case, the assessee does not fall under the plain and simple definition of the power generation. Instead, the plain and simple definition of the power generation the plain and simple definition of the power generation the assessee is claiming generation o assessee is claiming generation of the cooling by way of the f the cooling by way of the cooling tower as equivalent to ing tower as equivalent to power generation and claiming power generation and claiming deduction. The claim of the assessee th The claim of the assessee that cooling power measured at cooling power measured in ‘tonnes’ of refrigeration is synonymous with power generation in of refrigeration is synonymous with power generation in of refrigeration is synonymous with power generation in terms of section 80IA, raised a substantial issue which required a terms of section 80IA, raised a substantial issue which required a terms of section 80IA, raised a substantial issue which required a detailed and pointed inqu detailed and pointed inquiry by the Assessing Officer. iry by the Assessing Officer. He should have also examined that claim of assessee as refrigeration cooling have also examined that claim of assessee as refrigeration cooling have also examined that claim of assessee as refrigeration cooling tower as separate undertaking having GST number etc. In such a tower as separate undertaking having GST number etc. tower as separate undertaking having GST number etc. scenario, it was the obligatory obligatory on the part of the Assessing Officer to on the part of the Assessing Officer to carry out the inquiries inquiries to satisfy condition of business of generation to satisfy condition of business of generation of power as he is not merely adjudicator but also investigator as he is not merely adjudicator but also investigator. He as he is not merely adjudicator but also investigator could have issued commission invoking authority under section 131 could have issued commission invoking authority under section 131 could have issued commission invoking authority under section 131 of the Act to any scientific organisation like IIT, Bombay etc and of the Act to any scientific organisation like IIT, Bombay etc an of the Act to any scientific organisation like IIT, Bombay etc an referred the matter whether any power is generated in the referred the matter whether any power is generated in the referred the matter whether any power is generated in the refrigeration process employed by the assessee. The failure to refrigeration process employed by the assessee. refrigeration process employed by the assessee. conduct such inquiry renders the order of assessment vulnerable to conduct such inquiry renders the order of assessment vulnerable to conduct such inquiry renders the order of assessment vulnerable to revision under Explanation 2(a) to section 263 of the Act Thus, revision under Explanation 2(a) to section 263 of the Act revision under Explanation 2(a) to section 263 of the Act accordingly, under the provisions of clause (a) of Explanation 2 to under the provisions of clause (a) of Explanation 2 to under the provisions of clause (a) of Explanation 2 to section 263 of the Act, the assessment order is deemed to be section 263 of the Act, the assessment order is deemed to be section 263 of the Act, the assessment order is deemed to be erroneous in so far as prejudicial to the interest of the Revenue to erroneous in so far as prejudicial to the interest of the Revenue to erroneous in so far as prejudicial to the interest of the Revenue to the extent of the issue of deduction claimed u/s 80IA in respect of the extent of the issue of deduction claimed u/s 80IA in the extent of the issue of deduction claimed u/s 80IA in cooling tower. We, therefore, uphold the finding of the learned PCIT We, therefore, uphold the finding of the learned PCIT We, therefore, uphold the finding of the learned PCIT that the assessment order was that the assessment order was deemed to erroneous in so far as erroneous in so far as prejudicial to the interests of the Revenue with respect to the prejudicial to the interests of the Revenue with respect to the prejudicial to the interests of the Revenue with respect to the deduction allowed under section 80IA. deduction allowed under section 80IA.

6.6 In so far as second issue of deduction u/s 80G of the Act is far as second issue of deduction u/s 80G of the Act is far as second issue of deduction u/s 80G of the Act is concerned, the Assessing officer had issued a query letter on the Assessing officer had issued a query letter on the Assessing officer had issued a query letter on 20.09.2022 whereas he specifically asked as why the deduction 20.09.2022 whereas he specifically asked as why the deduction 20.09.2022 whereas he specifically asked as why the deduction claimed u/s 80G on CSR activities in contravention of Explanation claimed u/s 80G on CSR activities in contravention of Explanation claimed u/s 80G on CSR activities in contravention of Explanation 2 to section 263 of the Act be disallowed. T n 263 of the Act be disallowed. The assessee filed a he assessee filed a detailed reply which is available on Paper Book page 56 to 61. For detailed reply which is available on Paper Book page 56 to 61. For detailed reply which is available on Paper Book page 56 to 61. For ready reference said reply is reproduced as under: ready reference said reply is reproduced as under:

“1.0 Claim of deduction on account of CSR activities and 1.0 Claim of deduction on account of CSR activities and 1.0 Claim of deduction on account of CSR activities and donations made u/s 80G of th donations made u/s 80G of the Income Tax Act, 1961 (the e Income Tax Act, 1961 (the Act): 1.1 During the captioned year, the assessee has debited Rs. 1.1 During the captioned year, the assessee has debited Rs. 1.1 During the captioned year, the assessee has debited Rs. 30,23,800/- towards eligible CSR & donations in Profit & Loss towards eligible CSR & donations in Profit & Loss towards eligible CSR & donations in Profit & Loss Account. The said amount was already disallowed the expenses Account. The said amount was already disallowed the expenses Account. The said amount was already disallowed the expenses for CSR and donations u/s 37(1) of the for CSR and donations u/s 37(1) of the Act by the assessee in Act by the assessee in computation of income. Thereafter under separate chapter i.e. VIA computation of income. Thereafter under separate chapter i.e. VIA computation of income. Thereafter under separate chapter i.e. VIA as per the provisions of section 80G, the assessee has claimed as per the provisions of section 80G, the assessee has claimed as per the provisions of section 80G, the assessee has claimed deduction of Rs. 18,29,265/ deduction of Rs. 18,29,265/- being the payment made to the being the payment made to the trusts or organization which are eligible for trusts or organization which are eligible for the deduction. the deduction. 1.2 In this regard, the assessee has submitted the tax audit 1.2 In this regard, the assessee has submitted the tax audit 1.2 In this regard, the assessee has submitted the tax audit report and annual report certifying the said amount of deduction report and annual report certifying the said amount of deduction report and annual report certifying the said amount of deduction u/s 80G. Further, the list of eligible trust to whom CSR and u/s 80G. Further, the list of eligible trust to whom CSR and u/s 80G. Further, the list of eligible trust to whom CSR and donation is being made alongwith copies of the donation is being made alongwith copies of the receipt to whom receipt to whom CSR and donation is made is attached as Annexure 2. CSR and donation is made is attached as Annexure 2. 1.3 In this regard, reference is made to Section 29 of the Act 1.3 In this regard, reference is made to Section 29 of the Act 1.3 In this regard, reference is made to Section 29 of the Act which is placed in Chapter IV which is placed in Chapter IV - Computation of Business Income Computation of Business Income which is reproduce as under: which is reproduce as under: Income from profits and gains of Income from profits and gains of business or profession, how business or profession, how computed.

1.4 Thus, the income under the head Income from business and 1.4 Thus, the income under the head Income from business and 1.4 Thus, the income under the head Income from business and profession has to be computed a profession has to be computed after giving effect to section 30 to fter giving effect to section 30 to 43D of the Act. Further, reference has to be drawn on section 43D of the Act. Further, reference has to be drawn on section 43D of the Act. Further, reference has to be drawn on section 37(1) of the Act which has been amended vide Finance Act (No. 2) 37(1) of the Act which has been amended vide Finance Act (No. 2) 37(1) of the Act which has been amended vide Finance Act (No. 2) 2014 w.e.f AY 2014 w.e.f AY 2015-16 as under: General. 37. (1) Any expenditure (not being expenditure of th 37. (1) Any expenditure (not being expenditure of th 37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of described in sections 30 to 36 and not being in the nature of described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid capital expenditure or personal expenses of the assessee), laid capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively or the purposes of the out or expended wholly and exclusively or the purposes of the out or expended wholly and exclusively or the purposes of the business or profession shall be allowed in computing the in business or profession shall be allowed in computing the in business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or chargeable under the head "Profits and gains of business or chargeable under the head "Profits and gains of business or profession". Explanation 2. Explanation 2. - For the removal of doubts, it is hereby declared For the removal of doubts, it is hereby declared that for the purposes of sub that for the purposes of sub- section (1), any expenditure incurred section (1), any expenditure incurred by an assessee on the activities relating to by an assessee on the activities relating to corporate social corporate social responsibility referred to in section 135 of the Companies Act, responsibility referred to in section 135 of the Companies Act, responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013) shall not be deemed to be an expenditure 2013 (18 of 2013) shall not be deemed to be an expenditure 2013 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or incurred by the assessee for the purposes of the business or incurred by the assessee for the purposes of the business or profession. 1.5 Considering the above general section 1.5 Considering the above general section 37(1) of the Act, the 37(1) of the Act, the assessee had duly disallowed the expenses of CSR / Donation in assessee had duly disallowed the expenses of CSR / Donation in assessee had duly disallowed the expenses of CSR / Donation in computing the Income from business and Profession which is computing the Income from business and Profession which is computing the Income from business and Profession which is clearly evident from the computation of income attached above. clearly evident from the computation of income attached above. clearly evident from the computation of income attached above. 1.6 As per the separate chapter "Chapter VIA 1.6 As per the separate chapter "Chapter VIA - Deduction to be duction to be made in computing total income". Section 80A(1) which is made in computing total income". Section 80A(1) which is made in computing total income". Section 80A(1) which is reproduce as under: reproduce as under: Deductions to be made in computing total income Deductions to be made in computing total income Deductions to be made in computing total income 80A. (1) In computing the total income of an assessee, there shall 80A. (1) In computing the total income of an assessee, there shall 80A. (1) In computing the total income of an assessee, there shall be allowed from his gross total income, in accord be allowed from his gross total income, in accordance with and ance with and subject to the provisions of this Chapter, the deductions specified subject to the provisions of this Chapter, the deductions specified subject to the provisions of this Chapter, the deductions specified in sections 80C to 80U. in sections 80C to 80U. 1.7 Further, section 80G of the Act which is reproduce as under: 1.7 Further, section 80G of the Act which is reproduce as under: 1.7 Further, section 80G of the Act which is reproduce as under: Deduction in respect of donations to certain funds, charitable Deduction in respect of donations to certain funds, charitable Deduction in respect of donations to certain funds, charitable institutions, etc 80G. institutions, etc 80G. (1) In computing the total income of an (1) In computing the total income of an assessee, there shall be deducted, in accordance with and assessee, there shall be deducted, in accordance with and assessee, there shall be deducted, in accordance with and subject to the provisions of this section, subject to the provisions of this section, -

1.8 Thus, on reading of section 80A(1) and 80G(1) of the Act 1.8 Thus, on reading of section 80A(1) and 80G(1) of the Act 1.8 Thus, on reading of section 80A(1) and 80G(1) of the Act which state that, in computing the total income ded which state that, in computing the total income deduction shall be uction shall be allowed to the assessee as per the specified section 80C to 80U allowed to the assessee as per the specified section 80C to 80U allowed to the assessee as per the specified section 80C to 80U of the Act. 1.9 On perusing the section 80G of the Act which nowhere state 1.9 On perusing the section 80G of the Act which nowhere state 1.9 On perusing the section 80G of the Act which nowhere state that, payment which are classified as CSR or donation shall not that, payment which are classified as CSR or donation shall not that, payment which are classified as CSR or donation shall not be allowed even after the amendment i be allowed even after the amendment in the section 37(1) of the n the section 37(1) of the Act, there is no change in the section 80G of the Act. Further, in Act, there is no change in the section 80G of the Act. Further, in Act, there is no change in the section 80G of the Act. Further, in section 80G of the Act there is no such restriction of CSR section 80G of the Act there is no such restriction of CSR section 80G of the Act there is no such restriction of CSR expenses. 1.10 Section 37(1) of the Act falls in Chapter IV 1.10 Section 37(1) of the Act falls in Chapter IV - Computation of Computation of Business Income, whereas S Business Income, whereas Section 80G of the Act falls in Chapter ection 80G of the Act falls in Chapter VIA - Deduction to be made in computing total income. Both Deduction to be made in computing total income. Both Deduction to be made in computing total income. Both sections are placed in different chapter for specific purpose and sections are placed in different chapter for specific purpose and sections are placed in different chapter for specific purpose and thus cannot be imported to other chapter. thus cannot be imported to other chapter. 1.11 Section 37(1) of the Act states, expenses wil 1.11 Section 37(1) of the Act states, expenses will not be allowed l not be allowed in computation of business income. Whereas section 80G of the in computation of business income. Whereas section 80G of the in computation of business income. Whereas section 80G of the Act state of deduction from the gross total income (i.e. aggregate Act state of deduction from the gross total income (i.e. aggregate Act state of deduction from the gross total income (i.e. aggregate of all five head of income). Thus, the meaning of "expenses" and of all five head of income). Thus, the meaning of "expenses" and of all five head of income). Thus, the meaning of "expenses" and "deduction" are different. Expenses are allow "deduction" are different. Expenses are allowed from the ed from the business income. While deduction is to be allowed from the gross business income. While deduction is to be allowed from the gross business income. While deduction is to be allowed from the gross total income irrespective of whether the payment is made for the total income irrespective of whether the payment is made for the total income irrespective of whether the payment is made for the business purpose or not. business purpose or not. 1.12 Further, section 37(1) of the Act being general in nature and 1.12 Further, section 37(1) of the Act being general in nature and 1.12 Further, section 37(1) of the Act being general in nature and will not override the will not override the specific section of 80G of the Act while specific section of 80G of the Act while allowing the deduction on the payment made to charitable trust allowing the deduction on the payment made to charitable trust allowing the deduction on the payment made to charitable trust or organization. or organization. 1.13 In this regard, it is pertinent to note the ratio laid down by 1.13 In this regard, it is pertinent to note the ratio laid down by 1.13 In this regard, it is pertinent to note the ratio laid down by the Hon'ble Rajasthan High Court in the case of Jaswant Trading the Hon'ble Rajasthan High Court in the case of Jaswant Trading the Hon'ble Rajasthan High Court in the case of Jaswant Trading Co -vs.- CIT [1996] 85 Taxman 639 (RAJ.) wherein the firm made CIT [1996] 85 Taxman 639 (RAJ.) wherein the firm made CIT [1996] 85 Taxman 639 (RAJ.) wherein the firm made payment to various trusts and CM relief fund and claimed as payment to various trusts and CM relief fund and claimed as payment to various trusts and CM relief fund and claimed as business expenses u/s 37(1) @ 100%. Revenue contested that, business expenses u/s 37(1) @ 100%. Revenue contested that, business expenses u/s 37(1) @ 100%. Revenue contested that, such payment are covered by deduction u/s 80G @ 50% instead such payment are covered by deduction u/s 80G @ 50% instead such payment are covered by deduction u/s 80G @ 50% instead of claiming it a of claiming it as business expenses. In this regard, High Court s business expenses. In this regard, High Court held payment made to trust / funds which are eligible for held payment made to trust / funds which are eligible for held payment made to trust / funds which are eligible for deduction are clearly covered u/s 80G and 50% deduction has to deduction are clearly covered u/s 80G and 50% deduction has to deduction are clearly covered u/s 80G and 50% deduction has to be allowed as the same doesn't falls within section 37(1) of the be allowed as the same doesn't falls within section 37(1) of the be allowed as the same doesn't falls within section 37(1) of the Act. Relevant part of Act. Relevant part of the order is reproduced as under: the order is reproduced as under: 7. Besides the above, the provisions of section 37 are general in 7. Besides the above, the provisions of section 37 are general in 7. Besides the above, the provisions of section 37 are general in nature and the provisions of section 80G are specific. Applying nature and the provisions of section 80G are specific. Applying nature and the provisions of section 80G are specific. Applying the maxim generalia specialibus non derogant if an amount is the maxim generalia specialibus non derogant if an amount is the maxim generalia specialibus non derogant if an amount is liable for deduction under sect liable for deduction under section 80G it cannot be claimed under ion 80G it cannot be claimed under the general provisions of section 37(1). Section 80G provides that the general provisions of section 37(1). Section 80G provides that the general provisions of section 37(1). Section 80G provides that in computing the total income of an assessee, there shall be in computing the total income of an assessee, there shall be in computing the total income of an assessee, there shall be deducted, in accordance with and subject to the provisions of this deducted, in accordance with and subject to the provisions of this deducted, in accordance with and subject to the provisions of this section, an amount equal t section, an amount equal to fifty per cent of the aggregate of the o fifty per cent of the aggregate of the sums specified in sub sums specified in sub-section (2). If a particular amount of section (2). If a particular amount of expenditure falls within the category of donation, then the expenditure falls within the category of donation, then the expenditure falls within the category of donation, then the deduction as provided under section 80G alone is applicable. deduction as provided under section 80G alone is applicable. deduction as provided under section 80G alone is applicable. 1.14 The assessee would also like 1.14 The assessee would also like to place reliance on the to place reliance on the decision of Hon'ble Bangalore Tribunal in the case of First decision of Hon'ble Bangalore Tribunal in the case of First decision of Hon'ble Bangalore Tribunal in the case of First American (India) Pvt. Ltd. v. ACIT (ITA No. 1762/Bang/2019, American (India) Pvt. Ltd. v. ACIT (ITA No. 1762/Bang/2019, American (India) Pvt. Ltd. v. ACIT (ITA No. 1762/Bang/2019, dated 29- 04- -2020) (copy of the decision enclosed as Annexure 3) 2020) (copy of the decision enclosed as Annexure 3) wherein AO was of opinion that claim made und wherein AO was of opinion that claim made under section 80 G er section 80 G was not allowable as amount was forming part of CSR expenses was not allowable as amount was forming part of CSR expenses was not allowable as amount was forming part of CSR expenses debited to P & L A/c. However, Tribunal has allowed the claim of debited to P & L A/c. However, Tribunal has allowed the claim of debited to P & L A/c. However, Tribunal has allowed the claim of the assessee by stating that, CSR expenditure is to be disallowed the assessee by stating that, CSR expenditure is to be disallowed the assessee by stating that, CSR expenditure is to be disallowed by new Explanation 2 to section 37(1), while com by new Explanation 2 to section 37(1), while computing Income puting Income under Head 'Income from Business and Profession'. Expenditure under Head 'Income from Business and Profession'. Expenditure under Head 'Income from Business and Profession'. Expenditure incurred under section 30 to 36 are claimed while computing incurred under section 30 to 36 are claimed while computing incurred under section 30 to 36 are claimed while computing income under head, 'Income from Business and Profession", income under head, 'Income from Business and Profession", income under head, 'Income from Business and Profession", where as monies spent under section 80G are claimed while where as monies spent under section 80G are claimed while where as monies spent under section 80G are claimed while computing "Total Taxable income" in hands of assessee. Point of uting "Total Taxable income" in hands of assessee. Point of uting "Total Taxable income" in hands of assessee. Point of claim under these provisions are different. Further, intention of claim under these provisions are different. Further, intention of claim under these provisions are different. Further, intention of legislature is very clear and unambiguous, since expenditure legislature is very clear and unambiguous, since expenditure legislature is very clear and unambiguous, since expenditure incurred under section 30 to 36 are excluded from Explanation 2 incurred under section 30 to 36 are excluded from Explanation 2 incurred under section 30 to 36 are excluded from Explanation 2 to section 37(1) they are specifically excluded in clarification ction 37(1) they are specifically excluded in clarification ction 37(1) they are specifically excluded in clarification issued. There is no restriction on an expenditure being claimed issued. There is no restriction on an expenditure being claimed issued. There is no restriction on an expenditure being claimed under above sections to be exempt, as long as it satisfies under above sections to be exempt, as long as it satisfies under above sections to be exempt, as long as it satisfies necessary conditions under section 30 to 36 for computing necessary conditions under section 30 to 36 for computing necessary conditions under section 30 to 36 for computing income under he income under head, "Income from Business and Profession" For ad, "Income from Business and Profession" For claiming benefit under section 80G, deductions are considered at claiming benefit under section 80G, deductions are considered at claiming benefit under section 80G, deductions are considered at stage of computing "Total taxable income'. Even if any payments stage of computing "Total taxable income'. Even if any payments stage of computing "Total taxable income'. Even if any payments under section 80G forms part of CSR payments, same would under section 80G forms part of CSR payments, same would under section 80G forms part of CSR payments, same would already stand excluded w already stand excluded while computing, Income under head, hile computing, Income under head, "Income "Income "Income from from from Business Business Business and and and Profession". Profession". Profession". Effect Effect Effect of of of such such such disallowance would lead to increase in Business income. disallowance would lead to increase in Business income. disallowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for Thereafter benefit accruing to assessee under Chapter VIA for Thereafter benefit accruing to assessee under Chapter VIA for computing "Total Taxable Income" cannot be denied computing "Total Taxable Income" cannot be denied to assessee, to assessee, subject to fulfillment of necessary conditions therein. subject to fulfillment of necessary conditions therein. 1.15 The assessee further would like to place reliance on the 1.15 The assessee further would like to place reliance on the 1.15 The assessee further would like to place reliance on the recent decision of Hon'ble Kolkata Tribunal in case of JMS Mining recent decision of Hon'ble Kolkata Tribunal in case of JMS Mining recent decision of Hon'ble Kolkata Tribunal in case of JMS Mining (P.) Ltd v. PCIT (ITA No 146/Kol/2021, dated 22 (P.) Ltd v. PCIT (ITA No 146/Kol/2021, dated 22-07-2021) ( 2021) (copy of the decision enclosed as Annexure 4) wherein after having of the decision enclosed as Annexure 4) wherein after having of the decision enclosed as Annexure 4) wherein after having detailed discussion it has been held that, section 37(1) which detailed discussion it has been held that, section 37(1) which detailed discussion it has been held that, section 37(1) which denies deduction for CSR expenses by way of business denies deduction for CSR expenses by way of business denies deduction for CSR expenses by way of business expenditure is applicable only to extent of computing 'business expenditure is applicable only to extent of computing 'business expenditure is applicable only to extent of computing 'business income' under Chapter IV der Chapter IV-D and it could not be extended or D and it could not be extended or imported to CSR contributions which was otherwise eligible for imported to CSR contributions which was otherwise eligible for imported to CSR contributions which was otherwise eligible for deduction under Chapter VI donation made by assessee deduction under Chapter VI donation made by assessee deduction under Chapter VI donation made by assessee company on account of corporate social responsibility to two company on account of corporate social responsibility to two company on account of corporate social responsibility to two funds/trusts which were duly r funds/trusts which were duly registered under section 80G(5)(vi) egistered under section 80G(5)(vi) was to be allowed as deduction under section 80G. was to be allowed as deduction under section 80G. 1.16 Reliance is also placed on the recent decision of Hon'ble 1.16 Reliance is also placed on the recent decision of Hon'ble 1.16 Reliance is also placed on the recent decision of Hon'ble Bangalore Tribunal in case of Sling Media Pvt. Ltd. Vs DCIT (ITA. Bangalore Tribunal in case of Sling Media Pvt. Ltd. Vs DCIT (ITA. Bangalore Tribunal in case of Sling Media Pvt. Ltd. Vs DCIT (ITA. No. 197/Bang/2020, dated 30.11.2021) (copy No. 197/Bang/2020, dated 30.11.2021) (copy of the decision of the decision enclosed as Annexure 5) wherein it was held that assessee enclosed as Annexure 5) wherein it was held that assessee enclosed as Annexure 5) wherein it was held that assessee cannot be denied the benefit of claim under Chapter VI A, which cannot be denied the benefit of claim under Chapter VI A, which cannot be denied the benefit of claim under Chapter VI A, which is considered for computing 'Total Taxable Income". If assessee is is considered for computing 'Total Taxable Income". If assessee is is considered for computing 'Total Taxable Income". If assessee is denied this benefit, merely because such payment f denied this benefit, merely because such payment forms part of orms part of CSR, would lead to double disallowance, which is not the CSR, would lead to double disallowance, which is not the CSR, would lead to double disallowance, which is not the intention of Legislature'. intention of Legislature'. 1.17 Further, to the above decisions, the assessee relies on the 1.17 Further, to the above decisions, the assessee relies on the 1.17 Further, to the above decisions, the assessee relies on the following decisions wherein on consistent basis it has been held following decisions wherein on consistent basis it has been held following decisions wherein on consistent basis it has been held that, the CSR expenditure wh that, the CSR expenditure which are disallowed u/s 37(1) in ich are disallowed u/s 37(1) in computing the Income from business and profession are allowed computing the Income from business and profession are allowed computing the Income from business and profession are allowed as deduction u/s 80G of the Act of Chapter VIA: as deduction u/s 80G of the Act of Chapter VIA: i. Goldman Sachs v Jt. CIT [(2020) 117 taxmann.com 535 (ITAT i. Goldman Sachs v Jt. CIT [(2020) 117 taxmann.com 535 (ITAT i. Goldman Sachs v Jt. CIT [(2020) 117 taxmann.com 535 (ITAT Banglore)] ii. ii. National National Seeds Seeds Corpn. Corpn. Ltd. Ltd. v. v. Addl. Addl. CIT CI T (ITA (ITA No. No. 6794/Delhi/2014, dated 04.04.2018) 6794/Delhi/2014, dated 04.04.2018) iii. Allegis Services (India) (P.) Ltd. v. Asstt. CIT (ITA No. iii. Allegis Services (India) (P.) Ltd. v. Asstt. CIT (ITA No. iii. Allegis Services (India) (P.) Ltd. v. Asstt. CIT (ITA No. 1693/Bang/2019, dated 29.04.2020) 1693/Bang/2019, dated 29.04.2020) iv. FNF India (P.) Ltd. v. Asstt. CIT (ITA No. 1565/Bang/2019, iv. FNF India (P.) Ltd. v. Asstt. CIT (ITA No. 1565/Bang/2019, iv. FNF India (P.) Ltd. v. Asstt. CIT (ITA No. 1565/Bang/2019, dated 05.01.2021) dated 05.01.2021) 1.18 Considering the above, the 1.18 Considering the above, the assessee has correctly assessee has correctly disallowed the CSR / donation expenses u/s 37(1) of the Act in disallowed the CSR / donation expenses u/s 37(1) of the Act in disallowed the CSR / donation expenses u/s 37(1) of the Act in computing the business income and claimed deduction u/s 80G computing the business income and claimed deduction u/s 80G computing the business income and claimed deduction u/s 80G of the Act which falls under different Chapter VIA wherein there of the Act which falls under different Chapter VIA wherein there of the Act which falls under different Chapter VIA wherein there is no such restriction. restriction.” 6.7 On perusal of the above notice issued by the AO and the reply the above notice issued by the AO and the reply the above notice issued by the AO and the reply by the assessee, we find that the Assessing Officer specifically we find that the Assessing Officer specifically we find that the Assessing Officer specifically issued a show cause notice dated 20.09.2022 questioning the issued a show cause notice dated 20.09.2022 questioning the issued a show cause notice dated 20.09.2022 questioning the allowability of deduction in respect of CSR expenditure in the light allowability of deduction in respect of CSR expenditure in the light allowability of deduction in respect of CSR expenditure in the light of section 80G. In response, the assessee furnished a detailed G. In response, the assessee furnished a detailed G. In response, the assessee furnished a detailed submission, citing statutory provisions and judicial precedents, submission, citing statutory provisions and judicial precedents, submission, citing statutory provisions and judicial precedents, explaining that CSR expenditure disallowed under section 37(1) in explaining that CSR expenditure disallowed under section 37(1) in explaining that CSR expenditure disallowed under section 37(1) in computing computing computing business business business income income income could could could nevertheless nevertheless nevertheless qualify qualify qualify for for for deduction under Ch deduction under Chapter VIA, particularly section 80G. The apter VIA, particularly section 80G. The Assessing Assessing Assessing Officer, Officer, Officer, after after after considering considering considering the the the reply, reply, reply, made made made no no no disallowance. Thus, disallowance. Thus, the Assessing Officer has duly examined the the Assessing Officer has duly examined the specific issue of allowability of deduction u/s 80G of the Act in specific issue of allowability of deduction u/s 80G of the Act specific issue of allowability of deduction u/s 80G of the Act respect of CSR expenditure. respect of CSR expenditure.

6.8 On perusal of the notice and the reply, it is evident that a On perusal of the notice and the reply, it is evident that a On perusal of the notice and the reply, it is evident that a conscious examination of the issue was indeed carried out by the conscious examination of the issue was indeed carried out by the conscious examination of the issue was indeed carried out by the Assessing Officer, who applied his mind and accepted the Assessing Officer, who applied his mind and accepted the Assessing Officer, who applied his mind and accepted the explanation of the assessee. Once inquiry was conducted and a view explanation of the assessee. Once inquiry was conducted and a view explanation of the assessee. Once inquiry was conducted and a view was taken, the mere fact that the Assessing Officer did not record as taken, the mere fact that the Assessing Officer did not record as taken, the mere fact that the Assessing Officer did not record elaborate reasons cannot justify assumption of jurisdiction under elaborate reasons cannot justify assumption of jurisdiction under elaborate reasons cannot justify assumption of jurisdiction under section 263. The law as declared by the Hon’ble Supreme Court in section 263. The law as declared by the Hon’ble Supreme Court in section 263. The law as declared by the Hon’ble Supreme Court in V-Con Integrate Solutions Pvt. Ltd. Con Integrate Solutions Pvt. Ltd. (supra) is clear that t ) is clear that the assessee has no control over the manner in which the Assessing Officer pens has no control over the manner in which the Assessing Officer pens has no control over the manner in which the Assessing Officer pens his order; if the inquiry has been made, the presumption is that the his order; if the inquiry has been made, the presumption is that the his order; if the inquiry has been made, the presumption is that the Assessing Officer was satisfied with the explanation offered. Assessing Officer was satisfied with the explanation offered. Assessing Officer was satisfied with the explanation offered.

6.9 In view of the above discussion, we hold In view of the above discussion, we hold that the assumption that the assumption of jurisdiction by the learned PCIT under section 263 of the Act is of jurisdiction by the learned PCIT under section 263 of the Act is of jurisdiction by the learned PCIT under section 263 of the Act is justified in respect of the deduction allowed under section 80IA of justified in respect of the deduction allowed under section 80IA of justified in respect of the deduction allowed under section 80IA of the Act, where no inquiry was carried out by the Assessing Officer. the Act, where no inquiry was carried out by the Assessing Officer. the Act, where no inquiry was carried out by the Assessing Officer. However, in respect of the deduc However, in respect of the deduction allowed under section 80G of tion allowed under section 80G of the Act, the record demonstrates that the Assessing Officer had the Act, the record demonstrates that the Assessing Officer had the Act, the record demonstrates that the Assessing Officer had conducted due inquiry and applied his mind to the issue. Therefore, conducted due inquiry and applied his mind to the issue. Therefore, conducted due inquiry and applied his mind to the issue. Therefore, invocation of Explanation 2(a) to section 263 is not sustainable on invocation of Explanation 2(a) to section 263 is not sustainable on invocation of Explanation 2(a) to section 263 is not sustainable on this aspect.

6.10 The ground No. 1 of the appeal of the assessee is accordingly The ground No. 1 of the appeal of the assessee is accordingly The ground No. 1 of the appeal of the assessee is accordingly partly allowed.

7.1 We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused the relevant materials on record. the relevant materials on record. It is the PCIT's contention that the It is the PCIT's contention that the assessee was not entitled to the said deduction, citing the principle assessee was not entitled to the said deduction, citing the principle assessee was not entitled to the said deduction, citing the principle that donations must be that donations must be voluntary and not made under a legal voluntary and not made under a legal obligation. The Ld. PCIT referred to the decision of the Hon’ble The Ld. PCIT referred to the decision of the Hon’ble The Ld. PCIT referred to the decision of the Hon’ble Supreme Court in the case of PVG Raju, Raja Vizianagaram (1976 upreme Court in the case of PVG Raju, Raja Vizianagaram (1976 upreme Court in the case of PVG Raju, Raja Vizianagaram (1976 CSR (1) 1017] but, the ld PCIT, in his own order, acknowledged that , the ld PCIT, in his own order, acknowledged that , the ld PCIT, in his own order, acknowledged that the very issue is curr the very issue is currently sub-judice before the jurisdictional judice before the jurisdictional Bombay High Court, following a contrary view taken by the co- Bombay High Court, following a contrary view taken by the co Bombay High Court, following a contrary view taken by the co ordinate Benches of this Tribunal, which had ruled in favor of the ordinate Benches of this Tribunal, which had ruled in favor of the ordinate Benches of this Tribunal, which had ruled in favor of the assessee in similar cases. The PCIT's order expressly states: The assessee in similar cases. The PCIT's order expressly states: assessee in similar cases. The PCIT's order expressly states: relevant finding of the Ld. PCIT is reproduced as under: the Ld. PCIT is reproduced as under: the Ld. PCIT is reproduced as under:

“6.5 As regards the judicial pronouncements cited by the As regards the judicial pronouncements cited by the As regards the judicial pronouncements cited by the assessee, it is stated that appeals filed by the Department before assessee, it is stated that appeals filed by the Department before assessee, it is stated that appeals filed by the Department before the Hon’ble Bombay High Court on this issue are pending for ble Bombay High Court on this issue are pending for ble Bombay High Court on this issue are pending for adjudication in the following adjudication in the following cases:- Sr. Name of the Assessee Name of the Assessee PAN ITAT Order No. High Court Lodging No. High Court Lodging No. No

2. Worley Services AAACH0456J 554/Mum/2024 ITXAL/4392/2025 ITXAL/4392/2025 Industries Pvt. Ltd. Industries Pvt. Ltd.

Since the issue Since the issue is sub-judice before the jurisdictional Bombay judice before the jurisdictional Bombay High Court, the contention of the assessee cannot be accepted. High Court, the contention of the assessee cannot be accepted. High Court, the contention of the assessee cannot be accepted.” 7.2 It is therefore evident that, at the time the Assessing Officer t is therefore evident that, at the time the Assessing Officer t is therefore evident that, at the time the Assessing Officer (AO) completed the assessment, two plausible interpretations of the (AO) completed the assessment, two plausible interpretations of the (AO) completed the assessment, two plausible interpretations of the law existed on this matter. One view, adopted by the co-ordinate law existed on this matter. One view, adopted by the co law existed on this matter. One view, adopted by the co Benches of this Tribunal, supported the assessee's claim, while the Benches of this Tribunal, supported the assessee's claim, wh Benches of this Tribunal, supported the assessee's claim, wh other, championed by the Revenue, denied it. The Hon'ble Supreme other, championed by the Revenue, denied it. The Hon'ble Supreme other, championed by the Revenue, denied it. The Hon'ble Supreme Court, in CIT v. Max India Ltd. [295 ITR 282 (SC)] CIT v. Max India Ltd. [295 ITR 282 (SC)] CIT v. Max India Ltd. [295 ITR 282 (SC)], has definitively held that where two opinions on a point of law are definitively held that where two opinions on a point of law are definitively held that where two opinions on a point of law are available, and the Assessing Officer has adopted one of them, the available, and the Assessing Officer has adopted one of them, t available, and the Assessing Officer has adopted one of them, t Commissioner cannot invoke the revisional powers under Section Commissioner cannot invoke the revisional powers under Section Commissioner cannot invoke the revisional powers under Section 263 merely to substitute his own opinion for that of the AO. Such 263 merely to substitute his own opinion for that of the AO. Such 263 merely to substitute his own opinion for that of the AO. Such an assessment cannot be deemed "erroneous" and "prejudicial to an assessment cannot be deemed "erroneous" and "prejudicial to an assessment cannot be deemed "erroneous" and "prejudicial to the interests of the Revenue. In light of this settled legal position, the interests of the Revenue. In light of this settled legal the interests of the Revenue. In light of this settled legal we hold that the action of the Assessing Officer in allowing the we hold that the action of the Assessing Officer in allowing the we hold that the action of the Assessing Officer in allowing the deduction under Section 80G, being based on a plausible and deduction under Section 80G, being based on a plausible and deduction under Section 80G, being based on a plausible and available interpretation of the law, was not erroneous. The ground available interpretation of the law, was not erroneous available interpretation of the law, was not erroneous No. 2 of the appeal of the assessee is accordingly all No. 2 of the appeal of the assessee is accordingly allowed. owed.

“2.1 On plain reading of section 801A(4) (iv) of the Act, it could be 2.1 On plain reading of section 801A(4) (iv) of the Act, it could be 2.1 On plain reading of section 801A(4) (iv) of the Act, it could be seen that deduction under section 801A is available in respec seen that deduction under section 801A is available in respec seen that deduction under section 801A is available in respect of profit or gains derived from the business of generation of 'power'. profit or gains derived from the business of generation of 'power'. profit or gains derived from the business of generation of 'power'. The word power is not defined under Income The word power is not defined under Income-tax Act ('the Act'). tax Act ('the Act'). However, in the decision of Apex Court in the case of CIT However, in the decision of Apex Court in the case of CIT However, in the decision of Apex Court in the case of CIT-vs.- Tanfac Industries Ltd (SLP No. 18537 of 2009) (copy of t Tanfac Industries Ltd (SLP No. 18537 of 2009) (copy of t Tanfac Industries Ltd (SLP No. 18537 of 2009) (copy of the decision is attached as Annexure decision is attached as Annexure-7) has laid down the ration 7) has laid down the ration wherein it was held that steam is also form of power and wherein it was held that steam is also form of power and wherein it was held that steam is also form of power and assessee is entitled to deduction u/s 80 assessee is entitled to deduction u/s 80-IA on the same on captive IA on the same on captive basis. The rationale of eligibility of section 801A deduction on basis. The rationale of eligibility of section 801A deduction on basis. The rationale of eligibility of section 801A deduction on steam and cooling power is similar and Courts are taking am and cooling power is similar and Courts are taking am and cooling power is similar and Courts are taking consistent views on the same. consistent views on the same. 2.2 In the notice issued under Section 263, at paragraph 2, Your 2.2 In the notice issued under Section 263, at paragraph 2, Your 2.2 In the notice issued under Section 263, at paragraph 2, Your Honour has stated that: Honour has stated that: The assessee has installed a cooling Tower that generates a The assessee has installed a cooling Tower that generates a The assessee has installed a cooling Tower that generates a cooling effect at their plant and has claimed deduction u/s 80 cooling effect at their plant and has claimed deduction u/s 80 cooling effect at their plant and has claimed deduction u/s 80- 1A(4)(iv) amounting to Rs. 1,62,14,945/ 1A(4)(iv) amounting to Rs. 1,62,14,945/- which should have been which should have been disallowed by the Assessing Officer. For claiming the deduction disallowed by the Assessing Officer. For claiming the deduction disallowed by the Assessing Officer. For claiming the deduction assessee has relied on the decision of Hon'ble ITAT in the case Saf see has relied on the decision of Hon'ble ITAT in the case Saf see has relied on the decision of Hon'ble ITAT in the case Saf Yeast Yeast Yeast Company Company Company Private Private Private Limited Limited Limited vs. vs. vs. DCIT DCIT DCIT (ITA (ITA (ITA No.1635/Mum/2015, dated 24 No.1635/Mum/2015, dated 24-11-2017) wherein, relying on 2017) wherein, relying on Hon'ble Supreme Court decision in the case of Tanfac Industries Hon'ble Supreme Court decision in the case of Tanfac Industries Hon'ble Supreme Court decision in the case of Tanfac Industries (SLP No. 18537 of 2009), Hon' (SLP No. 18537 of 2009), Hon'ble ITAT had held that steam is also ble ITAT had held that steam is also form of power. On the same basis it was claimed by the assessee form of power. On the same basis it was claimed by the assessee form of power. On the same basis it was claimed by the assessee that cooling effect generated through Cooling Tower also falls in that cooling effect generated through Cooling Tower also falls in that cooling effect generated through Cooling Tower also falls in the definition of Power. It is also seen that the auditor who has the definition of Power. It is also seen that the auditor who has the definition of Power. It is also seen that the auditor who has certified Form No. 10CC certified Form No. 10CCB in the case of assessee for claiming the B in the case of assessee for claiming the deduction u/s. 801A has qualified this fact. However, the facts of deduction u/s. 801A has qualified this fact. However, the facts of deduction u/s. 801A has qualified this fact. However, the facts of the cited case are different from those in the case of assessee. In the cited case are different from those in the case of assessee. In the cited case are different from those in the case of assessee. In the cited case decided by the Hon'ble Supreme Court, the question the cited case decided by the Hon'ble Supreme Court, the question the cited case decided by the Hon'ble Supreme Court, the question was whether was whether the power generated through steam is eligible for the power generated through steam is eligible for 801A. Hon'ble Supreme Court while delivering the decision has 801A. Hon'ble Supreme Court while delivering the decision has 801A. Hon'ble Supreme Court while delivering the decision has held that the power generated through steam is eligible for held that the power generated through steam is eligible for held that the power generated through steam is eligible for deduction u/s. 801A. However, in the case of assessee, the deduction u/s. 801A. However, in the case of assessee, the deduction u/s. 801A. However, in the case of assessee, the assessee has installed co assessee has installed cooling Tower at their plant which oling Tower at their plant which generates cooling effect through "cooling Tower" which is different generates cooling effect through "cooling Tower" which is different generates cooling effect through "cooling Tower" which is different from the power generated through steam. from the power generated through steam. 2.3 However, basis for making the revision is factually incorrect, 2.3 However, basis for making the revision is factually incorrect, 2.3 However, basis for making the revision is factually incorrect, the assessee would like to highlight that, the the assessee would like to highlight that, the Hon'ble Jurisdictional Hon'ble Jurisdictional Tribunal in case of Saf Yeast Company Private Limited v. DCIT Tribunal in case of Saf Yeast Company Private Limited v. DCIT Tribunal in case of Saf Yeast Company Private Limited v. DCIT (ITA No. 1635/Mum/2015, Date of order 24 (ITA No. 1635/Mum/2015, Date of order 24-11-2017) [the copy of 2017) [the copy of the order is attached as Annexure 8] has specifically held that, the order is attached as Annexure 8] has specifically held that, the order is attached as Annexure 8] has specifically held that, power generating by Cooling Tower falls in power generating by Cooling Tower falls in the definition of Power the definition of Power and is eligible for 801A deduction. In taking this view, the tribunal and is eligible for 801A deduction. In taking this view, the tribunal and is eligible for 801A deduction. In taking this view, the tribunal relied on the ratio laid down in the decision of Apex Court in the relied on the ratio laid down in the decision of Apex Court in the relied on the ratio laid down in the decision of Apex Court in the case of Tanfac Industries Ltd (Supra) and the Delhi Tribunal case of Tanfac Industries Ltd (Supra) and the Delhi Tribunal case of Tanfac Industries Ltd (Supra) and the Delhi Tribunal decision in the case of SIAL SBEC decision in the case of SIAL SBEC Bioenergy Ltd. vs. DCIT. Bioenergy Ltd. vs. DCIT. Following were the important facts highlighted by Court in Following were the important facts highlighted by Court in Following were the important facts highlighted by Court in allowing section 80IA deduction: allowing section 80IA deduction: Tribunal referred to the CIT (A) observations that the term 'Power' Tribunal referred to the CIT (A) observations that the term 'Power' Tribunal referred to the CIT (A) observations that the term 'Power' has not been defined to mean electrical power to the exclusion of has not been defined to mean electrical power to the exclusion of has not been defined to mean electrical power to the exclusion of other forms of power and the term has to be understood in its forms of power and the term has to be understood in its forms of power and the term has to be understood in its natural meaning. Tribunal further stated that legislature has natural meaning. Tribunal further stated that legislature has natural meaning. Tribunal further stated that legislature has clearly provided benefit of deduction u/s 80 clearly provided benefit of deduction u/s 80-IA of the Act for IA of the Act for generation of any form of power generated by an undertaking. generation of any form of power generated by an undertaking. generation of any form of power generated by an undertaking. Just like steam, cooling power/Refrigeration power is also a form am, cooling power/Refrigeration power is also a form am, cooling power/Refrigeration power is also a form of power. The power generated by the Cooling Tower is known as of power. The power generated by the Cooling Tower is known as of power. The power generated by the Cooling Tower is known as Refrigeration Power or Cooling Power. Cooling or Refrigeration Refrigeration Power or Cooling Power. Cooling or Refrigeration Refrigeration Power or Cooling Power. Cooling or Refrigeration Power, as the name suggests, is used in reducing the temperature Power, as the name suggests, is used in reducing the temperature Power, as the name suggests, is used in reducing the temperature of an object, whether solid, liquid or gaseous. , whether solid, liquid or gaseous.

2.4 The issue in both these cases revolves around whether the 2.4 The issue in both these cases revolves around whether the 2.4 The issue in both these cases revolves around whether the power generated through steam, or a cooling effect generated by a power generated through steam, or a cooling effect generated by a power generated through steam, or a cooling effect generated by a cooling tower, can be eligible for deduction under section 80 cooling tower, can be eligible for deduction under section 80 cooling tower, can be eligible for deduction under section 80-IA. 2.5 While it is true that 2.5 While it is true that in the case of Tanfac Industries (supra), the in the case of Tanfac Industries (supra), the Hon'ble Supreme Court dealt with the issue of whether steam and Hon'ble Supreme Court dealt with the issue of whether steam and Hon'ble Supreme Court dealt with the issue of whether steam and captively used qualifies as power for the purposes of Section 80 captively used qualifies as power for the purposes of Section 80 captively used qualifies as power for the purposes of Section 80- IA. The ratio of this decision was later reinforced by the Hon'ble IA. The ratio of this decision was later reinforced by the Hon'ble IA. The ratio of this decision was later reinforced by the Hon'ble ITAT in Saf Ye ITAT in Saf Yeast Company Private Limited's (supra) case where it ast Company Private Limited's (supra) case where it was held that the power generated through a cooling tower also was held that the power generated through a cooling tower also was held that the power generated through a cooling tower also qualifies as power and is eligible for the same deduction u/s 80 qualifies as power and is eligible for the same deduction u/s 80 qualifies as power and is eligible for the same deduction u/s 80- IA. 2.6 Thus, Your honour is incorrect in mentioning that, the decision 2.6 Thus, Your honour is incorrect in mentioning that, the decision 2.6 Thus, Your honour is incorrect in mentioning that, the decision of Hon'ble Mumbai Tribunal pertains to generation of steam and on'ble Mumbai Tribunal pertains to generation of steam and on'ble Mumbai Tribunal pertains to generation of steam and not cooling power and the facts of both the case are different. The not cooling power and the facts of both the case are different. The not cooling power and the facts of both the case are different. The assessee would like to highlight that, facts of both the case are assessee would like to highlight that, facts of both the case are assessee would like to highlight that, facts of both the case are same and squarely same and squarely covered.” 8.2 The learned counsel for the ass The learned counsel for the assessee further placed reliance on essee further placed reliance on the decision of the Co the decision of the Co-ordinate Bench of the Mumbai Tribunal in ordinate Bench of the Mumbai Tribunal in the case of Saf Yeast Company Pvt. Ltd. v. Dy. CIT Saf Yeast Company Pvt. Ltd. v. Dy. CIT in in to 1637/Mum/2014 and ITA Nos. 1777 to 1780/Mum/2014 to 1637/Mum/2014 and ITA Nos. 1777 to 1780/Mum/2014 to 1637/Mum/2014 and ITA Nos. 1777 to 1780/Mum/2014 pertaining to assessment years 2005 pertaining to assessment years 2005-06 to 2008-09. In the said 09. In the said decision, it was held that generation of cooling power falls within decision, it was held that generation of cooling power falls within decision, it was held that generation of cooling power falls within the ambit of “power generation” and is, therefore, eligible for the ambit of “power generation” and is, therefore, eligible for the ambit of “power generation” and is, therefore, eligible for deduction under section 80IA of the Act. The learned PCIT, deduction under section 80IA of the Act. The learned PCIT, deduction under section 80IA of the Act. The learned PCIT, however, distinguished the said decision however, distinguished the said decision on the ground that the on the ground that the ruling therein was rendered in the context of steam generation. The ruling therein was rendered in the context of steam generation. The ruling therein was rendered in the context of steam generation. The relevant observations of relevant observations of the learned PCIT relevant observations of the learned PCIT are reproduced the learned PCIT are reproduced are reproduced hereunder:

“5.1 On going through the provisions of Section 80 5.1 On going through the provisions of Section 80- of the Act it is of the Act it is seen that the same applies t seen that the same applies to an undertaking which is set up in o an undertaking which is set up in any part of India for generation or generation and distribution of any part of India for generation or generation and distribution of any part of India for generation or generation and distribution of power if it begins to generate power during the period 01.04.1993 power if it begins to generate power during the period 01.04.1993 power if it begins to generate power during the period 01.04.1993 to 31.03.2017. The provision clearly applies to the entities which to 31.03.2017. The provision clearly applies to the entities which to 31.03.2017. The provision clearly applies to the entities which are in the business are in the business of generation or generation and distribution of of generation or generation and distribution of power. On going through the provisions of Section 80 power. On going through the provisions of Section 80 power. On going through the provisions of Section 80-IA(4) of the Act, it is clear that the intent of legislature is to provide incentive Act, it is clear that the intent of legislature is to provide incentive Act, it is clear that the intent of legislature is to provide incentive by way of deduction under section 801A of the Income Tax Act to by way of deduction under section 801A of the Income Tax Act to by way of deduction under section 801A of the Income Tax Act to the enterprises engaged in generation or generation and terprises engaged in generation or generation and terprises engaged in generation or generation and distribution of power. distribution of power. 5.2 On perusal of details furnished by the assessee, it is seen that 5.2 On perusal of details furnished by the assessee, it is seen that 5.2 On perusal of details furnished by the assessee, it is seen that the assessee has installed cooling Tower at their plant which the assessee has installed cooling Tower at their plant which the assessee has installed cooling Tower at their plant which generates cooling effect through "Cooling Tower" and generates cooling effect through "Cooling Tower" and generates cooling effect through "Cooling Tower" and which is utilized by the company on captive basis for its manufacturing utilized by the company on captive basis for its manufacturing utilized by the company on captive basis for its manufacturing processes. The generation of 'cooling power' in the case of processes. The generation of 'cooling power' in the case of processes. The generation of 'cooling power' in the case of assessee is nothing but transfer of heat through heat exchangers assessee is nothing but transfer of heat through heat exchangers assessee is nothing but transfer of heat through heat exchangers and not transformation of energy into power. On the contra and not transformation of energy into power. On the contra and not transformation of energy into power. On the contrary, actual generation of power is inherently through use of coal or actual generation of power is inherently through use of coal or actual generation of power is inherently through use of coal or water and not exchange of heat in cooling tower. It is also seen water and not exchange of heat in cooling tower. It is also seen water and not exchange of heat in cooling tower. It is also seen that the facts of the present case are clearly distinguishable from that the facts of the present case are clearly distinguishable from that the facts of the present case are clearly distinguishable from the facts of Tanfac Industries (SLP No. 18537 of 2009) the facts of Tanfac Industries (SLP No. 18537 of 2009) the facts of Tanfac Industries (SLP No. 18537 of 2009) decided by the Hon'ble Supreme Court wherein the issue involved was that of the Hon'ble Supreme Court wherein the issue involved was that of the Hon'ble Supreme Court wherein the issue involved was that of power generation through steam. The facts of the assessee's case power generation through steam. The facts of the assessee's case power generation through steam. The facts of the assessee's case are also distinguishable from that of Saf Yeast Company Private are also distinguishable from that of Saf Yeast Company Private are also distinguishable from that of Saf Yeast Company Private Limited decided by the Hon'ble ITAT, Mumbai since t Limited decided by the Hon'ble ITAT, Mumbai since t Limited decided by the Hon'ble ITAT, Mumbai since the manufacturing process involved in the said case is totally different manufacturing process involved in the said case is totally different manufacturing process involved in the said case is totally different from that of the assessee. Further, the Department has not from that of the assessee. Further, the Department has not from that of the assessee. Further, the Department has not accepted the said decision of Hon'ble ITAT, Mumbai and further accepted the said decision of Hon'ble ITAT, Mumbai and further accepted the said decision of Hon'ble ITAT, Mumbai and further appeal has been preferred before the Hon'ble Bombay High court appeal has been preferred before the Hon'ble Bombay High court appeal has been preferred before the Hon'ble Bombay High court which is pending adjudication. Hence the assessee is not eligible which is pending adjudication. Hence the assessee is not eligible which is pending adjudication. Hence the assessee is not eligible for claim of deduction u/s. 80 for claim of deduction u/s. 80-IA(4) of the Act. Accordingly, the IA(4) of the Act. Accordingly, the deduction of Rs. 1,62,14,945/ deduction of Rs. 1,62,14,945/- claimed by the assessee u/s.80 claimed by the assessee u/s.80- IA(4) of the Act has been erroneously allowed by the Assessin IA(4) of the Act has been erroneously allowed by the Assessin IA(4) of the Act has been erroneously allowed by the Assessing Officer while passing the Assessment Order dated Officer while passing the Assessment Order dated 23.09.2022. 23.09.2022.” 8.3 We have carefully considered the rival submissions and We have carefully considered the rival submissions and We have carefully considered the rival submissions and examined the record. examined the record. The central controversy pertains to the The central controversy pertains to the interpretation of the expression “generation of power” occurring in interpretation of the expression “generation of power” occurring in interpretation of the expression “generation of power” occurring in section 80-IA of the Act. With IA of the Act. With due respect, we are unable to respect, we are unable to subscribe to the construction canvassed on behalf of the assessee. subscribe to the construction canvassed on behalf of the assessee. subscribe to the construction canvassed on behalf of the assessee.

8.4 The term “power The term “power” has, in common commercial and statutory ” has, in common commercial and statutory parlance, been understood as referring to electrical power. Section parlance, been understood as referring to electrical power. Section parlance, been understood as referring to electrical power. Section 80-IA, in express terms, refers to undertakings engaged in the IA, in express terms, refers to undertakings engaged in the IA, in express terms, refers to undertakings engaged in the business of “generation” or “generation and distribution of power,” business of “generation” or “generation and distribution of power,” business of “generation” or “generation and distribution of power,” and clause (b) of sub of sub-section (4)(iv) speaks of “transmission or section (4)(iv) speaks of “transmission or distribution by laying a network of new transmission or distribution distribution by laying a network of new transmission or distribution distribution by laying a network of new transmission or distribution lines.” Such language unmistakably points to electricity and its lines.” Such language unmistakably points to electricity and its lines.” Such language unmistakably points to electricity and its infrastructural transmission. It does not extend to mechanical or infrastructural transmission. It does not extend to mechanical or infrastructural transmission. It does not extend to mechanical or thermodynamic processes which merely regulate temperature. dynamic processes which merely regulate temperature. dynamic processes which merely regulate temperature.

8.5 A cooling tower, by its very nature, A cooling tower, by its very nature, does not "g does not "generate power, it is a heat exchanger it is a heat exchanger and a net Consumer of Power. and a net Consumer of Power. The very foundation of the Assessee’s claim and the foundation of the Assessee’s claim and the reliance placed on reliance placed on order of coordinate bench of ITAT in the case of Saf Yeast Compnay rdinate bench of ITAT in the case of Saf Yeast Compnay rdinate bench of ITAT in the case of Saf Yeast Compnay Private Limited (supra) Private Limited (supra) is a fundamental mischaracterization of is a fundamental mischaracterization of what what what a a a refrigeration refrigeration refrigeration cooling cooling cooling tower tower tower does does does and and and a a a gross gross gross misinterpretation of the term "power" as intended by Parliament in misinterpretation of the term "power" as intended by Parliament in misinterpretation of the term "power" as intended by Parliament in Section 80-IA of the Act. he Act.

8.6 To understand the To understand the meaning of ‘power’ from scientific angle meaning of ‘power’ from scientific angle, one must turn to the fundamental principles of ‘physics’ and one must turn to the fundamental principles of one must turn to the fundamental principles of ‘thermodynamics’, which def , which define these terms with precision. ine these terms with precision.

8.7 In physics, ‘power power’ is defined as the rate at which work is done is defined as the rate at which work is done or energy is transferred. The standard unit of power is the Watt (W), or energy is transferred. The standard unit of power is the Watt (W), or energy is transferred. The standard unit of power is the Watt (W), which is one Joule of energy per second. which is one Joule of energy per second. In its true sense, “power n its true sense, “power generation” refers to the creation of a new, usable form of energy— generation” refers to the creation of a new, usable form of energy generation” refers to the creation of a new, usable form of energy such as the conversion of fuel into electricity or water’s potential s the conversion of fuel into electricity or water’s potential s the conversion of fuel into electricity or water’s potential energy into mechanical and electrical output. Refrigeration, by energy into mechanical and electrical output. Refrigeration, by energy into mechanical and electrical output. Refrigeration, by contrast, does not generate power or create “cold,” but merely contrast, does not generate power or create “cold,” but merely contrast, does not generate power or create “cold,” but merely transfers heat from a colder region to a hotter one, an operation transfers heat from a colder region to a hotter one, an operation transfers heat from a colder region to a hotter one, an operation contrary to the natural direction of heat flow under the Second Law contrary to the natural direction of heat flow under the Second Law contrary to the natural direction of heat flow under the Second Law of of of Thermodynamics. Thermodynamics. Thermodynamics. Authoritative Authoritative Authoritative texts texts texts in in in physics physics physics and and and thermodynamics uniformly affirm that such transfer is possible thermodynamics uniformly affirm that such transfer is possible thermodynamics uniformly affirm that such transfer is possible only with external work input, thereby distinguishing refrigeration only with external work input, thereby distinguishing refrigeration only with external work input, thereby distinguishing refrigeration as a process of energy transfer, not energy generation. a process of energy transfer, not energy generation. a process of energy transfer, not energy generation.

8.8 A ‘cooling’ tower is a specific type of heat exchanger. Its sole tower is a specific type of heat exchanger. Its sole tower is a specific type of heat exchanger. Its sole function is to take heated water from an industrial process and function is to take heated water from an industrial process and function is to take heated water from an industrial process and reject that waste heat into the atmosphere. It achieves this reject that waste heat into the atmosphere. It achieves this reject that waste heat into the atmosphere. It achieves this primarily through evaporative cooling. To facilitate this process, it through evaporative cooling. To facilitate this process, it through evaporative cooling. To facilitate this process, it uses fans and pumps, which consume electrical power. uses fans and pumps, which consume electrical power. uses fans and pumps, which consume electrical power.

8.9 A A A refrigeration refrigeration refrigeration cooling cooling cooling tower tower tower is is is fundamentally fundamentally fundamentally a a a thermodynamic machine that consumes power (work input) to move thermodynamic machine that consumes power (work input) to move thermodynamic machine that consumes power (work input) to move heat. To describe its func heat. To describe its function as the "generation of cooling power" is tion as the "generation of cooling power" is a scientific misnomer and an oxymoron. It does not generate any a scientific misnomer and an oxymoron. It does not generate any a scientific misnomer and an oxymoron. It does not generate any usable energy; it dissipates unwanted energy (waste heat). The usable energy; it dissipates unwanted energy (waste heat). The usable energy; it dissipates unwanted energy (waste heat). The output is chilled water, a process utility, not a form of power that output is chilled water, a process utility, not a form of power that output is chilled water, a process utility, not a form of power that can be harnessed to do work on an external system. d to do work on an external system.

8.10 Applying the principles of Applying the principles of Noscitur a Sociis (i.e. Contextual Interpretation), the meaning of "power" in Section 80 he meaning of "power" in Section 80 he meaning of "power" in Section 80-IA(4)(iv)(a) cannot be read in isolation. It must be read alongside clause (iv)(b), cannot be read in isolation. It must be read alongside clause (iv)(b), cannot be read in isolation. It must be read alongside clause (iv)(b), which speaks of undertakings that start "transmission or undertakings that start "transmission or distribution by laying a network of new transmission or distribution distribution by laying a network of new transmission or distribution distribution by laying a network of new transmission or distribution lines." This language is uniquely and exclusively applicable to the This language is uniquely and exclusively applicable to the This language is uniquely and exclusively applicable to the electrical power sector. Electricity is transmitted over long distances electrical power sector. Electricity is transmitted over long distances electrical power sector. Electricity is transmitted over long distances through a grid. Chilled water, the output of a cooling tower, is piped gh a grid. Chilled water, the output of a cooling tower, is piped gh a grid. Chilled water, the output of a cooling tower, is piped over short distances within a factory. over short distances within a factory.

8.11 The inclusion of clause (b) acts as a contextual illuminator, The inclusion of clause (b) acts as a contextual illuminator, The inclusion of clause (b) acts as a contextual illuminator, clarifying that Parliament's focus was on the electrical grid and its clarifying that Parliament's focus was on the electrical grid and its clarifying that Parliament's focus was on the electrical grid and its components. Interpreting "power" to include "cooling power" renders terpreting "power" to include "cooling power" renders terpreting "power" to include "cooling power" renders the specific language of clause (b) incongruous and out of place, the specific language of clause (b) incongruous and out of place, the specific language of clause (b) incongruous and out of place, violating the principle of harmonious construction. violating the principle of harmonious construction.

Every tax incentive provision is enacted with a specific 8.12 Every tax incentive provision is enacted with a specific Every tax incentive provision is enacted with a specific economic objective. Th economic objective. The objective of Section 80-IA was to overcome IA was to overcome the critical shortage of electrical power in the country by the critical shortage of electrical power in the country by the critical shortage of electrical power in the country by encouraging private investment in power plants. The Memorandum encouraging private investment in power plants. The Memorandum encouraging private investment in power plants. The Memorandum explaining the provisions of the Finance Bill, 1993, which explaining the provisions of the Finance Bill, 1993, which explaining the provisions of the Finance Bill, 1993, which nsistently refers to boosting "power introduced this incentive, co introduced this incentive, consistently refers to boosting "power generation" in the context of the national infrastructure deficit. generation" in the context of the national infrastructure deficit. generation" in the context of the national infrastructure deficit. 8.13 To extend this benefit to a standard piece of industrial To extend this benefit to a standard piece of industrial To extend this benefit to a standard piece of industrial equipment like a cooling tower would be to completely divorce the equipment like a cooling tower would be to completely divorce the equipment like a cooling tower would be to completely divorce the provision from its intended purpose. It would transform a targeted provision from its intended purpose. It would transform a targeted provision from its intended purpose. It would transform a targeted infrastructure incentive into an unintended, general industrial infrastructure incentive into an unintended, general industrial infrastructure incentive into an unintended, general industrial subsidy for any process involving temperature regulation. This bsidy for any process involving temperature regulation. This bsidy for any process involving temperature regulation. This could not have been the intent of Parliament. could not have been the intent of Parliament. In this In this reference , it is relevant to reproduce part of budget speech of 1993-94 of Hon’ble relevant to reproduce part of budget speech of 1993 relevant to reproduce part of budget speech of 1993 Finance Minister on 27th February, 1993, as under: 27th February, 1993, as under: 27th February, 1993, as under:

5 7 . Electricity is a critical input for the future growth of our economy. I Electricity is a critical input for the future growth of our economy. I Electricity is a critical input for the future growth of our economy. I therefore propose to introduce a five propose to introduce a five-year tax holiday in respect of year tax holiday in respect of profits and gains of new profits and gains of new industrial undertakings set up anywhere in industrial undertakings set up anywhere in India for either generation or generation India for either generation or generation and distribution of power. The distribution of power. The five-year tax holiday will begin from the year of year tax holiday will begin from the year of generation of power. generation of power. 5 8 . The five-year tax holiday, in both these cases, will be part of year tax holiday, in both these cases, will be part of year tax holiday, in both these cases, will be part of section 80- IA of the Income IA of the Income-tax Act. At the end of the five tax Act. At the end of the five-year period, these units will be entitled to the existing deduction under section 80 ll be entitled to the existing deduction under section 80-IA ll be entitled to the existing deduction under section 80 for the remaining period. for the remaining period. 8.14 Thus, the reference of power Thus, the reference of power in budget speech in budget speech was in relation with electrical power only. with electrical power only.

8.15 We may further refer that in the case of We may further refer that in the case of North British and North British and Mercantile Insurance Co. v. Life Insurance Corpora Mercantile Insurance Co. v. Life Insurance Corporation of India, AIR tion of India, AIR 1969 SC 221, the Supreme Court held that the meaning of a word he Supreme Court held that the meaning of a word he Supreme Court held that the meaning of a word in a statute must be understood in the context in which it is used in a statute must be understood in the context in which it is used in a statute must be understood in the context in which it is used and not in a wide or universal sense. and not in a wide or universal sense. In the landmark cas landmark case of Commissioner of Income Tax v. Srivenkateswara Hatcheries (P) Ltd. Commissioner of Income Tax v. Srivenkateswara Hatcheries (P) Ltd. Commissioner of Income Tax v. Srivenkateswara Hatcheries (P) Ltd. [1999] 237 ITR 174 (SC):, the [1999] 237 ITR 174 (SC):, the Hon’ble Supreme Court was tasked Supreme Court was tasked with interpreting "produces articles or things." It rejected the with interpreting "produces articles or things." It rejected the with interpreting "produces articles or things." It rejected the argument that a hen "produces" eggs in the industrial sense, argument that a hen "produces" eggs in the industrial sen argument that a hen "produces" eggs in the industrial sen stating that it is a natural process. The Court held: stating that it is a natural process. The Court held:

"The "The "The word word word 'production' 'production' 'production' or or or 'produce' 'produce' 'produce' when when when used used used in in in juxtaposition with the word 'manufacture' takes in bringing juxtaposition with the word 'manufacture' takes in bringing juxtaposition with the word 'manufacture' takes in bringing into existence new goods by a process which may or may not into existence new goods by a process which may or may not into existence new goods by a process which may or may not amount to manufacture. It also amount to manufacture. It also takes in all the by takes in all the by-products, intermediate products and residual products which emerge intermediate products and residual products which emerge intermediate products and residual products which emerge in the course of manufacture of goods." in the course of manufacture of goods."

8.16 The key takeaway is that the term must be understood in its The key takeaway is that the term must be understood in its The key takeaway is that the term must be understood in its commercial and industrial context. A cooling tower's operation is an commercial and industrial context. A cooling tower's operation commercial and industrial context. A cooling tower's operation intermediate step in a manufacturing process; it does not "produce" intermediate step in a manufacturing process; it does not "produce" intermediate step in a manufacturing process; it does not "produce" or "generate" a final, marketable commodity called "power." It or "generate" a final, marketable commodity called "power." It or "generate" a final, marketable commodity called "power." It merely facilitates the main production by regulating temperature. merely facilitates the main production by regulating temperature. merely facilitates the main production by regulating temperature.

8.17 The Hon’ble Supreme Court in the case of Hon’ble Supreme Court in the case of Hon’ble Supreme Court in the case of CIT v. N.C. Budharaja and Co. [1993] 204 ITR 412 (SC), nd Co. [1993] 204 ITR 412 (SC), while interpreting while interpreting "industrial undertaking," emphasized that the entity must be "industrial undertaking," emphasized that the entity must be "industrial undertaking," emphasized that the entity must be engaged in the business of manufacturing or producing articles. By engaged in the business of manufacturing or producing articles. By engaged in the business of manufacturing or producing articles. By analogy, an undertaking claiming deduction for "generation of analogy, an undertaking claiming deduction for "generation analogy, an undertaking claiming deduction for "generation power" must be in the business of generating power. A pharma power" must be in the business of generating power. A power" must be in the business of generating power. A manufacturer is in the business of manufacturer is in the business of manufacturing medicines manufacturing medicines. The cooling tower is a tool for this business, not a separate business of cooling tower is a tool for this business, not a separate business of cooling tower is a tool for this business, not a separate business of power generation.

8.18 We may summarise our observation a We may summarise our observation above that t bove that the term "generation of power" as used in Section 80 "generation of power" as used in Section 80-IA, when interpreted IA, when interpreted through the lens of scientific accuracy, statutory context, and through the lens of scientific accuracy, statutory context, and through the lens of scientific accuracy, statutory context, and legislative purpose, can only mean the generation of electrical legislative purpose, can only mean the generation of electrical legislative purpose, can only mean the generation of electrical power. The Assessee's claim is based on the power. The Assessee's claim is based on the semantic artifice of semantic artifice of renaming a heat rejection process as "generation of cooling power." renaming a heat rejection process as "generation of cooling power." renaming a heat rejection process as "generation of cooling power." A cooling tower is a net consumer of electricity, its function is A cooling tower is a net consumer of electricity, its function is A cooling tower is a net consumer of electricity, its function is ancillary to manufacturing, and its output is not a form of power ancillary to manufacturing, and its output is not a form of power ancillary to manufacturing, and its output is not a form of power that can be transmitted or distribu that can be transmitted or distributed in the infrastructural sense ted in the infrastructural sense contemplated by the Act. contemplated by the Act.

8.19 Accordingly, the very foundation of the assessee’s claim under Accordingly, the very foundation of the assessee’s claim under Accordingly, the very foundation of the assessee’s claim under section 80-IA rests upon a scientific and legal misapprehension. If IA rests upon a scientific and legal misapprehension. If IA rests upon a scientific and legal misapprehension. If such contention were to be accepted, every air such contention were to be accepted, every air-conditioner wo conditioner would amount to a “power-generating” device, a conclusion wholly at odds generating” device, a conclusion wholly at odds generating” device, a conclusion wholly at odds with both science and common sense. with both science and common sense.

8.20 Having observed above observed above, in the present case, we are not , in the present case, we are not required to conclusively adjudicate on the legal merits of the required to conclusively adjudicate on the legal merits of the required to conclusively adjudicate on the legal merits of the assessee’s eligibility und assessee’s eligibility under section 80-IA. Our finding rests on IA. Our finding rests on the jurisdictional infirmity of the assessment order itself and the jurisdictional infirmity of the assessment order itself the jurisdictional infirmity of the assessment order itself our observations above are rendered merely academic. The our observations above are rendered merely academic. our observations above are rendered merely academic. Assessing Officer failed to conduct any inquiry into this claim, Assessing Officer failed to conduct any inquiry into this claim, Assessing Officer failed to conduct any inquiry into this claim, bound to examine. In terms of clause (a) of which he was duty- -bound to examine. In terms of clause (a) of Explanation 2 to section 263, an order passed without such inquiry Explanation 2 to section 263, an order passed without such inquiry Explanation 2 to section 263, an order passed without such inquiry is deemed to be erroneous in so far as prejudicial to the interests of is deemed to be erroneous in so far as prejudicial to the is deemed to be erroneous in so far as prejudicial to the the Revenue. Thus, as far as deduction u/s 80IA is as far as deduction u/s 80IA is concerned, the as far as deduction u/s 80IA is assessment order stands vitiated on this ground alone. We therefore assessment order stands vitiated on this ground alone. We therefore assessment order stands vitiated on this ground alone. We therefore refrain from recording a conclusive finding on the substantive refrain from recording a conclusive finding on the substantive refrain from recording a conclusive finding on the substantive eligibility of the claim under section 80 eligibility of the claim under section 80-IA. Ground No. 3 of the Ground No. 3 of the assessee’s appeal is, therefore, rendered academic and stands assessee’s appeal is, therefore, rendered academic and stands assessee’s appeal is, therefore, rendered academic and stands dismissed as infructuous. dismissed as infructuous.