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Facts
The appeals by both the assessee and the revenue arise from the order of the CIT(A) for assessment year 2007-08. The revenue's appeal pertains to allowing certain expenditures as revenue expenses and treating penalty charges as capital receipts. The assessee's appeal concerns disallowance of proportionate premium on leasehold land, prior period expenses, software expenses, adjustment of unabsorbed depreciation and losses, disallowance under Section 14A, transfer pricing addition, and taxation of export incentives.
Held
The Tribunal held that expenditure on dies, moulds, jigs and fixtures are revenue expenditure, and penalty charges recovered are capital receipts. Leasehold premium is allowable as revenue expenditure. Prior period expenses crystalized in the year are deductible. Software expenses are revenue in nature. Unabsorbed depreciation and losses prior to the initial assessment year cannot be notionally adjusted for Section 80IA deduction. Disallowance under Section 14A is restricted to 2% of exempt income and interest expenditure is deleted. The transfer pricing issue is remitted for fresh verification. Export incentives are taxable as income. Provision for doubtful debts is remitted for verification.
Key Issues
Whether expenditure on dies, moulds, jigs, fixtures and software are revenue or capital in nature? Whether penalty charges recovered are capital or revenue receipts? Whether leasehold premium is deductible as revenue expenditure? Whether prior period expenses are allowable? Whether unabsorbed depreciation and losses can be carried forward and set off against profits for Section 80IA deduction? Whether disallowance under Section 14A is to be computed as per Rule 8D? Whether the transfer pricing adjustment is correct? Whether export incentives are taxable income? Whether provision for doubtful debts is allowable?
Sections Cited
147, 148, 143(3), 80-IA, 14A, 8D, 92CA(3), 36(1)(vii), 31, 194I, 37(1), 10(34), 10(35), 10(15), 28(iv)
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Income Tax Appellate Tribunal, “K” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SHRI RENU JAUHRI
ORDER Per: Smt. Beena Pillai, J.M.: Present cross appeal arises out of order dated 01.07.2012 passed by ld. CIT(A)-15 for assessment year 2007-08 on following grounds of appeal: Departments appeal are as follows: “"1.On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing expenditure on dies and moulds amounting to Rs. 32,04,54,326/- as Revenue expenditure.
2. "On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in holding that penalty charges recovered on capital goods of Rs. 13,38,780/- are capital receipts and same shall not be reduced from the cost of assets for depreciation.
3. "On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in allowing expenditure on jigs and fixture amount Rs. 16,91,36,986/-."
4. The appellant therefore, prayed that the order of the CIT(A) be set aside and that of the Assessing Officer be restored".
5. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary".”
Assessee’s appeal are as follows: “. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in not allowing deduction in respect of fines and penalties amounting to Rs 34,100/- 2 On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the & 5652/Mum/2012; 3 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) Assessing Officer in not allowing deduction in respect of proportionate premium on leasehold land written off amounting to Rs.46,70,725/- 3. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in not allowing deduction of a sum of Rs 86,24,198/- being short provision in respect of incentives to transporters for the Financial Year 2005-06 debited in the accounts of the previous year relevant to Assessment Year 2007-08 as "Prior Period Expenses".
On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in disallowing the claim for deduction in respect of wealth-tax paid amounting to Rs 20,10,784/-.
5. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in treating expenses amounting to Rs 1,61,04,826/- incurred in relation to purchase and upgradation of software as capital in nature.
6. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in holding that the unabsorbed depreciation and accumulated losses of earlier years prior to the initial assessment year need to be adjusted while computing the amount of profit eligible for deduction under section 80-IA of the Act. 7.a) On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the disallowance under section 14A of the Act at Rs 9,02,59,225/-computed by a method based on Rule 8D of the Income-tax Rules, 1962. (b) On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in not accepting the reasonable basis working made by the appellant having regards to the accounts of the appellant. (c) On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the disallowance under section 14A of the Act without establishing any nexus between the interest bearing borrowed funds and investments yielding tax free income. (d) Without prejudice to the above grounds of appeal, the Commissioner of Income-tax (Appeals) erred in rejecting the contention of the appellant that even if the disallowance is to be made under section 14A of the Act, the same ought to be computed only on those investments which have yielded exempt income during the relevant previous year.
& 5652/Mum/2012; 4 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) (e) Without prejudice to the above grounds of appeal
, the appellant prays that even if the disallowance is to be made under section 14A of the Act, the same ought not to be computed on those investments which are capable of earning taxable income.
8. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in making an addition of Rs. 28,13,755/- under section 92CA(3) of the Act in respect of the international transaction of export of machinery and tools. The appellant hereby reserves the right to add, to alter or amplify the above grounds of appeal.”
2. The ld. AR brought to our notice that the assessee has raised following additional grounds “1. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in taxing the entire export incentives amounting to Rs. 101,68,11,191 credited to Profit and Loss Account.
2. On the facts and in the circumstances of the case and in law, the appellant submits that deduction ought to be allowed in respect of provision of bad and doubtful debts of Rs. 29,14,284 under section 36(1) (vii) of the Income-tax Act, 1961.” 2.1 The Ld. Sr. Counsel submitted that no new facts need to be considered in order to adjudicate the above issues and therefore prayed for its admission. He submitted that the issues are already considered by co-ordinate bench of this Tribunal for A.Y. 2004-05 to 2006-07. 2.2 On the contrary, the Ld. DR though objected for admission of the additional grounds could not controvert the submissions made by the Ld. Sr. Coun sel. We have perused the submission advanced in both sides in the light of records placed before us.
& 5652/Mum/2012; 5 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) 2.3 Admittedly no new facts need to be considered in order to adjudicate the claim raised by the assessee in the additional grounds. It is submitted that inadvertently the same could not be raised at the time of filing of the original grounds of appeal and that it arises out of the impugned order passed by the ld. CIT(A). Considering the submissions of the assessee and the ld. DR, we admit the ground filed by the assessee vide application dated 16.12.2024.
3. Brief facts of the case are as under: Assessee is as company and filed its return of income for year under consideration disclosing total income of Rs. 14,55,03,15,940/- on 31.10.2007. The return was processed u/s. 143(1) of the Act, accepting the returned income. Subsequently, assessee filed revised return disclosing total income of Rs. 14,29,07,43,011/- on 31.03.2009. The assessee was subsequently issued notice u/s. 143(2) of the Act, in response to which assessee furnished various details as called for. After considering the submissions of the assessee, the Ld. AO made disallowances and computed income in the hands of the assessee by making addition of Rs. 17,11,94,50,521/- to the revised return of income. Aggrieved by the order of Ld. AO, assessee preferred appeal before the Ld. CIT(A).
4. The Ld. CIT(A) partly allowed the claims of the assessee. Aggrieved by the order of Ld. CIT(A), assessee as well as revenue are in appeal before this Tribunal.
& 5652/Mum/2012; 6 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.)
5. At the outset the Ld. Sr. Counsel submitted that all issues raised by the revenue in its appeal are covered in favour of assessee by various decisions of this Tribunal in the assessee’s own case for preceding assessment year. Revenue’s Appeal: 6. Ld. Sr. Counsel submitted that Ground no. 1 raised by revenue has been considered by this Tribunal on identical facts and circumstances for A.Y. 2004-05 and 2005-06 vide order dated 17.02.2025. 6.1 Both the sides admitted that there is no change in the facts and circumstances. Reliance is placed on the following observation of this Tribunal for A.Y. 2005-06 wherein the issue has been considered as under: “Ground No. 3 16. Ground No.3 raised by the Revenue, which pertains to allowability on dies and moulds amounting to of expenditure INR.24,79,56,477/- written off during the relevant previous year, reads as under: "3. On the facts and circumstances of the case and in law, the Learned CIT(A). erred in directing the A.O. to treat expenditure on dies and moulds amounting to Rs. 24,79,56,477/-as revenue expenditure." 16.1. The relevant fact in brief are that the Assessee had claimed deduction for INR. 24,79,56,477/- as revenue expenditure being expenditure Incurred for purchase of dies and moulds during the relevant previous year. The Assessee accounted for the aforesaid expenses as capital expenses in the books of accounts. However, in the notes to the computation of income it was stated that the dies and moulds are used in the press to produce press parts used in the manufacture of automobiles. Since the dies and moulds represent a part of the plant and machinery, the expenditure on purchase of the same originally was capitalized along with plant and machinery cost. However, the cost of & 5652/Mum/2012; 7 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) new dies and moulds used during the year represents replacements cost incurred on account of wear & tears of die; or change in the design of the press parts. A particular die/mould can cast approximately 1,00,000 impressions and considering the turnover of the Assessee, the life of the dies/mould would be approximately six months in majority of the cases. Therefore, the cost of dies and moulds put to use during the year, was claimed as an allowable deduction. The Assessing Officer was not convinced with the aforesald explanation offered by the Assessee and therefore, disallowed deduction as claimed by the Assessee holding the expenditure on mould and dies as capital in nature. However, the Assessing Officer allowed depreciation on the same. 16.2. In appeal, the CIT(A) overturned the decision of the Assessing Officer and allowed deduction for expenditure incurred on mould and dies as revenue expenditure accepting the explanation provided by the Assessee. 16.3. Being aggrieved, the Revenue has carried the issue in appeal before the Tribunal 16.4. We have given thoughtful consideration to rival submission and perused the material on record. We find that while adjudicating identical issue in appeals pertaining to the preceding assessment years, the Tribunal has held that the expenditure incurred on moulds and dies is in the nature of revenue expenditure. The Tribunal has accepted the submission of the Assessee that expenditure incurred on replacement of moulds/dies was in the nature of revenue expenditure and that the same was allowable as deduction as replacement cost in terms of Section 31 of the Act. In this regard, reliance was placed on behalf of the Assessee, inter alia, on the following decisions in the case of the Assessee: (a) AY 2002-03 (ITA No.2899/Mum/2010, dated 24/06/2024) (b) AY 2001-02 (ITA No.4372/Mum/2005, dated 23/02/2024) (c) AY 2000-01 (ITA No.2655/Mum/2005, dated 28/11/2023) (d) AY 1999-00 (ITA No.1933/Mum/2005, dated 28/11/2023) (e) AY 1998-99 (ITA No.8952/Mum/2004, dated 22/08/2023) (f) AY 1997-98 (ITA No.5030/Mum/2001, dated 13/04/2023) 16.5. We have perused the decision of the Tribunal in appeal preferred by the Revenue for the AY 2001-2002 [ITA No. 4372/Mum/2005, dated 23/02/2024]. The relevant extract of the aforesaid decision of the Tribunal reads as under: "12. With regard to Ground No. 3 which is in respect of allowing deduction in respect of expenditure incurred on dies and moulds as revenue expenditure. Ld. AR of the assessee brought to our & 5652/Mum/2012; 8 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) notice that the issue in appeal has been considered by the Co- ordinate Bench of this tribunal in assessee's own case and decided the issue in favour of the assessee and against the department.
13. On the other hand, Ld. DR has fairly accepted the submissions of the Ld.AR.
14. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 1997-98. While deciding the Issue, the Coordinate Bench of the Tribunal in ITA.No. 5030/Mum/2001 dated 13.04.2023 held as under: "4. At the outset, with regard to Ground No. (a), which is in respect of allowing the expenditure on dies &moulds of ₹.7,16,16,415/- as a expenditure, Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co-ordinate Bench of this tribunal in assessee's own case and decided the issue in favour of the assessee and against the department.
On the other hand, Ld. DR has fairly accepted the submissions of the Ld.AR.
Considered the rival submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee in the A.Y. 1995-96, While deciding the issue, the Coordinate Bench of the Tribunal in dated 20.01.2021 held as under: "55. Considered the rival submission and material placed on record. We notice from the records that the identical issue has already been decided by the Coordinate Bench of ITAT in assessee's own case for Assessment Year: 1990-91 to 1994-95 (ITA No. 6324 6325/Mum/2010 and 6963 6964/Mum/2014) on merits. For the sake of clarity, relevant portion of the said decision is reproduced below:-& & 5.1. We find that for the Assessment Year 1991, 1993 94 & 1994-95, the only ground raised
by the revenue is with regard to the direction of the Ld. CIT(A) in allowing the revenue expenditure in respect of replacement of jigs and fixtures and dies and moulds. The decision restored by us in ground no. 1 for Assessment Year 1990-91 would hold good for the same. Accordingly, the grounds raised by the revenue are dismissed. & 5652/Mum/2012; 9 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.)
56. Therefore, respectfully following the above decisions of Coordinate bench of ITAT in assessee's own case which is applicable mutatis mutandis in the present case, we are inclined to accept the submission of Ld. AR. Accordingly, this ground raised by the revenue is dismissed."
7. We further observe that in assessee's own case for the immediately preceding Assessment Year i.e. A.Y. 1996-97, the Tribunal decided the above issue in favour of the assessee following the decision for the A.Y.1995-96. Respectfully following the above decisions and following the principle of consistency, the view taken by the Tribunal in A.Y. 1995-96 is respectfully followed, ground raised by the revenue is accordingly dismissed."
15. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in A.Y. 1997-98 is respectfully followed, accordingly, ground raised by the revenue is dismissed. 16.6. Similarly, while deciding identical issue in appeal for the Assessment Year 1998-99 [ITA No. 8952/Mum/2004, dated 22/08/2023] it was held by the Tribunal as under: "
16. Ground No.3 raised by the revenue relates to the disallowance of expenses incurred on Dies and Moulds amounting to Rs.30.47 crores. The assessee treated the above said expenses as Capital in nature in the books of account, but claimed the same as revenue expenditure for income tax purposes. This is a recurring issue. The co-ordinate bench has decided this issue in favour of the assessee by confirming the decision rendered by Ld CIT(A) in holding that the expenditure incurred in purchase of dies and moulds are allowable as revenue expenditure in AY 1990-91. The said decision is being followed year after year. In AY 1997-98 also in dated 13.04.2023, the Tribunal has upheld the identical decision taken by Ld CIT(A). Consistent with the view taken by the co-ordinate benches year after year, we confirm the order passed by Ld CIT(A) in holding that the expenditure incurred on Dies and Moulds is allowable as deduction."
16.7. Thus, this is a recurring Issue. Identical explanation offered by the Assessee in the preceding assessment years has been accepted by the Co-Ordinate Benches of the Tribunal to hold that expenditure & 5652/Mum/2012; 10 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) on replacement of mould and dies is in the nature of replacement cost allowable as deduction under Section 31 of the Act being revenue in nature. There is nothing on record to persuade us to take a different view of the matter. Accordingly, we decline to interfere with the order passed by the CIT(A) on this issue. Therefore, Ground No. 3 raised by the Revenue is dismissed.” 6.2. From the above observations and findings, it is noted that this is a recurring issue and the explanation offered by the assessee in the preceding assessment years has been excepted by the co-ordinate bench to come to the conclusion that expenditure on replacement of mould and dice are in the nature of cost allowable as deduction u/s. 31 of the Act. Nothing new has been submitted by the Ld. DR in order to deviate from the aforesaid view. Respectfully following the same we do not find any infirmity in the view taken by the Ld. CIT(A) and the same is upheld. Accordingly, Ground no. 1 raised by the revenue stands dismissed.
Ground no. 2 raised by the revenue is against allowability of penalty charges received from suppliers of capital goods amounting to Rs. 13,38,780/-. 7.1 It is submitted that, identical issue came up for consideration before Co-Ordinate Bench of this Tribunal in assessee’s own case for A.Y. 2005-06, in an appeal filed by the revenue in ITA No. 535/MUM/2010. This Tribunal while deciding this issue observed and held as under: “Ground no. 4 17. Ground No. 4 raised by the Revenue, which pertains to allowability of penalty charges recovered on capital goods and to reduce the total income amounting to INR.1,52,846/- written off during the relevant previous year, reads as under:
& 5652/Mum/2012; 11 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) "4. On the facts and circumstances of the case and in law, the Learned CIT(A), erred in directing the A.O. to allow the penalty charges recovered on the capital goods and to reduce the total income by Rs. 1,52,846/- without reducing the aforesaid amount while computing the depreciation." 17.1. During the previous year relevant to Assessment Year 2005-06, the Assessee recovered a sum of INR.1,52,846/- on account of penalty charges for breach of contractual obligations from suppliers of capital goods for delay in execution of orders. The aforesaid receipts were credited to the Profit & Loss Account. However, the same were excluded from the computation of income for tax purposes. During the assessment proceedings it was claimed by the Assessee that the aforesaid receipts were in the nature of capital receipts not liable to tax. However, the Assessing Officer rejected the aforesaid contention of the Assessee and held that the aforesaid receipts were liable to tax in the hands of the Assessee as the same were revenue in nature. 17.2. In appeal preferred by the Assessee, the CIT(A) held that the above receipts were capital in nature and the same should not be reduced from the cost of acquisition of the respective capital asset. 17.3. Being aggrieved, the Revenue is appeal before the Tribunal on this issue. 17.4. Having given thoughtful consideration to rival submissions and on perusal of record, we find that this is a recurring issue which has been decided in favour of the Assessee in preceding assessment years by the Tribunal, inter alia, in the following appeals: (a) AY 2002-03 (ITA No.2899/Mum/2010, dated 24/06/2024) (b) ΑΥ 2001-02 (ITA No.4372/Mum/2005, dated 23/02/2024) (c) AY 2000-01 (ITA No.2655/Mum/2005, dated 28/11/2023) (d) ΑΥ 1999-00 (ITA No.1933/Mum/2005, dated 28/11/2023) (e) AY 1998-99 (ITA No.8952/Mum/2004, dated 22/08/2023) (f) AY 1997-98 (ITA No.5030/Mum/2001, dated 13/04/2023) (g) AY 1994-95 (ITA No.6964/Mum/2014, dated 28/08/2020) (h) AY 1993-94 (ITA No.6963/Mum/2014, dated 28/08/2020) 17.5. We have perused the decision of the Tribunal in appeal preferred by the Revenue for the AY 2001-2002 (ITA No. 4372/Mum/2005, dated 23/02/2024) and the relevant extract of the same reads as under: "16. With regard to Ground No. 4 which is in respect of allowing penalty charges recovered from suppliers of capital & 5652/Mum/2012; 12 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) goods as capital receipts, Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co-ordinate Bench of this tribunal and decided the issue in favour of the assessee and against the revenue.
On the other hand, Ld. DR has fairly accepted the submissions of the Ld.AR.
18. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 1997-98. While deciding the issue, the Coordinate Bench ITA.No. 5030/Mum/2001 dated 13.04.2023 held as under:- "8. With regard to Ground No. (b) which is in respect of deleting the addition of ₹.27,95,851/- representing penalty charges received from machinery suppliers, Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co ordinate Bench of this tribunal in assessee's own case and decided the issue in favour of the assessee and against the department.
9. On the other hand, Ld. DR has fairly accepted the submissions of the Ld.AR.
10. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee in the A.Y. 1995- 96. While deciding the issue, the Coordinate Bench of the Tribunal in held as under: - "34. At the outset, Ld. AR brought to our notice para 4 of assessment order and para 3 of CIT(A)'s order and submitted that this issue has already been decided by the Coordinate Bench of ITAT in assessee's own case for Assessment Year: 1993-94 & 1994-95 (ITA No. 2739, 3175, 3491 & 3492/Mum/1999) on merits in favour of the assessee.
On the other hand, Ld. DR relied on the orders passed by revenue authorities, however he conceded that this ground is covered by the decision of ITAT.
Considered the rival submission and material placed on record. We notice from the records that the identical issue has already been decided by the Coordinate Bench of ITAT in assessee's own case for Assessment Year: 1993-94 & 1994-95 (ITA No. 2739, & 5652/Mum/2012; 13 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) 3175, 3491 & 3492/Mum/1999) on merits. For the sake of clarity, relevant portion of the decision in assessee's own for Assessment Year 1993-94 (ITA No. 3491/Mum/1999) is reproduced below:- 3. The first issue in this appeal filed by the revenue is against the deletion of an addition 22,80,791/- representing penalty charges received from machinery suppliers. Both the parties agreed that the issue is covered by the decision of this Tribunal in assessee's own case for the assessment year 1989-90 to 1992-93 wherein the receipt in question has been held as a capital receipt. The Tribunal in the above referred orders (ITA 2468/Mum/98 & for the assessment year 1992-93 - 'J' Bench order dated 16th November, 2006, paragraph 15) has dealt with the issue in the following manner in rejecting the ground raised
by the Revenue:- "15. Ground no. 8 relates to the addition of Rs. 24,14,323/-being the penalty charges received from the suppliers of machineries on account of some default. The learned CIT(A) has deleted the addition following his order Assessment Years 1989-90 to 1991-92 as well as the decision of Hon'ble Andhra Pradesh High Court in the case of Barium and Chemicals Ltd 168 ITR164. After hearing both the parties, we find that this issue is covered in favour of the assessee by the decisions of the Tribunal in assessee's own case pertaining to Assessment Years 1988-89 and 1991-92. Therefore following the same, the order of the learned CIT(A) is upheld and the ground o the Revenue is dismissed. We do not have a reason deviate from this consistent view of the Tribunal on the issue. Accordingly, this ground of the revenue is rejected.
37. Therefore, respectfully following the above decisions of Coordinate bench of ITAT in assessee's own case which is applicable mutatis mutandis in the present case, we are inclined submission to accept the of Ld. AR. Accordingly, this ground raised by the revenue is dismissed."
& 5652/Mum/2012; 14 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) 11. Further, in assessee's own case in ΠΑ. Νο. 2230/Mum/2000 20.06.2022 for the A.Y. 1996-97, Coordinate Bench, held as under: - "15. During the period relevant to assessment year under appeal, the assessee recovered penalty charges amounting Rs.2,56,209/- from suppliers of the capital goods. The assessee claimed the aforesaid charges as capital receipt, whereas, the Assessing Officer treated the aforesaid charges as revenue in nature. The CIT(A) following the order of his predecessor in Assessment Year 1991-92 to 1994-95 held the penalty charges to be capital receipt. We find that in the preceding Assessment Year this issue had come up in the appeal of assessee. The Co- ordinate Bench after considering the decisions in assessee's own case for Assessment Year 1993- 94 in ITA decided No.3491/Mum/1999 the issue in favour of assessee holding penalty charges to be capital receipt. The aforesaid decision of the Tribunal has not been controverted by the Revenue, hence, following the same we uphold the findings of CIT(A) and dismiss ground No.2 in the appeal by Revenue."
12. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in A.Y.1996-97 is respectfully followed, accordingly, ground raised
by the revenue is dismissed."
19. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in Α.Υ. 1997-98 is respectfully followed, accordingly, ground raised by the revenue is dismissed. 17.6. The Revenue has failed to bring on record any material to differentiate the above decisions of the Co-ordinate Benches of the Tribunal either in law or on facts. Therefore, respectfully following the same, we decline to interfere with the order passed by the CIT(A) on this issue. Accordingly, Ground No. 4 raised by the Revenue is dismissed” 7.2. Admittedly, the facts are identical for the year under consideration. The revenue has not been able to place any new submission on record. Respectfully following the aforesaid view, we & 5652/Mum/2012;
15. A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) do not find any reason to interfere with the view taken by the Ld. CIT(A) and the same is upheld. Accordingly ground no. 2 raised by the revenue is dismissed.
Ground no. 3 raised by the revenue is against allowability of expenditure on jigs and fixtures amounting to Rs. 4,92,83,957/- for the year under consideration. The assessee claimed deduction of Rs. 4,92,83,957/-. In respect of the expenditure incurred on jigs and fixtures. The Ld. AO denied the claim of the assessee on the ground that it resulted in enduring benefit to the assessee and were capital in nature. 8.1 The ld. CIT(A) deleted the disallowance by placing reliance on the orders passed by this Tribunal in the preceding assessment years. 8.2 We have perused the submissions and material available on record and find that this issue is also a recurring issue and consistently considered by this Tribunal by following the view taken in the preceding assessment year by observing as under: “18.3. We find that this is a recurring Issue. The Assessee had consistently claimed that Jigs and Fixtures were tooling alds required in the production process. Fixtures were required to hold in a fixed place, the raw material to be worked on. While, Jigs are tools used to guide the working tools. The jigs and fixtures purchased along with the machinery were capitalised in the books of accounts whereas the expenditure incurred to replace the same was charged off in the Profit & Loss Account. The expenditure does not result in installation or increase in the existing capacity and the same is incurred to maintain operational efficiency. The aforesaid explanation has been accepted by the Tribunal while deciding identical issue in favour of the Assessee in the appeal pertaining to assessment years 1990-1991, 1991-1992, 1993-1994 to 2002-2003.
& 5652/Mum/2012; 16 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) 18.4. We have perused the decision of the Tribunal in appeal preferred by the Revenue for the AY 2001-2002 (ITA No. 4372/Mum/2005, dated 23/02/2024) and the relevant extract of the same reads as under: "20. With regard to Ground No. 5 which is in respect of allowing deduction of expenditure incurred in respect of jigs and fixtures as revenue expenditure, Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co-ordinate Bench of this tribunal in assessee's own case and decided the issue in favour of the assessee and against the department.
21. On the other hand, Ld. DR has fairly accepted the submissions of the Ld.AR.
Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 1997-98. While deciding the issue, the Coordinate Bench in ITA.No. 5030/Mum/2001 dated 13.04.2023 held as under:- "13. With regard to Ground No.(c) which is in respect of directing the Assessing Officer to allow deduction of ₹.2,36,37,738/- towards expenditure relating to purchase of jigs and fixtures, Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co- ordinate Bench of this tribunal in assessee's own case and decided the issue in favour of the assessee and against the department.
14. On the other hand, Ld. DR has fairly accepted the submissions of the Ld.AR.
Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 1995-96. While deciding the issue, the Coordinate Bench of the Tribunal in ITA.No. 3493/Mum/1999 dated 20.01.2021 held as under:- "57. With regard to this ground, Ld. AR brought to our notice para 8-8.5 of assessment order and para 33 of CIT(A)'s order and submitted that the similar issue has already been decided by the Coordinate Bench of ITAT in assessee's own case for Assessment Year: 1990-91 to 1994 95 (ITA No. 6324 6325/Mum/2010 and 6963 & 6964/Mum/2014) on merits in favour of the assessee.
On the other hand, Ld. DR relied on the orders passed by revenue authorities, however he conceded that this ground is covered by the decision of ITAT.
& 5652/Mum/2012; 17 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) 59. Considered the rival submission and material placed on record. We notice from the records that the identical issue has already been decided by the Coordinate Bench of ITAT in assessee's own case for Assessment Year: 1990-91 to 1994-95 (ITA No. 6325/Mum/2010 and 6324 & 6963 & 6964/Mum/2014) on merits. For the sake of clarity, relevant portion of the said decision is reproduced below:- 3.1. We have heard rival submissions and perused the materials available on record. We find that the assessee company had incurred expenditure on jigs and fixtures amounting 1,06,11,0647- including capital to Rs. work in progress amounting to the Rs.11,18,955/- during Financial Year 1989-90 relevant to Α.Υ. 1990-91. Assessee submitted that these are nothing but replacement of jigs and fixtures in the main plant and machinery and would be eligible for deduction as revenue expenditure. During the course of assessment proceedings, the assessee requested the Id. AO to allow the sum of Rs. 94,92,103/-as deduction in A.Y. 1990-91 and the balance sum of Rs. 11,18,955/-in A.Y. 1991-92 since the said amount was lying in capital work In progress and the same was not put to use during the A.Y. 1990-91. We find that the Id. AO observed that the expenditure incurred on replacement of jigs and fixtures would be capital expenditure and accordingly, granted depreciation thereon. It is not in dispute that assessee had indeed capitalised the replacement cost of jigs and fixtures in its books and had claimed depreciation as per Companies Act in its books. However, for the purpose of Income Tax, the assessee had claimed the said expenditure as the revenue expenditure on the ground that the said expenditure would fall under the category of "current repairs". We find that the present state of appellate proceedings is the second round of proceedings, since in the first round, this Tribunal had restored this issue to the file of the Id. CIT(A) for adjudication in the light of various judicial decisions relied upon by the assessee. We find that the expenditure Incurred on replacement of jigs and fixtures are basically toolling alds required in the production process and these items are part of the machinery in automobile industry. We find that these jigs and fixtures need to be constantly replaced due to constant wear and tear and also due to changes in the design of the part. It is not in dispute that the 'expenditure Incurred on jigs and fixtures at the time of first purchase together with the main plant and machinery was duly capitalised by the assessee at the time of first purchase for the purpose of Income Tax Act and depreciation claimed accordingly for the purpose of Income Tax Act. Later, & 5652/Mum/2012; 18 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) whenever the said jigs and fixtures were replaced for the reasons stated supra, the assessee has been claiming the same as revenue expenditure for the purpose of Income Tax Act. We find that this argument was duly 'appreciated by the Id. CIT(A) and the Id. CIT(A) duly granted relief to the assessee in this regard by following the decision of his predecessor in assessee's own case for the A. Yrs 2002-03, 2005-06 and 2006-07.
Therefore, respectfully following the above decisions of Coordinate bench of ITAT in assessee's own case which is applicable mutatis mutandis in the present case, we are inclined to accept the submission of Ld. AR. Accordingly, this ground raised
by the revenue is dismissed."
16. Further, in assessee's own case for the A.Y. 1996-97 the Coordinate Bench in ITA.No. 2230/Mum/2000 dated 20.06.2022, held as under: - "16. The assessee has purchased Jigs and Fixtures to the tune of Rs.1,83,34,475/- to be used in production process. The assessee revenue. claimed the said expenditure as against the claim of assessee the Assessing Officer treated the expenditure as capital in nature and allowed depreciation on the same. In the first appellate proceedings, the CIT(A) reversed the findings of Assessing Officer and held the expenditure to be on revenue account. We find that in immediate preceding assessment year, the Tribunal following its earller order in assessee's own case for assessment years 1990-91 to 1994 revenue. held the expenditure on Jigs and Fixtures as We find no infirmity in the findings of the CIT(A) on this issue. Ergo, ground No 3 raised in the appeal by Revenue dismissed."
17. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in A.Y. 1996-97 is respectfully followed, accordingly, ground raised by the revenue is dismissed."
23. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in A.Y. 1997-98 is respectfully followed, accordingly, ground raised by the revenue is dismissed." 18.5. The Revenue has failed to bring on record any material to differentiate the above decisions of the Co-ordinate Benches of the Tribunal either in law or on facts. Therefore, respectfully following the same, we decline to interfere with the order passed by the CIT(A) on this issue. Accordingly, Ground No. 5 raised by the Revenue is dismissed.”
& 5652/Mum/2012; 19 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.)
8.3. Admittedly the facts for the year under consideration are identical with that of preceding assessment year. There is nothing placed on record by the revenue to take a different view. Respectfully following the consistent view, we do not find any reason to interfere on the decision of Ld. CIT(A) and the same is upheld. Accordingly, ground no. 3 raised by the revenue stands dismissed. Assessee’s appeal 9. At the outset, the Ld. Sr. Counsel submitted that, Ground no. 1 is not praised due to smallness of the claim.
Ground no. 2 raised by the assessee is against the denial of deduction in respect of proportionate premium paid on leasehold land amounting to Rs. 46,70,725/-. 10.1. The appellant had taken a land on lease from Maharashtra Industrial Development Corporation ('MIDC') for setting up factory for a period of 99 years. The appellant had paid upfront premium for obtaining the land on lease and was required to pay nominal amount as lease rent each year for a period of 99 years. 10.2. The annual rent payable as per the lease agreement is extremely low and therefore cannot be considered as economical rent. Thus, premium paid is in effect advance rent paid by the appellant which ought to be apportioned for the period of the lease term.
& 5652/Mum/2012; 20 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.)
10.3. During the year under consideration, the appellant has debited to Profit and Loss Account a sum Rs 46,70,725/- which represents proportionate premium for the year on leasehold lands. It is submitted that leasehold premium is in effect advance rent and as such the proportionate write off is an allowable deduction following the ratio of the decision of the Hon'ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd vs C.I.T. (225 ITR 802) wherein in the context of claiming deduction for discount given on debentures issued, the Hon'ble Supreme Court held that the said amount of discount ought to be allowed over the period for which the debentures were issued. Accordingly, the Appellant has claimed the premium over the period for which the lease agreement was entered into by the Appellant. 10.4. The Ld. CIT(A) while considering this issue placed reliance on the observation of its predecessor for A.Y. 2002-03 and 2004- 05 to 2006-07(Supra) wherein the issue was decided against the assessee. 10.5. Before this Tribunal the Ld. Sr. Counsel submitted that, this Tribunal in for assessment years 2002-03 & 2004-05 to 2006-07 (Supra) while considering the disallowance placed reliance on the following decision in assessee’s own case on identical facts: “(a) ITAT-AY 2006-07 (ITA No. 5299/Mum/2010) (b) ITAT-AY 2005-06 (ITA No. 1223/Mum/2010) (c) ITAT-AY 2004-05 (ITA No. 6838/Mum/2008) (d) ITAT-AY 2003-04 (ITA No. 1420/Mum/2007) (e) ITAT-AY 2002-03 (ITA No. 3043/Mum/2010) (f) ITAT-AY 1999-00 (ITA No. 1933/Mum/2005) (g) ITAT-AY 1998-99 (ITA No. 8952/Mum/2004)
& 5652/Mum/2012; 21 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) (h) ITAT-AY 1997-98 (ITA No. 5030/Mum/2001) (i) ITAT-AY 1996-97 (ITA No. 1781/Mum/2000) (j) ITAT - AY 1995-96, (ITA No. 3493/Mum/1999)” 10.6. The Ld. Sr. Counsel submitted that Hon’ble Gujarat High Court in Case of Sun Pharmaceutical Ind. Ltd reported in (2009) 227 CTR 206 has considered a identical situation and has held as under: “The assessee-company claimed deduction of a sum of Rs. 48,02,616 being payment to Gujarat Industrial Development Corporation (GIDC). The Assessing Officer called upon the assessee to substantiate the said claim. It was contended that the lease rent in respect of the land allotted to the assessee-company being very nominal. i.e., at the rate of Rs. 40 per year, the said payment was nothing else but advance rent and, hence, allowable as revenue expenditure. After going through the lease agreement the Assessing Officer disallowed the claim holding that the assessee had acquired a benefit of enduring nature in the form of use of land for a period of 99 years; that the land in' had been transferred through a registered deed involving transfer of immovable property; and, thus, the assessee had acquired a fixed asset in the form of a parcel of land. The Tribunal held that the land in question was not acquired by the assessee and that merely because the deed was registered the transaction in question would not assume a different character. The Tribunal observed the lease rent was very nominal; by obtaining the land on lease the capital structure of the assessee did not undergo any change; the assessee only acquired a facility to carry on the business profitably by paying nominal lease rent. Therefore, the Tribunal allowed the assessee's claim. Held that, it was a case which warranted no interference. Even the Assessing Officer had recorded that the payment was for use of land. There was no legal infirmity committed by the Tribunal. Thus, the Tribunal was justified in holding that the lease rent paid by the assessee to GIDC was allowable as revenue expenditure.” He further submitted that the said decision was also followed in the subsequent decision of Gujarat High Court in case of United Phosphorous Ltd. V. ACIT reported in (2015) 56taxmann.com 354. Referring to the decision passed by co-ordinate bench in assessee’s own case referred to hereinabove. The Ld. Sr. Counsel submitted & 5652/Mum/2012; 22 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) that this Tribunal placed reliance on the decision of Hon’ble High Court in case of DCIT V. Sun Pharmaceutical Ind. Ltd (Supra). 10.7. On the contrary, the Ld. DR placed reliance on Circular no. 35/2016 which was in the context of applicability of TDS provision. u/s. 194I of the Act on the lumpsum lease premium paid for acquisition of long-term lease. She submitted that vide circular CBDT categorically noted that lease premium paid for acquiring plot of land was in the nature of capital expenses and therefore the TDS was not deductible. 10.8. The Ld. DR submitted that Hon’ble Delhi High Court in case of CIT(A) V. Indian Newspaper society in vide order dated 10.12.2015 had observed that payment of lease premium cannot be categorized as rent and is outside the purview of section 37(1) of the Act. She submitted that the circular no. 35/2016 issued by the CBDT was clarifying the said decision of Hon’ble Delhi High Court. The Ld. DR thus submitted that the long term capital lease premium has to be treated as capital expenditure as it transfers an endeavoring benefit to the assessee to hold such property and all right of easement were effectuated to the assessee for during the period of lease. The Ld. DR vide its written submission dated 21.08.2025 has relied on various other decisions of co-ordinate bench of this Tribunal in case of Navi Mumbai Sez Pvt.Ltd V. ITO in ITA No. 738 to 741/Mum/2012 and Oriental Bank of Commerce in ITA no. 1300 and 1301/Mum/2014 to submit that and upfront premium paid to acquire lease hold right cannot be treated as rent for use and has to be capitalized. & 5652/Mum/2012; 23 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) 10.9. The Ld. Sr. Counsel responding to the submissions of the Ld. DR submitted that the decisions referred to pertains to whether TDS on premium paid on the lease hold land is required to be deducted by payer. He submitted that the tax of the present assessee is similar to the facts of these cases only to the extent in which the lease transaction is entered into by the assessee. The Ld. Sr. Counsel further submitted that in none of the above decisions the view taken by the Hon’ble Gujarat High Court in case of DCIT V. Sun Pharmaceutical Ind. Ltd (Supra) was not brought to the notice of the courts. The Ld. Sr. Counsel emphasize that in the present facts of the case the assessee had claimed the proportionate premium on leasehold land for the year under consideration and is ought to be allowed. We have perused the submission advanced in both sides in the light of records placed before us. 10.10. It is noted that, this Tribunal consistently followed the view taken by co-ordinate bench of this Tribunal for A.Y. 1995-96 in vide order dated 20.01.2021. It is noted that this Tribunal placed reliance on the decisions of Hon’ble Gujarat High Court in case of DCIT V. Sun Pharmaceutical India Ltd. (Supra) and various other judgements by High Court and this Tribunal. It is noted that this Tribunal held and observed as under: “Ground No. 6 Allowablity of deduction in respect of proportionate premium paid on leasehold land.
Ld. AR brought to our notice para 32-32.2 of CIT(A)'s order and submitted that this issue is covered by the following decisions of Hon'ble Supreme Court, High Courts and ITAT on merits in favour of the assessee:- & 5652/Mum/2012; 24 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) i) DCIT vs. Sun Pharmaceutical Ind. Ltd [2010] 329 ITR 479 (Guj) ii) DCIT vs. Sun Pharmaceutical Ind. Ltd [2010] 325 ITR (SC) iii) United Phosphorous Ltd. vrs. ACIT(2015) 230 Taxman 596 (Guj) iv) VIS. JCIT (ITA No. Lupin Ltd. 5088/Mum/2005) 50. On the other hand, Ld. DR relied on the orders passed by revenue authorities, however he conceded that this ground is covered by the decision of Hon'ble Apex Court, High Courts & ITAT.
Considered the rival submission and material placed on record. We notice from the records that the identical issues have already been decided by the Hon'ble Supreme Court, High Courts and ITAT on merits:- i) DCIT vs. Sun Pharmaceutical Ind. Ltd [2010] 329 ITR 479 (Guj) ii) DCIT vs. Sun Pharmaceutical Ind. Ltd [2010] 325 ITR (SC) United Phosphorous Ltd. vrs. ACIT(2015) 230 Taxman 596 (Guj) iv) Lupin Ltd. Vrs. JCIT (ITA No. 5088/Mum/2005) For the sake of clarity, relevant portion of the decision in the case of Lupin Ltd is reproduced below:- 7. Ground nos. 5 and 6 relates to the disallowance of amortisation of payment made for leasehold land of 2,45,000/-. At the outset, the learned counsel of the assessee submitted that this issue has come up for consideration in assessee's own case in the A.Y. 2000- 01 in and in the A.Y. 2002-03 in wherein this issue has been decided against the assessee. However, the learned counsel submitted that this issue now stands covered by the decision of DCIT v SUN Pharmaceuticals Limited reported in 329 ITR 479, wherein it has been held that making of advance payment for acquiring land on lease for 19 years was allowable as revenue expenditure. Therefore, the decision of the earlier Tribunal order may not be followed. 7.1 On the other hand, the learned DR relied upon the findings given by the Ld. CIT(A) as well as the earlier orders of the ITAT.
8. After carefully considering the rival submissions, we find that the amount which has been amortized relates to the payment for lease hold of land and building. The Ld. CIT(A) has dismissed the assessee's ground on the reason that this issue has been decided against the assessee by the Ld. CIT(A) in the earller year. The Tribunal also in the A.Y. 2000-01 in has dismissed the assessee's appeal on the following reasoning:-
& 5652/Mum/2012; 25 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) "6. Ground 2 relates to CIT (A)'s decision in confirming the disallowance of the assessee's claim of Rs 2,97,015/-u/s 35D.
7. During the assessment proceedings before us, the Ld AR stated that the said expenditure was incurred in connection with the issue of shares for increase in share capital. AO made disallowance basing on the apex court judgments in the case of M/s Brooke Bond India Ltd (225 ITR 798)(SC) and M/s Punjab State Industrial Development Corporation Ltd (225 ITR 792)(SC). The CIT (A) confirmed the action of the AO stating that the said expenditure should not be allowed as revenue expenditure. During the proceedings before us, Ld AR for assessee relied on various judgments including the jurisdictional High Court judgment in the case of Maharashtra Ugine and Steel Co Ltd (250 ITR 84) (Bom). After going through the said judgments, we find that the said jurisdictional High Court judgment relates to allowability of expenditure incurred on payment of Stamp duty for debenture issue and, therefore, we are of the considered opinion that the apex court judgments cited above are relevant and expenses are not allowable as revenue expenditure and thus, the order of the CIT (A) does not call for any interference. Accordingly, ground 2 is dismissed."
From the perusal of the above decision, it is seen that the Tribunal had decided this issue based on the decision of M/s Brooke Bond India Ltd. (supra) and M/s Punjab State Industrial Development Corporation Ltd (supra), wherein the matter related to the issue of allotment of shares and increase in share capital, whereas in this case, the issue is entirely different and relates to the payment on account of lease hold of land and building. This issue as rightly been pointed out by the learned counsel is covered by the decision of the Hon'ble High Court of Gujarat in the case of DCIT vs. Sun Pharmaceuticals Industries Ltd. reported in 329 ITR 479, wherein the Hon'ble High Court has held that the payment of advance lease rent for acquisition of land on lease for a period of 19 years is revenue expenditure. While coming to this conclusion the Hon'ble High Court has relied upon the principle and ratio laid down by the Hon'ble Supreme Court in the case of CIT vs. Madras Auto Services Ltd. (1998), reported in 233 ITR 468 (SC). The point in issue is also covered by the decision of the Hon'ble Madras High Court in the case of CIT vs. Ucal Fuel Systems Ltd. reported in 296 ITR 702, wherein similar matter was involved and was held that upfront lease rent charges paid for obtaining lease of land and building is revenue expenditure. In view of the aforesaid preposition laid down by the Hon'ble High Courts, we are persuaded to agree with the learned counsel that the earlier decision of the Tribunal cannot be held as a & 5652/Mum/2012; 26 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) binding precedence on the facts of the case. Accordingly, the ground nos. 5 and 6 are allowed in favour of the assessee.
Therefore, respectfully following the above decision of Coordinate Bench of ITAT and also the decision of Hon'ble Supreme Court and Hon'ble High Courts, which are applicable mutatis mutandis in the present case, we are inclined to accept the submission of Ld. AR. Accordingly, this ground raised
by the revenue is dismissed.” 10.11. It is noted from the audited financial accounts of the assessee placed at page 14 of the paper book that the assessee has capitalized the leasehold land in the schedule 5 to the fixed assets. In schedule 12, the assessee has written off the amount of leasehold premium proportionately for the year under consideration. The same has been substantiated by the Note 17 at page 27 that reads as under:
17. Amount written off against leasehold land - Rs 4,670,725/- Proportionate premium for the year on leasehold land amounting to Rs 4,670,725/- was debited to Profit and Loss Account. In the return of income out of abundant caution no deduction was claimed for said expenses. It is submitted that leasehold premium is in effect advance rent and as such the proportionate write off is an allowable deduction following the ratio of the decision of the Supreme Court in the case of Madras Industrial Investment Corporation Ltd vs CIT (225 ITR 802) and decision of the Commissioner of Income Tax (Appeals) in our own case from Assessment Year 1991-92 onwards” In fact we noted that there is no loss to the revenue and the assessee has treated the entire premium as capital asset. Since the same is not refundable the amount reflecting in the Balance sheet has to proportionately reduced year to year. We therefore do not find any infirmity in the claim of the assessee Accordingly, this ground raised by the assessee stands allowed.
& 5652/Mum/2012; 27 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) 11. Ground no. 3 raised by the assessee is against the disallowance of prior period disallowances amounting to Rs. 86,24,198/-. 11.1. The Ld. Sr. Counsel submitted that, assessee claimed prior period expenses a’s an allowable expenditure in its original return of income. Assessee was called upon to explain as to why the same should not be disallowed. The Ld. Sr. Counsel submitted that, prior period expense was allowed in the past, in the year in which it was debited and therefore the said amount cannot be disallowed during the year under consideration. 11.2 He submitted that the prior period expenses were incurred in connection with incentives paid to transporters for quick turnaround time i.e if the actual time gap between the dispatch time and reporting back of the vehicle for the next dispatch is lesser than the expected time. The Ld. Sr. Counsel submitted that, this ensured maximum availability of vehicles for dispatch and timely delivery to the dealers. The Ld. Sr. Counsel submitted that, the logistic department estimated the incentive based on delivery time and report back time of vehicle at the dispatched location. 11.3 The Ld. Sr. Counsel submitted that, for the previous year ended on 31.03.2006, assessee estimated the liability on account of such incentives payable to transporters at Rs. 5,79,82,00/- and thus made provision of the said amount in the books of accounts for F.Y. 2005-06. He submitted that during F.Y. 2006-07 relevant to assessment year under consideration the actual transport incentive paid for the period relating to F.Y. 2005-06 amounted to & 5652/Mum/2012; 28 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) Rs. 6,66,06,198/- and accordingly an amount of Rs. 86,24,196/- being the difference between the provisions made and actual sum paid represented a short provision. 11.4. The Ld. Sr. Counsel thus submitted that, it was upon the receipt of actual bills that the incentives were calculated during the year under consideration and the differential amount was actually paid during the year under consideration. He thus submitted that it is an allowable expenditure in the hands of the assessee. He also submitted that note 18 to the computation of total income and the audited financials clarifies the position. 11.5. On the contrary, the ld. DR relied on the order passed by authorities below. We have perused the submission advanced in both sides in the light of records placed before us. 11.6 It is noted that, the assessee claimed deduction of Rs. 86,24,198/- during the year under consideration as the said amount was crystalized and the liability accrued during the year. It is noted that the auditor reported the same in the tax audit report the relevant fact in respect of the same. There is no dispute that the amount of Rs. 86,24,198/- became due upon receipt of the invoices during the year under consideration and had to be paid. As the amount been crystalized during the year under consideration upon receipt of invoices, it was correctly debited to the profit and loss account by the assessee. We therefore do not find any reason to uphold the addition made by the authorities below and the same is directed to be deleted.
& 5652/Mum/2012; 29 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) Accordingly, ground no. 3 raised by the assessee stands allowed.
Ground no. 4 raised by the assessee is not pressed and therefore dismissed as infructuous.
Ground no. 5 raised by the assessee is against treating expenses incurred in relation to purchase and upgradation of software as capital in nature amounting to Rs. 1,61,04,826/-. 13.1. At the outset, the Ld. Sr. Counsel submitted that, this issue has been considered by following decisions of this Tribunal in assessee’s own case as well as various other decision. a) ITATAY 2003-04 (ITA No. 1496/Mum/2007, b) ITATAY 2002-03 (ITA No. 3043/Mum/ 2010, c) Asahi Safety Glass vs Commissioner of Income-tax) (346 ITR 329) (Del HC) j) Amway India Enterprises vs CIT (346 ITR 341) (Del HC) g) Raychem RPG Ltd [2012] 346 ITR 138 (Bombay) h) Aker Powergas Pvt. Ltd (ITA No. 1276 of 2017) (Bombay High Court) i) M/s. Group M Media India Pvt. Ltd (ITA No.3088/M/2019, Mumbai Tribunal) k) M/s. Kotak Mahindra Bank Limited (As successor in business of erstwhile ING Vysya Bank Limited) (ITA No. 748/Bang/2011) (Bangalore Tribunal) d) ITAT - AY 2006-07 (ITA No. 5299/Mum/2010, para no. 29, page no 65-67) e) ITAT AY 2005-06 (ITA No. 1223/Mum/2010, para no. 9, page no 17- 21) f) ITAT AY 2004-05 (ITA No. 6838/Mum/2008, para no. 44, page no 77- 78) 13.2. The Ld. Sr. Counsel submitted that, for A.Y.2004-05 to A.Y. 2006-07, the issue was subjected to verification by Ld. AO. Reference was made to the following observations of this Tribunal as under:
& 5652/Mum/2012; 30 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) “29.5. We have given thoughtful consideration to the rival submissions and have perused the material on record. In our view there is no material change in the facts and circumstances. Accordingly, keeping in view our finding and adjudication pertaining to Ground No.5 raised in appeal preferred by the Assessee for the Assessment Year 2005-2006 contained in paragraph 9 to 9.8 above, we deemed it appropriate to remand this issue back to the file of Assessing Officer with the directions to allow deduction for software expenses of INR.1,33,52,800/- as revenue expenditure after verifying the factual averments made by the Assessee to the effect that the software expenses (a) do not provide any benefit of enduring nature to the Assessee; and/or (b) include expenses for purchase of software licenses not giving any ownership rights to the Assessee. In case the Assessing Officer accepts the contention of the Assessee and grants deduction for software expenses of INR.1,33,52,800/- as revenue expenditure, the Assessing Officer is directed to reverse the depreciation of INR.1,13,80,393/-granted to the Assessee in respect of the same.” 13.3. There is nothing on record brought out by the revenue contrary to the above observation by this Tribunal. Respectfully following the aforesaid view, the claim of the assessee to treat the software expenses as revenue in nature is allowed. Accordingly ground no. 5 raised by the assessee stands allowed.
Ground no. 6 raised by the assessee is against adjusting unobserved depreciation and accumulated losses of the years prior to initial assessment year, while computing the amount eligible for deduction u/s. 80IA of the Act. 14.1. Ld. Sr. Counsel submitted that the initial assessment year for the purpose of allowing deduction u/s. 80IA must be considered as the first year in which the assessee exercises its option to claim deduction under the said section and not the first year in which the unit started generating power. It is submitted that assessee exercised the option for the first time in its 6th year & 5652/Mum/2012; 31 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) of operation and therefore the unabsorbed depreciation and accumulated losses of the earlier years cannot be notionally adjusted while computing the amount of eligible deduction u/s. 80IA of the Act. In support he placed reliance on the decision of Hon’ble Bombay High Court in case of PCIT V. M/s. Aker Power Gas Pvt. Ltd. in vide order dated 20.01.2020 and decision of Hon’ble Madras High Court in case of Velayudhaswamy Spinning Mills (P) Ltd (Mad) reported in 340 ITR 477. 14.2. The Ld. Sr. Counsel submitted that, the assessee already set off the unabsorbed depreciation in the earlier years against profits from other business, and therefore it is not available to be set off now against the profits of the eligible unit for the purposes of computing deduction u/s. 80IA of the Act. He placed reliance on the note placed in the paper book at page 42-45 in support. He also relied on the CBDT Circular No. 1/2016 on the issue of selection of initial year to start the claim of deduction u/s. 80IA of the Act. 14.3. On the contrary the Ld. DR relied on order passed by the authorities below. We have perused the submission advanced in both sides in the light of records placed before us. 14.4. It is submitted that identical issue was considered by co- ordinate bench of this Tribunal in the assessee’s own case in the preceding assessment year as under: “a) ITAT ΑΥ 2006-07 (ITA No. 5299/Mum/2010, para no. 30, page no 67- 68)
& 5652/Mum/2012; 32 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) b) ITAT AY 2005-06 (ITA No. 1223/Mum/2010, para no. 12, page no 28- 34) c) Bajaj Finserv Limited - AY 2008-09 and AY 2009-10 (ITA No. 4223/Mum/2012) (Mumbai ITAT) d) Velayudhaswamy Spinning Mills (P) Ltd (Mad) (340 ITR 477) e) Anil H Lad vs DCIT (ITA No 1262/Bang/2010) (Bang)(ITAT) f) Mohan Breweries & Distilleries Ltd. [2008] 23 SOT 32 (Chennai) (ITAT) g) Rangamma Steels & Malleables vs. Asst CIT (132 TTJ 365) (Chennai ITAT)” 14.5. It is noted that admittedly the facts leading to the addition are similar with the year under consideration for A.Y. 2004-05 and 2006-07, this Tribunal considered the issue by observing as under:
“. 12.4. We have head both the sides, perused the material on record and examined the position in law in view of the submission made by both the sides and judicial precedents cited during the course of hearing on this issue. 12.5 During the course of hearing heavy reliance was placed on behalf of the Assessee on the decision of Hon'ble Madras High Court in the case of M/s Velayudhaswamy Spinning Mills (P) Ltd. vs ACIT (340 ITR 477) (Madras High Court) which was confirmed by the Hon'ble Supreme Court ((2016) 244 Taxman 58 (SC). On perusal of the aforesaid judgment of the Hon'ble Madras High Court we find that, inter alia, following substantial questions of law was raised for consideration: "(c) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in saying that unabsorbed depreciation of earlier years before the first year of claim, which has already been absorbed, could be notionally carried forward and taken into consideration for computation of deduction under section 80-IA? 12.6. Answering the above question of law in favour of the Assessee, the Hon'ble High Court held as under: "17. From a reading of sub-section (1), it is clear that it provides that where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4), i.e., referred to as the eligible business, there shall, in accordance with and subject to the provisions of the section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to 100 per cent. of the profits and gains derived from such business for ten consecutive assessment years. Deduction is given to eligible business and the same is defined in sub-section (4). Sub-section (2) provides option to the assessee to choose 10 consecutive assessment years out of 15 years. Option has to be exercised, if it & 5652/Mum/2012; 33 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) is not exercised, the assessee will not be getting the benefit. Fifteen years is outer limit and the same is beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure activity, etc. Sub-section (5) deals with quantum of deduction for an eligible business. The words "initial assessment year" are used in sub-section (5) and the same is not defined under the provisions. It is to be noted that "Initial assessment year" employed in sub-section (5) is different from the words "beginning from the year" referred to in sub-section (2). The important factors are to be noted in sub-section (5) and they are as under: "(1) It starts with a non obstante clause which means it overrides all the provisions of the Act and other provisions are to be ignored; (2) It is for the purpose of determining the quantum of deduction; (3) For the assessment year immediately succeeding the initial assessment year; (4) It is a deeming provision; (5) Fiction created that the eligible business is the only source of income; and (6) During the previous year relevant to the initial assessment year and every subsequent assessment year.
From a reading of the above, it is clear that the eligible business were the only source of income, during the previous year relevant to the initial assessment year and every subsequent assessment years. When the assessee exercises the option, the only losses of the years beginning from initial assessment year alone are to be brought forward and no losses of earlier years which were already set off against the income of the assessee. Looking forward to a period of ten years from the initial assessment is contemplated. It does not allow the Revenue to look backward and find out if there is any loss of earlier years and bring forward notionally even though the same were set off against other income of the assessee and the set off against the current income of the eligible business. Once the set off is taken place in earlier year against the other income of the assessee, the Revenue cannot rework the set off amount and bring it notionally. A fiction created in subsection does not contemplates to bring set off amount notionally. The fiction is created only for the limited purpose and the same cannot be extended beyond the purpose for which it is created.
In the present cases, there is no dispute that losses incurred by the assessee were already set off and adjusted against the profits of the earlier years. During the relevant assessment year, the assessee exercised the option under section 80-IA(2). In Tax Case Nos. 909 of 2009 as well as 940 of 2009, the assessment year was 2005-06 and in Tax Case No. 918 of 2008 the assessment year was 2004-05. During the relevant period, there were no unabsorbed depreciation or loss of the eligible undertakings and the same were already absorbed in the earlier years. There is a court cited supra considered the scope of sub- section (6) of section 80-1, which is the corresponding provision of & 5652/Mum/2012; 34 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) sub-section (5) of section 80-IA. Both are similarly worded and, therefore, we agree entirely with the Division Bench judgment of this court cited supra. In the case of CIT v. Mewar Oil and General Mills Ltd. (No. 1) [2004] 271 ITR 311 (Raj); [2004] 186 CTR (Raj) 141, the Rajasthan High Court also considered the scope of section 80-1 and held as follows (page 314 of 271 ITR): "Having considered the rival contentions which follow on the line noticed above, we are of the opinion that on finding the fact that there was no carry forward losses of 1983-84, which could be set off against the income of the current assessment year 1984-85, the recomputation of income from the new industrial undertaking by setting off the carry forward of unabsorbed depreciation or depreciation allowance from previous year did not simply arise and on the finding of fact noticed by the Commissioner of Income- tax (Appeals), which has not been disturbed by the Tribunal and challenged before us, there was no error much less any error apparent on the face of the record which could be rectified. That question would have been germane only if there would have been carry forward of unabsorbed depreciation and unabsorbed development rebate or any other unabsorbed losses of the previous year arising out of the priority industry and whether it was required to be set off against the income of the current year. It is not at all required that losses or other deductions which have already been set off against the income of the previous year should be reopened again for computation of current income under section 80-1 for the purpose of computing admissible deductions thereunder. In view thereof, we are of the opinion that the Tribunal has not erred in holding that there was no rectification possible under section 80-1 in the present case, albeit, for reasons somewhat different from those which prevailed with the Tribunal. There being nо carry forward of allowable deductions under the head depreciation or development rebate which needed to be absorbed against the income of the current year and, therefore, recomputation of income for the purpose of computing permissible deduction under section 80-1 for the new industrial undertaking was not required in the present case. Accordingly, this appeal fails and is hereby dismissed with no order as to costs.' 20. From a reading of the above, the Rajasthan High Court held that it is not at all required that losses or other deductions which have already been set off against the income of the previous year should be reopened again for computation of current income under section 80-1 for the purpose of computing admissible deductions thereunder. We & 5652/Mum/2012; 35 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) also agree with the same. We see no reason to take a different view.
The standing counsel appearing for the Revenue is unable to bring to our notice any relevant material or any compelling reason or any contra judgment of other courts to take a different view. He only relied heavily on the Memorandum explaining the provisions in the Finance (No. 2) Bill, 1980, [1980] 123 ITR (St.) 154 to support this case and the same reads as follows: "Clause 30(iii). In computing the quantum of 'tax holiday' profits in all cases, taxable income derived from the new industrial units, etc., will be determined as if such units were an independent unit owned by a taxpayer who does not have any other source of income. In the result, the losses, depreciation and investment allowance of earlier years in respect of the new industrial undertaking, ship or approved hotel will be taken into account in determining the quantum of deduction admissible under the new section 80-I even though they may have been set off against the profits of the taxpayer from other sources."
22. We are not agreeing with the counsel for the Revenue. We are, therefore, of the view that loss in the year earlier to the initial assessment year already absorbed against the profit of other business cannot be notionally brought forward and set off against the profits of the eligible business as no such mandate is provided in section 80-IA(5)." (Emphasis Supplied) 12.7. The above judgment was followed by the Co-ordinate Bench of the Tribunal in the case of Bajaj Finserv Limited Vs. The deputy Commissioner of Income Tax LTU [ITA No.4223/Mum/2012, Assessment Year 2008-09, dated 24/06/2021] cited on behalf of the Assessee. 12.8. Keeping in view the judicial precedents cited in behalf of the Assessee, we set aside the order passed by the CIT(A) and directed the Assessing Officer to recomputed the deduction under Section 801A of the Act as per the judgment of the Hon'ble Madras High Court in the case of M/s Velayudhaswamy Spinning Mills (P) Ltd. (supra) wherein it was held that the unabsorbed depreciation/loss pertaining to assessment years preceding the initial assessment year to the extent already absorbed against the profit of other business of the Assessee cannot be notionally brought forward and set off against the profits of the eligible business for the purpose of the computing deduction under Section 801A of the Act as no such mandate has been provided by Section 801A(5) of the Act. The & 5652/Mum/2012; 36 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) Assessing Officer is directed accordingly. In terms of the aforesaid directions, Ground No. 8 raised by the Assessee is allowed. allowed” 14.5. Considering the above observations and the ratio of the decision of Hon’ble Madras High Court (Supra), we do not find any reason to uphold the disallowance made by the Ld. AO notionally against the profits of the eligible unit for the year under consideration. Accordingly, this ground raised
by the assessee stands allowed.
15. Ground no. 7 raised by the assessee is against the disallowance made u/s. 14A of the Act by adopting computation as per Rule 8D. 15.1. The Ld. Sr. Counsel at the outset submitted that Rule 8D is not applicable for the year under consideration and therefore the computation of disallowance by adopting mechanism is bad in law. He submitted that during the year under consideration, following income was claimed as exempt by the assessee u/s. 10 of the Act- a. dividend received of Rs. 37,29,77,083/- exempt u/s. 10(34) of the Act. b. income from unit of Rs. 36,994,564/- exempt u/s. 10(35) of the Act. c. interest on tax free bonds exempt u/s. 10(15) of the Act of Rs. 10,94,86,697/-. 15.1. He submitted that, the assessee in the revised return computed disallowance of Rs.23,89,438/- considering the & 5652/Mum/2012; 37 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) expenses debited to the profit and loss account. The Ld. Sr. Counsel submitted that, investment was made out of assessee’s own fund on 31.03.2007. It is submitted that assessee has Rs. 55,343 million as reserve and surplus, whereas the borrowed funds amounts to Rs. 16,254 million. It is thus submitted that no interest disallowance therefore could be made in the hands of the assessee as assessee has sufficient interest free own funds to make the investments. The Ld. AR placing reliance on page 51 of the paper book submitted that, a working of disallowance u/s. 14A was provided in which no fault was found by the Ld. AO. It is submitted that the suo-moto disallowance made by the assessee is on a reasonable basis taking into account the expenditure incurred by the assessee towards the corporate finance department and other non-allocable expenditure in the ratio of exempt income to the total income credited to the profit and loss account. 15.2 He submitted that the expenditure relating to wind mill and that expenditure directly related to manufacturing and sales have to be excluded since they are not related to the exempt income. The Ld. Sr. Counsel in support placed reliance on the decision of Hon’ble Bombay High Court in case of Godrej and Boyce Manufacturing company Ltd reported in (2010) 194 taxmann.com 203. He also placed reliance on Hon’ble Bombay High Court in case of CIT V. Reliance Utility and Power Ltd. reported in 313 ITR 340. 15.3. Without prejudice to the above, the Ld. Sr. Counsel submitted that, the disallowance if any could be restricted to 2% & 5652/Mum/2012; 38 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) of the exempt income as has been made in the preceding assessment years being A.Y. 2004-05 to 2006-07. 15.4. The Ld. DR on the contrary, though opposed the submissions of the Ld. Sr. Counsel submitted that, the disallowance may be restricted at 2% as observed by this Tribunal in the preceding assessment year. We have perused the submission advanced in both sides in the light of records placed before us. 15.5. Admittedly assessee has sufficient own funds and therefore no interest expenditure could be attributed for computing disallowance u/s. 14A. The same is therefore directed to be deleted. 15.6. In respect of the administrative expenditure, we follow the consistent view adopted by this Tribunal in the preceding assessment years and the disallowance is restricted to 2% of the exempt income. The Ld. AO is thus directed to compute the disallowance as directed herein without resorting to Rule 8D which is applicable prospectively from 2008-09. Accordingly, ground no. 7 raised by the assessee stands partly allowed.
Ground no. 8 raised by the assessee is in respect of the transfer pricing addition of Rs. 28,13,755/-. 16.1. The Ld. Sr. Counsel submitted that, the assessee is engaged in manufacturing of two and three dealers. It is submitted that the assessee entered into international transaction of export of & 5652/Mum/2012; 39 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) machinery and tools with its associated enterprise in Indonesia. It is submitted that, the assessee only purchased machinery and tools from regular suppliers and sold the same to the AE in Indonesia. The assessee used transactional net margin method (TNMM) to bench mark this transaction. It is submitted that in the transfer pricing study report, the assessee regarded that it is following cost plus 25%. However, in actual the margin earned by the assessee was cost plus 14.01%. 16.2. Assessee also submitted that the comparable companies selected to determine the arm’s length price earned only 2.18% and therefore the transaction of the assessee was treated to be at arm’s length. 16.3. The Ld. TPO after considering the submissions of the assessee was of the opinion that assessee could not earn the margin as per the transfer pricing study report and therefore made adjustment of Rs. 28,13,755/- being, difference between the margin earned by the assessee and the margin claimed as per transfer pricing report. Aggrieved by the order of the Ld. AO, the assessee preferred appeal before the Ld. CIT(A) who upheld the adjustment made. Aggrieved by the order of Ld. CIT(A), assessee is in appeal before this Tribunal. 16.4. The Ld. Sr. Counsel submitted that assessee wrongly mentioned the margin of the transaction at cost plus 25% in the transfer pricing study report which is a typographic error. He submitted that sample copies of the invoices relating to the export & 5652/Mum/2012; 40 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) with the AE was submitted before the Ld. AO as well as third party. He further submitted that, the assessee has to be compared with the activity of export with that of the comparables undertaking similar function and not at the entity level. The Ld. Sr. Counsel further submitted that the revenue did not doubt the invoice filed by the assessee and therefore the action of the Ld. AO deserves to be reversed. 16.5. On the contrary, the Ld. DR submitted that this issue requires verification by the Ld. TPO, since correct benchmarking has to be made. It is also not verified whether there are any expenditure incurred in respect of the same which needs to be considered for computing the margin. We have perused the submission advanced in both sides in the light of records placed before us. 16.6. It is noted that the Ld. TPO did not verify any documents filed by the assessee in terms of the invoices in order to determine the correct margin earned by the assessee. In the interest of justice we deem it appropriate to remit this issue back to the Ld. AO to consider the claim in accordance with the law, having regards to the invoices raised by the assessee independent of the margin mentioned by the assessee in the transfer pricing study report. Whatever, is the margin earned by assessee over the cost has to be considered based on the principal of transfer pricing rules. We therefore direct the Ld. AO/TPO to reconsider the issue afresh in accordance with law.
& 5652/Mum/2012; 41 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) Accordingly, this ground raised by the assessee stand partly allowed for statistical purposes. Addl. Ground no. 1
17. During the course of assessment proceedings, the company submitted that, only export incentive utilized under the Duty Entitlement Pass Book (DEPB) Scheme was taxable during the year under consideration. Accordingly, the export benefits receivable amounting to Rs. 27,48,88,852/- ought not to be taxed. However, the Ld. AO taxed entire amount of DEPB benefit receivable amounting to Rs. 101,68,11,191/- as income of the assessee. Aggrieved by the order of the Ld. AO, the assessee preferred appeal before this Tribunal. 17.1 The CIT(A) rejected the submission of the assessee on the ground that once an item is accounted as income in the accounts, there is no reason to exclude the same for the purpose of income- tax. Aggrieved by the order of Ld. CIT(A) the assessee is in appeal before this Tribunal. 17.1 The Ld. Sr. Counsel submitted that the assessee has been consistently accounting for the export benefit on the basis of exports made by it. The Ld. Sr. Counsel submitted that, this issue has been considered by the co-ordinate bench of this Tribunal for various assessment year as under: a) ITATAY 2006-07 (ITA No. 5299/Mum/2010, b) ITATAY 2005-06 (ITA No. 1223/Mum/2010, & 5652/Mum/2012; 42 A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) c) ITATAY 2004-05 (ITA No. 6838/Mum/2008, d) ITATAY 2003-04 (ITA No. 1496/Mum/2007, e) ITATAY 2002-03 (ITA No. 3043/Mum/2010, f) Excel Industries Limited [2013] 358 ITR 295 (SC) g) United, Phosphorous Ltd of 2013 (HC)” 17.2. On the contrary the Ld. DR relied on the order passed by authorities below. We have perused the submission advanced in both sides in the light of records placed before us. 17.3 It is noted that this Tribunal in preceding assessment years decided the issue by observing as under: “10.5. We have given thoughtful consideration to the rival submissions. It emerges that identical issue had come up for consideration before the Tribunal in Assessee's own case for the Assessment Year 2002-2003 & ITA [ITA No.3043/Mum/2010 No.2899/Mum/2010, dated 24/06/2024], wherein both the sides had agreed that issues raised were to be decided afresh after considering the facts and circumstances of the case as per the judgment of Hon'ble Supreme Court in the case of Excel Industries Ltd. (2013) 358 ITR 295 (SC). The relevant extract of the aforesaid decision of the Tribunal reads as under: "53. Heard both the sides and perused the material on record. The facts and findings on the issue of taxability is not fully discussed in the order of the assessing officer and the CIT(A) therefore we restore this issue to the file of the assessing officer to decide the same after examination in accordance with the decision of Hon'ble Supreme Court in the case of Excel Industries Ltd. (2013) 358 ITR 295 (SC). Therefore this ground of appeal of the assessee is allowed for statistical purpose." 10.6. The above decision of the Tribunal was followed by the Co-ordinate bench while adjudicating identical ground raised in appeal for the & 5652/Mum/2012;
43. A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) Assessment Year 2003-2004 [ITA No. 1496 & 1420/Mum/2007, dated 09/09/2024]. 10.7. Since the facts and circumstances prevailing during the relevant previous year were identical to those prevailing in Assessment Years 2002-03 and 2003-04, we find no reason to depart from the consistent view taken by the Tribunal in appeals for the Assessment Year 2002- 2003 and 2003-04. Accordingly, the issues raised by way of Ground No.6 in the present appeal are remanded back to the file of Assessing Officer for denovo adjudication as per the judgment of the Hon'ble Supreme Court in the case of Excel Industries Ltd. (supra). The Assessee is directed to furnish before the Assessing Officer the details of corresponding proceeds and utilisation of DEPB Benefit. All the rights and contentions of the Assessee are left open. In terms of the aforesaid, Ground No. 6 raised by the Assessee is statistical purposes. purposes.” 17.3. Admittedly there is no change in the facts and circumstances for the year under consideration. Revenue has not been able to bring any material on record to take a contrary view. 17.3. Respectfully following the above view, assessee is directed to furnish all the details in respect of the same proceeds or utilization of the DEPB as the case may be. The Ld. AO is directed to consider the claim of the assessee based on the real income theory as observed by Hon’ble Supreme Court in case of CIT(A) V. Excel industries Ltd. reported in (2013) 38 taxmann.com 100. For the sake of clarity the same is reproduced as under: “27. Applying the three tests laid down by various decisions of this Court, namely, whether the income accrued to the assessee is real or hypothetical; whether there is a corresponding liability of the other party to pass on the benefits of duty free import to the assessee even without any imports having been made; and the probability or improbability of realisation of the benefits by the assessee considered from a realistic and practical point of view (the assessee may not have made imports), it is & 5652/Mum/2012;
44. A.Y. 2007-08 Bajaj Holding & Investment Ltd. (Formerly Known as Bajaj Auto Ltd.) quite clear that in fact no real income but only hypothetical income had accrued to the assessee and Section 28(iv) of the Act would be inapplicable to the facts and circumstances of the case. Essentially, the Assessing Officer is required to be pragmatic and not pedantic.” Accordingly, the additional grounds raised by the assessee stands partly allowed for statistical purposes.