Loading judgment…
No AI summary yet for this case.
Before: SHRI SAKTIJIT DEY & SHRI PRABHASH SHANKAR
आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :-
The present appeal emanating from the appellate order dated 19.11.2024 is preferred by the Revenue against the order passed by the Ld. Commissioner of Income-tax (Appeal)/CIT(A)-47, Mumbai [hereinafter referred to as “CIT(A)”] pertaining to the Rectification order passed u/s. 154 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 27.03.2018 for the Assessment Year [A.Y.] 2011-12.
A.Y. 2011-12 UltraTech Cement Limited, Mumbai 2. The grounds of appeal are as under:- 1. “Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deciding that the order of rectification would reckon only with the earlier order of the CIT(A) and not with the original assessment order?” 2. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right to derive the unfounded conclusion that the impugned order u/s. 154 of the Act was passed by the AO on a matter already decided by the CIT(A) on an earlier date when such is not the case and the rectification order u/s. 154 carried out by the AO was on a matter not in dispute before the CIT(A) in such earlier order?” 3. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right to unilaterally presume that the impugned order passed u/s. 154 of the Act imposed upon the earlier dated order of the CIT(A) the AO's intent to modify the decision made in such earlier order, while also simultaneously seeking to conclude that the passing of such earlier order by the CIT(A) would invalidate the statutory jurisdiction and/or time frame mandated to pass such order of rectification?” 4. “Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in allowing the profit of Thermal Power Plant as deduction u/s 801A without appreciating provision of Section 801A(12A) of the Income Tax Act, 1961 and that the revenue has preferred an appeal before the Hon'ble Bombay High Court on the same issue for 2010-11, 2012- 13, 2013-14 & 2014-15?” 5. “Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is right in not adjudicating on the ground raised by the assessee that a (as alleged) change of opinion on the same set of facts is not a mistake apparent from record when the impugned matter of the claim of deduction u/s. 801A(12A) of the Income Tax Act, 1961 is a direct beneficial claim the wrong allowability of which would be an error in law as well as ultra vires Article 265 of the Constitution.”
A.Y. 2011-12 UltraTech Cement Limited, Mumbai 3. Facts of the case are that the assessee is a Public limited company engaged in manufacturing and sale of Cement and allied products. The appeal pertains to Samruddhi Cement Limited (henceforth ‘SCL’) which was amalgamated with the assessee UltraTech Cement Limited w.e.f. 1st July 2010. SCL filed its return of income u/s 139 of the Act, for the AY 2011-12 on 30.09.2011 declaring total income at Rs.385,73,75,528/-.The AO passed an order u/s. 143(3) of the Act on 10.03.2014 determining total income at Rs.400,49,18,590/-. The order u/s 143(3) was rectified vide order u/s 154 dated 10.03.2014 to grant credit for TDS. Notably, the claim of deduction u/s 80IA of the Act was not disturbed in this rectification order. Against this order, SCL filed an appeal before the ld.CIT(A), with respect to the disallowances made and claims rejected by the AO in the regular assessment. The ld. CIT(A) decided the said appeal vide order dated 19.05.2017, granting substantial relief to the assessee.
3.1 Thereafter, the AO issued a show cause notice dated 13.02.2018 u/s 154 of the Act, proposing to rectify and disallow an amount of Rs.16,37,73,346/-, being the deduction u/s 80IA in respect of seven units transferred after 01.10.2009 from the demerged company. The assessee argued that there was no mistake apparent from records necessitating rectification of order passed u/s 143(3) of the Act. The A.Y. 2011-12 UltraTech Cement Limited, Mumbai assessee also made submissions on merits on the issue as to why deduction u/s 80IA in respect of the units transferred from Grasim Industries Ltd., was allowable. The AO however did not accept its contention. In the order passed u/s 154 r.w.s. 250 dated 27.03.2018, the AO rectified the earlier order by disallowing the claim made u/s 80IA of Thermal Power Plants amounting to Rs.16,41,59,884/-. The AO had also observed that the claim was made by the assessee u/s 80IA(12) of the Act. He further held that with the insertion of sub-section (12A) in section 80IA, the assessee's claim u/s 80IA(12) was a mistake apparent from record. He therefore, rejected the claim of the assessee u/s.80IA, amounting to Rs.16,41,59,884/-.
In the subsequent appeal before the ld.CIT(A),the assessee contented that during the course of assessment proceedings, the appellant had furnished detailed submissions in respect of claim made u/s. 80IA of the Act in respect of power generating undertakings (Thermal Power Plants) and Railway undertakings. Based on the submission so made, the claim for deduction u/s 80IA for TPP as well as Rail Systems was examined in detail during the course of regular assessment proceedings. The ld.AO passed order under section 143(3) of the Act dated 10.03.2014. In the order, he has discussed at length in para 9 (Page 6 onwards) regarding deduction claimed under Chapter A.Y. 2011-12 UltraTech Cement Limited, Mumbai VIA. The claim of the assessee in respect of TPP had been allowed at Rs.16,37,54,164/- after adding back an amount of Rs.3,86,538/- towards appropriation of Head Office Expenses and Rs.19,182/- towards Other income. As regards Rail systems, the entire claim of Rs.12,54,59,320/- was disallowed on the premise of non-fulfilment of the requirements of section 801A.There has been no change of facts between the time the regular assessment order was passed and the issue of notice dated 13.02.2018 under section 154 of the Act. The ld.AO ought to have appreciated that disallowance of deduction already considered in the original assessment tantamounts to review of own order or change of opinion on the same set of facts which is beyond the purview of powers prescribed u/s 154 of the Act. It was submitted that a rectification order can be passed only to rectify a mistake which is apparent from records and not for any matter which requires a review of earlier order or change of view earlier taken. It was further submitted that the assessee had made the claim of deduction under section 80IA in its Return of Income and had, along with the Return, filed Form 10CCB certified by the auditors in respect of its claim. Further, during the course of assessment proceedings, the appellant vide letter dated 22.02.2013, submitted the details in relation to claim made in respect of the power undertakings under section 80IA. Company provided all the information about the A.Y. 2011-12 UltraTech Cement Limited, Mumbai demerger of cement business by Grasim and acquisition of those units by the appellant Company. The claim has been examined and after due verification it was allowed in the assessment order passed under section 143(3) of the Act. In doing so, however, AO disputed the quantum of claim and reduced to the extent of allocation of head office expenses and other income.
4.1 It was stated further before the ld.CIT(A) that the claim under section 80IA in respect of as Rail undertakings was also examined in detail in the regular assessment and had been disallowed in the assessment order on the premise that the provisions of section 801A were not fulfilled. The said issue was raised in appeal before the ldCIT(A). After due examination of facts and legal position on the issue, the ld. CIT(A) examined the fulfilment of the requirement of section 80IA to the facts of the case and allowed the claim. No objection was raised either by the AO or by the CIT(A) in respect of provisions of section 80IA(12A) of the Act. Further, in the appellant's own case, the ld. CIT(A) for AY 2010-11, allowed the claim made under the provisions of section 801A in respect of Rail System Undertaking.
4.2 Based on above facts, it was pleaded that the allowability of claim under section 80IA has been already considered by the predecessor AO as well as the CIT(A). Carrying out of rectification under A.Y. 2011-12 UltraTech Cement Limited, Mumbai section 154, therefore, tantamounts to review of own order or change of opinion and cannot be considered as mistake apparent from record. Hence the order passed under section 154 of the Act is bad in law. In this case, reliance was also placed on various case laws i.e.Beena Rahul Mishra vs CIT & others (185 ITR 361), T.S. Balram ITO v. Volkart Brothers & Others (82 ITR 50) (SC),Khatau Junkar Ltd. vs K.S. Pathania [1992] 196 ITR 55 (Bom),Satish Kumar Aggarwal v. Deputy Commissioner of Income-tax [2012] 20 taxmann.com 172 (Delhi ITAT) and Additional CIT v. Chemical Limes (149 ITR 325) (Raj).Based on the above decisions, it is stated that the proposed action to withdraw the claim under section 801A cannot be classified as a mistake apparent from records.
4.4. It was also pleaded that it is logical to presume that the claim was examined thoroughly by the predecessor AO during the course of regular assessment proceedings under section 143(3) of the Act. The assessment order was passed after taking into consideration the facts and details submitted and the contention raised by the appellant Company. Hence, the proposed rectification would tantamount to change of opinion. Reliance is placed on Dushyant Kumar Jain v. DCIT 166 taxmann.com 126) (2016), Commissioner of Income-tax, Bangalore v. TTK Prestige Ltd [2009] (184 taxmann 18),Commissioner of Income A.Y. 2011-12 UltraTech Cement Limited, Mumbai tax v Budge Budge Amalgamated Mills Ltd. [1988] (41 taxmann 140),Express Newspapers Ltd. v. Dy. CIT & Anr. [2010] (228 CTR 405) and Supreme Court in the case of CIT Vs. Kelvinator of India Ltd. (320 ITR 561].
We have perused the appellate order passed wherein the ld.CIT(A) has duly considered all the above contentions of the assessee and has given the decision which is reproduced as below for the sake of clarity:
“Further, the appellant has also submitted that change of opinion on same set of facts is not a mistake apparent from record. It has been submitted that the claim of deduction u/s 80IA for TPP as well as Rail systems was examined during the course of regular assessment proceedings. I have gone through the assessment order and have noted that the AO has discussed about deduction u/s 80IA claimed for Rail systems and disallowed the same by following the order in the case of Grasim Industries Ltd. for AY 2003-04. However, there is no discussion in the assessment order with regard to sub section 12A and its applicability.Further, the 154 order was passed on 27.03.2018 and the provision was rightly read by the AO having prospective effect. However, as discussed in pre paras, the Hon’ble ITAT has passed an order dated 14.12.2021 for the AY under consideration after discussing the merits of the case in detail and directed the AO to allow deduction as claimed by the appellant u/s 80 IA of the Act. Further, in the case of appellant for AY 2010-11, the Hon’ble ITAT vide order dated 21.02.2023 upheld this ground of appeal as under : “4.11. In any case, even on merits, the Id. AR placed on record the copy of decision of this Tribunal in the case of Ultratech Cement Ltd. vs. DCIT for A.Y.2011-12, 2012-13, 2013-14 and 2014-15 in and CO Nos. 129,130,118 & 155/Mum/2019 vide order dated 14/12/2021 wherein this A.Y. 2011
12. UltraTech Cement Limited, Mumbai Tribunal had passed an elaborate order after due consideration of provisions of Section 801A (12A) of the Act and granted deduction u/s.80IA of the Act to the successor company. For the sake of brevity, the elaborate observations made by this Tribunal on merits is not reproduced hereunder. Hence, even on merits, the assessee is entitled for deduction u/s.80IA of the Act in the facts and circumstances of the instant case. Accordingly, the ground Nos. 1-4 raised by the assessee are allowed.” 5.5 Thus, respectfully following the Hon’ble Tribunal’s decisions in the case of appellant on identical issue for earlier years the grounds 1, 2 & 4 of the appellant are upheld.
6.1 In ground no. 3, the appellant has contended that once the claim has been allowed by the Ld. CIT (A) the same cannot be rectified subsequently by the AO. 6.2 I have gone through the order dated 18.05.2017 of the Ld. CIT (A). It is noted that while disposing of the ground related to claim of deduction u/s 80IA of the Act in respect of Rail systems, the Ld. CIT (A) has briefly decided the matter as under: “14. Ground no. 9 Vide this office appeal order dated 21.4.2017 in appellant's own case for A.Y. 2010-11, this ground has been decided in favour of appellant company. Therefore, since the ground here is identical, it is allowed. Ground of appeal no. 9 is allowed.” Notably, the Ld. CIT (A) has neither discussed the merits of the case nor discussed the applicability of sub section 12A. However, since section 154 of the Act has limited provisions, I am of the opinion that once an issue has been decided by Ld. CIT (A), the AO could not have invoked provision of section 154 of the Act to withdraw the benefits granted by ld. CIT (A) on that particular issue. 6.3 Accordingly this ground of appeal is upheld.”
7. We have carefully considered all the relevant facts of the case, rival submissions and perused the materials available on record. We find that the present appeal is concerned with Samruddhi Cement Ltd. and A.Y. 2011-12 UltraTech Cement Limited, Mumbai the order dated 27.03.2018 passed by the ld.AO under section 154 of the Act, withdrawing assessee's claim for deduction under section 80-IA of the Act in respect of profits of the TPP by invoking the provisions of section 80IA(12A) thereof. The TPPs in respect of which the said deduction is claimed were originally set-up as a part of the Cement undertakings by Grasim Industries Limited. As a part of the demerger scheme, the said Power Plants along with the Cement Undertakings were transferred to Samruddhi Cement Limited w.e.f. 01/10/2009. The present appeal is being pursued by Ultratech Cement Ltd. as the amalgamated company of the assessee. According to the ld. AO, section 80-IA(12) of the Act enables the resulting company, being the assessee herein, to claim deduction under the said section in respect of the remaining period for which deduction is to be allowed. By virtue of insertion of sub-section 12A of Section 80IA of the Act, the ld. AO was of the opinion that the enabling provision in sub-section 12 has been withdrawn by the Finance Act 2007 w.e.f. 01/04/2008 and accordingly, the assessee would not be entitled for deduction u/s.80IA of the Act.The ld.AO resorted to section 154 of the Act and withdrew the deduction u/s 80IA(12) hitherto allowed in the assessment order as also by the ld.CIT(A) in the subsequent appellate order. The assessee has contented that no rectification could be done as there was no mistake apparent A.Y. 2011-12 UltraTech Cement Limited, Mumbai from the records. Moreover, the issue was already decided in favour of the assessee in the appellate order.Therefore.the assessment order having been merged in the appellate order, it could not be rectified subsequently. As per the provisions of section 154 of the Act, rectification of mistake (1) with a view to rectifying any mistake apparent from the record an income- tax authority referred to, in section 116 may- “(a) amend any order passed by it under the provisions of this Act; (b) amend any intimation sent by it under sub- section (1) of section 143, or enhance or reduce the amount of refund granted by it under that sub- section.] (1A) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub- section (1), the authority passing such order may, notwithstanding anything contained in any law for the,, time being in force, amend the order under that sub- section in relation to any matter other than the matter which has been so considered and decided.] (2) Subject to the other provisions of this section, the authority concerned-- (a) may make an amendment under sub- section (1) of its own motion, and (b) shall make such amendment for rectifying any- such mistake which has been brought to its notice by the assessee, and where the authority concerned is the Deputy Commissioner (Appeals)]” 7.1 However, it is a settled position of law that issues which are debatable and controversial cannot be taken up in proceedings u/s 154 of the Act. A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. Thus,the ld.AO was wholly wrong in holding that there A.Y. 2011-12 UltraTech Cement Limited, Mumbai was a mistake apparent from the record of the assessments. A 'mistake apparent' is a mistake that is manifest, plain or obvious; a mistake that can be realized without a debate or dissertation. The plain meaning of the word 'apparent' is that it must be something, which appears to be ex- facie that it is incapable of argument or debate. The mistake can be regarded as 'apparent only when it is glaring, obvious of self-evident mistake. The hon’ble Supreme Court, in the case of T.S. Balaram, ITO V. Volkart Bros (supra), has held that a mistake apparent from record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there can conceivably be two opinions. Thus, if a statutory provision is capable of two interpretations taking one such interpretation cannot give rise to an error apparent from the record even if one is of the view that the other interpretation was more correct in this context. A mistake apparent from the record is one to point out which no elaborate argument is required, it must be a glaring , obvious or self-evident mistake.Matter or evidence extraneous to record is not a mistake apparent from the record. In a nutshell, it can be taken to be well settled that the provisions of section 154 cannot be resorted to in order to make a revision in a matter on which there could be two plausible interpretation. Provisions of section 154 were inapplicable inasmuch as A.Y. 2011-12 UltraTech Cement Limited, Mumbai entire issue being debatable, act of withdrawing the impugned deduction could not be of nature of rectifying mistake apparent from record.
7.2 In so far as the merits of the claim of deduction claimed and disallowed is concerned, the coordinate bench of ITAT,Mumbai in the case of assessee itself in Ultra Tech Cement Ltd., Mumbai vs Asstt. Cit Cc-1(4), Mumbai on 21 February, 2023 in for A.Y.2010-11 has deleted similar disallowance.
7.3 It may also be stated here that the coordinate bench has exhaustively dealt with the issue in hand in its order in the case of the assessee Ultratech Cement Ltd, Mumbai vs Dcit Cen Cir 1(4), Mumbai on 14 December, 2021 in 2461,2462, 2872, 2873 &3764/MUM/2018 C.O.NOs. 130, 118 & 155/MUM/2019 for various assessment years including the year under consideration. More specifically in Assessee's Appeal - 2011-12 the issue was analysed in great detail before allowing the claim of deduction u/s 80IA(12A).The relevant ground and the decision rendered therein are extracted below for ready reference as under:
“1. Grounds raised by the assessee are as under: 1) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in upholding A.Y. 2011
12. UltraTech Cement Limited, Mumbai the disallowance u/s 80IA amounting to Rs.82,61,81,708 for Rail Systems and Rs. 18,91,43,054 for Power Plants. He erred in holding that in respect of Rail Systems and Power Plants transferred from Samruddhi Cement Limited to the appellant Company pursuant to the scheme of amalgamation, the deduction is not allowable as per the provisions of section 80IA(12A) of the income Tax Act 1961.
Ground no.1 of the appeal filed by the assessee relate to disallowance of claim made by the assessee amounting to Rs.82,61,81,708 for rail system and Rs.18,81,43,054 for power generation. The AO has held that the undertakings which were transferred to the assessee from Samruddhi Cement Limited pursuant to the scheme of amalgamation are not eligible for tax holiday benefit under section 80IA in view of the provisions of sub-section (12A) of section 80IA of the IT Act.
Before we get into the merits of the claim of the assessee, it is important to understand the facts in the case before us. i. The assessee is a subsidiary of Grasim Industries Limited (Grasim) with the promoter holding of more than 60%. ii. During the financial year 2010-11, as per the Scheme of Amalgamation duly approved by the Hon'ble High Courts of Bombay and Gujarat, Samruddhi Cement Ltd. (SCL) was amalgamated with the assessee w.e.f. 01.07.2010 (appointed date). The amalgamating company, viz. SCL was a 100% subsidiary of Grasim. iii. Pursuant to the sanction of the Scheme by the High Courts and upon coming into effect of the Scheme of Amalgamation from the appointed date, all the estate, assets, properties, rights, claims, title, interest and authorities including accretions and appurtenances comprised in the undertaking of SCL stood transferred to and vested in UTCL, as a going concern. iv. The abovementioned rights, properties, estates etc. of SCL included Rail undertakings and power plants for which SCL had been claiming tax holiday u/s 80IA. v. Upon amalgamation of SCL and vesting of its Railway undertakings at Rawan - District Raipur, at Hotgi - District Sholapur, at Shambhupura - District Chittorgarh, and at Dodaballarpur - District Bangalore, into the assessee, the assessee Company claimed a deduction of Rs.82,61,81,708/- u/s 80-IA of the IT Act for the period 1st July 2010 to 31st March 2011:
A.Y. 2011-12 UltraTech Cement Limited, Mumbai vi. Similarly, the assessee Company also claimed deduction of Rs.18,91,43,054/- u/s 80IA of the IT Act (as tabulated below) with respect to its power generating eligible undertakings which were acquired from SCL.
The AO disallowed the claim of the assessee in respect of these Rail systems and power undertakings inherited by the assessee from SCL under the scheme of amalgamation, invoking the provisions of sub- section (12A) of Section 80-IA. In this regard, the AO relied on the Memorandum explaining the provisions of Finance Bill, 2007.
The LD CIT(A) upheld the view taken by the AO and noted that amendment provision brought in by the Finance Act, 2007 is free from any ambiguity and pursuant to such amendment, deduction under section 80IA becomes impermissible for the amalgamated company in respect of the undertakings inherited under the scheme of amalgamation..
The Ld AR took us through the provisions of sub-section (1) and submitted that the benefit of tax holiday, as envisaged u/s.80IA, is attached to an 'undertaking' and not to the 'owner'. Accordingly, it was emphasized that the change in ownership has no impact on the availability of deduction in the hands of the successor company…………..
According to the Ld AR of the assessee, sub-section (12) was introduced merely with the intention to put to rest the divergent views taken by the authorities on this issue. It was also pointed out that sub- section (12) to section 80IA did not confer any new right to an assessee to claim the deduction. Sub-section (12) merely clarified that the successor company shall be eligible to claim the deduction for the as per section 80IA(1) of the IT Act.
The Ld AR of the assessee on the other hand, as aforementioned, argued that sub-section (12) of section 80IA did not create any new right of tax holiday to the successor entity at the first place. Thus, insertion of sub-section (12A) in section 80IA of the IT Act, which merely disabled the applicability of sub-section (12), cannot be construed as withdrawal of right to claim the deduction by the successor.
The Ld AR of the assessee further argued that sub-section (12A) was introduced merely to neutralise the abnormalities brought into the statue by sub-section (12) of section 80IA. According to Ld AR of A.Y. 2011-12 UltraTech Cement Limited, Mumbai the assessee following anomalies had arisen on account of introduction of sub-section (12) in section 80IA of the IT Act: "i. In cases of amalgamation / demerger which are effective on a day other than beginning of a financial year, the predecessor company has no right to claim any deduction despite the income for such period is reported by such predecessor company. ii. A strict application of sub-section (12A) read with sub-section (12) in case of demerger would disentitle the demerged entity from claiming deduction with respect to other eligible undertakings even when only one or few eligible undertakings are transferred under the demerger process."
According to the Ld AR of the assessee, the intent of introduction of sub-section (12A) was never to deny the deduction to the eligible undertakings but it merely restored the position of law as it was before insertion of sub-section (12) in section 80IA…………….
The Ld AR further submitted that sub-section (12) was in fact a disabling provision as it disabled the predecessor entity from claiming deduction in the year of amalgamation on a pro-rata basis. Therefore, sub-section (12A) merely negates the effect of such disabling provision and it does not restrict the eligibility of an undertaking to claim deduction under section 80IA of the IT Act which is granted under sub- section (1) of section 80IA of the IT Act. 36. ……………… The Scheme has sanction of the High Court of Bombay as well as High Court of Gujarat. Hence, once the scheme of amalgamation of SCL with the assessee has received the approval of the Hon'ble High Courts, conferring the right upon the assessee company to continue to claim deduction u/s. 80-IA in respect of the eligible undertakings for the residual period, the tax authorities cannot deny the deduction in contempt of the order of Hon'ble High Court.
In the rejoinder, the Ld AR of the assessee submitted that the interpretation of CBDT is contrary to the plain reading of sub-section (12) or (12A), as also the explanatory memorandum to the Finance Bill, 1999 by which sub-section (12) was introduced in the statute and Finance Bill, 2007 by which sub-section (12A) was introduced in the statute. It was further argued that Circulars issued by CBDT are not binding either on the assessee or on the Courts/ Tribunals for the purpose of interpretation of law especially when the language used in the statute is plain and unambiguous. Reliance was placed in this A.Y. 2011-12 UltraTech Cement Limited, Mumbai regard on the Supreme Court Ruling in the case of Ratan Melting & Wire Industries (Civil Appeal No.4022 of 1999).
We have carefully gone through the orders of the lower authorities / materials placed before us and considered the arguments of both parties. Grievance of both parties revolve around eligibility of tax holiday claim for units acquired by the assessee Company from SCL pursuant to the Scheme of amalgamation.
Thus, there is no dispute that the deduction under section 80IA(1) r.w.s. 80IA(4) is available to an undertaking or an enterprise and not to the owner. Having said that, it is necessary to examine whether introduction of sub-section (12) in section 80IA had any implications in terms of the said understanding.
Sub-section (12) providing for allowance of deduction in case of a transfer of undertaking, pursuant to amalgamation or demerger, was inserted in section 80IA by the Finance Act, 1999, with effect from 1st April 2000.
Sub-section (12) of section 80IA of the IT Act, uses the word 'undertaking' signifying that it applies to an undertaking and not to a taxpayer or owner of the undertaking. It provided that in case of amalgamation/demerger, the benefit will flow to the assessee which acquires the undertaking. It is hence important to understand the purpose of introduction of sub-section (12) in the statute...
With a view to reorganise demergers, slump sales and to rationalise the existing provisions of amalgamation, a number of amendments have been proposed on the basis of the following broad principles: (a) demergers should be tax neutral and should not attract any additional liability to tax. (b) in demergers, tax benefits and concessions are available to any undertaking should be available to the said undertaking on its transfer to the resulting company....".
In summary, prior to insertion of sub-section (12) in section 80IA, the deduction was allowed to the amalgamating and the amalgamated companies on a pro- rata basis for the year in which the amalgamation took place. Sub-section (12), although allowed the benefit to the successor entity to which the undertaking was transferred, it changed the position a little, by disentitling the amalgamating company to claim any deduction in the year of amalgamation. Therefore, sub- A.Y. 2011-12 UltraTech Cement Limited, Mumbai section (12) did not create a new right, since this right was already provided in the statute to the successor. It, in effect, curtailed the rights of the amalgamating company or demerged company by disenabling them to claim any benefit in the year of amalgamation/demerger.
In the backdrop of above discussion let us now examine the provisions of sub-section (12A) and its applicability to the present case. Sub- section (12A) was inserted by the Finance Act, 2007 w.e.f. 01.04.2008. It reads as follows: "(12A) Nothing containing sub-section (12) shall apply to an enterprise or undertaking which is transferred in the scheme of amalgamation or demerger on or after the 1st day of April, 2007".
Notes on clauses to the Finance Act, 2007 explains it as follows: "It is proposed to insert sub-section (12A) so as to provide that nothing contained in sub-section (12) shall apply to any undertaking or enterprise which is transferred in a scheme of amalgamation or demerger on or after the 1st day of April, 2007".
The Notes on clauses simply reiterated what has been stated in sub-section (12A). The memorandum explaining the provisions of the Finance Bill 2007, which has been relied upon by the AO as well as LD CIT(A) states as under: "Tax benefit u/s 80-IA not available to undertakings / enterprises of Indian companies undergoing amalgamation or demerger after 31.03.2007. The existing provisions of section 80-IA provide for 100% deduction for ten years in respect of profits and gains of certain undertakings or enterprises engaged in the business of development, operation and maintenance of infrastructure facility, industrial parks and special economic zones or generation distribution or transmission of power, laying and operating cross- country natural gas distribution network, including gas pipelines and storage facilities being an integral part of the network, etc. Sub-section (12) of the said section 80-IA, inter-alia, provides that where any undertaking of an Indian company which is entitled to the deduction under the said section is transferred before the expiry of the period specified therein, to another Indian company in a scheme of amalgamation or demerger, the provisions of the said section 80-IA shall apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place.
A.Y. 2011-12 UltraTech Cement Limited, Mumbai It is proposed to insert a new sub-section (12A) in section 80-IA so as to provide that the provisions of sub-section (12) shall not apply to any undertaking or enterprise which is transferred in a scheme of amalgamation or demerger after 31.03.2007." (emphasis supplied).
As has been held above, sub-section (12) did not confer any new rights to the successor entity when the undertakings were transferred from one taxpayer to another. Sub-section (12A) simply states that in a case of amalgamation or demerger after 31.3.2007, the provisions of sub-section (12) would not be applicable. If the intention of legislature was to curtail the rights of the new owner of the undertaking to claim the tax holiday for residual period, it could have simply stated that benefit u/s 80IA will not be available or it could have stated that the deduction prescribed under sub-section (1) of section 80IA will not be available to the successor. Instead it has used the language to depict that post 31.3.2007, in case of amalgamation/demerger, the provisions of sub-section (12) will have no application. We are of the view that by doing so, the legislature has restored the position that prevailed prior to insertion of sub-section (12) in section 80IA. As discussed above, various Courts have confirmed the availability of benefit of tax holiday claims (although under different sections) and allowed to the successor even prior of specific provisions of sub-section (12) in section 80IA of the IT Act.
Looking from another angle, since the provisions of sub-section (12) were disabling in nature, as it disentitled an amalgamating company or a demerged company from claiming deduction in the year of amalgamation or demerger, the insertion of sub-section (12A) merely negated the effect of sub-section (12) and cured the disability created under sub-section (12) of section 80IA of the IT Act. ……….
In our view, therefore, the clarification provided in the circular for insertion of sub-section (12A) cannot be extended beyond what is unambiguously stated in the provisions of the IT Act. Sub-section (12A) simply states that from a particular date i.e. 31 March 2007 the provisions of sub-section (12) shall not apply in the specified situations. There cannot be any other meaning to such simple provision of the IT Act.
While we reject the contention of the Revenue that intention of the legislature in introducing sub-section (12A) was to deny the benefit to the successor in the scheme of amalgamation or demerger, it is also worth noting that in the present case, the initial investment in eligible undertakings /enterprises was made by Grasim (the holding company of the assessee). These undertakings were demerged by Grasim to its A.Y. 2011-12 UltraTech Cement Limited, Mumbai wholly owned subsidiary, viz. SCL. Subsequently, SCL was amalgamated with the assessee w.e.f. 1 July 2010. Accordingly, even after the amalgamation of SCL with the assessee, there is no change in the entity which made the initial investment since Grasim still retains the entrepreneurial risk with itself as the ultimate shareholder of the assessee company. Therefore, even assuming that the CBDT Circular is to be relied upon, the conditions prescribed by the CBDT for denial of deduction is not fulfilled in the present case. Accordingly, even on this count, the deduction should continue to be available to the assessee company.
We are also inclined to draw reference to one more argument of the AR of the assessee. The scheme of amalgamation of SCL with the assessee was duly approved by the Hon'ble High Courts of Bombay and Gujarat. The Hon'ble Courts in its order has explicitly conferred upon the assessee, being the amalgamated company, a right to claim deduction under section 80-IA in respect of the eligible undertakings for the residual period. ………………
In view of the above discussion, we hold that sub-section (12A) of section 80IA of the IT Act, merely neutralises applicability of sub- section (12) and does not disentitle the successor entities to claim deduction in accordance with section 80IA of the IT Act. Accordingly, AO is directed to allow the deduction as claimed by the assessee with respect to eligible units acquired from SCL. Accordingly, Ground no.1 of the assessee is allowed.” 8. On careful consideration of the entire factum surrounding the issue in hand and the detailed orders(supra), we can conclude that the issue of allowability of the deduction u/s 80IA(12A) is not an issue which could be considered a case of prima facie mistake apparent from the records. The issue under consideration was examined by the ld.CIT(A) in appeal to the extent of partial disallowance due to reallocation of head office expenses. The ld.CIT(A) having co-terminus powers of the Assessing officer and also having powers of enhancement, A.Y. 2011-12 UltraTech Cement Limited, Mumbai however, did not consider it appropriate to modify the claim of the assessee in any other manner or for that matter invoking the provisions of above sub-section which was very much open even before him having partly considered it. Moreover, the detailed discussion and analysis by the hon’ble coordinate bench in the case of Ultratech(supra) in itself makes it evidently clear that the issue could not be decided by invoking the provisions of section 154 of the Act. We dismiss the grounds of appeal in this regard.
8.1 We find from the ground of appeal no.4(supra) that the decision of the coordinate Bench(supra) on the issue of deduction u/s 80IA in respect of TPP, the revenue has preferred an appeal before the Hon'ble Bombay High Court for AYs 2010-11, 2012-13, 2013-14 and 2014-15 which are yet to be decided. The decision coming from the coordinate Bench having binding effect, we therefore, respectfully following the above quoted orders of the coordinate Bench, are of the considered opinion that the AO was not justified in invoking the provisions of section 80IA(2A) for withdrawing the claim of the assessee even on merits. The provisions of rectification u/s 154 of the Act, in any case could not have been applied on the facts and the circumstances of the case. Therefore, both on legal grounds and merits of the case, we do
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 08/04/2025.