NAVIN FLURINE INTERNATIONAL,MUMBAI vs. DY CIT 7(3)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “B”, MUMBAI BEFORE SHRI ABY T VARKEY, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No. 6532/Mum/2019 (A.Y. 2012-13) ITA No. 6533/Mum/2019 (A.Y. 2013-14) Navin Fluorine International Ltd. Suntech Centre, 2nd Floor, 37/40, Subhash Road, Vile Parle (E), Mumbai- 400 057. PAN: AABCP0464B ...... Appellant Vs. Dy.CIT-7(3)(1), Aayakar Bhavan, M.K. Road, Mumbai- 400 020. ..... Respondent ITA No. 6815/Mum/2019 (A.Y. 2012-13) ITA No. 6816/Mum/2019 (A.Y. 2013-14) Dy.CIT-10(3)(1), Room No. 217/212, 1st Floor, Aayakar Bhavan, M.K. Road, Mumbai- 400 020. ..... Appellant Vs. Navin Fluorine International Ltd. Suntech Centre, 2nd Floor, 37/40, Subhash Road, Vile Parle (E), Mumbai- 400 057. PAN: AABCP0464B ...... Respondent Appellant/Assessee by : Ms. Aarti Vissanji & Sh. Aamod Prabhudesai

2 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. Respondent/Revenue by : Sh. Manoj Kumar Sinha, DR Date of hearing : 02/09/2022 Date of pronouncement : 30/11/2022 ORDER PER GAGAN GOYAL, A.M:

These four appeals, out of two by assessee and two by Revenue are directed against the order of Commissioner of Income Tax (Appeals)-17, Mumbai [for short ‘CIT (A)’] vide common orders dated 26.08.2019 for the Assessment Years (AY) 2012-13 & 2013-14 respectively. We shall first take up assessee’s Appeal No. 6532/Mum/2019 as lead case. The assessee has raised common grounds of appeal for both the AYs. Which are as follows: “In the facts and circumstances of the case and in law, the Ld. CIT (A) ought to have held that: 1. The average value of investments to be computed in terms of rule 8D2 (iii) should include only those investments on which dividend (exempt) income has been received during the year. Hence, inadmissible expenditure u/s. 14A r.w.r. 8D2 (iii) ought to have been restricted to Rs.1, 79,515/- as against Rs. 38, 04,609/-. 2. The appellant is eligible for weighted deduction U/s. 35(2AB) of Rs. 14, 40, 63,055/- in respect of scientific research expenditure incurred of Rs. 7, 20, 31,528/-. 3. The amount of Rs. 2, 25, 60, 05,954/- (net) received on sale of Carbon Credit is a "capital receipt" to be excluded in computing the book profit U/s. 115JB. 4. It is humbly prayed that the reliefs as prayed for hereinabove should be granted. 5. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary.” 2. In ITA No. 6815/Mum/2019 for A.Y. 2012-13, the Revenue has raised the following grounds of appeal:

3 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. “On the facts and in the circumstances, the Ld. CIT (A) erred in deleting the disallowance u/s 14A of the income tax Act, 1961 r.w. Rule 8 D (ii) amounting to Rs. 39,95,460/- and r.w. Rule 8D(iii) restricting the Disallowance to Rs.78,00069/- in the facts and circumstances the Ld. CIT(A) has ignored the fact that the Assessee has failed to establish directly that the interest cost as well as expenses in the nature of administrative expenses have no co-relation with tax free investments. The Ld. CIT (A) has ignored the Fact that in the year under consideration and earlier the Assessee's auditors in their report us 44A8 have admitted the application of provision of Section 14A of the Act to the facts of instant case." 2 "On the facts and circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs.8,06,650/- made u/s 41(1) of the income Tax Act, 1961. Further The Ld. CT (A) has ignored the fact that the Assessee has written back amount due to Credit on to the extent of Rs.35,79,944/- out of which 27,73,094/-. Assessed in AY 2009-10, out of Balance Rs. 8, 08,650/- only Rs. 5, 74,204/- was offered to tax in AY 2012-13. The remaining amount of Rs 2.32.446/- & reduced in while back for AY 2013-14," 3 "On the facts and circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs. 31,37,56,129/- received on sale of Carbon Credit treating it as capital receipt. The Ld. CIT (A) ignored the fact that, the claim of Assessee to treat the receipt of Rs. 51, 37, 56,129/- as capital receipt was mode by the Assessee in its revised return of income. Further the Ld. CIT (A) has ignored the fact that the Assessee has spent on construction of project as well as to earn carbon credit" 4 The appellant prays that the order of the Ld.CIT (A) on the above ground be set aside and that of the AO be restored.” 3. In ITA No. 6816/Mum/2019 for A.Y. 2013-14, the Revenue has raised the following grounds of appeal: “1. "On the facts and circumstances of the case and in law the Ld. CIT(A) has erred in deleting the disallowance u/s 14A of the Income Tax Act, 1961 r.w. Rule 8 D(ii) amounting to Rs.27,67,160/- In the facts and circumstances the Ld. CIT (A) has ignored the fact that the Assessee has failed to establish directly that the interest cost as well as expenses in the nature of administrative expenses have no co- relation with tax free investments."

4 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. 2. "On the facts and circumstances of the case and in law the Ld. CIT(A) has erred The Ld. CIT (A) erred in deleting the addition of Rs. Rs.6,41,479/- made u/s 41(1) of the Income Tax Act, 1961. The Ld. CIT (A) has ignored the fact that the Assessing Officer has made the Protective Addition of Rs. 35, 79,944/-, the same is treated as the double addition by the Ld. CIT (A)." 3. "On the facts and circumstances of the case and in law the Ld. CIT(A) has erred deleting the addition of Rs.51,37,56,129/- received on sale of Carbon Credit treating it as capital receipt. The Ld. CIT (A) ignored the fact that, the claim of Assessee to treat the receipt of Rs.51,37,56,129/ as capital receipt was made by the Assessee in its revised return of income. Further the Ld. CIT (A) has ignored the fact that the Assessee has spent on construction of project as well as to earn carbon credit." 4. The appellant prays that the order of the Ld.CIT (A) on the above ground be set- aside and that of the AO be restored. 4. Brief facts of the case are that the assessee filed its return of income for AY 2012-13 on 21-11-2012, declaring total income at Rs. 242,04,24,140/-. The return was selected for scrutiny and notice/s 143(2) was issued on 09-08-2013. Subsequent to the issue of notice u/s 143(2) assessee filed revised return on 29-03-2014 declaring the total income at Rs 11,09,12,388/- and book profit of Rs. 17,98,93,521/- u/s 115JB of the Act. 5. The reasons for filing the revised return of income have been provided which is reproduced herein as under: “Subsequent to the issue of notice u/s 143(2) of the I.T. Act, the assessee filed revised return of income on 29.03.2014 declaring the total income at Rs. 11,09,12,388/- and book profit of Rs. 17,98,93,521/- u/s. 115JB of the I.T. Act. The taxability in the return has been determined at the earlier being higher. The reasons for filing the revised return of income has been provided in letter dated 11.05.2015 which is reproduced herein as under: i. Income from Sale of Certified Emission Reduction Certificates (CERs) is a capital receipt not chargeable to income tax.

5 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. ii. Consequential impact of being granted depreciation on computer software @ 25% instead of 60% in assessing the total income of the assessee u/s. 143(3) for the year ending 31st March 2007. iii. Non-applicability of provisions of Section 14A. iv. Claim of weighted deduction in respect of Scientific Research expenditure u/s. 35(2AB). v. Setoff of MAT credit u/s. 115JAA of the I.T. Act. “ 6. Assessee Company engaged in the business of manufacturing and trading of chemicals as in the past. The principal products manufactured by the assessee are refrigerant gases, hydro fluoric acid and fluoro chemicals. The manufacturing facilities are situated at Surat and Dewas in M.P. 7. During the assessment proceeding AO rejected the revised return filed by the assessee on the ground that revised return can be filed only in case of any inadvertent error or omission but in this case as per AO revised return had been filed with the purpose of changing total approach and stand. As per AO assessee’s case is not entitled to file revised return u/s 139(5). The AO declare revised return as invalid and had not taken any cognizance of the same. 8. Ignoring assessee’s claims filed through revised return were ignored and AO made certain additions as under: a) Disallowance u/s. 14A amounting to Rs. 78, 00,069/-. b) Addition on account of unmoved creditors u/s. 41(1) amounting to Rs. 6, 41,479/-. c) Addition on account of application of provisions of sec. 145A amounting to Rs. 55, 52,629/-. d) Taxability of sale of carbon credit amounting to Rs. 225, 60, 05,954/-.

6 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. e) Income accrued and arisen in the year under consideration but not offered to tax amounting to Rs. 10, 60,754/-. f) Excess claim of depreciation amounting to Rs. 25, 03,892/-. g) Disallowance of weighted deduction u/s. 35(2AB) amounting to Rs. 7, 20, 31,528/-. 9. Against this order of AO assessee preferred an appeal before the Ld. CIT (A) -17, (Mumbai). Ld. CIT (A) partly allowed the appeal of the assessee and also rejected part of the appeal of the assessee. Against this rejection assessee is before us and grounds raised by assessee are already mentioned supra. We have gone through the order of the AO, order of the Ld. CIT (A) and submissions of the assessee along with paper-book filed. 10. Through this appeal assessee raised total 3 grounds of appeal for AY 2012-13. Our ground-wise adjudication is as under: Ground No-1 a) Assessee challenged disallowance under rule 8D (2)(iii) Amounting to Rs. 38, 04,609/- against as computed by assessee amounting to Rs. 1, 79,515/-. On this issue we heard both the sides along with material before us. In addition to the arguments of both the sides we also referred assessee’s own case vide ITA No. 7797/M/2012, AY-2009-10, ITA NO 5301/M/2014 AND ITA NO 6491/M/2018 for AY 2010-11 and 2011-12 respectively. Moreover we relied upon the decision of the special bench of ITAT in the case of ACIT v/s Vireet Investments Pvt. Ltd.(82 Taxmann.com 415). b) The facts of the case are similar to what assessee had for AY 2009-10 to 2011-12. In addition to this there is a categorical finding of special bench supra (on identical issue). We respectfully agreed and follow the decisions of co-

7 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. ordinate bench of the ITAT in assessee’s own case and decision of special bench mentioned supra. In view of above we are of the considered view that the investments not yielded any dividend income should be excluded for the purposes of computation of average investment under Rule 8D (2)(iii) R.w.s. 14A. c) In view of above we direct the AO to re-compute the disallowance under Rule 8D2 (iii) by excluding the investments not yielding any exempt income for the purposes of average value of investments. In the light of above this ground of assessee is allowed for statistical purposes. Ground no-2 a) This ground of appeal pertains to weighted deduction u/s 35(2AB) amounting to Rs. 14,40,63,055/- against scientific research expenditure incurred of Rs. 7,20,31,528/-. 11. On this issue we have gone through the findings of the AO and Ld. CIT (A) along with arguments of the assessee. For elaborate discussion we are reproducing here-in-below the finding of Ld. CIT (A) in verbatim as under: “3.8.2 Decision I have carefully considered the arguments and submissions of the A.R. of the appellant company and have also gone through the facts and circumstances of the case leading to disallowance of weighted deduction u/s. 35 (2AB). The provisions of section 35(2AB), provides weighted deduction of 200% on Research and Development expenditure by the assessee for its R&D facility. One of the requirements under the Rule is to file certificate issued by Competent Authority in form No.3CM on the basis of application filed by the assessee in prescribed form 3CK. It is an undisputed fact that the assessee's R&D facility has been approved by the competent authority w.e.f. 01-04-2013 up to 31-03-2016 which is evident from the certificate issued by the competent authority. The competent authority i.e. Secretary Department of Science Industrial Development Research Government of

8 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. India has accorded approval to the assessee's in house R&D facility u/s 35(2AB) of the Income Tax for the period w.e.f. 01-04-2013 up to 31-03-2016. In other words there was no approval by the competent authority for the FY i.e. 01-04-2012 to 31- 03-2013, relevant to the instant assessment year. During appellate proceeding it is contended that as per rule 6(5A) of the IT Rules, there is no reference of any date in form No.3CM and therefore the certificate of competent authority specified the period for which approval was granted, has no meaning. The reliance has been placed on number of decisions/judgements. This is a open and shut case where disallowance is based on the clear cut period for which the approval for weighted deduction u/s 35(2AB) was given by the competent authority. Under the identical circumstances, the Hon'ble ITAT in the case of PCB Chemicals (P) Ltd., 88 Taxmann.com (Mum). It is held that "The solitary issue came up for consideration is weighted deduction claimed by the assessee under section 35(2AB) in respect of R&D expenditure incurred by the assessee towards research and development in its in-house R&D which is not disputed by the lower authorities. The only dispute is with regard to the date of approval by the competent authority and period of approval According to the Assessing Officer, the assessee is not entitled for the benefit for the Assessment year 2011-12 because the competent authority has approved the assessee's R&D facility with effect from 1-4-2011 onwards. The Assessing Officer further observed that the assessee has filed an application in prescribed form 3CK on 12-8-2011 and the competent authority has issued approval in prescribed form 3CM from 1-4-2011 to 31-3-2013 Therefore, the assessee is not entitled for weighted deductions for the year under consideration. It is the contention of the assessee that date of approval is not material for the purpose of claiming weighted deduction, if the facility is recognized by the competent authority. The assessee further contended that its R&D facility has been recognized by the competent authority Le Secretary, Department of Scientific and Industrial Development & Research, Government of India and the formal approval has been accorded in prescribed form with effect from 1-4-2011 to 31-3-2013 but the assessee has incurred R&D expenditure in the impugned financial year relevant to Assessment year 2011-12, therefore, the assessee is eligible for weighted deduction under section 35(2AB) of the Act.

9 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. The provisions of section 35(2AB) provides for weighted deduction of 200 per cent on research and development expenditure incurred by the assessee in its in-house R&D facility, if such R&D facility has been prescribed in Rules 6(18), 5(4), 6(5A) and 6(7A) of the Income-tax Rules, 1962. As per the rules, the assessee has to make an application in prescribed form with necessary evidences along with agreement with the competent authority. The competent authority, having satisfied with the conditions prescribed under the Act, can approve the R&D facility in prescribed form 3CM with intimation to the department through proper channel. In this case, the facts with regard to the assessee's R&D expenditure and recognition from the competent authority are not doubted by the lower authorities The only dispute is with regard to the period of approval As per the certificate issued by the competent authority in Form 3CM assessee's R&D facility had been approved for the period from 1-4-2011 to 31-3-2013 on the basis of application filed by assessee in prescribed form 3CK on 12-08-2021. Therefore, the assessee was not entitled for weighted deductions towards its R&D expenditure for the assessment year under consideration.” 12. We have referred assessee’s Paper Book dated 07.07.2022. By this Paper Book vide page no. 57 assessee submitted a letter of Ministry of Science and Technology, DSIR, F. No. TU/IV-RD/2410/2009 dated 20.05.2009. By this letter DSIR accord renewal of recognition to the in-house R&D Unit at Bhestan, Surat up to 31.03.2012. By virtue of this letter from competent authority as prescribed under section 35(2AB) i.e. DSIR recognized, assessee’s unit at Bhestan, Surat eligible for deduction subject to the terms and conditions imposed by the competent authority from time to time. We found the order of AO and consequently the order of Ld. CIT (A) factually incorrect. To further substantiate our findings, we are relying on the Paper Book submitted by assessee and relevant summary pertaining to recognition/renewal under section 35(2AB) is as under: Date of letter Recognition/Renewal Period Pg. of PB of DSIR

10 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. 23.03.2014 Initial recognition 01.04.2003 to 56 31.03.2006 Letter of 2006 Renewal of recognition 01.04.2006 to 57 31.03.2009 25.05.2009 -----------do------------- 01.04.2009 to 58 31.03.2012 23.10.2012 -----------do------------- 01.04.2012 to 59 31.03.2016

11 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. Agappe Diagnostics Ltd. v/s. DCIT (Mumbai ITAT "F" Bench) (2018) (ITA No. 5284/Mum/2016) (A.Y 2012-13) (P.Y. 2011-12) Aarti Industries Ltd. v/s. Addl. CIT (Mumbai ITAT "A" Bench) (2012) (ITA No. 370/Mum/2009) (A.Y. 2003-04) (P.Y. 2002-03) CIT v/s. Claris Life sciences Ltd. (Gujarat High Court) (2008) 174 Taxman 113 (A.Y. 2001-02) (P.Y. 2000-01) Note: SLP filed by the department is dismissed by Hon. Supreme Court of India vides Order dated 04.08.2009. CIT v. Wheels India Ltd. (Madras High Court) (2011) 20 taxmann.com 682 (A.Y. 2004-05) (P.Y. 2003-04) Banco Products (India) Ltd. v/s. DCIT (Gujarat High Court) (2018) 95 taxmann.com 132 (A.Y. 2008-09) (P.Y. 2007-08) CIT v/s. Sandan Vikas (India) Ltd. (Delhi High Court) (2011) 22 taxmann.com 19 (A.Y. 2005-06) (P.Y. 2004-05) Note: SLP filed by the department is dismissed by Hon. Supreme Court of India Vide order dated 09.01.2012. 15. Ground No.3 pertains to the amount of Rs. 2, 25, 60, 05,954/- (net) received on sale of Carbon Credit is a “capital receipt” to be excluded in computing the book profit u/s. 115JB. This ground raised by assessee is not pressed, hence rejected. ITA No. 6533/Mum/2019 (A.Y. 2013-14) 16. Ground No. 1 & 2, by applying the findings of ITA No. 6532/Mum/2019 (A.Y. 2012-13) mutatis mutandis, these grounds of appeal stand allowed. 17. Ground No.3 raised by assessee is not pressed, hence, rejected.

12 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. 18. Ground No.4 pertains to additional depreciation of Rs. 1,54,14,557/- under section 32(1)(iia) being the balance additional depreciation on new Plant & Machinery which were put to use for less than 180 days. 19. Relevant extracts of the findings given by AO during the assessment proceedings are reproduced here-in-below for ready reference and to appreciate the matter: “9.1 In the revised computation of income, it is observed that the assessee has claimed additional depreciation of Rs.1,54,14,5771 u/s 32(1)(ia) in respect of the assets put to use for less than 180 days during the assessment year 2012-13. The assessee's AR Vide its letter dated 2nd March 2016 submitted as under: “8:1 Additional Depreciation & 20 allowable U/s 32(1) (iia) was restricted to 50% when the plant and machinery acquired and installed by the assessee, were put to use for the purposes of business and profession for a period of less than 180 days in the proceeding previous year to Assessment Year 2012-13 in terms of proviso to Section 32(1) of the Act. The balance 50% of additional depreciation on such plant and machinery which has not been allowed in the preceding previous year i.e. Assessment Year 2012-13 is allowable in the immediately succeeding year i.e. Assessment Year 2013-14 and hence, claimed. The above proposition is duly endorsed by the following judicial pronouncements. (a) Century Enka Ltd Vs DCIT (2015) 37 ITR (Trib) 644 Kolkata. (b) Apollo Tyres Ltd Vs ACIT (Cochin Tribunal) (c) MITC Rolling Mills P Ltd Vs ACIT (Mumbai Tribunal) (d) ACIT V SIL Investments Ltd (2012) 73 DTR 233 (Delhi Tribunal) (e) DCIT Vs Cosmo Films Ltd (2012) 139 TD 628 (Delhi Tribunal)" 9.2 The above contention of the assessee is not acceptable on plain reading of the Act. For reference clause (in) of section 32(1) of the Act is reproduced as follows: [(iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing for in the business of generation or generation and distribution of power, a further sum equal to twenty per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii):

13 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. As per second Proviso to section 32(1) (ii) which clearly states the following: Provided further that where an asset referred to in clause (i) or clause (for clause iia)], as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this sub-section in respect of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause () or clause ( for clause (iia)], as the case may be Therefore it is amply clear that clause (in) that deals with additional depreciation is envisaged as per the Act.” 20. Relevant extracts of the findings given by the Ld. CIT (A) also during the appeal proceedings are reproduced here-in-below for ready reference and to appreciate the matter: “10. Briefly the facts are that the assessee purchased and installed certain new plant and machinery in financial year 2011-12 corresponding to Assessment Year 2012-13. Since, the new assets were put to use for a period less than 180 days in Assessment Year 2012-13, the additional depreciation allowable at 20% to the assessee was restricted to 50% as per Second Proviso to section 32(1)(a). The balance unclaimed additional depreciation was carried forward to the impugned assessment year and was claimed by the assessee. The Assessing Officer, however, disallowed assessee's claim on the reasoning that it has to be allowed only in the year in which plant and machinery was purchased and put to use and the unclaimed additional depreciation cannot be carried forward and allowed in the subsequent assessment year. The learned DRP also upheld the aforesaid decision of the Assessing Officer. 11. We have considered rival submissions and perused the materials on record. The facts on record clearly reveal that in Assessment Year 2012-13 the assessee had purchased new plant and machinery on which additional depreciation @20% is allowable. However, since the plant and machinery were put to use for a period of less than 180 days in Assessment Year 2012-13, the additional depreciation was restricted to 50% of the admissible amount. In other words, depreciation was allowed @10% the balance unclaimed additional depreciation was claimed by the assessee in the impugned assessment year. Now, the law is fairly well settled that the balance unclaimed amount of additional depreciation has to be allowed to the assessee in the immediately succeeding assessment year. In this context, we may refer to the following decisions, wherein, it has been held that the amendment made

14 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. to section 32(1) (a) by Finance Act, 2015 being clarificatory in nature would apply retrospectively. 1. Rittal India Pvt. Ltd BO ITR 423 (Kar) 2. Shree T.P. Textiles Pvt. Ltd-79 taxmann.com 411 3. PCIT vs. Godrej Industries Ltd- ITA No. 511/Mum/2016 12. Respectfully following the judicial precedents noted above, we allow assessee's claim. This ground is allowed.” 21. We have gone through both the orders mentioned (supra) along with assessee’s submissions and Paper Book submitted. The ground raised by assessee has been discussed at various Forums including ITAT, various Hon’ble High Courts (including Hon’ble Jurisdictional High Court). We observed that assessee acquired Plant & Machinery during the A.Y. 2012-13, but were put to use for the purposes of business & profession for less than 180 days, hence, depreciation was allowed on the 50% of the allowable depreciation (@ 20%). This fact is on record and not under challenge. Allowability of depreciation is also not under challenge; the only question to be decided by us is whether balance 50% depreciation of the previous year can be allowed in the current year or not? 22. The language used in Clause (iia) of the said Section clearly provides that "a further sum equal to 20% of the actual cost of such machinery or plant shall be allowed as deduction under Clause (ii)". The word "shall" used in the said Clause is very significant. The benefit which is to be granted is 20% additional depreciation. By virtue of the proviso referred to above, only 10% can be claimed in one year, if plant and machinery is put to use for less than 180 days in the said financial year. This would necessarily mean that the balance 10% additional deduction can be availed in the subsequent assessment year, otherwise the very purpose of

15 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. insertion of Clause (iia) would be defeated because it provides for 20% deduction which shall be allowed. 23. The plain language of section 32(1) (iia) read along with relevant proviso would have us come to the conclusion that, there is no limitation in the assessee claiming the balance 10 per cent of additional depreciation in the succeeding assessment year. As a matter of fact, with effect from April 1, 2016, the ambiguity, if any, in this regard, in the mind of the Assessing Officer, stands removed by virtue of the Legislature, incorporating in the Statute, the necessary clarificatory amendment. We may only indicate that during the course of the arguments, our attention was drawn to the "Memorandum explaining the provisions in Finance Bill, 2015" whereby, the aforementioned amendment was brought about. The relevant part of the memorandum is extracted hereafter:- “To remove the discrimination in the matter of allowing additional depreciation on plant or machinery used for less than 180 days and used for 180 days or more, it is proposed to provide that the balance 50 per cent of the additional depreciation on new plant or machinery acquired and used for less than 180 days which has not been allowed in the year of acquisition and installation of such plant or machinery, shall be allowed in the immediately succeeding previous year. This amendment will take effect from 1" April, 2016 and will, accordingly, apply in relation to the assessment year 2016- 17 and subsequent assessment years." 24. A perusal of the extract of the memorandum relied upon would show that the legislature recognized the fact that the manner in which the Revenue chose to interpret the provision, as it stood prior to its amendment would lead to discrimination, in respect of plant and machinery, which was used for less than 180 days, as against that, which was used for 180 days or more. In our opinion, as indicated above, the amendment is clarificatory in nature and not prospective, as is sought to be contended by the Revenue. The memorandum cannot be read in

16 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. the manner, in which, the Revenue has sought to read it, which is, that the amendment brought in would apply only prospectively. We are, clearly, of the view that the memorandum, which is sought to be relied upon by the Revenue, only clarifies as to how the un-amended provision had to be read all along. In any event, in so far as the court is concerned, it has to go by the plain language of the un-amended provision, and then, come to a conclusion in the matter. As alluded to above, our view, is that, upon a plain reading of the un-amended provision, it could not be said that the assessee could not claim balance depreciation in the assessment year, which follows the assessment year, in which, the machinery had been bought and used, albeit, for less than 180 days. In view, of the above we are in agreement with the ground raised by the assessee and the same is allowed. To strengthen our view we have relied on the following judicial pronouncements: i. Pr. CIT Vs. Godrej Industries Limited (Bom. HC) (2018) ITA No. 511 of 2016 ii. Brakes India Ltd. Vs. DCIT (Mad. HC) (2017) TCA No. 551 of 2013 iii. Supermax Personal Care Pvt. Ltd. Vs. DCIT (Mum. ITAT) ITA No. 7041/Mum/2017) 25. In the result, appeals filed by the assessee is partly allowed for statistical purposes. ITA No. 6815/Mum/2019 (A.Y. 2012-13) ITA No. 6816/Mum/2019 (A.Y. 2013-14)

17 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. assessee’s favour. As far as issue pertaining to deletion of disallowance under section 14A r.w.r. 8D2 (ii) is concerned, we have gone through the order of Ld. CIT (A) vide para-3.2.2 as under: “I have gone through the facts of the case as well as submissions of the appellant. As far as disallowance of interest u/s 14A is concerned. I find that this issue is already decided in favour of the appellant by my own Order in appellant's own case for the immediately preceding assessment year i.e. 2011-12 wherein it was held that there should not be any disallowance of interest u/s. 14A r.w. Rule 8D(2)() as own funds exceeds investments. Said view is also duly supported by the decision of the Ld. CIT(A) in appellant's own case for the assessment year 2010- 11, decision of the Hon. ITAT, Mumbai in appellant's own case for the assessment year 2007-08 to 2009-10 as well as by other decisions of Hon. Bombay High Court and Supreme Court. For the year under consideration also, the facts and circumstances of the case have not changed and consequently, I am abide by my own decision. Accordingly, the AO is directed to delete the disallowance of interest u/s. 14A R.w. Rule 8D (2)(ii) of Rs. 37,95,460/-in its entirety.” 27. We have gone through ITA No. 5553/Mum/2010, ITA No. 1192/Mum/2012, ITA No. 7797/Mum/2012, ITA No. 7038/Mum/2018 and ITA No. 6491/Mum/2018 for AY 2007-08, AY 2008-09, AY 2009-10, 2010-11 and AY 2011-12 in assessee’s own case decided in favour of assessee by ITAT, Mumbai. In addition to these cases pertaining to assessee, we have gone through the decisions rendered by various Hon’ble High Courts including Jurisdictional High Court also. In view of above, we do not find any perversity in the order of Ld. CIT (A), hence, agreeing with that we are not inclined to interfere in the order of Ld. CIT (A). In the result, Ground No.1 raised by the Revenue is dismissed. 28. Ground No.2 pertains to deletion of addition of Rs. 8, 06,650/- by Ld. CIT (A). We have gone through the order of ld. CIT (A) and AO. Ld. CIT (A) vide its decision in para-3.9.2 analyzed deeply the contentions of assessee and order of AO. After thoroughly analyzing both the sides, he directed for deletion of addition

18 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. under section 41 amounting to Rs. 8, 06,650/-. We have further gone through the orders in the case of assessee decided by ITAT, Mumbai for A.Y. 2009-10 vide ITA No. 7797/Mum/2012. The facts of the appeal under consideration and the ratio decided by the ITAT, Mumbai (supra) in assessee’s own case are similar; hence, we do not find any perversity in the order of Ld. CIT (A). In the light of above, we are not inclined to interfere in the findings of Ld. CIT (A). Resultantly Ground No.2 raised by Revenue is dismissed. 29. Ground No.3 raised by the Revenue pertains to chargeability of Carbon Credit sale amounting to Rs. 51,37,56,129/-. We have gone through the order of Ld. CIT (A) and AO. This issue has already been decided in favour of assessee vide ITA No. 5301/Mum/2014 and ITA No. 6491/Mum/2018 for AY 2010-11 and 2011- 12. We came across the similar issue in the matter of Essel Mining & Industries Limited vs. DCIT, CC-1(4) in ITA No. 602/Mum/2021 (A.Y. 2015-16) and held as under: “9. Next ground of appeal pertains to taxability of Carbon Credit received by assessee amounting to Rs. 10, 20,587/-. We have gone through the order of AO and ld. CIT (A). The decisions of various High Courts and Co-ordinate Benches of Tribunal relied upon by the ld. CIT (A) are distinguishable and not applicable to the facts of the case. 10. Issue is whether receipts received by the assessee on sale of alleged carbon credit is revenue in nature or capital in nature. 11. Thus, taking into consideration resolution of litigation on this issue by the Legislature itself, which had made provision for taxation of such receipts at the rate of 10 per cent from the assessment year 2018-19. Thus, any sum received on account of carbon credit or protecting the environment is not included in the business income however, subsequently there is an amendment by Finance Act, 2017 whereby Section 115BBG has been inserted in the statute w.e.f 01.04.2018 which reads as under: — "Following section 115BBG shall be

19 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. inserted after section 115BBF by the Finance Act, 2017, w.e.f. 1-4-2018: Tax on income from transfer of carbon credits. 115BBG. (1) Where the total income of an assessee includes any income by way of transfer of carbon credits, the income tax payable shall be the aggregate of— (a) the amount of income-tax calculated on the income by way of transfer of carbon credits, at the rate of ten per cent; and (b) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (a). (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) of sub- section (1). Explanation.—For the purposes of this section "carbon credit" in respect of one unit shall mean reduction of one tonne of carbon dioxide emissions or emissions of its equivalent gases which is validated by the United Nations Framework on Climate Change and which can be traded in market at its prevailing market price." Thus, the income by way of transfer of carbon credit has been given a special treatment as chargeable to tax @ 10% and not as part of the normal business income of the assessee. The said amendment is prospective in nature and therefore, cannot be applied to the assessment years under consideration. 12. The ld. AR for the assessee brought to the notice of the Bench that the identical issue has already been decided by the Co-ordinate Bench of Tribunal in favour of assessee in case cited as DCIT Vs. M/s Dawarkesh Sugar Industry Ltd. in ITA No. 312/Mum/2019 for A.Y. 2014-15 by following the decisions rendered by the Hon’ble Andhra Pradesh High Court in the case of My Home Powers Ltd. (2014) 365 ITR 082 (AP). 13. We have perused the order passed by the Co-ordinate Bench of Tribunal in case of M/s Dawarkesh Sugar Industry Ltd. (supra), wherein identical issue has been decided in favour of the assessee by returning following findings. “7. Considered the submissions of the learned Counsel for both the parties and perused the material on record. While going through the judicial pronouncements relied upon by the learned Counsel for the assessee, we find that the issue for our adjudication is squarely covered by the aforesaid decisions relied upon by the learned Counsel wherein in one of the cases relied upon in CIT v/s My Home Power Ltd., [2014] 365 ITR 082 (AP) (supra) filed by the Revenue, the Hon'ble Andhra Pradesh High Court held that the Tribunal had factually found

20 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. that Carbon Credit was not off-shoot of business but off-shoot of environmental concerns and no asset was generated in course of business but it was generated due to environment concerns. Further we find that the Hon'ble A.P. High Court agreed with the factual analysis as the assessee carried on business of power generation and Carbon Credit was not even directly linked with power generation. It is held that on sale of excess Carbon Credits income was received and the Tribunal correctly held that it is capital receipt and could not be a business receipt or income. As a matter of convenience, the observations of the Hon'ble A.P. High Court in CIT v/s My Home Power Ltd., [2014] 365 ITR 082 (AP) (supra) is reproduced below: "ITAT have considered the aforesaid submission and ITAT are unable to accept the same, as the learned Tribunal has factually found that "Carbon Credit is not an offshoot of business but an offshoot of environmental concerns. No asset is generated in the course of business but it is generated due to environmental concerns' ITAT agree with this factual analysis as the Assessee is carrying on the business of power generation. The Carbon Credit is not even directly linked with power generation. On the sale of excess Carbon Credits the income was received and hence as correctly held by the Tribunal it is capital receipt and it cannot be business receipt or income. In the circumstances, we do not find any element of law in this appeal." 14. Following the order passed by Co-ordinate Bench of Tribunal in case of M/s Dawarkesh Sugar Industry Ltd. (supra) which is based upon the decision rendered by Hon’ble Andhra Pradesh High Court in case of My Home Power Ltd. (supra), we are of the considered view that sale of Renewable Energy Certificate (Carbon Credit) of income received by the assessee is a capital receipt and could not be business receipt or income nor it is directly linked with the business of the assessee nor any asset is generated in the course of business but it is generated due to environmental concern. So the addition of Rs. 10, 20,587/- by the AO from the sale of Carbon Credit and confirmed by the ld. CIT (A) is not sustainable, hence, ordered to be deleted.”

21 ITA Nos. 6532, 6533 & 6815, 6816/Mum/2019 Navin Fluorine International Ltd. decline to interfere in the order of Ld. CIT(A). Resultantly, Ground No.3 raised by the Revenue is dismissed. 31. In the result, appeal of the Revenue is fully dismissed.

ITA No. 6816/Mum/2019 (A.Y. 2013-14) 32. In all these three grounds of appeal, adjudication on similar facts has already been done by us vide ITA No. 6815/Mum/Mum/2019, ratio is applicable mutatis mutandis here also. In the result, Ground No. 1 to 3 raised by the Revenue is dismissed. 33. In the result, appeal of the Revenue is fully dismissed.

Order pronounced in the open court on 30th day of November 2022.

Sd/- Sd/- (ABY T.VARKEY) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, िदनांक/Dated: 30/11/2022 SK, Sr.PS Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. 3. आयकर आयु�(अ)/The CIT(A)- 4. आयकर आयु� CIT 5. िवभागीय �ितिनिध, आय.अपी.अिध., मुबंई/DR, ITAT, Mumbai 6. गाड� फाइल/Guard file. BY ORDER, //True Copy// (Dy. /Asstt.Registrar) ITAT, Mumbai