JSW STEEL LIMITED,MUMBAI vs. ADDLCIT, BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI AMARJIT SINGH (JUDICIAL MEMBER)

ITA No. 858/BANG/2011 Assessment Year: 2007-08 JSW Steel Limited, The Addl. CIT, Range 11, Jindal Mansion, 5A, Vs. Bangalore. Dr. G. Deshmukh Marg, Mumbai-400026. PAN No. AAACJ 4323 N Appellant Respondent ITA No. 8530/MUM/2011 Assessment Year: 2007-08 DC. CC.46, M/s JSW Steel Ltd., R.No. 659, 6th floor, Aayakar Vs. Jindal Mansion, 5-A, Dr. G Bhavan, M.K. Road, Deshmukh Marg, Mumbai-20. Mumbai-400026. PAN No. AAACJ 4323 N Appellant Respondent ITA No. 876/MUM/2015 Assessment Year: 2007-08 M/s JSW Steel Ltd., DCIT, Central Circle 46, JSW Centre, Bandra Kurla Vs. 6th flr., Aayakar Bhavan, M.K. Complex, Road, Mumbai-400051. Mumbai-400020. PAN No. AAACJ 4323 N Appellant Respondent

JSW Steel Ltd. 2 ITA No.s 858/M/2011 & Ors. ITA No. 1339/MUM/2015 Assessment Year: 2007-08 Dy. CIT, Central Circle-8(3), M/s JSW Steel Ltd., [Erstwhile DCIT, CC-46, Vs. JSW Centre, Bandra Kurla Complex, Mumbai] Mumbai-400051. R.No. 659, 5th floor, Aayakar Bhavan, M.K. Road, Mumbai-20. PAN No. AAACJ 4323 N Appellant Respondent Assessee by : Mr. Danesh Bafna & Mr. Hirali Desari, ARs Revenue by : Mr. Achal Sharma, CIT-DR Date of Hearing : 22/02/2022 Date of pronouncement : 16/03/2022

ORDER PER OM PRAKASH KANT, AM These cross appeals by the assessee and the Revenue are directed against two separate orders dated 19/08/2011 and 01/12/2014, passed by the Ld. Commissioner of Income-tax (Appeals)-I, Bangalore and the Commissioner of Income-Tax (Appeals)-47, Mumbai respectively, for assessment year 2007-08. The first set of cross appeals are in relation to original assessment proceedings, whereas the second set of cross appeals are in relation to search assessment proceedings. As common issues are involved in these appeals, same were

JSW Steel Ltd. 3 ITA No.s 858/M/2011 & Ors. herded together and disposed off by way of this consolidated order for convenience and avoid reputation of facts.

2.1 Grounds of appeal of the assessee

JSW Steel Ltd. 4 ITA No.s 858/M/2011 & Ors. 1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in directing the AO to treat sales tax incentives concessions I refund of Rs. 54.02 crores as capital receipt and to recompute business income by reducing the said amount." 2. "On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the disallowance of depreciation of Rs.7,80,30,000/- by holding that sales tax subsidy cannot be deducted from cost of assets for computing depreciation. 3. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in allowing depreciation of Rs.5,79,08,466/- on increased WDV of assets, without appreciating the reasons discussed by the AO in the assessment order. 4. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in holding that interest of Rs. 7,26,71,000/- is assessable as 'Business Income' and not 'Income from Other Sources', without taking into consideration the decision of the Hon'ble Supreme Court in the case of M/s. Tuticorin Alkali Chemicals & Fertilizers Ltd. reported in 227 ITR 172. 5. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in directing the AO to quantify the disallowance u/s 14A as per principle of proportion as against application of Rule 8D r.w.s14A as held by the A.O.

2.3 The assessee has also filed an additional ground on 24/04/2012, which is reproduced as under:

“The above-mentioned appeal is fixed for hearing and disposal before your Honours on June 4, 2012. In this connection, we are enclosing herewith additional grounds of appeal, in triplicate. We request your Honours to admit the additional grounds as the consideration of these grounds would

JSW Steel Ltd. 5 ITA No.s 858/M/2011 & Ors. not require any investigation into fresh facts in accordance with the powers vested in you.” 3. The Ld. counsel of the assessee submitted that additional ground being purely of the legal nature and no investigation of the fresh facts is required, same might be admitted in view of the decision of the Hon’ble Supreme Court in the case of NTPC Ltd reported in 229 ITR 383 (SC). The ld. DR objected for admission of the additional ground.

4.1 We find that all the facts in relation to the issue in dispute raised in additional ground are on the record and ground is being legal in nature, same is admitted for adjudication.

JSW Steel Ltd. 6 ITA No.s 858/M/2011 & Ors. income for the year under consideration on 30/10/2007 declaring income of ₹10,80,39,02,855/-. The return of income filed by the assessee was selected for the scrutiny assessment. The scrutiny assessment under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) was completed on 18/12/2009 after making various additions and disallowances. In the said assessment order income under the regular provisions of the Act is assessed at ₹12,79,73,73,047/-and ‘book profit’ under section 115 JB of the Act has been assessed at ₹19,65,61,21,057/-. On further appeal, the Ld. CIT(A) allowed part relief to the assessee. Aggrieved with the finding of the Ld. CIT(A), both the assessee and the Revenue are before the Tribunal by way of raising grounds as reproduced above.

5.1 With regard to the additional ground, the Ld. counsel of the assessee relied on the decision of the Tribunal in ITA No. 156/Bang/2011 in the case of the assessee for assessment year 2006-07, wherein identical ground has been adjudicated in favour of the assessee. The Ld. DR on the other hand submitted that as per the provisions of the Act, profit is declared in the books of accounts maintained as per the Company Act and subject to inclusion/exclusion of income listed in section 115 JB of the Act, for book profit is required to be computed in terms of section 115JB of the Act.

JSW Steel Ltd. 7 ITA No.s 858/M/2011 & Ors. 6. We have heard rival submissions of the parties on the issue in dispute and perused the relevant material on record. In the additional ground, the assessee is seeking for reducing amount of ‘sales tax subsidy’ being capital receipt, from the ‘book profit’ computed under section 115 JB of the Act. We find that Tribunal (supra) in the case of the assessee for assessment year 2006- 07 following the Special Bench in the case of Sutlej Cotton Mills Ltd Vs ACIT (supra) directed the Assessing Officer to exclude amount of sales tax subsidy received from the computation of the ‘book profit’. The relevant finding of the Tribunal is reproduced as under:

“46. We have heard both the parties, perused the material available on record and gone through orders of the authorities below along with case laws cited by both parties. The limited issue came up for our consideration from cross objection filed by the assesee is whether, sales tax subsidy being capital in nature shall be reduced from book profit computed u/s 115JB of the I.T.Act, 1961 or not. We find that the coordinate bench of ITAT, Mumbai Tribunal in assesee's own case for AY 2004-05 in ITA.No.923/Bang/2009, had considered an identical issue and held that where a receipt is held to JSW Steel Limited be capital in nature not chargeable to tax under the normal provision of the Act, the same cannot be taxed u/s 115JB of the I.T. Act, 1961. 47. We further noted that Hon'ble Kolkata High Court, in the case of Ankit Metal & Power Ltd. In ITA no. 155 of 2018 had considered an identical issue and after considering the decision of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. Vs. CIT (supra) held that when a receipt is not in the

JSW Steel Ltd. 8 ITA No.s 858/M/2011 & Ors. character of income as defined under section 2(24) of the I.T.Act, 1961, then it cannot form part of the book profit u/s 115JB of the I.T.Act, 1961. The Hon'ble High court, further observed that sales tax subsidy received by the assesee is capital receipt and does not come within definition of income under section 2(24) of the I.T.Act, 1961 and when, a receipt is not a in the nature of income, it cannot form part of book profit u/s 115JB of the I.T.Act, 1961. The Court, further observed that the facts of case before the Hon'ble Supreme Court in the case of Apollo Tyres Limited (supra) were altogether difference, where the income in question was taxable, but was exempt under a specific provision of the Act, and as such it was to be included as a part of book profit, but where the receipt is not in the nature of income at all, it cannot be included in book profit for the purpose of computation u/s 115JB of the I.T. Act, 1961.

JSW Steel Ltd. 9 ITA No.s 858/M/2011 & Ors. and came to conclusion that in those cases the capital receipt is in the nature of income, but by a specific provision, the same has been exempted and hence, the came to the conclusion that, once particular receipt is routed through profit and loss account, then it should be part of book profit and cannot be excluded, while arriving at book profit u/s 115JB of the Act 1961. 50. In this view of the matter and considering the ratio of case laws discussed hereinabove, we are of the considered view that when a particular receipt is exempt from tax under the Income tax law, then the same cannot be considered for the purpose of computation of book profit u/s 115JB of the I.T.Act 1961. Hence, we direct the Ld. AO to exclude sales tax subsidy received by the assesee amounting to Rs. 36,15,49,828/- from book profits computed u/s 115JB of the I.T. Act, 1961.” 6.1 As the issue in dispute raised in the additional ground before us is identical to the issue decided by the Tribunal (supra), respectfully following the same, in the year under consideration also, the Assessing Officer is directed to exclude amount of sales tax subsidy received by the assessee for the purpose of computation of the ‘book profit’ under section 115 JB of the Act. The additional ground of the appeal is accordingly allowed.

JSW Steel Ltd. 10 ITA No.s 858/M/2011 & Ors. 7.1. The brief qua the issue in dispute are that assessee made a contribution of ₹21,93,812/-to the Rajiv Gandhi Institute of Steel Technology and claimed the same as deduction under section 37(1) of the Act. The assessee submitted that this Institute was located in the company’s premises at ‘Thoranagallu’ and was functioning as a training institute for steel professionals and for catering training needs of employees including the assessee. The assessee accordingly claimed that contribution was for providing training to company’s employees and therefore being in nature of business expenditure, same is allowable under section 37(1) of the Act. The Assessing Officer however held that during the year under consideration, the institute was a government Institute and therefore any contribution to such institute should have been made and claimed in accordance with the provision of section 80G of the Act, and therefore same is not allowable under section 37(1) of the Act.

“18. The Appellant contended before me that RGIST is functioning as Training Institute for steel professionals and is also catering to the training needs of the employees of the Appellant. The Board of the Appellant had accorded its approval for taking over the GIST for its effective running and management to enable the Government of Karnataka for effective implementation of the above decision. In line with this decision of the Board, GIST was completely taken over by the Appellant and eventually the

JSW Steel Ltd. 11 ITA No.s 858/M/2011 & Ors. Government stake was reduced to nominal. The same was evident from the Mandatory Disclosure at the Appellant's website. The Appellant plans to transform this Institute.”

“19. The Appellant further contended that the training was necessary to increase the efficiency of the employees and to make them technically sound for smooth operations of the business. Since there was no other training Institute in the vicinity of the Company the employees of the Appellant were sent for the training in that Institute In support of this, the Appellant filed the details of the employees trained in the Institute. RGIST also conducted various coordinated programs for the benefit of the employees of the Appellant. In view of the above the appellant claims the expenditure as for the purpose of its. business

JSW Steel Ltd. 12 ITA No.s 858/M/2011 & Ors. in view of the decision of Hon’ble Bombay High Court in the case of Krishan Sahkari Sakhar Karkhana Ltd Vs CIT (1998) 229 ITR 577(Bom) and decision of Hon’ble Karnataka High Court in the case of Mysore Kirloskar Ltd. Vs CIT(1987) 166 ITR 836 (Karn.).

JSW Steel Ltd. 13 ITA No.s 858/M/2011 & Ors. Tribunal. But on further appeal, Hon’ble Bombay High Court referred to the decision of CIT vs Malyalam Plantation Ltd (1964) 53 ITR 140 wherein it is observed that the expression “for the purpose of the business” is wider in scope than the expression “for the purpose of earning profits” which take into account not only the day-to-day running of the business, but also the rationalization of its administration and modernization of its machinery. It may include measures for preservation of the business and for the protection of its assets and property from expropriation, coercive process or assumption of hostile title; it may also comprehend payment of statutory dues and taxes imposed as a precondition to commence or for the carrying on of a business; it may comprehend many other acts incidental to the carrying on of a business. The only limitation is that the purpose should be the purpose of the business, that is to say, the expenditure incurred should be for the carrying on a business and the such should incur it in his capacity as a person carrying on the business and it cannot include some expense for the purpose un-connected with the business. The Hon’ble High Court after considering other decisions on the issue in dispute allowed the contribution made by the assessee to the ‘Education Fund’ of the state federal society as allowable business expenditure observing as under:

“9. It is clear from the provisions of section 68 of the Maharashtra Co- operative Societies Act read with rule 53 of the rules that it is a statutory

JSW Steel Ltd. 14 ITA No.s 858/M/2011 & Ors. obligation of the co-operative society to contribute to the education fund at the rates prescribed in rule 53. In the instant case, the assessee was liable to pay to the education fund at the rate of 25 paise per ton of sugarcane crushed per year, subject, however, to the maximum of Rs. 50,000. This contribution, the assessee had to pay because it was carrying on the business of running the sugar factory and was engaged in crushing sugarcane. If no sugarcane was crushed, no contribution was required to be paid to the education fund. That being so, it is clear that the contribution made by the assessee to the State federal society under section 68 of the Maharashtra Co- operative Societies Act read with rule 53 of the rules was an expenditure directly connected or related to the carrying on of the assessee's business.

12.1 Further, in the case of Mysore Kirloskar Ltd (supra), the assessee company constituted a trust with an object to provide education for the children of its employees and ex-employees. In furtherance of its objects, the trust established a school near the industry of the assessee. The assessee donated certain amount to the said trust and claimed part of its as business

JSW Steel Ltd. 15 ITA No.s 858/M/2011 & Ors. expenditure under section 37(1) of the Act. The ITO disallowed the claim of the assessee and Tribunal also upheld on the two ground; first, the section 80G was applicable and not section 37(1) in respect of the donation and second, since the school run by the trust was also open to the children of the persons who were not exclusively the employees or ex-employees of the assessee. The Hon’ble High Court after analyzing the relevant provisions of section 80 G and 37(1) of the Act, allowed donation made to the school as expenditure under section 37(1) of the Act observing as under:

“4. Following the above decision, we answer the question in the affirmative and against the assessee. 5. This takes us to question No. 3. To answer this question, we may set out some relevant facts : The assessee is a public limited company engaged in the manufacture and selling of tools, lathes, etc. The assessment year is 1976-77. By a deed dated August 15, 1958, the company has constituted trust called the "Mysore Kirloskar Education Trust". Clause (3) of the trust deed is relevant and it reads : "The Trustees shall hold the trust funds and the income thereof upon trust to apply the same for the promotion and encouragement of education principally of the children of the employees and ex-employees of the settlor at Harihar by providing or by establishing conducting the continuing or by arranging or procuring the establishment, conduct and continuance of places of instruction of all kinds whatsoever including primary, secondary

JSW Steel Ltd. 16 ITA No.s 858/M/2011 & Ors. or technical schools, colleges, imparting higher or university education or academics or by any other ways and means whatsoever or otherwise howsoever".

JSW Steel Ltd. 17 ITA No.s 858/M/2011 & Ors. 12.2 When we examine the claim of the assessee of allowing the deduction for contributions made to the institute, in the light of above decisions, we find that contribution has been made by the assessee for furtherance of its business by way of training or skilling to its employees. The main beneficiary of the institute is assessee company and respectfully following the decision cited above, the claim of deduction under section 37 (1) for the contribution made to institute is allowed. The ground No. one of the appeal of the assessee, is accordingly allowed.

12.3 The ground No. 2 (Two) of the appeal of the assessee relates to disallowance of upfront fee of ₹1,15,20,193/-paid to banks for availing loans for the purpose of construction of captive power plant. According to the assessee, the expenditure of ‘upfront fee’ was paid to the bank after putting captive power plant to use and expenditure being similar to interest on loans, therefore in terms of section 36 (1)(iii) of the Act, payment made after putting the asset to use, is revenue in nature and should be allowed accordingly. According to the Assessing Officer the expenditure was in relation to capital asset and therefore was not allowable as revenue expenditure. The Ld. CIT(A) upheld the disallowance observing as under:

JSW Steel Ltd. 18 ITA No.s 858/M/2011 & Ors. “25. I have considered the facts of the case and perused the assessment order, submissions of the Appellant as well as the judicial pronouncements on the subject. The A.O. is of the opinion that upfront fees had been paid to raise the loan to purchase Plant & Machinery of the captive Power Plant and therefore, should have been capitalized. The A.R. argued that since the upfront fees were paid after the plant and machinery were put to use, it is allowable as revenue expenditure. I see both are looking to two different sides of the same claim but I observe the A.O's visualization gives the correct picture and nature of expenditure. The upfront fees may be paid at any time, i.e. before the purchase of plant and machinery or even after its purchase and use but such does not render it the characteristic of revenue expenditure. The fact that upfront fees was paid for raising the loan for purchase of capital assets viz., plant and machinery for setting up the units of Captive Power Plant itself proves that the expenditure is capital in nature and hence disallowable. Hence addition is confirmed. This ground is thus decided against the Appellant.” 13. The Ld. counsel of the assessee relied on the decision of Hon’ble Madras High Court in the case of CIT Vs Super Spinning Mills Ltd (2008) 296 ITR 168 (Mad) and CIT vs Sri Meenkshi Mills Ltd (1979) 120 ITR 211 (Mad). The Ld. counsel submitted that Hon’ble Madras High Court has held that ‘upfront fee’ paid to the bank for availing loan for purchase of capital asset is allowable as revenue expenditure and same does not bring into existence an asset of enduring nature. The Ld. counsel submitted that ‘upfront fee’ has to be paid to the bank even if loan is not sanctioned and therefore it is not connected with the purpose for which loan is availed.

JSW Steel Ltd. 19 ITA No.s 858/M/2011 & Ors. 14. The Ld. DR on the other hand relied on the order of the lower authorities and submitted that the loan was taken for the purchase of capital asset and therefore the expenditure connected to the purchase of capital asset is also capital in nature.

JSW Steel Ltd. 20 ITA No.s 858/M/2011 & Ors. and machinery or after the purchase of the plant and machinery, the character of the payment remains capital in nature. The Hon’ble Madras High Court in the case of Super Spinning Mills Ltd. (supra) has held the expenditure of ‘upfront fee’ paid to bank for availing loan for setting up of a new unit as revenue expenditure. The relevant finding of the Hon’ble High Court is reproduced as under:

“6. After careful consideration of the respective submissions of learned counsel on either side, I am of the view that there is no substance or merit in the preliminary objection raised. In Jeypore Sugar Co. Ltd.'s case [1980] 124 ITR 518 (Mad), the Division Bench of this court sustained an objection on behalf of the Revenue to the jurisdiction of this court to entertain a writ petition at the instance of an assessee on the file of the Income-tax Officer, 'A' Ward, Circle-I, Kakinada, challenging the notice for reassessment issued and served at the office of the assessee at Chagallu once again within the jurisdiction of the assessing authority. As a matter of fact, the Division Bench pointed out that the petitioner, the assessee in that case, had not taken any steps for transferring its file to Madras where its administrative office was situate and as the assessing authority had territorial jurisdiction over the assessee and inasmuch as the notice was issued from Kakinada and served at a place Chagallu, no part of the cause of action arose in Madras. The Division Bench was also of the view that mere location of the administrative office was not relevant to the question of jurisdiction. Unlike the fact situation in the said case, in the case on hand, it is specifically contended that subsequent to the impugned order, the registered office of the petitioner company had been transferred to the present Commissioner having jurisdiction over the petitioner's case, the first respondent, viz., the

JSW Steel Ltd. 21 ITA No.s 858/M/2011 & Ors. Commissioner of Income-tax, Coimbatore. The learned counsel for the assessee argued that any order that this court may have to pass in the light of the subsequent events has to be implemented only by the first respondent within the jurisdiction of this court. The decision referred to by counsel for the assessee also lends support to the above stand of the petitioner. Consequently, in my view, the decision relied upon for the Revenue has no application to the present case. In K. S. Rashid and Son's case , the Supreme Court expressed the view that there are only two limitations placed on the exercise of the powers by a High Court exercising jurisdiction article 226 of the Constitution of India, viz., (i) the writs issued by the High Court cannot run beyond the territories subject to its jurisdiction and (ii) the person or authority to whom the High Court is empowered to issue writs must be amenable to its jurisdiction either by residence or location within those jurisdictions. Relying upon this, learned counsel contended that the rule is required to be issued to the first respondent only in the changed circumstances and there is no impediment for this court to entertain the writ petition and proceed to decide the same on merits. The decision in J. K. Cotton Spinning and Weaving Mills Co. Ltd. v. State of U. P. , was also relied upon to say that, when the records and files relating to the petitioner assessee have already been sent to the first respondent, a writ cannot be issued to the second respondent who is outside the jurisdiction and who has passed the order at this stage. In Seth Paluram Dhanania v. ITO [1960] 39 ITR 429, a Division Bench of the Madhya Pradesh High Court expressed the view that even though original notices were issued by the Income-tax Officer, Special Circle-I, Nagpur, having regard to the subsequent transfer of the cases to the authorities at Calcutta and later to the authorities at New Delhi, the writ petition was held not to be maintainable before the said court. There can be no controversy over the fact that, after the insertion of article 226(2) by the Constitution (Fifteenth Amendment) Act, 1963, any High Court may also exercise its powers under article 226(1), if the cause of

JSW Steel Ltd. 22 ITA No.s 858/M/2011 & Ors. action wholly or in part arises for the exercise of such power in relation to the territories under its control notwithstanding that the seat of such Government or authority or the residence of such persons was not within that territory. There is no controversy or dispute over the claim made by the assessee in this case that, subsequent to the passing of the impound order, not only the registered office of the petitioner company was changed but the relevant income-tax files also stood transferred to the jurisdiction of the first respondent who is well within the territorial limits and jurisdiction to this court. As claimed by counsel for the assessee, even if the impugned order is to be set aside or any direction is to be given, it is the first respondent who has to implement the same and not the second respondent who ceased to have jurisdiction over the matter any longer. Consequently, I am of the view that the petitioner has sufficient cause of action to maintain this writ petition before this court. The preliminary objection, therefore, fails and shall stand rejected.” 15.1 Thus Hon’ble High Court has held that if interest paid on borrowed loan could be held to revenue expenditure, the expenditure incurred for obtaining the loan for setting up the new unit should also be considered as revenue expenditure. In the case also, the assessee before the Assessing Officer submitted to treat upfront fee as analogous to interest payment for availing loans for purchase of capital asset. The assessee particularly referred to section 36(1)(iii) of the Act which prescribes treating of interest payment for money borrowed for the purchase of the capital asset, after putting the said capital asset to use, as revenue expenditure. Thus, respectfully following the finding of the Hon’ble Madras High Court (supra), the ‘upfront fee’ paid after putting the

JSW Steel Ltd. 23 ITA No.s 858/M/2011 & Ors. capital asset to use in respect of loan for said capital asset, is held to be revenue in nature. The Ground No. 2 (Two) of the appeal of the assessee is accordingly allowed.

JSW Steel Ltd. 24 ITA No.s 858/M/2011 & Ors. 19. The Ld. counsel of the assessee submitted that sales tax refund during the year under consideration has been received under the ‘Industrial Policy 1993’ of Government of Karnataka and subsequent notification issued, which is in continuation to sales tax refund received in the assessment year 2006-07 and held as capital receipt by the Tribunal in ITA No. 156/Bang/2011.

“28. We have heard both the parties, perused the material available on record and gone through orders of the authorities below along with plethora of case laws cited by both parties. As we discussed in earlier year paragraph, the facts clearly indicates that in the year 1993 the Government of Karnataka proposed a new industrial policy, 1993 and package of incentives and concession with an objective to attract new industrial investments and to accelerate industrial development in the state to promote the development of backward regions and generate employment for the local people. It is also an admitted fact those in terms of the said policy, in the year 1994, the assessee proposed to set up a integrated steel

JSW Steel Ltd. 25 ITA No.s 858/M/2011 & Ors. plant for manufacturing of 1.25 million tons per annum (MTPA) of Hot rolled (HR) Coils at Village Torangallu, Bellary Hospet, Karnataka state with an initial investment of Rs. 3,200 crores. It is also not in dispute that the assesee has made an application under the industrial policy to the Government of Karnataka, for which the order has been passed by the Government of Karnataka granting exemption from payment of purchase tax and entry tax and also exemption from payment of sales tax on sale of finished goods.

JSW Steel Ltd. 26 ITA No.s 858/M/2011 & Ors. various high courts, in light of industrial policy of various state Governments and came to the conclusion that the mechanism, the source, point in time and the form in which subsidy has been granted are irrelevant and what is relevant is only the purpose for which the subsidy is granted to decide, whether the subsidy is revenue or JSW Steel Limited capital in nature. The Hon'ble Supreme Court in the case of Chaphalkar Brothers (supra) had considered an identical issue, in the light of setting up a new multiplex theatre complex and held that if, the object of the scheme was to promote cinema houses by constructing multiplex theatres, then irrespective of the fact that the multiplexes have been constructed out of the own funds or borrowed funds, the receipt of subsidy would be on capital account. Further, the Hon'ble Supreme Court, while delivering the judgment has considered its earlier decision in the case of Sahney Steel & Press Works Ltd. vs CIT(supra) and held that even in Sahney Steel and press works Ltd(supra), the court has considered the purpose for which, the said subsidy was given and came to the conclusion that in the facts of those case, the subsidy was given for running of business after commencement of production and hence, opined that subsidy/incentive received is in the nature of revenue receipt.

JSW Steel Ltd. 27 ITA No.s 858/M/2011 & Ors. Alloys ITA No. 02/2010 had considered an identical issue and held that the purpose for which subsidy was given is very relevant to decide the nature of recipient, but not the manner in which such subsidy was quantified. The Hon'ble Gujarath High court in the case of Shivshakti Flour Mills (P.) in ITA No 06/2014 had considered an identical issue and held that the purpose of the transfer subsidy was to encouraging investment and thereby stimulate industrial activity in difficult and far flung states in the North Eastern region for creating employment opportunities. Therefore, it is in the nature of capital receipt. The Hon'ble Bombay High Court, in the case of Welspun Steel Ltd. Vs CIT (103 taxann.com 436) held that the scheme was envisaged to encourage investment, which would in turn provide fresh employment opportunity in the district, which has suffered due to devastating earthquake. The computation of subsidy may be on the basis of sales tax or excise duty. But, nevertheless, the purpose test would ensure that, the subsidy was capital in nature. The Hon'ble Kolkata High Court in the case of Shyam Steel Industries Ltd. (303 CTR 628) had expressed similar view and held that purpose test is most relevant to decide the nature of subsidy. The sum and substance of the ratio laid down by Hon'ble Supreme Court and various High Courts are that if the assistance/subsidy was given to enable to set up a new unit or to expand the existing unit in the backward area, the receipt of the subsidy was on capital account.

JSW Steel Ltd. 28 ITA No.s 858/M/2011 & Ors. that when, the subsidy was given with an object to effect new industries in the backward area of the state in terms of sales tax exemption, then the said subsidy shall be treated as capitol receipt. The Ld. CIT(A) after considering relevant facts has rightly held that subsidy received by the assessee from state Government of Karnataka is for the purpose of setting up of a new industry and in the nature of capital receipt not charitable tax. We do not find any error in the findings of the Ld. CIT(A) and hence, we are inclined to uphold the findings of the Ld. CIT(A) and reject ground taken by the revenue.” 20.1 The Ld. CIT(A) has also treated the sales tax refund amount received during the year under consideration as capital receipt following his own finding in assessment year 2006-07. As identical issue is involved in the year under consideration, respectfully following the finding of the Tribunal in assessment year 2006-07, the sales tax subsidy received of ₹ 54.02 crore during the year under consideration is held to be capital in nature. We do not find any error or infirmity in the order of the Ld. CIT(A) and we uphold the same. The ground No. 1 (One) of the appeal of the Revenue is accordingly dismissed.

JSW Steel Ltd. 29 ITA No.s 858/M/2011 & Ors. subsidy received to meet the cost of plant and machinery, accordingly he directed the assessee to rework out the ‘depreciation on plant and machinery’ after reducing the sales tax subsidy amount. As per the working submitted by the assessee, the Assessing Officer made disallowance of the excess claim of depreciation amounting to ₹7,80,30,000/-. Before the Ld. CIT(A), the assessee contended that subsidy cannot be reduced from the cost of the asset, because the subsidy was not given to meet the cost of asset. The Ld. CIT(A) after considering the submission of the assessee deleted the disallowance of depreciation observing as under:

“14. On a careful consideration of the facts brought before me, arguments adduced by the Appellant as well as the judicial pronouncements on the subject, it is observed that the working provided by the appellant to the AO in respect of depreciation after reducing the amount of sales tax exemption of Rs.54.10 cr from the cost of assets cannot be treated as the stand accepted by the appellant since the aforesaid working was provided only on the insistence of the AO. Further even on merits the subsidy cannot be reduced from the cost of asset because the subsidy was not given to meet the cost of asset. The Government, in order to determine the amount of cash subsidy, decided to follow one of the recognized methods of working it out on the basis of the amount invested by an entrepreneur in acquiring capital assets and specified a certain percentage of the amount so invested in the capital assets as cash subsidy. The basis adopted for determining the cash subsidy with reference to the cost or value of fixed assets was only a measure for quantifying the subsidy and the subsidy was not given for the specific purpose of meeting any portion of the cost of the fixed assets. Consequently,

JSW Steel Ltd. 30 ITA No.s 858/M/2011 & Ors. the subsidy did not form part of the actual cost of plant and machinery within the meaning of section 43 of the Income-tax Act. 1961. Thus based on the decisions relied by the appellant and the for the reasons stated above it is held that the amount of subsidy cannot be deducted from the cost of assets for computing depreciation, In view thereof, the A0 is directed to delete the disallowance of depreciation of Rs.7,80,30,000. This ground is decided in favour of the Appellant.” 23. Before us, the Ld. DR relied on the order of the lower authorities and submitted that subsidy has been granted up to the extent of purchase value of plant and machinery and therefore it is to meet the cost of the asset and hence should be reduced from the cost of the asset as per section 43 of the Act.

JSW Steel Ltd. 31 ITA No.s 858/M/2011 & Ors. Officer has treated the sales tax from cost or subsidy received by the assessee as provided to meet cost of asset, and therefore he has reduced the amount of sales tax subsidy written down value of assets, which has resulted into reducing claim of depreciation of the assessee amounting to ₹7,80,30,000/-. While deciding the issue of sales tax subsidy as capital receipt, the assessee has brought on record application dated 29/01/1994 under the industrial policy of the Government of Karnataka for grant of infrastructural assistance and incentive under the New Industrial Policy of 1993. In response to the application, the Government of Karnataka, passed an order No. CI 29 SPI 94, Bangalore Dated 11/10/1994 granting exemption from payment of purchase tax and entry tax on all machines, plant and equipment and other production assets acquired for the implementation of the project, for a period of 14 years. It also included exemption from payment of sales tax on sale of finished goods, by product and waste products. Further exemption was granted from payment of purchase tax and entry tax and all raw material. It is the contention of the assessee that subsidy was provided to encourage private sector participation in development of infrastructure including establishment of industrial estate. The subsidy was provided by way of refund of sales tax paid, which was restricted to hundred percent value cost of the fixed asset. In background of these facts, the Assessing Officer is of the view that subsidy has been given to

JSW Steel Ltd. 32 ITA No.s 858/M/2011 & Ors. meet the cost of the asset, whereas subsidy has been given to the extent of amount invested in plant and machinery as un-quantification of the subsidy and not for meeting cost of such assets. The revenue has not been able to substantiate that subsidy was granted to the assessee for the purpose of reducing cost of plant and machinery. Before us the assessee has relied on the decision of the Hon’ble jurisdiction High Court in the case of Welspun Steel Ltd (2019) 103 taxmann.com 436 (Bombay), wherein similar subsidy was given under the industry policy for setting up of new industry in Kutch district of Gujarat. Before the Hon’ble High Court following question of law was raised:

“2(b) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that subsidy cannot be considered as payment directly or indirectly to meet any portion of the actual cost ignoring the fact that if the assessee claims the same as capital receipt, the same shall be reduced from the cost of asset and depreciation claim should be on the net value/cost of the asset after reducing the amount of incentives in terms of Explanation 10 to Section 43(1) of the Act?” 25.1 The Hon’ble High Court decided the question as under:

JSW Steel Ltd. 33 ITA No.s 858/M/2011 & Ors. subsidy had not been given in relation to acquisition of plant or machinery and that, therefore, same cannot be adjusted towards cost of acquisition.

S.R.JOSHI itxa-1743-2016-group.odt " We have carefully considered the provisions relating to the grant of cash subsidy under the schemes framed by the Central Government and the State Government. The Central Government as well as the State Government noticed that areas specified as backward areas and tribal areas were undeveloped or under- developed. Entrepreneurs were not willing to set up industries in such undeveloped or under- developed areas. The industries were concentrating only in urban areas. In other words, rapid urbanization was taking place. So far as the State of Gujarat is concerned, there was rapid industrial growth in cities like Baroda, Ahmedabad and Surat resulting in strain on municipal services. Urbanization created several problems such as pollution, growth of slums etc . It was also necessary to have balanced growth of industry in different regions. However, as pointed out above, entrepreneurs were reluctant to set up industries in backward areas. These areas were identified as backward because

JSW Steel Ltd. 34 ITA No.s 858/M/2011 & Ors. there was un-development or under-development of industries in these areas. It was, therefore, that the Government decided to give financial incentives to encourage and induce entrepreneurs to move to backward areas and establish industries there so that the region may develop and promote the welfare of the people living in that region. One of the incentives which the Government decided to grant was cash subsidy so that entrepreneurs could utilize such cash subsidy for any purpose connected with the establishment of industries in the backward areas. Once the decision to give cash subsidy was taken, the Government had to work out some method to determine the quantum of such subsidy. In other words, the question as to how the amount of cash subsidy should be determined had to be considered by the Government. The Government, in order to determine the amount of cash subsidy, decided to follow one of the recognized methods of working it out on the basis of the amount invested by an entrepreneurs in acquiring capital assets as cash subsidy. The scheme does not say as to in what manner the subsidy was granted is to be utilized. In other words, the entrepreneur to whom the subsidy was granted was free to utilize it in any manner he liked. It would, therefore, appear that quantification of subsidy on the basis of investment was a measure adopted by the Government for convenience to work out the subsidy. If subsidy could be utilized by the entrepreneur in any manner he liked, could it be said that it was S.R.JOSHI itxa-1743-2016-group.odt granted for meeting the cost of the capital assets? In our opinion, taking an overall view of the various provisions of the scheme, it is difficult to hold that cash subsidy was granted to entrepreneur to meet the cost of the fixed assets or part thereof. The cost of the fixed assets was merely adopted as a measure for working out subsidy. In fact, a careful examination of the scheme reveals that it is the value of the fixed assets and not

JSW Steel Ltd. 35 ITA No.s 858/M/2011 & Ors. its cost which is adopted as the basis for computing the amount of the subsidy. Emphasis on value and not the cost is evident from the fact that land and building already owned by an industrial unit, cost of tools, jigs, dies and moulds, transport charges, insurance premium, erection cost, value of second-hand machinery purchased by an industrial unit etc. were to be taken into account while computing the value of fixed assets for the purposes of subsidy. In other words, it was the value of the fixed assets which formed the basis for computation of subsidy to be granted under the scheme. Subsidy, in our opinion, did not meet the cost of the fixed assets directly or indirectly. Under the scheme of the Central Government or the scheme of the State Government, cash subsidy was quantified by determining the same at a specified percentage of the value/ cost of the fixed assets. Therefore, as observed above, the basis adopted for determining the cash subsidy with reference to the cost or value of fixed assets was only a measure for quantifying the subsidy and it could not be said that the subsidy was given for the specific purpose of meeting any portion of the cost of the fixed assets. The subsidy was granted to compensate the entrepreneur for the hardship and inconvenience which he might encounter while setting up industries in backward areas."

JSW Steel Ltd. 36 ITA No.s 858/M/2011 & Ors. portion of the actual cost of acquisition of capital asset. It was held and observed as under:-

" In so far as question No.2 is concerned, this court finds that the same is squarely covered by the decision of the Supreme Court in CIT v. P. J. Chemicals Ltd., [1994] 210 ITR 830. In the said case, after review of the law on the point, the Supreme Court has held as under (headnote):

" Where Government subsidy is intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, the specified percentage of the fixed capital cost, which is the basis for determining the subsidy, being only a measure adopted under the scheme to quantify the financial aid, is not a payment, directly or indirectly, to meet any portion of the 'actual cost'. The expression 'actual cost' in section 43(1) of the Income Tax Act,1961, needs to be interpreted liberally. Such a subsidy does not partake of the incidents which attract the conditions for its deductibility from 'actual cost'. The amount of subsidy is not to be deducted from the 'actual cost' under section 43(1) for the purpose of calculation of depreciation etc." No question of law, therefore, arises in this respect.” 25.2 Respectfully following the above decision, we are of the opinion that in the instant case also subsidy has been given for encouraging the entrepreneurs for establishing industries in backwards area and the quantum of financial aid and the quantum of subsidy has been determined maximum upto the investment in plant and machinery but payment is not directly or indirectly to

JSW Steel Ltd. 37 ITA No.s 858/M/2011 & Ors. meet any portion of the actual cost of asset as defined under section 43(1) of the Act. In view of facts and circumstances, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute and accordingly we uphold the same. The ground No. 2 of the appeal of the Revenue is accordingly dismissed.

JSW Steel Ltd. 38 ITA No.s 858/M/2011 & Ors. 28. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that the Tribunal in assessment year 2006-07 has deleted the disallowance of depreciation in respect of WDV of merged companies. The relevant finding of the Tribunal is reproduced as under:

“15. We have heard both the parties, perused the material available on record and gone through orders of the authorities below along with certain case laws cited by both the parties. The only dispute under consideration is whether, the written down value of the assets transferred on amalgamation was to be computed in the hands of the amalgamated company considering the unabsorbed depreciation, i.e depreciation not given effect to, in the assessment of the amalgamating companies. The provisions of Explanation (2) and (3) to section 43(6), which explains what, will be the WDV of assets in the hands of amalgamated company, in the cases of amalgamation. Similarly, section 32(2), which provides for carry forward of unabsorbed depreciation and section 72A, which provides for carry forward of business loss and unabsorbed depreciation in the hands of the amalgamated company in the cases of amalgamation. If you go through, Explanation (2) to section 43(6), it is very clear that the word used therein speaks about depreciation ‘actually allowed’ in relation to said preceding year in case of amalgamated company. Thus, in view of Explanation (2) to section 43(6) of the Act, the WDV in the hands of the assesse as on 01/4/2005 (appointed date) would be the WDV of block of assets as on 31/03/2004 as reduced by the depreciation ‘actually allowed’ during the said preceding year i.e FY 2004-05 in the hands of the

JSW Steel Ltd. 39 ITA No.s 858/M/2011 & Ors. amalgamating companies. Accordingly, the WDV of assets transferred on amalgamation in the hands of the amalgamating company has to be necessarily computed in terms of Explanation (2) to section 43(6) of the Act. As can be seen from the above, in terms of Explanation (2) to section 43(6), while computation the WDV on amalgamation, depreciation actually allowed has to be reduced.

However, the case of the AO is that Explanation (3) has to be read into Explanation (2) and accordingly, the WDV of assets transferred on amalgamation has to be computed after reducing the total depreciation in the hands of the amalgamated companies. Accordingly, it is necessary to read and comprehend as to why provision of section (3) to section 43(6) of the Act, cannot be applied in the facts of the present case. Explanation (3) to section 43(6) states that any depreciation, which is carry forward u/s 32(2) of the Act, shall be deemed to be depreciation actually allowed. As can be seen from the above, Explanation (2) and (3) to section 43(6) of the Act, both used the term depreciation actually allowed. However, as against Explanation (2), Explanation (3) to section 43(6) of the Act, operates as a deeming fiction, wherein depreciation which is carried forward u/s 32(2) of the Act, is deemed to have been actually allowed. In our considered view, Explanation (3) being a deeming fiction, operates only in a particular conditions and in order to remove an anomaly, which otherwise would have been created under the other provisions of the Act. It thus follows that while interpreting Explanation (3), one needs to be aware of the intention of the statute. These provisions along with their intent have been explained elaborately by the Hon’ble Bombay High Court, in the case of Hindustan Petroleum Corporation Limited (supra), where it was held that explanation (3) to section 43(6) of the Act, seeks to find certain anomalies which would have otherwise exists under the Act.

JSW Steel Ltd. 40 ITA No.s 858/M/2011 & Ors. The intention of explanation (3) is not a simply to nullify the provision of explanation (2) to section 43(6), as has been read by the Ld.AO. This is also evident from the fact that the Explanation (2) has been introduced from 01.4.1988, whereas Explanation (3) was always on statute, which clearly implies that Explanation (3), which is a legal/deeming fiction, was not introduced to nullify the impact of Explanation (2) of the Act. Accordingly, in terms of Explanation (3) to section 43(6), in the present case, unless the unabsorbed depreciation of the amalgamating companies is carried forward in the hands of the amalgamated company u/s 32(2) of the Act, Explanation (3) cannot be read into Explanation (2) to simply conclude that depreciation ‘actually allowed’ also includes unabsorbed depreciation.

JSW Steel Ltd. 41 ITA No.s 858/M/2011 & Ors. case of CIT vs. Hindustan Petroleum Corporation Ltd. (supra). Further, it is relevant to note that a Special Leave Petition filed against the aforesaid High Court decision has been dismissed by the Hon’ble Supreme Court on merits in SLP (C) No. 19054 of 2008(SC). A similar proposition has been laid down by the Hon’ble Madras High Court, in the case of EID Parry India’s vs CIT (ITA.No. 1311 & 1312/2005) (Mad HC).

28.1 Since the issue of depreciation in respect of written down value of the assets of the merged companies is consequential to value of the depreciation in assessment year 2006-07, respectfully following the finding of the Tribunal, we uphold the order of the Ld. CIT(A) on the issue in dispute. The ground No. three of the appeal of the Revenue is accordingly dismissed.

JSW Steel Ltd. 42 ITA No.s 858/M/2011 & Ors. 29. Ground No. 5 (Five) of the appeal of the Revenue relates to treatment of interest of ₹7,26,71,000/- as business income instead of income from other sources.

JSW Steel Ltd. 43 ITA No.s 858/M/2011 & Ors. income. In assessment year 2006-07 also similar business income was treated by the assessee as business income, however held by Assessing Officer as income under the head ‘income from other sources’. We find that identical issue of interest income by the assessee from fixed deposit has been held to be business income by the Tribunal in assessment year 2006-07. The relevant finding of the Tribunal is reproduced as under:

“21. We have heard both the parties and perused the material available on record. Initially, the ITAT, Bangalore Tribunal ruled in favour of the assessee by holding that interest income arising to the assesee was to be taxed under the head Business Income. The Department appealed against the said order of the Bangalore Tribunal before the Hon’ble Karnataka High Court, wherein the order of the Tribunal was set aside. Basis, the aforesaid decision of the Hon’ble Karnataka High court, the AO taxed the interest income under the head income from other sources. Thereafter, against the said order of the Hon’ble Karnataka High Court, the assesse preferred an appeal before the Hon’ble Supreme court, wherein the Hon’ble Supreme Court vide order dated 29th September, 2009 in SLP (Civil Appeal) No. 6555 of 2009 set aside the order of the Hon’ble Karnataka High Court and directed to answer the question of law, which was raised before it. In set aside proceedings, the Hon’ble High Court vide its order dated 17/08/2011 had decided the issue in favour of the assessee and held that interest income earned by the assessee from fixed deposit in the normal course of business was to be taxed as business income. The relevant findings of the court are as under:-

JSW Steel Ltd. 44 ITA No.s 858/M/2011 & Ors. "23. Therefore, from the aforesaid judgment, ii is dear, that till the company commences its business and earns income, if they have kept their surplus funds in short deposits in order to earn interest that interest income is chargeable under section 56 of the Act, However, once the assesses commences business and earns income and in addition to the income so corned, the company also earns interest by way of such deposits, then the said income cannot be construed as income from other sources.........................

"4. The basic proposition that has to be borne in mind in this case is that it is possible for a company to have six different sources of income, each one of wh.ifh will be chargeable to income-tax 'Profits and gains of business or profession' is only vie of the head under

JSW Steel Ltd. 45 ITA No.s 858/M/2011 & Ors. which the company's income is liable to assessed to tax. If a company has not commenced business, there cannot be any question of assessment of its profits and gains of business. That does not mean that does not mean that until and unless the company commences its business^ its income from any other source will not be noted. If the company even before it commences business, invests the surplus, fund in its hand for purchase of land or house property and later sells it of profit, the gain made by the company will be assessable under the head Capital gains. Similarly, if a company purchases a rented house and gets rent, which rent will be assessable to tax under section22 of the Act as income fro house property. Likewise, a company may have income from other sources. It ay buy shares and get dividends. Such dividends will be taxable under section 56. The company may also as in this case, keep the surplus fund in short term deposits in order to earn interest. Such interest will be chargeable under section 56. The company has chosen not to keep its surplus capital idel, but has decided to invest it fruitfully. The fruits of such investment will clearly be of revenue nature.” 23. Therefore, from the aforesaid judgment, it is clear that till the company commences its business and earns income, if they have kept their surplus funds in short deposits in order to earn interest that income is chargeable under section 56 fo the Act. However, once the assessee commences its business and earns income and in additions to the income so earned, the company also earns interest by way of such deposits, then the said income cannot be construed as income from other sources.”

JSW Steel Ltd. 46 ITA No.s 858/M/2011 & Ors. fixed deposits under the head income from business and accordingly, we reject ground taken by the revenue.” 32. Respectfully following the finding of the Tribunal, the interest income is held to be assessed under the head ‘profit and gains of business’. The ground No. 4 (Four) raised by the Revenue is accordingly dismissed.

34.1 The assessee challenged the disallowance on three grounds. Firstly, the assessee made few investment for strategic purpose with the primary object to facilitate and promote the business interest of the company and not with a view to earning any dividend income and therefore expenditure incurred in relation to such investment was deductible as business expenditure. Secondly, no disallowance was required in respect of the investment when no dividend

JSW Steel Ltd. 47 ITA No.s 858/M/2011 & Ors. income was earned by the assessee. Thirdly no disallowance under section 14A could be made in respect of investment in foreign companies, where income was already offered for the tax purposes.

JSW Steel Ltd. 48 ITA No.s 858/M/2011 & Ors. assessment year 2007-08, the rule 8D was not applicable, and therefore where an assessee is not able to quantify the exact disallowance, the disallowance under section 14A could be made on the basis of a reasonable estimate. In our opinion, the disallowance of expenses under section 14A upheld by the Ld. CIT(A) in proportion of exempted income is one of the reasonable method. As no other method except Rule 8D(iii) has been pointed out by the Revenue for estimation of disallowance of expenses towards earning of exempted income, we concur with the finding of the Ld. CIT(A) and uphold disallowance computed by him. The ground No. 5 (Five) of the appeal of the Revenue is accordingly dismissed.

37.1 The grounds raised by the assessee and the revenue and the assessee in their respective appeals are reproduced as under:

37.1 Ground of appeal of Assessee

JSW Steel Ltd. 49 ITA No.s 858/M/2011 & Ors. 2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of the DCIT in not allowing the exclusion of the Sales Tax Subsidy of Rs.54,02,00,000/- from the Book Profits for the purpose of MAT Computation. 3. On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that the Appellant was not permitted to raise a fresh claim in the search assessment proceedings.

37.2 Grounds of appeal of the Revenue

JSW Steel Ltd. 50 ITA No.s 858/M/2011 & Ors. down value of the assets received from the merged companies thereby allowing the depreciation of ₹ 5,79,08,466/ - 7. Whether in facts and circumstances of the case and in law, the Id. CIT(A) is justified in directing the AO to treat interest income of Rs. 7,26,71,000/- as income from business and profession. 8. Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in directing the AO to re-compute the disallowance u/s. 14A following the proportionate method as directed by the Ld. CIT(A)-I, Bangalore in the original appellate order ignoring the fact that department has not accepted the order and filed appeal with the Hon'ble ITAT on this issue which is pending. 9. Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in allowing consequential depreciation of Rs. 26,12,427/- in respect of loss of Rs. 2,04,89,627/- incurred during FY 2005-06 on cancellation of forward contract considered as Capital Expenditure as per CIT(A)'s order. 10. Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in allowing consequential depreciation of ₹3,80,48,443/- in respect of loss of ₹39,78,92,211/- incurred during FY 2004-05 on cancellation of forward contract considered as Capital Expenditure as per CIT(A)'s order. 11. Whether in the facts and circumstances of the case and in law, the Ld. CITIA) is justified in deleting the addition made by the Assessing Officer u/s. 14A for the purpose of computing Book Profit u/s. 115JB of the Act. 12. Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in directing the Assessing Officer to re-compute the interest u/s. 234B casted on the Assessee Company due to retrospective amendment relying on the decision of Hon'ble ITAT Mumbai in the case of JSW Energy Ltd. for AY 2006-07 ignoring the fact that the department has

JSW Steel Ltd. 51 ITA No.s 858/M/2011 & Ors. not accepted the decision and filed appeal with Hon 'ble High Court on this issue which is pending. 13. Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in directing the Assessing Officer to re-compute interest u/s. 234C on the basis of returned income instead of income declared in the return of income filed in response to notice u/s. 153A relying on the decision of Hon'ble ITAT Mumbai in the case of JSW Energy Ltd. for AY 2006-07 ignoring the fact that the department has not accepted the decision and filed appeal with Hon'ble High Court on this issue which is pending. 14. Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in directing the AO to grant interest u/s. 244A in respect of refund, if any due to the Assessee Company on account of Self Assessment Tax paid relying on the decision of the Hon 'ble ITAT in the Assessee Company's own case for AY 2007-08 ignoring the fact that the department has not accepted the decision and filed appeal with Hon'ble High Court on this issue which is pending. 38. Briefly stated facts of the case are that consequent to search and seizure action in the case of the assessee, notice under section 153A Act was issued requiring the assessee to file return of income. In response to said notice the assessee filed return of income on 20/12/2011 declaring total income of Rs.988,77,61,031/. While assessing the income under search assessment, the Assessing Officer begin computation of total income with the business income of ₹13,73,93,92,153/- declared in the return of income under section 153A and thereafter made additions which were sustained in the order of the appellate authority in original assessment proceedings. As on the date of the passing of

JSW Steel Ltd. 52 ITA No.s 858/M/2011 & Ors. the impugned assessment order, the order of the first appellate authority i.e. the Ld. CIT(A) in original assessment proceedings was only available, the Assessing Officer retained the addition sustained by him. On further appeal, the Ld. CIT(A) allowed part relief to the assessee. Aggrieved both the assessee and the Revenue are in appeal before the Tribunal raising the grounds is reproduced above.

JSW Steel Ltd. 53 ITA No.s 858/M/2011 & Ors. 858/Mum/2011 against the order of the Ld. First Appellate Authority in original appellate proceedings, therefore the disallowance sustained by the Ld. CIT(A) in present proceeding also does not survive. Accordingly, the ground of the appeal of the assessee is allowed.

JSW Steel Ltd. 54 ITA No.s 858/M/2011 & Ors. 43. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. Before the Ld. CIT(A) assessee made claim for exclusion of sales tax subsidy of ₹54.02 crores from the book profit for the purpose of MAT computation. The Ld. CIT(A) denied this claim of the assessee observing as under:

“12.4 I find that the appellant had never made claim of reduction of sales tax incentive from Book Profit during original assessment or appellate proceedings. The claim has been raised for the first time during the reassessment proceedings u/s 153A. In the case of Goetze (I) Ltd vs CIT 284 ITR 323 (SC), it has been held by Hon'ble Supreme Court that claims of deduction before AO can be allowed to be made by filing a revised return. The appellant had opportunity to do so during the original assessment proceedings. Even otherwise, a legal ground could have been raised before appellate authorities, which the appellant failed to exercise and assessment proceedings became final. Hon' ble Rajasthan High Court has held in the case of Jai Steel India vs ACIT 259 TR 281 that the provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the A and/ or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act. The search assessment proceedings in cases where original assessments have achieved finality cannot be left open to assessee to take advantage of raising fresh claims which would not have been available to it had there been no search action. The ground of appeal is dismissed.”

JSW Steel Ltd. 55 ITA No.s 858/M/2011 & Ors. 43.1 Thus, according to the Ld. CIT(A) no fresh claim of deduction can be allowed in search assessment or in appellate proceedings related to search assessments. We find that identical issue has been decided against the assessee in assessment year 2006-07 by the Tribunal in ITA No.875 and 1338/Mum/2015 while adjudicating the appeals in relation to search assessments. The relevant finding of the Tribunal is reproduced as under:

“8. Upon careful consideration, we note that this issue of claim of the assessee that the sales tax subsidy being a capital receipt should be reduced from book profit computation u/s 115JB was subject matter of assessee’s appeal with ITAT in the course of regular assessment for AY 2006-07. The assessee had raised this issue by way of CO and ITAT has duly decided this issue in favour of assessee. However, the present case before us is assessment u/s 153A of the Act pursuant to search and assesee is himself claiming that this is a case of non abated assessment. It is noted that assessee has not made any such claim in the return filed pursuant to notice u/s 153A of the Act. It has also not filed any revised return in this regard. The claim was rejected by Ld. CIT(A) on the touchstone of Hon’ble Rajasthan High Court decision cited above that in case of non-abated assessment fresh claim cannot be allowed. We do not find any infirmity in the order of Ld. CIT(A). Hence, we uphold the same.” 43.2 Respectfully following the same, we hold that no fresh claim can be allowed to the assessee in present appellate proceedings in view of the decision of the Hon’ble Rajasthan High Court in the case of Jai Steel India versus ACIT

JSW Steel Ltd. 56 ITA No.s 858/M/2011 & Ors. 259 ITR 281 (Raj). The ground Nos. 2 (Two) and 3 (Three) of the appeal of the assessee are dismissed.

JSW Steel Ltd. 57 ITA No.s 858/M/2011 & Ors. 46. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. Since the Assessing Officer has merely repeated the addition/ disallowances made in the original proceedings and no specific addition except addition of 14A disallowance while computing book profit has been made. Therefore, the grounds raised infructuous in nature and no specific adjudication on these issues is required in present appellate proceedings. The effect of the finding of the appeal eight authorities in original appellate proceeding is only required to be given while computing the total income under search assessment. We find that identical grounds have been dismissed by the Tribunal in assessment year 2006-07. The relevant finding of the Tribunal is reproduced as under : “10. At the outset, on this issue Ld. Counsel of the assessee submitted that all the issues raised are covered in favour of the assessee by the decision of ITAT in the appeal against CIT(A) order in original proceedings u/s.143(3). He submitted that Ld.CIT(A) has followed earlier appellate order, which has been duly approved by the ITAT. 11. On careful consideration, we note that the AO has a specifically made only one addition in the course of present assessment, which relates to computation of book profit which reads as under:-

“One of the adjustments to be made while computing the book profit u/s. 115JB is to increase the net profit as per P & L a/c. by the amount(s) of expenditure relatable to

JSW Steel Ltd. 58 ITA No.s 858/M/2011 & Ors. any income to which [sec 10 (other than provisions contained in clause (38 thereof) or section 11 or section 12 apply]. It is observed that while computing the total income under the normal provisions of the Act, assessee has considered expenditure u/s. 14A at Rs.10,06,722/- as relatable to exempt dividend income. However, while computing the book profit u/s. 115JB, the same expenditure is not added back to the book profit. Accordingly, while working out book profit u/s. 115JB, adjustment in respect of expenditure u/s. 14AofRs, 10,06, 722/- is also being made.”

JSW Steel Ltd. 59 ITA No.s 858/M/2011 & Ors. hence, addition made by the AO are not with reference to any cogent material found in search. Hence, assessment u/s 153A on those issues is bad on this count too.” 47. Before us the Ld. counsel of the assessee has submitted that the Ld. CIT(A) has only followed earlier appellate orders in original proceedings only. Then, respectfully following the finding of the Tribunal (supra), the relevant grounds are accordingly dismissed as infructuous.

“14. On the issue of disallowance made u/s 14A for the purpose of 115JB, we note that Ld.CIT(A) is correct in holding that the same is not sustainable as no incriminating material was found during search as this is non abated assessment. Hence, we uphold the order of Ld.CIT(A) of this issue.” 49. Accordingly, respectfully following the finding of Tribunal (supra), in the year under consideration also, we upheld the order of the Ld. CIT(A) and dismiss the ground of the Revenue.

JSW Steel Ltd. 60 ITA No.s 858/M/2011 & Ors. CIT(A) has also followed the same. Therefore, we don’t find any infirmity in the order of Ld. CIT(A) on the issue-in-dispute inserted in grounds. Accordingly, we uphold the finding of the Ld. CIT(A) on those issues. The ground No. 14 is covered by the decision of jurisdictional High Court in the case of Indian Oil Corporation Ltd. (supra). The Ld. CIT(A) has followed binding precedent and therefore we don’t find any error in the order of Ld. CIT(A) on this issue. Accordingly, we uphold finding of the Ld. CIT(A) on this issue. The ground No. 12 to 14 of the appeal are accordingly dismissed.

Order pronounced in the open Court on 16/03/2022. Sd/- Sd/- (AMARJIT SINGH) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 16/03/2022 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent.

JSW Steel Ltd. 61 ITA No.s 858/M/2011 & Ors. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Sr. Private Secretary) ITAT, Mumbai