THE INDIA CEMENTS LTD.,CHENNAI vs. DCIT CORPORATE CIRCLE 2(1), CHENNAI

आदेश /O R D E R Per G. MANJUNATHA, AM:

This bunch of 4 appeals and 1 cross objection filed by the Revenue as well as by the assessee are directed against separate but identical orders of learned Commissioner of Income Tax (Appeals)-6, Chennai, even dated 30.06.2017, 14.06.2017, 14.06.2017 & 30.11.2017 and pertains to assessment years 2008-09, 2009-10, 2012-13 & 2013-14. Since, facts are identical and issues are common, for the sake of convenience these appeals were heard together and are being disposed of by this consolidated order.

3 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 ld. DR submitted that the Revenue could not file appeals within the time allowed under the Act, therefore delay may be condoned. Having heard both sides and considered the petitions filed by the Revenue for condonation of delay, we are of the considered view that reasons given by the Revenue for not filing the appeal within the time allowed under the Act comes under reasonable cause as provided under the Act for condonation of delay and hence, delay in filing of above appeals is condoned and appeals filed by the Revenue are admitted for adjudication.

ITA No.2210/CHNY/2017, Assessment year 2008-09 3. The Revenue has raised the following grounds of appeal:- “1.1 The Order of the learned Commissioner of Income Tax (Appeals) is contrary to the Law and facts of the case. 2.1 The CIT(A) erred in directing the AO to delete the disallowance of release from reserves under the normal provisions of the Act. 2.2 The CIT(A) failed to consider the fact that there cannot be any deduction for any release from reserve unless the same has gone to increase the profits of the year in which the said reserve was created. 2.3 The CIT(A) failed to consider the fact that no justification for claiming such depreciation has been explained by the assessee. 3.1 The CIT(A) erred in deleting the addition of interest income under tonnage tax based on the decision of Mumbai High Court in the case of Varun Shipping Co Ltd., [2011] 16 taxmann.com 8. 3.2 The CIT(A) ought to have appreciated the fact that there was no interest income earned either from core activity as per provisions of Sec.115Vl(2) or incidental activity as per provisions of Sec.115VI(5).

4 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 But the assessee is doing the business of manufacturing and sale of cement / real estate and property development. 3.3 The CIT(A) erred in deleting the addition of interest income under Tonnage Tax without taken into account of the nature of business (core/incidental) and finding facts of the Mumbai tribunal in the case of Varun Shipping Co Ltd, such as the purpose of loan and approval from RBI for the same, utilization of loan and interest on unutilized portion. 4.1 The CIT(A) erred in directing the AO to modify the disallowance u/s.14A by disallowing 0.5% of the average value of investment, the income from which does not form part of the total income. 4.2 The CIT(A) erred in directing the AO to apply only the third limb of the Rule 8D for the purpose of disallowance u/s.14A where as no such relief available in the Act/Rule. 4.3 The CIT(A) erred in restricting the disallowance u/s.144 when the disallowance has to be computed as per Rule 8D(2)(i)(ii)&(iii) of the IT Rules. 4.4 The CIT(A) erred in directing the AO to modify the 14A disallowance made under Rule 8D without the considering the facts that when assessee had mixed bag of funds and huge investments were made in assets yielding exempt income. 5.1 The CIT(A) erred in directing the AO to delete disallowance of Rs.2,06,66,000/- made by AO on account of interest cost on borrowings. 5.2 The CIT(A) ought to have appreciated that the assessee has paid huge interest on borrowed funds. 5.3 The CIT(A) erred in deleting the proportionate interest cost of borrowings in connection with investment of shares of certain companies, when the commercial expending for such diversion of funds was not proved by the assessee. 5.4 The CIT(A) omitted to consider the decision of the Hon'ble Madras High Court in the case of K. Somasundaram and Brothers (1999) (238 ITR 939) (Mad) which is in favour of the department. 6. For these and other grounds that may be adduced at the time of hearing, it is prayed that the Order of the learned Commissioner of

5 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 Income Tax (Appeals) be set aside and that of the Assessing Officer be restored.”

4.1 The facts with regard to impugned dispute are that during the year under consideration the assessee had, in the computation of total income under normal provisions as well as book profits has reduced an amount of Rs.298.78 lakhs as amount transferred from reserves to Profit & Loss account. This amount represents depreciation claimed on assets purchased at concessional import duty with a condition that if assessee fulfills export obligation, it gets concessional rate of duty on import of assets. In the books of accounts, the assessee has capitalized the asset with its monetary value including normal import duty applicable on said asset, but credited concessional duty availed under the scheme to reserves and surplus account under the head ‘deferred income’. Since, the assessee has claimed depreciation on enhanced value of assets including concessional

6 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 duty benefit availed under the scheme, it has reversed an equal amount withdrawn from reserves and surplus account and credited to profit & loss account. The AO has disallowed amount released from reserves and surplus account and credited to profit & loss account, on the ground that the assessee has claimed depreciation on assets received free of cost and hence, same is not allowable under the Act. The AO further noted that release from reserves & surplus account cannot be reduced from book profit unless same has gone to increase book profits of the year, in which said reserve was credited.

4.2 The ld.DR submitted that the ld.CIT(A) has deleted additions made by the AO towards disallowance of release from reserve account without appreciating the fact that deduction cannot be allowed unless the same has gone to increase profits of the year in which said reserve was credited.

4.3 The ld.AR for the assessee on the other hand submitted that this issue is squarely covered in favour of the assessee by the decision of Tribunal in assessee’s own case for assessment year 2001-02 in ITA No.1339/Mds/2010 dated 12.05.2017, where an

7 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 identical issue has been considered by the Tribunal and after considering relevant facts had held that amount released from reserves and surplus account is a notional entry which does not affect the real profit of the assessee and hence, provisions of section 28(iv) have no application.

4.4 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. Admittedly, the assessee has imported certain capital asset on a concessional import duty with a condition that if export obligations are met, then it could avail the benefit of concession duty payable for import of goods. Further, when the assets were imported under concessional import duty scheme, the assessee has accounted plant & machinery in books of accounts with its monetary value including concessional duty availed under the scheme and credited the concessional duty benefit to reserves and surplus account under the head ‘deferred income’ account. The assessee has claimed depreciation on said plant & machinery with its full value, but released an equal amount from reserves and surplus account and credited to Profit & Loss account. The net result of the accounting entries passed in the books of

8 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 accounts was that the assessee has claimed enhanced depreciation on concessional duty and at the same time, reversed the same from reserves and surplus account and thus, the net effect of the entry is nil adjustment to income computed for the year. Therefore, we are of the considered view that the AO was erred in disallowing depreciation claim on asset and added back to total income without understanding the fact that entries passed in the books of accounts is not determinative to compute correct income of the assessee. The CIT(A) after considering relevant facts and also by following the decision of ITAT, Chennai in assessee’s own case in ITA No.1339 to 1342/Mds/2010 for assessment years 2001-02, 2004-05 & 2006-07 deleted addition made by the AO. The Revenue has failed to bring on record any evidences to counter the findings of fact recorded by the ld.CIT(A), in light of decision of ITAT in assessee’s own case for earlier years. Hence, we are inclined to uphold the findings of CIT(A) and reject ground taken by the Revenue.

9 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 tonnage tax u/s.115VI of the Income Tax Act, 1961 (hereinafter the ‘Act’).

5.1 During the year under consideration, the assessee has received a sum of Rs.21,12,367/- interest income and included in gross receipts for tonnage tax scheme and offered income as per section 115VI of the Act. The AO has assessed interest income under the head ‘income from other sources’ by holding that interest income does not fall under Chapter – XII-G dealing with tonnage tax and as such, it should be considered separately under the head ‘income from other sources’. The AO further noted that as per section 115VI of the Act, only relevant shipping income which is derived from core activities referred to in section 115VI(2) and profits from the incidental activities referred to in section 115VI(5) read with Rule 11R of Income Tax Rules, 1962 (hereinafter the ‘Rules’) is eligible for tonnage tax scheme. On appeal, the CIT(A) has deleted addition made by the AO by holding that interest income earned from surplus fund kept in short term deposits is part of receipts from core activities of shipping business and thus, is eligible for tonnage tax scheme u/s.115VI of the Act.

10 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 5.2 The ld.DR referring to the provisions of section 115VI of the Act and Rule 11R of IT Rules, submitted that as per said provision “the relevant shipping income of a tonnage tax company means, its profits from core activities referred to in sub-section(2) and its profits from incidental activities referred to in sub-section (5) of the Act.” He further submitted that as per sub-section (2), the core activities of a tonnage tax company shall its activities from operating qualifying ships and other ship-related activities mentioned therein. Similarly, the incidental activities shall be the activities which are incidental to the core activities and which may be prescribed for the purpose. The incidental activities have been prescribed under Rule 11R of Income Tax Rules, 1962, as per which, “maritime consultancy charges, income from loading or unloading of cargo, ship management fees or remuneration received for managed vessels; and maritime education or recruitment fees”. Therefore, from sub-section (2) and (5) of section 115VI and Rule 11R, it is very clear that interest is neither considered as deriving from core activity of a shipping company nor incidental activity as referred to under Rule 11R and hence, the ld.CIT(A) has completely erred in deleting addition made by the AO towards interest income.

11 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 5.3 The ld.AR for the assessee on the other hand supporting order of the ld.CIT(A) submitted that the issue is now squarely covered in favour of the assessee by the decision of Hon’ble Bombay High Court in the case of CIT vs. Varun Shipping C. Ltd., 334 ITR 263, where the Hon’ble High Court held that interest income derived by a shipping company out of surplus funds kept in short term deposits was very much part and parcel of core activity of shipping business. He further referring to decision of ITAT, Mumbai in case of Shipping Corporation of India Ltd., vs. ADIT, 31 ITR (Trib) 545, submitted that income on account of interest and dividend cannot be termed as earned from carrying on separate business activity other than tonnage tax business and is chargeable to tax under the head ‘income from other sources’. Therefore, he submitted that there is no error in the order passed by the ld.CIT(A) in deleting addition made by the AO.

5.4 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The provisions of section 115VI of the Act, deals with taxation of shipping companies under tonnage tax scheme. As per said

12 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 provisions, a shipping company is assessable on tonnage basis on its income derived from shipping business. For the purpose of this chapter, the relevant shipping income of a tonnage tax company means, its profits from core activities referred to in sub- section (2) and its profits from incidental activities referred to in sub-section(5). As per sub-section (2), the core activities of a tonnage tax company shall be its activities from operating qualifying ships and other ship-related activities mentioned as under including shipping contracts in respect of earning from pooling arrangements and contracts of affreightment. Similarly, as per provisions of sub-section (5), incidental activities shall be the activities which are incidental to core activities. The incidental activities u/s.115VI of the Act has been defined under Rule 11R of the Rules, as per which only maritime consultancy charges, income from loading or unloading of cargo, ship management fees or remuneration received for managed vessels; and maritime education or recruitment fees is considered as income derived from incidental activities. From the provisions of section 115VI(2) & (5) of the Act and Rule 11R, it is very clear that except activities mentioned therein, no other income derived from any other activity can be considered a income derived from

13 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 shipping business, which is eligible for tonnage tax scheme. In this case, the assessee has earned interest income and claimed that such interest income is derived from shipping business, on the ground that it had maintained separate books of accounts for shipping business and hence, whatever income derived from the segment of shipping business is eligible for tonnage tax scheme. We do not find merits in the arguments of the assessee for the simple reason that interest earned on deposits or loans out of income generated from shipping business cannot be considered as income derived from core activity of operating a ship or incidental activities connected to operating a ship. The question whether the assessee had maintained separate books of accounts or not is irrelevant to decide the nature and head of income. Therefore, we are of the considered view that interest income earned by the assessee from deposits is not an income derived from shipping business and thus, the same is not entitled for tonnage tax scheme. The ld.CIT(A) without appreciating the facts simply deleted addition made by the AO. Hence, we reverse the findings of ld.CIT(A) and allow the ground taken by the Revenue.

14 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 6. The next issue that came up for our consideration from Ground No.4 of Revenue appeal is disallowance u/s.14A at the rate of 0.5% of average value of investments, income from which does not form part of total income. It was the claim of the assessee before the AO that only those investments which yielded exempt income for the year needs to be considered while computing disallowance under Rule 8D(2)(iii) of the IT Rules, 1962.

6.1 Having heard both the sides and considered material on record, we find that an identical issue has been considered by the Co-ordinate Bench of ITAT, Chennai in assessee’s own case for assessment years 2007-08 in ITA Nos.1343/Mds/2010, where the Tribunal held that, only those investments which yielded exempt income shall be considered to disallow 0.5% of average value of investment, the income from which does not form part of total income. We further noted that ITAT, Delhi Special Bench in the case of ACIT vs. Vireet Investment Pvt. Ltd., 58 ITR (Trib) 313 had considered an identical issue and held that only those investments which yielded exempt income for the year needs to be considered for computing disallowance of 0.5% of the average

15 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 value of investment. The ld.CIT(A) after considered relevant facts has rightly directed the AO to recompute disallowance by taking those investments which yielded exempt income for the year. Therefore, we are of the considered view that there is no error in the findings of the ld.CIT(A) and hence, we are inclined to uphold the findings of ld.CIT(A) and reject ground taken by the Revenue.

7.1 The facts with regard to the impugned dispute are that during the year, the assessee had invested in shares of M/s. Jagathi Publications Pvt. Ltd. and M/s. Bharathi Cement Corporation Ltd. The AO has disallowed proportionate interest expenses u/s.36(1)(iii) of the Act, on the ground that assessee has diverted interest bearing funds for non-business purpose. The AO further noted that the investments made in above two companies are quid pro quo for getting benefit from Government of Andhra Pradesh at the relevant time. It was the claim of the assessee before the AO that investments made in M/s. Jagathi

16 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 Publications Pvt. Ltd. and M/s. Bharathi Cement Corporation Ltd., was strategic investment for business purpose and the assessee has derived commercial advantage. Therefore, the same cannot be considered as quid pro quo for getting certain benefits, because the investments are made in companies related to certain individual.

7.2 The ld.DR submitted that the ld.CIT(A) has erred in deleting addition made by the AO towards proportionate interest on diversion of funds for non-business purpose to companies M/s. Jagathi Publications Pvt. Ltd. and M/s. Bharathi Cement Corporation Ltd., without appreciating the fact that investments made in above two companies is quid pro quo for getting benefits from Government of Andhra Pradesh to the business of the assessee. The ld.DR referring to the decision of Hon’ble Supreme Court in Criminal Appellate Jurisdiction in the case of Y.S. Jagan Mohan Reddy vs. Central Bureau of Investigation submitted that during investigation it was ascertained that the assessee has made investment in companies related to Y.S. Jagan Mohan Reddy for getting benefit in the form of additional water supply from Krishna river to the companies run by the assessee and

17 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 which is in the nature of a quid pro quo. He, further referring to the judgment, submitted that CBI has already filed a charge sheet and highlighted the investigation relating to M/s. India Cements Ltd., and the various amounts exchanged between the parties. The AO has brought out all these facts before concluding that investment made in above two companies is not a strategic investment but a quid pro quo and hence, interest relatable to said investment needs to be disallowed u/s.36(1)(iii) of the Act. The ld.CIT(A) without appreciating the facts simply deleted addition made by the AO.

7.3 The ld.AR for the assessee on the other hand submitted that the AO has approached the investment with suspicious, doubt and attempted to create an illusion that strategic investment are not for business purpose and thereby disallowed interest expenditure on notional and adhoc basis without appreciating the fact that said investment is a strategic investment and the assessee has derived commercial advantage. The ld.AR further submitted that it is immaterial to go into charge sheet filed by some investigation agency to decide the issue of disallowance of interest u/s.36(1)(iii) of the Act, because charge sheet filed by an

18 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 investigation agency is an accusation but not a conclusive finding that the assessee has made payments in the nature of quid pro quo for getting certain benefits. He further submitted that the issue is now covered by the decision of Hon’ble Supreme Court in the case of M/s. S.A. Builders vs. CIT, 288 ITR 1, where the Hon’ble Supreme Court held that “the expenditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency”. In this case, the assessee has made investments on commercial grounds to derive certain benefits which cannot be considered as quid pro quo for getting certain benefits, because some investigation agency has filed charge sheet against some third person.

7.4 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The AO has disallowed proportionate interest u/s.36(1)(iii) of the Act on investments made in two companies M/s. Jagathi Publications Pvt. Ltd. and M/s. Bharathi Cement Corporation Ltd., by holding that both investments are not strategic investments for deriving certain commercial benefit but only a quid pro quo for getting

19 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 benefits from Government of Andhra Pradesh. The AO has given various reasons to reach to a conclusion that those two investments are not strategic investments and such conclusion has been reached on the basis of charge sheet filed by an investigation agency on some persons. Except this, the AO has not brought on record any evidence to prove that investment made by the assessee in above two companies is not strategic investments. Moreover, whether investment made in some companies is for strategic investments, for business purpose or not has to be decided by the person who is making investment in the company but the AO cannot decide himself whether said investment is strategic investment or not by assigning some flimsy reasons. In this case, the reasons given by the AO to treat investments in two companies has quid pro quo on the basis of charge sheet filed by an investigation agency in case of third person, but said charge sheet filed in the case of third person is not relevant to decide the issue of disallowance of interest u/s.36(1)(iii) of the Act. Moreover, the Hon’ble Supreme Court in the case of S.A. Builders v. CIT, supra, has held that interest on borrowed funds cannot be disallowed if the assessee has advanced interest free loans to a sister concern as a measure of

20 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 commercial expediency and what is to be seen is business purpose and what the sister concern did with the money advanced. The court further held that the expenditure may not have been incurred under any legal obligation but yet it is allowable as business expenditure, if it was incurred on the ground of commercial expediency. The Hon’ble Supreme Court in the case of M/s. Hero Cycles Ltd., vs. CIT, (2015) 379 ITR 347 discussed the scope of commercial expediency and held that “once it is established that there is nexus between the expenditure and the purpose of business, the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the Board of Directors and decide how much is reasonable expenditure having regard to the circumstances of the case”. In this case, the AO has exactly done what the Hon’ble Supreme Court said in the case of M/s. Hero Cycles Ltd., and sat in the arm-chair of businessman and decided himself that investment made in above two companies are not strategic investments but only a quid pro quo without bringing on record any evidence to prove that said investments is a quid pro quo. The CIT(A) after considering relevant facts has rightly deleted additions made by the AO and hence, we are inclined to uphold

21 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 the findings of the ld.CIT(A) and reject ground taken by the Revenue.

ITA No.2038/CHNY/2017, Assessment year 2009-10 9. The first issue that came up for our consideration from Ground No.2 of assessee appeal is validity of reopening of assessment u/s.147 of the Act. The ld.AR for the assessee at the time of hearing submitted that he does not want to press the ground challenging reopening of assessment. Hence, Ground No.2 of assessee appeal is dismissed as not-pressed.

22 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 10.1 The ld.AR for the assessee submitted that the issue is covered in favour of the assessee by decision of the ITAT in assessee’s own case in ITA Nos.2414, 2415 & 2416/Chny/2019 dated 12.12.2019 for assessment years 2014-15 to 2016-17, where the Tribunal by following decision of ITAT, Delhi Special Bench in the case of ACIT vs. Vireet Investment Pvt. Ltd., 58 ITR (Trib) 313 had held that “computation under Clause (f) of the Explanation -1 to Section 115JB(2) is to be made without resorting to the computation as contemplated u/s.14A r.w.rule.8D of the Rules”.

10.2 The ld.DR on the other hand agreed that the issue is squarely covered in favour of the assessee.

10.3 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We find that the Tribunal has considered an identical issue in assessee’s own case for assessment years 2014-15 to 2016-17 in ITA Nos.2414, 2415 & 2416/Chny/2019 and by following decision of ITAT, Delhi Special Bench in the case of ACIT vs. Vireet Investment Pvt. Ltd., supra, held that “computation under Clause

23 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 (f) of the Explanation -1 to Section 115JB(2) is to be made without resorting to the computation as contemplated u/s.14A r.w.rule.8D of the Rules”. Therefore, we direct the AO to delete addition made towards disallowance u/s.14A r.w.rule 8D to book profit computed u/s.115JB of the Act.

ITA No.2145/CHNY/2017, Assessment year 2012-13 12. The first issue that came up for our consideration from Ground No.2 of Revenue appeal is disallowance of notional interest on advances to subsidiaries.

12.1 The facts with regard to the impugned dispute are that during the relevant period under consideration, the assessee has borrowed huge loans and debited interest expenses of Rs.2019.36 lakhs to the Profit & Loss account. The assessee has given advance to various subsidiaries and has recognized interest on said advances. In the case of M/s. Trinetra Cement Ltd., interest has been charged @ 8%, however, no interest has been charged on advances to M/s.ICL Financial Services Ltd., M/s. ICL Securities Ltd., M/s. ICL

24 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 International Ltd., and M/s. Industrial Chemicals and Monomers Ltd. It was the claim of the assessee before the AO that advances to subsidiaries is for strategic investment purpose to derive business advantage and hence, no interest can be disallowed towards advance to subsidiaries. The AO however was not convinced with explanation furnished by the assessee and according to him, the assessee has paid substantial interest on borrowed funds but has not charged any interest on loans given to subsidiaries. Therefore, imputed interest @ 8% on advances to subsidiaries and made addition of Rs.2725.76 lakhs.

12.2 The ld.DR submitted that the ld.CIT(A) has erred in deleting addition made in respect of notional interest on advances to wholly owned subsidiaries without appreciating the fact that the assessee has paid huge interest on borrowed funds which was diverted to give interest free advances to subsidiaries. The ld.DR referring to decision of Hon’ble Madras High Court in the case of M/s. HR Sugar Factory, 187 ITR 363 and decision of Hon’ble Punjab & Haryana High Court in the case of M/s. Abishek Industries, 288 ITR 1, submitted that interest free advances given to sister concerns for non-business purposes would definitely hit by the provisions of section 36(1)(iii) of the Act.

25 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018

12.3 The ld.AR for the assessee, on the other hand submitted that this issue is covered in favour of the assessee by the decision of ITAT, Chennai Benches in assessee’s own case for assessment year 2007-08 in ITA No.1343/Mds/2010 dated 01.01.2016, where the Tribunal under identical circumstances and on identical loans to subsidiary companies deleted addition made by the AO towards notional interest on advances to subsidiaries. He further submitted that while deleting addition, the Tribunal had followed decision of Hon’ble Supreme Court in the case of M/s. S.A. Builders vs. CIT, 288 ITR 1. Therefore, there is no error in the findings recorded by ld.CIT(A) to delete additions made towards notional interest on loans to subsidiaries.

12.4 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We find that the Tribunal has considered an identical issue in ITA No.1343/Mds/2010 and by following decision of Hon’ble Supreme Court in the case of M/s. S.A. Builders vs. CIT, supra, has held that interest on borrowed funds cannot be disallowed if the assessee has advanced interest free loans to sister concerns as a measure of

26 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 commercial expediency and what is to be seen is business purpose and what the sister concern did with the money advanced. In this case, the Tribunal has recorded categorical findings that the assessee has advanced loans to sister concerns for business purpose and hence, interest cannot be disallowed for diversion of funds to sister concerns. The relevant findings of the Tribunal are as under:- “10. We have considered the rival submissions on either side and also perused the material available on record. As rightly submitted by the ld. Counsel for the assessee even if the borrowed funds were diverted for making advances to subsidiary companies, this Tribunal is of the considered opinion that there cannot be any addition of notional interest since it is not the case of the Revenue that the subsidiary companies had misused the funds for any other purpose. In other words, since the subsidiary companies used the funds for their business this Tribunal is of the considered opinion that in view of the judgment of the Apex Court in S.A Builders(supra) there cannot be any addition in the hands of the assessee. A bare reading of the order of the CIT(A) shows that similar addition was made by the Assessing Officer in assessment years 2003-04 and 2004-05. The CIT(A), however, deleted the addition. This Tribunal in I.T.A.Nos.778 & 779/Mds/2008 dated 15.7.2009 has confirmed an identical order of the CIT(A). In fact, the CIT(A), by following the decision of this Tribunal in assessee’s own case for the assessment years 2003-04 and 2004-05 and the judgment of the Apex Court in S.A Builders(supra) allowed the claim of the assessee. Therefore, this Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly, the same is confirmed.”

27 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 12.5 In this view of matter and consistent with view taken by the Co-ordinate Bench, we are of the considered view that there is no error in the order of CIT(A) deleting notional interest on advances to subsidiaries and hence, we are inclined to uphold the findings of CIT(A) and reject the ground taken by the Revenue.

28 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 14. The next issue that came up for our consideration from Ground No.4 of Revenue appeal is disallowance of advertisement expenditure paid to M/s. Kalaignar TV Pvt Ltd.

14.1 The facts with regard to the impugned dispute are that the company had entered into an agreement with M/s. Kalaignar TV Pvt. Ltd., for telecast of advertisements. As per agreement, a sum of Rs.60 crores was paid in two tranches of Rs.30 crore each on 19.01.2011 & 20.01.2011. The assessee has claimed proportionate expenses of Rs.11,80,62,699/- for the year under consideration under the head ‘advertisement expenses’. The AO has disallowed advertisement expenditure on the ground that said expenditure was not incurred wholly and exclusively for the purpose of business and the assessee has not offered any explanation as to why only Kalaignar TV Pvt. Ltd., is chosen for advertisement when number of TV channels are available for that purpose. He, further noted that the purported payment made for telecast of advertisement is only a facade to transfer money from the assessee to Kalaignar TV for the reasons best known to the assessee.

29 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 14.2 The ld.DR submitted that although the assessee has paid lumpsum payment for advertisement expenditure but not given proper reasons for giving advertisement to only one channel when number of channels are available for this purpose. However, he fairly agreed that the issue is covered in favour of the assessee by the decision of ITAT in earlier years.

14.3 The ld.AR on the other hand submitted that the issue is squarely covered in favour of the assessee by the decision of ITAT, Chennai Benches in assessee’s own case in ITA No.239/Mds/2015 dated 01.01.2016 for assessment year 2011- 12, where the Tribunal in identical circumstances and on identical payment held that advertisement charges paid to Kalaignar TV Pvt. Ltd., is a genuine business expenditure incurred wholly and exclusively for the purpose of business.

14.4 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We find that an identical issue has been considered by the Tribunal in assessee’s own case for assessment year 2011-12 and after considering relevant facts held that advertisement charges paid

30 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 to M/s. Kalaignar TV Pvt. Ltd., is for business purpose and the AO has disallowed the expenses on suspicious grounds by doubting the genuineness of payment but fact remains that assessee has paid the amount towards cost of advertisement for 5 years and filed necessary evidences to prove that M/s. Kalaignar TV Pvt. Ltd., has telecasted the advertisement in the TV for a period of 5 years. The relevant findings of the Tribunal are as under:- “105. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, there was an agreement between the assessee and M/s Kalaignar TV Pvt. Ltd. It is an electronic era and advertisement has to be made through electronic media. Even though conventional method of advertising is available in the country, the effective method to reach people is to make advertisement in the TV. The Revenue is objecting in choosing M/s Kalaignar TV Pvt. Ltd. when other channels are available. It is not for the Assessing Officer to suggest the television channel through which the assessee has to advertise its product. The assessee being a businessman knows very well in which manner he has to advertise its product to earn maximum profit. When the assessee decided to make advertisement through M/s Kalaignar TV Pvt. Ltd. the Assessing Officer cannot doubt the genuineness of the decision taken by the assessee for choosing M/s Kalaignar TV Pvt. Ltd. It is open to the assessee to select any channel including M/s Kalaignar TV Pvt. Ltd. Admittedly, the assessee has paid Rs. 60 crores in advance for making advertisement for five years. The payment was in fact made on two dates of Rs. 30 crores each. The assessee is not claiming the entire Rs. 60 crores as deduction. The assessee is only claiming proportionate amount of Rs. 1,59,38,000/-. The next objection of the Assessing Officer is that there was variation in telecasting the advertisement. It is for the assessee and the M/s Kalaignar TV Pvt. Ltd. to decide the time schedule for the

31 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 advertisement. The Assessing Officer cannot suggest the assessee or M/s Kalaignar TV Pvt. Ltd. when to telecast the assessee’s advertisement in their channel. When the assessee and M/s Kalaignar TV Pvt. Ltd. decided to telecast the advertisement in a particular time, the Assessing Officer cannot doubt the genuineness of the transaction. The fact remains that there was a telecast of advertisement in respect of the product manufactured by the assessee. It is also not in dispute that the assessee has paid Rs. 60 crores being the cost of advertisement for five years and the assessee is claiming proportionate cost for the year under consideration. Therefore, the CIT(A) has rightly allowed the claim of the assessee. This Tribunal do not find any infirmity in the order of the CIT(A) and accordingly, the same is confirmed.”

14.5 In this view of matter and consistent with view taken by the Co-ordinate Bench, we are of the considered view that there is no error in findings recorded by the CIT(A) and delete addition made towards disallowance of advertisement expenses. Hence, we are inclined to uphold the findings of CIT(A) and reject the ground taken by the Revenue.

15.1 The facts with regard to the impugned dispute are that during the year the assessee has redeemed FCCBs issued in May,

32 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 2007 in the Profit & Loss account. The assessee has reduced a sum of Rs.363.82 lakhs as exceptional item under the head ‘Foreign currency translation difference on FCCBs’. The assessee was asked to justify the claim, for which it has stated that the company had foreign currency exposure towards FCCBs and the same was redeemed during the year on maturity. At the time of redemption, there was a loss due to currency fluctuation and this included cost of foreign contracts in the form of option contract premium. The AO however was not convinced with explanation furnished by the assessee and according to him, the assessee has paid premium on redemption of FCCBs on account of fluctuation in foreign currency, on account of both the actual repayment of FCCBs as well as the premium. Therefore, he opined that whatever excess paid on account of fluctuation in foreign currency on account of repayment of FCCBs is capital account, whereas excess payment on account of fluctuation in foreign currency towards premium of redemption in FCCBs is revenue in nature and therefore, total premium paid by the assessee of Rs.1,80,61,809/- has been proportionately allocated to capital and revenue account in the rate of 67.75 : 32.25 and thus, made disallowance of Rs.1,22,35,875/- to capital account.

33 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018

15.2 On appeal, the ld.CIT(A) by following the decision of Hon’ble Supreme Court in the case of CIT vs. Woodward Governor India P. Ltd, (2009) 312 ITR 254 deleted addition made by the AO by holding that when the assessee has utilized the proceeds of FCCBs only towards day to day business operation, i.e., towards working capital requirement of business and not for purchase of any capital asset, any loss incurred on redemption of said FCCBs on account of fluctuation in foreign currency cannot be treated as capital in nature, whether or not said loss is arised out of repayment of principal portion of FCCBs or premium paid on said FCCBs.

15.3 The ld.DR submitted that the ld.CIT(A) has erred in deleting the disallowance of loss on redemption of FCCBs without appreciating the fact that the method of accounting by the assessee is not relevant to decide the nature of loss, whether it is capital or revenue in nature but, what is to be seen is the purpose for which said FCCBs was used and thus, the AO has proportionately allocated loss into capital account and revenue account based on repayment of FCCBs and premium paid on said

34 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 FCCBs. But the ld.CIT(A) without considering said aspect, but simply deleted addition made by the AO.

15.4 The ld.AR for the assessee on the other hand submitted that this issue is squarely covered in favour of the assessee by the decisions of Hon’ble Supreme Court in the case of ONGC Ltd., vs. CIT, 322 ITR 180 and further, in the case of Woodward Governor India (P.) Ltd., vs. CIT, 312 ITR 254. He further submitted that the assessee has incurred loss on account of redemption of FCCBs due to fluctuation in foreign currency and hence, it is in the nature of revenue expenditure, because the proceeds of FCCBs was utilized in the business operation of the assessee as working capital requirement. Therefore, the ld.CIT(A) after considering relevant facts, has rightly deleted addition made by the AO and his order should be upheld.

15.5 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. Admittedly, the ld.CIT(A) had recorded categorical finding that the assessee company has utilized the proceeds of FCCBs issued only towards working capital requirement of the company and not

35 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 for purchase of any capital asset. The ld.CIT(A) further recorded a categorical finding that the assessee is following a consistent method of accounting, where it is regularly accounting loss / gain as revenue expenditure or income on account of reinstatement of liability in the books for earlier assessment years and the same has been accepted by the Department. Therefore, the ld.CIT(A) opined that when the assessee is following a consistent method of accounting to treat loss / gain of reinstatement of liability towards FCCBs to account gain as income and loss as expenditure, there is no reason for the AO to take different view for the year under consideration, unless there is change in facts for the relevant year. The ld.CIT(A) further observed that the issue is covered by the decision of Hon’ble Supreme Court in the case of Woodward Governor India P. Ltd., vs. CIT, supra. The facts remain unchanged. The Revenue has failed to bring on record any evidence to prove the findings of fact recorded by the ld.CIT(A) is incorrect or any judgment of Supreme Court or High Courts to take a different view. Therefore, we are of the considered view that the ld.CIT(A) was right in deleting addition made by the AO towards disallowance of loss on redemption of FCCBs and hence,

36 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 we are inclined to uphold the findings of ld.CIT(A) and reject ground taken by the Revenue.

16.1 The facts with regard to impugned dispute are that in the computation of total income for income-tax purpose, the assessee has added back a sum of Rs.1,90,50,176/- as “amortization of deferred revenue expenditure – forex loss”. The assessee has also deducted a sum of Rs.10,78,44,657/- in the statement of total income under the head “additions to foreign currency monetary item translation difference account”. When the AO called upon the assessee to explain, the assessee stated that it has borrowed foreign currency loan for business purpose and also for Sankar Nagar power plant and has incurred translation loss in foreign currency loan at Rs.3700.62 lakhs. It was further explained that as per notification of MCA, Forex loss relating to loans for the purpose of acquiring fixed assets has been added to the cost of fixed asset while Forex loss on loans for a general

37 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 business purpose has been treated as “foreign currency monetary item translation difference account” and amortized during the balance period of the loan. The assessee further submitted that out of total loss for the year, a sum of Rs.2622.18 lakhs was capitalized to asset and Rs.1078.44 lakhs was debited to translation difference account. Out of Rs.1078.44 lakhs debited to translation difference account, a sum of Rs.190.5 lakhs was amortized and debited to Profit & Loss account. The AO however was not convinced with the explanation furnished by the assessee and according to him, the treatment given by the assessee in the books of accounts for accounting foreign currency monetary item translation difference is not correct and further MCA’s circular is not binding on the AO and therefore, he has rejected explanation of the assessee and added loss claimed in statement of total income to the total income.

16.2 The ld.DR submitted that the ld.CIT(A) has erred in deleting additions made by the AO towards foreign currency monetary item translation difference without appreciating the fact that the assessee has failed to file necessary evidences to prove that said loss was incurred on account of difference in foreign currency

38 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 loan and such loan was borrowed for general business purpose of the assessee. The ld.DR further submitted that the ld.CIT(A) has completely erred in following the decision of Hon’ble Supreme Court in the case of CIT vs. M/s. Wooodward Governor India P. Ltd., (2009) 312 ITR 254 without appreciating the fact that Hon’ble Supreme Court has clearly held that loss on account of capital account cannot be allowed as deduction.

16.3 The ld.AR for the assessee on the other hand supporting order of the ld.CIT(A) submitted that the issue is squarely covered in favour of the assessee by the decision of Hon’ble Supreme Court in the cases of CIT vs. M/s. Woodward Governor India P. Ltd., supra, and further in the case of M/s. ONGC vs. CIT, 322 ITR 180, where it was held that loss incurred on foreign currency transaction is revenue in nature, which can be allowed as deduction u/s.37 of the Act.

16.4 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The assessee has borrowed certain foreign currency loans for business purpose as ‘capital loan’ and also for setting up of plant &

39 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 machinery. The assessee has incurred loss on account of fluctuation in foreign currency, while repayment of loan borrowed for business purpose as well as for purpose of setting up of plant & machinery and such loss has been accounted in accordance with notification issued by MCA and claimed that loss related to loan borrowed for capital purpose has been added to cost of asset, whereas loss relating to loan borrowed for general business purpose was debited to foreign currency monetary item translation difference and amortized over a period of loan in the books of accounts, however claimed total loss incurred for the year as deduction in the statement of total income. The AO has disallowed total loss on the ground that said loss is on capital account. The ld.CIT(A) has recorded a categorical finding that loss related to capital account of Rs.2622.18 lakhs was added to the cost of asset whereas, loss related to loan borrowed for general purpose was added to monetary item translation difference account of Rs.1078.44 lakhs. It is an admitted fact that loss incurred on fluctuation in foreign currency while repaying any loan borrowed for the purpose of business of the assessee is held to be revenue in nature and allowable as deduction u/s.37 of the Act. This proposition is supported by the decision of Hon’ble

40 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 Supreme Court in the case of ONGC Ltd., vs. CIT, supra, where the Hon’ble Supreme Court held that “assessee having maintained accounts on mercantile system of accounting, loss claimed by the assessee on account of fluctuation in the rate of foreign exchange as on the date of balance sheet in respect of loans taken for revenue purposes is allowable as expenditure u/s.37(1) of the Act, notwithstanding the fact that the liability has not been actually discharged in the year in which the fluctuation in the rate of foreign exchange has occurred”. This proposition is further supported by the decision of Hon’ble Supreme Court in the case of CIT vs. M/s. Woodward Governor India P Ltd., supra. In this case, on perusal of facts, the assessee has treated loss incurred on fluctuation in foreign currency as per the circular of MCA and has accounted loss related to loans borrowed for capital purpose into capital account and added to concerned asset and loans related to general business purpose has been treated as revenue and added to Forex monetary item translation difference. Further the assessee has accounted said loss in the books of accounts as per the circular issued by MCA however, in the statement of total income deduction has been claimed towards total loss incurred in the year in respect of revenue account. The

41 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 assessee has following said accounting method consistently for several years and further, when the loss incurred on fluctuation in foreign currency is on revenue account then said loss is deductable u/s.37(1) of the Act irrespective of accounting treatment given in books of accounts of the assessee. Therefore, we are of the considered view that there is no error in findings recorded by the ld.CIT(A) to delete addition made by the AO towards loss on foreign currency translation difference account and hence, we are inclined to uphold the order of the CIT(A) and reject ground taken by the Revenue.

ITA 737/CHNY/2018, Assessment year 2013-14 18. The first issue that came up for our consideration from Ground No.2 of Revenue appeal is transfer pricing adjustment to deduction claimed u/s.80IA of the Act towards income generated on captive power plant.

18.1 The facts with regard to the impugned dispute are that the assessee company is engaged in the business of cement

42 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 manufacturing, is operating a captive power plant. The assessee has claimed deduction u/s.80IA of the Act in respect of captive power plants in Vishnupuram, AP and Kayathar, TN. The deduction has been claimed based on the rate at which power plant purchased either from the market or from the State Electricity Boards. Since, the deduction claimed u/s.80IA in respect of power generation from captive power plants under specified domestic transactions, the assessee has conducted transfer pricing study and has adopted comparable uncontrolled price method (CUP) as the most appropriate method and claimed that its specific domestic transactions are at arm’s length price. During the course of assessment proceedings, a show cause notice was issued by the TPO seeking to adjust deduction claimed u/s.80IA by adopting the rate at which the State Electricity Boards purchase power from independent power producers as per the TN Electricity Regulatory Commission. In response, the assessee claimed that both the plants are captive power plants meant for 100% captive use and therefore the ERC pricing has no bearing on the issue. The assessee further claimed that the windmill at Kayathar generates electricity which is fed into grid of TANGEDCO. Further, whenever the assessee draws power from

43 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 TANGEDCO grid while billing the factories, it has adjusted such power fed into the grid and bills for the rest at normal tariff rate which is Rs.5.69 per unit. The Waste Heat Recovery Plant is located in Telengana and therefore the TNERC rates are not applicable. The power generated in the grid is consumed internally and not fed into the grid and therefore adopting a tariff applicable to power generating entities is not correct.

18.2 The TPO however was not convinced with the explanation furnished by the assessee and according to him price fixed by ERC becomes a significant factor because the said rate was fixed to procure and sell power from independent power producers. This is so, since if the assessee had to sell power in the open mart, the buyers would have the only power distribution companies as electricity is not a commodity that is freely saleable to whomsoever is interested. Therefore, he opined that deduction claimed u/s.80IA of the Act on notional profit derived from internal consumption of power from captive power plant should be computed on the basis of rate of power purchase as ordered by ERC’s of AP & TN and hence, recomputed the amount of deduction by adopting rate fixed by ERCs of both states and

44 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 reworked adjustment of Rs.8,74,30,489/-. On appeal, the ld.CIT(A) by following decision of ITAT in assessee’s own case for earlier year deleted addition made by the AO towards transfer pricing adjustments on deduction claimed u/s.80IA of the Act.

18.3 The ld.DR submitted that the ld.CIT(A) has erred in deleting TP adjustment made regarding deduction claimed u/s.80IA of the Act without considering the fact that there is a difference between concept of market price and arms length price. The ld.DR further submitted that the ld.CIT(A) omitted to consider the fact that for the assessment year 2013-14 is the first year in which we have to take arm’s length price concept to determine the transfer price. Therefore, the case laws cited by the CIT(A) pertains prior to assessment year 2013-14 which are not relevant to decide the issue on hand. The ld.DR further submitted that the concept of arm’s length price for specific domestic transactions was first introduced for assessment year 2013-14, as per which the AO / TPO has to determine arm’s length price of transactions between the assessee and related party and such ALP determination has been prescribed under Rule 10B of IT Rules. As per Rule 10B, the AO has to determine the price by taking into account comparable

45 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 cases of similar nature independent of the assessee. Therefore, it is not correct to say that rate at which power purchased by the assessee from electricity supply companies cannot be considered as arm’s length price. He further submitted that when the assessee is performing generation function alone, the rate at which power is sold by the assessee cannot be equated to an entity which performs the other two functions also. Therefore, he submitted that the ld.CIT(A) has erred in deleting addition made by the AO to recompute deduction u/s.80IA of the Act.

18.4 The ld.AR for the assessee on the other hand strongly supporting order of the ld.CIT(A) submitted that the issue is squarely covered in favour of the assessee by the decision of ITAT in assessee’s own case, where the Tribunal by following decision of Bombay High Court in the case of CIT vs. Reliance Industries Ltd., and the decision of Hon’ble Chhattisgarh High Court in the case of M/s. Godavari Power and Ispat Limited, [2014] 42 taxman.com 551 held that deduction u/s.80IA was allowable to generation of power for captive consumption and the rate of power generation at which the electricity board supplied power to its consumers rather than the rate at which the power

46 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 generated companies supply its power to the electricity board was to be taken as the price. Therefore, there is no reason to revisit the issue once again to take a different view.

18.5 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We find that an identical issue has been considered by the Tribunal in assessee’s own case for assessment year 2011-12 in ITA No.2412/Chny/2019 dated 12.12.2019, where the Tribunal under identical set of facts by following certain judicial precedents including the decision of Hon’ble Bombay High Court in the case of Reliance Industries Ltd., and the decision of Hon’ble Chhattisgarh High Court in the case of M/s.Godavari Power and Ispat Ltd., supra held that while computing deduction u/s.80IA for generation of power for captive consumption, the rate at which electricity board supply power to its consumers should be considered instead of the rate at which the power generating companies supply its power to the electricity board. The relevant findings of the Tribunal are as under:- “31. We have considered the rival submission and perused the materials available on record.

47 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 32. A perusal of the facts in the present case clearly shows that the assessee has been captively consuming the electricity generated from its wind mill as also the Heat Waste Recovery Treatment Plant. Admittedly, the assessee is entitled to the deduction u/s.80IA of the Act in respect of the electricity generated and consumed. This is not in dispute. The dispute has risen for computing the deduction u/s.80IA of the Act. The issue admittedly is covered by the decision of the Co- ordinate Bench of this Tribunal in the case of Sri Velayudhaswamy Spinning Mills Vs Deputy Commissioner of Income Tax referred to supra and as also the decision in the case of Eveready Spinning Mills vs. Assistant Commissioner of Income Tax referred to supra. A similar view has also been taken in the case of M/s. Saranya Textiles vs. The Assistant Commissioner of Income Tax, wherein one of us is a party. This view of ours is also supported by the decision of the Hon’ble Gujarat High Court in the case of Commissioner of Income Tax vs. Gujarat Alkalies Chemicals Limited reported in 395 ITR 247(Guj.), wherein it has been held that the deduction u/s.80IA was allowable to the for generation of power for captive consumption and that the rate of power generation at which the electricity board supplied power to its consumers rather than the rate at which the power generating companies supply its power to the electricity board was to be taken as the price. Further, this view has been supported by the decision of the Hon’ble Bombay High Court in the case of Commissioner of Income Tax vs. Reliance Industries Limited in I.T.A. No.1056/Chny/2016 dated 0.01.2019 and as also the decision of the Hon’ble Chhattisgarh High Court in the case of Godavari power and Ispat Limited reported in [2014] 42 Taxman.com 551 (Chhattisgarh). As it is noticed that the learned CIT(A) has followed judicial discipline by following the decision of this Tribunal in the case of Sri Velayudhaswamy Spinning Mills Vs Deputy Commissioner of Income Tax and Eveready Spinning Mills vs. Assistant Commissioner of Income Tax referred to supra, as it is noticed this view has also been approved by the Hon’ble High Courts referred to supra, we find no error in the order of the learned CIT(A) which calls for any interference. It may be mentioned here that the deduction u/s.80IA is the deduction from the total income of the

48 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 assessee the profits and gains of an eligible undertakings. The Hon’ble Gujarat High Court has categorically admitted that the deduction u/s.80IA is permissible for captive consumption and even the rate at which the deduction is to be computed. Consequently, the issue is held in favour of the assessee and against the Revenue.”

18.6 In the present case, the facts are identical with that of the facts considered by the Tribunal in earlier year. The CIT(A) after considering relevant facts and also by following the decision of the ITAT, Chennai in the case of Eveready Spinning Mills (P) Ltd., vs. ACIT, (2012) 17 taxmann.com 254 and the decision in the case of Shri Velayudhaswamy Spinning Mills (P) Ltd., vs. DCIT, (2012) 19 taxmann.com 28 has deleted additions made by the AO by holding that market value of the power captively consumed should be computed considering the rate of power to a consumer in the open market and it should not be compared with the rate of power at which power could have been sold to SEBs because this is not the rate for which a consumer could have purchased power in the open market. Therefore, we are of the considered view that there is no error in the finding recorded by the ld.CIT(A) to delete additions made by the AO towards TP adjustment on deduction claimed u/s.80IA of the Act. Hence, we reject the ground taken by the Revenue.

49 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 19. The next issue that came up for our consideration from Ground No.3 of Revenue appeal is notional interest on advances to wholly owned subsidiary. We find that an identical issue has been considered by us for assessment year 2012-13 in ITA No.2145/Chny/2017, where we by following the decision of ITAT, Chennai in assessee’s own case for assessment year 2007-08 to 2016-17 in ITA No.1343/Mds/2010 deleted addition made by the AO towards notional interest on advances to subsidiaries. The reasons given by us in preceding para Nos. 12.4 & 12.5 shall mutatis mutandis apply to this appeal as well. Therefore, for similar reasons, we are inclined to uphold the findings of CIT(A) and reject the ground taken by the Revenue.

20.1 An identical issue has been considered by us for assessment year 2008-09 in ITA No.2210/Chny/2017, where we by following decision of ITAT in assessee’s own case for assessment year

50 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 2007-08 in ITA No.1343/Chny/2010 directed the Assessing Officer to recompute disallowance by taking only those investments which yielded exempt income for the year. The reasons given by us in preceding Para No.6.1 shall mutatis mutandis apply to this appeal as well. Therefore, we are inclined to uphold findings of CIT(A) and reject ground taken by the Revenue.

21.1 The assessee was owner of franchisee rights of Chennai Super Kings. The assessee company successfully bid for Chennai franchisee of BCCI-IPL for a period of 10 years for Rs.364 crores in the second half of the financial year 2007-08. The assessee company has to pay this amount in 10 years at the rate of Rs.36.4 crores per annum. However, the assessee company has capitalized the franchisee rights in its books of accounts for assessment year 2009-10 on the entirely bid amount of Rs.364 crores and claimed depreciation at the rate of 25% as applicable

51 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 to intangible assets. Accordingly for the year under consideration, the assessee has claimed depreciation of Rs.25.19 crores. The AO has not accepted the explanation furnished by the assessee and according to him, the assessee can claim depreciation on actual amount paid for acquiring franchisee rights and not on total bid amount and hence, recomputed depreciation by taking into account actual payments and thus made disallowance of Rs.5,09,00,000/-.

21.2 The ld.DR for the Revenue as well as the ld.AR for the assessee have fairly agreed that this issue is also covered in favour of the assessee by the decision of ITAT, Chennai in assessee’s own case for earlier assessment years.

21.3 Having heard both the sides and considered material on record, we find that the Tribunal has considered an identical issue in assessee’s own case for assessment year 2008-09 in ITA No.604/Mds/2012, where under identical set of facts has allowed depreciation claimed by the assessee on total value of franchisee rights of Rs.364 crores capitalized in books of accounts even

52 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 though the assessee has paid said amount over a period of 10 years. The relevant findings of the Tribunal are as under:- “25. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, the assessee is a successful bidder for franchise rights of Chennai Superking. The cost of the franchise rights is Rs. 364 crores which has to be paid in 10 years @ 36.4 crores per annum. The assessee is entitled for depreciation on the franchise right being an intangible asset under Explanation (3) to sec. 32(1) of the Act. This is not in dispute. The only dispute is whether the assessee is entitled for depreciation on the cost of the franchise rights or on the amount paid during the year under consideration. We have gone through the provisions of sec. 32 of the Act. Sec. 32(1) clearly says that in case of an asset used for generation or generation and distribution of power, depreciation has to be allowed on the actual cost of the asset at the rate prescribed. In case of block of assets, depreciation has to be allowed on the written down value at the rate prescribed. In this case, the prescribed rate for franchise rights is 25%. It is not in dispute that the assessee acquired the franchise rights during the year under consideration. The cost of block of assets was increased to the extent of Rs. 364 crores. Since the cost of the franchise rights is admittedly Rs. 364 crores, as per the terms and conditions of the bid, the assessee has to pay Rs. 364 crores in 10 years’ period. The assessee has to pay Rs. 36.4 crores every year. However, the cost of block of assets was increased to the extent of Rs. 364 crores. It is not a case of subsidy or discount in the cost which was given to the assessee. In such a case, the cost of franchise rights would be reduced to the extent of subsidy or discount, if any, given to the assessee. It is an admitted case of both parties that the cost of Rs. 364 crores was to be paid in 10 equal installments. Therefore, the cost of asset is Rs. 364 crores and not Rs. 36.4 crores. When the cost of block of assets was increased to the extent of Rs. 364 crores, this Tribunal is of the considered opinion that depreciation has to be allowed on the cost of block of assets increased. Therefore, the Assessing Officer is not justified in restricting the depreciation at Rs. 36.4 crores which was said to be paid during the year under

53 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 consideration. This Tribunal is of the considered opinion that the entire cost of the franchise rights has to be taken into consideration for computation of depreciation. The assessee also filed appeal against the order of the CIT(A), restricting the depreciation on the amount actually paid by the assessee during the year under consideration. While adjudicating the assessee’s appeal at para 34 hereunder this Tribunal found that the assessee is entitled for depreciation on the cost of Rs. 364 crores. Accordingly, the order of the CIT(A) is modified and the Assessing Officer is directed to allow depreciation on the entire cost of Rs. 364 crores.”

21.4 In this view of matter and consistent with view taken by the Coordinate Bench, we are of the considered view that there is no error in the findings recorded by the ld.CIT(A) in deleting additions made by the AO towards disallowance of depreciation and hence, we are inclined to uphold the findings of CIT(A) and reject the ground taken by the Revenue.

54 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 Ltd., vs., CIT, (supra), deleted addition made by the AO. The reasons given by us in preceding Para No. 16.4 shall mutatis mutandis apply to this appeal as well. Therefore for similar reasons, we are inclined to uphold the findings of ld.CIT(A) and reject ground taken by the Revenue.

23.1 The assessee has paid a sum of Rs.60,21,214/- as interest u/s.201(1A) of the Act for belated payment of TDS deducted under various sections. This has been disallowed under normal computation in the statement of total income. However, for computing book profit u/s.115JB of the Act, no addition has been made. Therefore, the AO has recomputed book profit by making addition made towards interest paid on TDS. The CIT(A) has deleted addition made by the AO by holding that as per Explanation 1(a) and Explanation 2 to section 115JB, only taxes on income needs to be added back but not interest paid on TDS.

55 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 23.2 The ld.DR submitted that the ld.CIT(A) has erred in deleting the disallowance of interest paid on TDS under MAT computation without considering Explanation (2) to section 115JB of the Act, where it was clearly stated that any interest charged under this Act.

23.3 The ld.AR for the assessee on the other hand submitted that Explanation (2) to Section 115JB of the Act was intended to exclude only interest on income tax and not interest on belated payment of TDS. Therefore, the ld.CIT(A) was right in deleting addition made by the AO towards disallowance of interest paid on TDS for recomputing book profit u/s.115JB of the Act. In this regard, he relied upon Circular No.1 of 2009 dated 27.03.2009 issued by the CBDT.

23.4 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. As per Explanation (2), income tax shall include any interest charged under this Act, and hence interest on income tax shall alone be added back under Explanation 1(a) to Section 115JB of the Act. Admittedly, TDS is not an income tax of the assessee. It is a tax

56 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 deducted at source in respect of income of a third party. Therefore, TDS cannot be considered as income tax payable by the assessee on its income. Therefore, any interest paid on belated remittance of TDS also in the nature of expenditure deductible under the Act and hence, the same cannot be added back to book profit computed u/s.115JB of the Act. This is so, as per Circular No.1 of 2009 dated 27.03.2009 issued by the CBDT where it has been clarified that the intention behind add backs to book profit is the items which mainly appear “below the line” in the Profit & Loss account. From the above it is very clear that only those items which appear below the line needs to be added back to compute book profit u/s.115JB of the Act. Since interest on TDS is an item above the line in the Profit & Loss account, the same cannot be added back while computing book profit u/s.115JB of the Act. The CIT(A) after considering relevant facts has rightly deleted additions made by the AO and hence we are inclined to uphold the order of CIT(A) and reject the ground taken by the Revenue.

57 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 assessee has claimed depreciation on UPS @ 60% as applicable to computers whereas, the AO has restricted depreciation @15% on UPS on the ground that UPS is a separate item of plant & machinery.

24.1 Having heard both the sides and considered material on record, we find that an identical issue has been considered by the Tribunal in assessee’s own case for assessment years 2011-12 to 2016-17 in ITA Nos. 2412 to 2416/Chny/2019, where the Tribunal has deleted addition made by the AO towards excess depreciation on UPS by holding that UPS is an integral part of computer system which is eligible for depreciation @ 60% as applicable to computers. The CIT(A) after considering relevant facts has rightly deleted addition made by the AO and hence, we are inclined to uphold the finding of ld.CIT(A) and reject ground taken by the Revenue.

58 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 25.1 The facts with regard to the impugned dispute are that the assessee has received sales tax incentive from the State Government of Maharashtra and the same has been treated as capital receipt not liable for tax. The assessee further claimed that sales tax incentive received from Government of Maharashtra relates to Parli Unit, Maharashtra and such subsidy has been granted for investing in backward area and hence, it is in the nature of capital subsidy, cannot brought to tax. In this regard, relied upon the decision of Hon’ble Supreme Court in the case of M/s.Sahney Steel & Press Works Ltd., 228 ITR 253. The AO however was not accepted the explanation furnished by the assessee and according to him, subsidy received from Government is in the nature of assistance given to companies in carrying on trade or business and hence it is in the nature of revenue receipt and liable for tax. The AO has considered the decision of Hon’ble High Court of Madras in the case of M/s. Brakes India Ltd., vs. JCIT, 363 ITR 13 to support his arguments. On appeal, the ld.CIT(A) deleted additions made by the AO by holding that the assessee has received subsidy from Government of Maharashtra to incentivize a manufacturing plant set up at Parli, Beed District, Government of Maharashtra under the

59 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 Industrial Promotion Policy of Government of Maharashtra and hence it is in the nature of capital subsidy not liable for tax.

25.2 The ld.DR submitted that the ld.CIT()A has erred in deleting addition made by the AO towards capital subsidy by relying upon the decision of Hon’ble Supreme Court in the case of M/s. Sahney Steel & Press Works Ltd., supra, ignoring the fact that facts of the case before the Hon’ble Supreme Court is entirely different from facts of the present case and further the case of the assessee is squarely covered by the decision of Hon’ble Madras High Court in the case of M/s. Brakes India Ltd., supra, where it was held that power tariff concession given for commencement of production to enable assessee run business more profitably is to be treated as revenue receipt. He further submitted that to decide subsidy received from Government is capital or revenue in nature, the nature of subsidy given by the Government is important. In this case, there is no details coming forward from the assessee to prove that said subsidy was for compensating amount invested in fixed asset for setting up a new manufacturing unit in terms of Industrial Promotion Policy of Government of Maharashtra. The

60 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 CIT(A) without appreciating the above facts had simply deleted additions made by the AO.

25.3 The ld.AR for the assessee on the other hand strongly supporting order of the ld.CIT(A) submitted that this issue is also covered in favour of the assessee by the decision of ITAT, in assessee’s own case right from assessment years 2004-05 to 2016-17, where under identical set of facts, the Tribunal held that if capital subsidy is received from Government to offset the cost incurred for setting of new unit then it is in the nature of capital receipt which is not taxable under the Act.

25.4 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We find that the Tribunal has considered an identical issue in assessee’s own case for assessment year 2011-12 to 2016-17 in ITA Nos.2412 to 2416/Chny/2019, where the Tribunal after considering relevant facts and also by following decision of Hon’ble Supreme Court in the case of CIT v. M/s. Ponni Sugars and Chemicals Ltd., (2008) 306 ITR 392 held that subsidy granted by the Government of Maharashtra for setting up new

61 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 manufacturing unit under Industrial Promotion Policy is capital in nature which is not taxable under the Act. The relevant findings of the Tribunal are as under:- “17. We have considered the rival submission and perused the materials available on record. 18. A perusal of the order of the learned CIT(A) clearly shows that the learned CIT(A) has categorically considered the fact that if the object of the subsidy is to enable the assessee to run a business more profitably, then the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy is to enable the assessee to set up a new unit or to expand its existing unit, then the receipt of the subsidy was on capital account. The learned CIT(A) has also considered the principles laid down by the Hon’ble Supreme Court in the case of Commissioner of Income-Tax vs. Ponni Sugars and Chemicals Limited [2008] 306 ITR 392 (SC). In the present case, the learned CIT(A) has also recognized the fact that the subsidy was granted to the assessee as incentive to invest in backward areas and consequently the said subsidy granted by the Government in fact was capital receipt. It is also noticed that the learned CIT(A) has recognized with the fact that the Cement Manufacturing Plant at Parli, Beed District in the state of Maharashtra comes under the Industrial Promotion Policy of the Government of Maharashtra and the ‘Package Scheme of Incentives 2007’ invited by the Directorate of Industries, Government of Maharashtra and consequently the assessee has made a fixed capital investment of nearly 152 crores as on 31.03.2011. It is after recognizing this that the learned CIT(A) has granted the assessee the benefit of treating the said subsidy as a capital receipt by following the principles laid down by the Hon’ble Supreme Court in the case of Commissioner of Income- Tax vs. Ponni Sugars and Chemicals Limited, referred to supra. This being so and also considering the fact that the Revenue has not been able to dislodge the findings of the fact as arrived by the learned CIT(A) on this issue. Consequently, the issue is held in favour of the assessee and against the Revenue.”

62 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 25.5 In the present case, the ld.CIT(A) has recorded categorical finding that the assessee had set up a new cement manufacturing plant at Parli, Beed District, Maharashtra under the Industrial Promotion Policy of Government of Maharashtra and the Package Scheme of Incentives 2011 notified by the Directorate of Industries. The CIT(A) further noted that the assessee has made investments in fixed assets of Rs.15,214.34 lakhs up to 31.03.2011. The subsidy has been given to offset the capital investment made for setting up new cement manufacturing plant at Parli. Therefore, we are of the considered view that, there is no error in findings recorded by CIT(A) to delete addition made by the AO and hence, we are inclined to uphold the findings of CIT(A) and reject ground taken by the Revenue.

CO No.76/Chny/2018, Assessment year 2013-14 27. The first issue that came up for our consideration from Ground No.2 of cross objection is disallowance u/s.14A r.w.r.8D, while computing book profit u/s.115JB of the Act.

63 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 27.1 We find that an identical issue has been considered by us in ITA No.2038/Chny/2017 for assessment year 2009-10, where we by following the decision of ITAT in assessee’s own case in ITA Nos.2414 to 2416/Chny/2019 for assessment years 2014-15 to 2016-17 and also by following decision of ITAT, Delhi Special Bench in the case of ACIT vs. Vireet Investments Pvt. Ltd., supra, held that computation under Clause (f) to Explanation 1 to Section 115JB(2) of the Act is to be made without resorting to computation as contemplated u/s.14A of the Act. In other words, disallowance u/s.14A r.w.r.8D could not be added while computing book profit as per Section 115JB of the Act, as Explanation to that section did not specifically mention Section 14A of the Act. The reasons given by us in preceding Para No.10.3 shall mutatis mutandis apply to this appeal as well. Therefore for similar reasons, we direct the AO to delete additions made towards disallowance u/s.14A r.w.r.8D while computing book profit u/s.115JB of the Act.

64 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 leave encashment both under normal provisions of the Act and book profit u/s.115JB of the Act.

28.1 The AO has disallowed a sum of Rs.33,34,91,000/- being provision for leave encashment. The disallowance has been made in view of the provisions of section 43B(f) of the Act. The ld.AR for the assessee submitted that this issue has been decided against the assessee by the Tribunal in assessee’s own case for earlier assessment years and has set aside the issue to the file of the AO to decide the issue afresh after the Supreme Court has decided the issue of deductibility of provision for leave encashment in light of amended provisions of section 43B(f) of the Act.

28.2 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We find that the Tribunal has considered an identical issue and after considering the ratios of Hon’ble Calcutta High Court in the case of M/s. Exide Industries Ltd., vs. Union of India., and subsequent order of Hon’ble Apex Court in the case of Exide Industries, (supra), has set aside the issue to the file of the AO and direct

65 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 him to reconsider the issue after the judgement of the Apex Court. We further noted that the statute has been amended by the Finance Act, 2001 by insertion of sub-clause (j) to Section 43B of the Act to neutralize the decision of Supreme Court in the case of Bharath Earth Movers Ltd vs. CIT, 245 ITR 428. This provision was struck down by the Calcutta High Court in Exide Industries Ltd., vs., Union of India, 292 ITR 470 being contrary and unconstitutional. The Revenue has challenged the order of the Hon’ble High Court of Calcutta before the Hon’ble Supreme Court and the Hon’ble Supreme Court has admitted the appeal filed by the Revenue and stayed the order of the Hon’ble Calcutta High Court. The Apex court has held that Clause (f) would remain in statute till final decision is given by it and the assessee was directed to pay tax. Since, the issue is still pending for adjudication at Hon’ble Supreme Court, the Tribunal has not decided the issue and restored the matter back to the file of the AO to decide after the outcome of the judgment of the Hon’ble Supreme Court. Therefore, by following the order of the Tribunal for earlier years, we set aside the issue to the file of the AO and direct him to follow the directions given by the Tribunal for earlier years.

66 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 29. The next issue that came up for our consideration from Ground No.4 of cross objection filed by the assessee is disallowance of payment to Vasthu Consultant, M/s. Rishividya Consultants P Ltd. The ld.AR for the assessee submitted that this issue was decided against the assessee by the Tribunal in assessee’s own case in ITA Nos.1343/Mds/2010, 604 & 1299/Mds/2012 and 237 to 239/Mds/2015.

29.1 We find that an identical issue has been considered by the Tribunal in assessee’s own case for assessment years 2007-08 to 2011-12 in ITA Nos. 1343/Mds/2010, 604 & 1299/Mds/2012 and 237 to 239/Mds/2015, where the Tribunal had confirmed addition made by the AO towards payment made to M/s. Rishividya Consultants Pvt. Ltd. The relevant findings of the Tribunal are as under:- “65. Now, coming to the payment made to M/s Rishi Vidhya Consultants Pvt. Ltd to the extent of Rs.2,50,00,000/-, this Tribunal has allowed the claim of the assessee for assessment year 2009-10 as revenue expenditure to the extent of Rs.50,00,000/-. It is not known why such a huge payment was made to the very same company M/s Rishi Vidhya Consultants Pvt. Ltd for the year under consideration. The assessee cannot make such a payment year after year in the name of vastu consultancy, therefore, it lacks bonafideness of the services rendered by M/s Rishi Vidhya Consultants Pvt. Ltd for the year under consideration. Hence, this Tribunal is of the considered opinion that

67 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 the CIT(A) has rightly confirmed the addition made by the Assessing Officer for the year under consideration.”

29.2 In view of the matter and consistent with view taken by the Co-ordinate Bench, we are of the considered view that there is no error in the findings recorded by the CIT(A) to confirm additions made by the AO towards disallowance of payment to vasthu consultancy M/s. Rishividya Consultants Pvt. Ltd. Hence, we reject the ground taken by the assessee.

30.1 Having heard both the sides and considered material on record, we find that the Tribunal has considered an identical issue and after considering necessary facts has confirmed additions made by the AO towards depreciation charges on amount paid to

68 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 consultant Dr. K. Venkatesan. The relevant findings of the Tribunal in ITA Nos. 1343/Mds/2010, 604 & 1299/Mds/2012 are as under:- “64. We have considered the rival submissions on either side and also perused the material available on record. Vastu is depending ITA No. 1343 etc upon the belief of a particular individual/group of individuals. It may improve the productivity and profit or may not improve the productivity and profit of the company. But nobody could stand in the way of belief of a particular individual. At the very same time, the assessee cannot make such an exorbitant payment year after year on the ground that it is for business purpose. For the assessment year 2009-10, the assessee has made a payment of Rs.2,50,00,000/- to M/s Rishi Vidhya Consultants Pvt. Ltd. In the earlier part of this order, this Tribunal allowed the claim of the assessee to the extent of Rs.50,00,000/- on the ground that it would depend upon the individual belief of the businessman and when the services rendered were not doubted, no disallowance can be made. However, such a huge payment cannot be made year after year. When the assessee claims that payment of Rs. 2,50,00,000/- was made for assessment year 2009- 10, it is not known why such a huge payment of Rs.75 lakhs was made to Dr. K. Venkatesan for the same services. The assessee is expected to incur certain expenditure on the belief that the art of vastu may increase the productivity or profit of the assessee. However, claiming such expenditure year after year cannot be for business purpose. Therefore, this Tribunal is of the considered opinion that payment for Rs.75 lakhs for the year under consideration to Dr. K. Venkatesan cannot ITA No. 1343 etc be considered to be for business purpose. Therefore, the CIT(A) has rightly confirmed the disallowance.”

30.2 In view of this matter and consistent with view taken by the Co-ordinate Bench, we are inclined to uphold the findings of the CIT(A) and reject ground taken by the assessee.

69 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 31. The next issue that came up for our consideration from Ground No.6 of cross objection filed by the assessee is amount withdrawn from a notional reserve for computing book profit u/s.115JB of the Act.

31.1 We find that a similar issue has been considered by us for assessment year 2008-09 in ITA No.2210/Chny/2017, where we by following the decision of Tribunal in assessee’s own case for assessment years 2001-02 to 2004-05, 2006-07 in ITA No.1339 to 1342/Chny/2010 held that notional entries passed in books of account for accounting concession availed in customs duty payment on import of machinery and reversal of depreciation on said machinery by withdrawing equal amount from reserves and surplus account and credited to Profit & Loss account does not give raise any income to the assessee and hence, the same cannot be considered for normal computation as well as for the purpose of book profit u/s.115JB of the Act. The reasons given by us in preceding Para No.4.4 shall mutatis mutandis apply to his appeal as well. Therefore for similar reasons, we direct the AO to delete addition made towards amount released from reserves and

70 I.T.A. Nos. 2145, 2210, 2038/Chny/2017, 737/Chny/2018 & C.O No.76/Chny/2018 surplus account and credited to Profit & Loss account while computing book profit u/s.115JB of the Act.

Order pronounced in the court on 18th August, 2021 at Chennai.

Sd/- Sd/- (वी दुगा� राव) (जी. मंजुनाथ) (V. Durga Rao) (G. Manjunatha) लेखा सद�य /Accountant Member �याियक सद�य/Judicial Member

चे�ई/Chennai, �दनांक/Dated, the 18th August, 2021 RSR आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. िनधा�रती/Assessee 2. राज�व/Revenue 3. आयकर आयु� (अपील)/CIT(A) 4. आयकर आयु� /CIT 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF.