ASST CIT(LTU) 1, MUMBAI vs. ADITYA BIRLA NUVO LTD, MUMBAI

ORDER PER VIKAS AWASTHY, JM: These cross appeals by the assessee and the Revenue are directed against the order of Commissioner of Income Tax (Appeals)-55, Mumbai [ in short ‘the CIT(A)] dated 31/03/2015 for the assessment year 2010-11.

Disallowance under section 14A:-

“1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax-Appeals (hereinafter referred as CIT(A)) has erred in- i) Disregarding the quantification of indirect expenses of Rs. 1,48,32,243/- made under Rule 8D(2)(iii) by the appellant having regard to the accounts of the appellant and supported by report of an independent Chartered Accountant. ii) Without prejudice to the above, learned CIT(A) erred in the quantification of the amount attributable towards earning exempt income: i. The learned CIT(A) erred in treating entire salary, wages & Employee benefit expenses of CFD (Head Office) amounting to Rs. 10,66,53,497 /- as indirect expenses attributable to earning the exempt income for the purpose of 14A disallowance, ii. The learned CIT(A) erred in treating 50% of audit fees amounting to Rs 53,42,728/- as indirect expenses connected with earning the exempt income for the purpose of 14A disallowance, iii. The learned CIT(A) erred in treating common expenses of Rs 5,84,73,070/- as indirect expenses for the purpose of 14A disallowance without any reasonable basis.

The learned Additional Commissioner of Income tax (hereinafter referred as "AO") be directed to restrict the addition to Rs. 1,48,32,243/- under Rule 8D(2)(iii) for 14A disallowance or to substantially reduce the disallowance having regard to the facts and circumstances and the law.”

Additional Grounds of appeal:- “1. On the facts and in the circumstances of the case and in law, the learned AO has erred in disallowing the Interest cost of Rs. 91.33 Crs u/s 14A, treating the same as Interest attributable towards expenditure incurred in relation to the Investment. The AO may be directed to reduce the disallowance u/s 14A accordingly.

2. The Appellant craves leave to add and/or to amend and/or to alter the above Ground of Appeal” 3.1 Shri Jehangir D. Mistri, appearing on behalf of the assessee submitted that ground No.1 and the additional grounds No.1 & 2 of the appeal by the assessee are in respect of disallowance made under section 14A of the Income Tax Act, 1961 ( in short ‘the Act). The Revenue has also assailed the findings of CIT(A) in respect of section 14A of the Act in ground No.1 of its appeal. The ld. Authorized Representative for the assessee submitted that the assessee has earned dividend income of Rs.8,00,92,335/-. During the period relevant to the assessment year under appeal the assessee made suo-motu disallowance under Rule 8D(2)(ii) Rs. 91.32 lakhs and under Rule 8D(2)(iii) Rs.1.48 crores in respect of exempt income earned. The Assessing Officer invoked the provisions of section 8D(2) r.w.s. 14A(2) of the Act and enhanced disallowance under Rule 8D(2)(iii) by Rs.24.55 crores. The ld. Authorized Representative for the assessee assailing the findings of Assessing Officer submitted that in the first instance, the Assessing Officer has not recorded satisfaction as envisaged under section 14A(2) of the Act. A perusal of the assessment order would show that the Assessing Officer has nowhere given reasons for rejecting suo-motu disallowance made by the assessee. It is a well settled law that before making disallowance under section 14A of the Act, the Assessing Officer has to record satisfaction rejecting the correctness of the claim of the assessee in respect of expenditure in relation to exempt income earned. In support of his contentions, the ld. Authorized Representative for the assessee placed reliance on the following decisions:-

(1) Godrej & Boyce Mfg. Co.Ltd. vs DCIT,394 ITR 449(SC) (2) PCIT vs. Bajaj Finance Ltd. in Income Tax Appeal No.237 of 2017 decided on 02/04 2019 by the Hon’ble Hon'ble Bombay High Court.

3.2 The second argument raised by the ld. Authorized Representative for the assessee against disallowance under section 14A of the Act was that own funds of the assessee comprising of share capital, reserves and surplus and profits are much more than the investments made. The ld. Authorized Representative for the assessee submitted that now it is a well settled law that where own funds of the assessee are sufficient to cover investments, no disallowance u/r.8D(2)(ii) is warranted. In support of his contention ld. Authorized Representative for the assessee placed reliance on the following decisions:-

(1) CIT vs. HDFC Bank Ltd., 366 ITR 505 (Bom)

(2) HDFC Bank Ltd. vs.DCIT,383 ITR 529 (Bom)

3.3 The third argument made by ld. Authorized Representative for the assessee on the issue of disallowance under section 14A of the Act was that only those investments which have yielded exempt income should be considered for making disallowance. The ld. Authorized Representative for the assessee furnished a chart giving details of the securities on which the assessee has earned dividend income. As per the chart the assessee has earned dividend income on following investments:-

(i) Hindalco Industries Ltd. - Rs.4,52,33,555/- (ii) Kotak Mahindra Bank Ltd. - Rs. 770/- (iii) Aaditya Birla Finance Ltd. Praf. Share - Rs.3,29,10,960/- (iv) Mutual Funds – Birla Sunlife Cash Balance- Rs 19,47,050/- To support his third contention, the ld. Authorized Representative for the assessee placed reliance on the following decisions:-

(1) ACIT vs. Vireet Investments Ltd. (2017) 165 ITD 27 (Del) (SB) (2) Godrej Agrovat Ltd. vs. DCIT in decided on 13/03/2019. (3) PCIT vs. Shreno Ltd.(supra) 408 ITR 401 (Guj)

The ld. Authorized Representative for the assessee further submitted that in the immediately preceding assessment year i.e. 2009-10, the Tribunal in assessee’s own case in (supra) has restored this issue to the file of Assessing Officer for recomputation of disallowance u/r 8D(2)(iii) of the Rules.

4. Shri. Anand Mohan representing the Department fairly admitted that the issue of disallowance under section 14A of the Act was the subject matter of dispute in the appeal by the Revenue as well as by the assessee in assessment year 2009-10. The ld. Departmental Representative pointed that the issue was restored back to the file of Assessing Officer for recomputation of disallowance in the light of various decisions of Hon’ble High Courts and the Tribunal. The ld. Departmental Representative vehemently controverted the contentions of the ld. Authorized Representative for the assessee that before making disallowance no satisfaction was recorded by the Assessing Officer. The ld. Departmental Representative pointed that the Assessing Officer in para 3.1of the assessment order has categorically observed that he is not satisfied with the correctness of the claim made by the assessee under the provisions of Rule 8D(2)(iii). The Assessing Officer accepted the disallowance made by assessee under Rule 8D(2)(ii).

5.1 The first contention of the assessee is that before rejecting assessee’s computation of disallowance u/r. 8D, the Assessing Officer has not recorded satisfaction. We have examined the assessment order. The Assessing Officer after reproducing the extracts of the assessee’s submission has negated the contention of the assessee by expressing his view in para 3.5 of the assessment order. Thereafter, in para 3.7 the Assessing Officer has computed the disallowance u/r. 8D(2). The Assessing Officer after examining books of the assessee accepted disallowance made by assessee in respect of interest expenditure. The manner of recording satisfaction under section. 14A r.w.r.8D(2) is subjective. There is no specified method or performa for recording of satisfaction by the Assessing Officer. If the Assessing Officer has recorded his express satisfaction in whatsoever manner in rejecting assessee’s suo motu disallowance, the condition as envisaged in Section 14A(2) is complied with. We do not concur with the contention of the ld. Authorized Representative for the assessee that the Assessing Officer has not recorded satisfaction before rejecting assessee’s method of computation of suo-motu disallowance. Hence, the first contention of the assessee fails.

5.2 The second contention of the assessee is that no disallowance u/r.8D(2)(ii) is warranted as the assessee is having own interest free funds in the shape of share capital, reserves & surplus and profits more than the investments made. Hence, there is no interest expenditure. The assessee by way of additional ground of appeal is seeking relief in respect of disallowance of interest expenditure under Rule 8D(2)(ii). The assessee suo motu disallowed Rs.91.32 crores under Rule 8D(2)(ii). The same was accepted by the Assessing Officer. The Hon'ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd.(supra) has held that where the assessee is having borrowed funds and own interest free funds, presumption is that the investments are made by utilizing own interest free funds. The same view has been reiterated by the Hon’ble High Court in the case of HDFC vs. DCIT(supra) and PCIT vs. Shreno Ltd.(supra). Thus, in principle we hold that no disallowance under section 14A r.w.r. 8D(2)(ii) is warranted if, the assessee is having sufficient own interest free funds to cover the investments made. However, for the purpose of verification of this fact, we deem it appropriate to restore this issue back to the file of Assessing Officer. The Assessing Officer after examining the financial statements of the assessee, if satisfied, that own interest free funds of the assessee are more than the investments made, shall make no disallowance u/r.8D(2)(ii).

5.3 The third contention of the assessee is that for the purpose of computing disallowance u/r.8D(2)(iii) only those investments are to be considered which have yielded exempt income. This contention of the assessee is supported by the decision rendered in the case of ACIT vs.Vireet Investments Pvt. Ltd.(supra). The assessee has filed fact sheet listing the investments where the assessee has earned dividend income. We deem it appropriate to restore this issue to the file of Assessing Officer for recomputation of disallowance u/r.8D(2)(iii) in line with the decision of Special Bench in the case of DCIT vs. Vireet Investments Pvt. Ltd.(supra). Thus in view of our above finding, ground No.1 and additional ground No.1 of the appeal by the assessee are partly allowed for statistical purpose.

Disallowance u/s.14A vis-a-vis computation of Book Profits u/s.115JB:

“ On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in :- i) Applying the disallowance quantified as per Rule 8D to book profit also, ii) Not restricting the disallowance of Rs. 1,48,32,2437- under Rule 8D(2)(iii) r.w.s.14A for computing Book Profit u/s 115JB.

The learned AO be directed to allow the deduction of the above amount from MAT income and reduce the total income accordingly.”

6.1 In this ground, the assessee has assailed the order of CIT(A) in upholding the findings of Assessing Officer in computing disallowance u/r.8D(2)(iii) r.w.s.14A of the Act on book profits. The ld. Authorized Representative for the assessee contended that the Hon'ble Bombay High Court in the case of Bengal Finance & Investments Pvt. Ltd., in Income Tax Appeal No.337 of 2013 decided on 10/02/2015 has held that amount disallowed under section 14A of the Act cannot be added to arrive at a book profit for the purpose of section 115JB of the Act. Similar view has been taken by the Special Bench of the Tribunal in the case of ACIT vs. Vireet Investments Pvt. Ltd.(supra).

“4. So far as Question (b) is concerned, the impugned order of the Tribunal followed its decision in M/s Essar Teleholdings Ltd. v/s. DCIT in to held that an amount disallowed under Section 14-A of the Act cannot be added to arrive at book profit for purposes of Section 115JB of the Act. The Revenue’s Appeal against the order of the Tribunal in M/s. Essar Teleholdings (supra) was dismissed by this Court in Income Tax Appeal No. 438 of 2012 rendered on 7th August, 2014. In view of the above, question (b) does not raise any substantial question of law”.

The Special Bench of the Tribunal in the case of Vireet Investments Pvt. Ltd.(supra) reiterated the view by holding that computation under clause (f) of Explanation 1 to Section 115JB(2), is to be made without resorting to the computation as contemplated under section 14A r.w.r. 8D. Thus, in the light of the above decisions, ground No.2 of the appeal by the assessee is allowed.

Additional Depreciation:

“ On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the learned AO for disallowing additional depreciation of Rs. 5,71,08,316/- being 10% on the assets acquired and put to use for less than 180 days in earlier assessment year i.e AY 2009-10. The learned AO be directed to allow the remaining claim of additional depreciation in this assessment year and to reduce the total income accordingly.” 8.1 The ld. Authorized Representative for the assessee submitted that the CIT(A) has erred in upholding the action of Assessing Officer in disallowing additional depreciation on assets acquired and put to use for less than 180 days in earlier assessment years. The ld. Authorized Representative for the assessee submitted that similar issue had come up before the Tribunal in assessee’s appeal for assessment year 2009-10 in ITA NO.2525/Mum/2014(supra). The Tribunal following the judgment of Hon'ble Bombay High Court in the case of PCIT vs. Godrej Industries Ltd., Income Tax Appeal No.511 of 2016 decided on 24/04/2018 has allowed the similar ground raised by the assessee.

9.1 The ld. Departmental Representative has not been able to controvert the findings of Co-ordinate Bench of the Tribunal on this issue in assessee’s own case. We find no reason to take a different view, hence, following the decision of the Tribunal in assessee’s own case in the immediate preceding assessment year, ground No.3 of the appeal is allowed in similar terms.

Expenditure on Corporate Advertisement:

“ On the facts and in the circumstances of the cases and in law, the learned CIT(A) has erred in upholding the action of the learned AO by treating the expenses of Rs. 72,79,283/- incurred towards corporate advertisement as capital expenditure. The learned AO be directed to allow the claim of the corporate advertising of Rs.72,79,2837- as revenue expenses and to reduce the total income accordingly”

10.1 The ld. Authorized Representative for the assessee submitted that assessee had incurred advertisement expenditure Rs.72,79,283/- during the period relevant to the assessment year under appeal. The Assessing Officer disallowed the advertisement expenditure stating it to be expenditure in the nature of corporate brand building and held the same to be capital in nature. The ld. Authorized Representative for the assessee submitted that similar disallowance of expenditure was made in assessment year 2009-10. The assessee carried the matter in appeal before the Tribunal in ITA No.2525/Mum/2014(supra). The Tribunal allowed the same holding it to be revenue expenditure.

ESOP Expenses:-

“ On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the disallowance of ESOP expenses of Rs. 9,83,7727- by treating the expenses to be capital in nature. The learned AO be directed to treat ESOP expenses of Rs. 9,83,7727- as revenue expenditure and to reduce the total income accordingly” [ 12.1 The ld. Authorized Representative for the assessee submitted that the assessee had claimed ESOP expenditure of Rs.9,83,772/-. The Assessing Officer held the expenditure to be on capital account and disallowed assessee’s claim. The ld. Authorized Representative for the assessee pointed that similar expenditure was claimed by the assessee in assessment year 2009-10 and the same was disallowed by the Assessing Officer for identical reasons. The Tribunal in assessee’s appeal for assessment year 2009-10 in allowed the assessee’s claim holding the expenditure to be on revenue account.

Corporate Guarantee to Subsidiaries:-

“6. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred :- i. Treating the corporate guarantee given by the appellant for its overseas subsidiary as an international transaction u7s 92 of the Income Tax Act, 1961. The learned TPO be directed not to treat the same as an international transaction and delete the above addition. ii. Partly confirming the additions in Transfer Pricing to arrive at Arm's Length Price applying rate of 0.5% towards commission on corporate guarantee/ performance guarantee on loan taken from foreign bank by ABMWI.”

14.1 The ld. Authorized Representative for the assessee submitted that the TPO has erred in holding corporate guarantee given to subsidiaries as international transaction. The CIT(A) has upheld the findings of TPO and has partly confirmed the addition by applying 0.5% rate on payment of commission and corporate guarantee on loans taken from foreign banks. The ld. Authorized Representative for the assessee fairly admitted that the Tribunal in the case of assessee’s group concern M/s. Aditya Birla Minacs Worldwide vs DCIT reported as 56 taxmann.com 317(Mum)(Trib) has adopted 0.5% as arm’s length guarantee commission charges in respect of corporate guarantee given by assessee for its foreign associated enterprise. The ld. Authorized Representative for the assessee further pointed that assessee has filed appeal on this issue before the Hon'ble Bombay High Court and the Hon'ble High Court has admitted the appeal of assessee.

2.5 Having considered the rival submissions as well as relevant material on record, we agree with the alternative plea of the Ld. AR that the arm’s length guarantee commission charges can be considered at the rate of 0.5% as held by this Tribunal in a series of decisions referred above. In the case of Everest Kanto Cylinder Ltd (supra), the Tribunal while considering an identical issue has held in para 9 as under:- ”9. Now, coming to the merit of the addition so made, we found that the issue has already been decided by the Tribunal in immediately preceding year in assessee’s own case, wherein charging of 0.5% guarantee commission from AE was held to be quite near to 0.6%, where assessee has paid independently to the ICICI bank and charging of guarantee commission @0.5% from its AE was held to be at arm’s length. The precise observation of the bench for the assessment year 2007-08 are as under :- "The universal application of rate of 3 percent for guarantee commission cannot be upheld in every case as it is largely dependent upon the terms and conditions, on which loan has been given, risk undertaken, relationship between the bank and the client, economic and business interest are some of the major factors which has to be taken into consideration. " “….in this case, the assessee has itself charged 0.5% guarantee commission from its AE, therefore, it is not a case of not charging of any kind of commission from its AE. The only point which has to be seen in this case is whether the same is at ALP or not. We havealready come to a conclusion in the foregoing paras that the rate of 3% by taking external comparable by the TPO, cannot be sustained in facts of the present case. We also find that in an independenttransaction, the assessee has paid 0.6% guarantee commission to IGIGI Bank India for its credit arrangement. This could be a very good parameter and a comparable for taking it as internal GUP and comparing the same with the transaction with the AE. The charging of 0.5% guarantee commission from the AE is quite near to 0.6%, where the assessee has paid independently to the IGIGI Bank and charging of guarantee commission at the rate of 0.5% from its AE can be said to be at arms length. The difference of 0.1% can be ignored as the rate of interest on which IGIGI Bank, Bahrain Branchhas given loan to AE (i.e. subsidiary company) is at 5.5%, whereas the assessee is paying interest rate of more than 10% on its loan taken with IGIGI Bank in India. Thus, such a minor difference can be on account of differential rate of interest. Thus, on these facts, we do not find any reason to uphold any kind of upward adjustment in ALP in relation to charging of guarantee commission.” As the facts and circumstances of the case during the year under consideration are pari materia, respectfully following the decision of the Tribunal in assessee’s own case, we direct the AO to compute arm’s length price of transaction as per the direction given by the Tribunal in the above order for A.Y. 2007-08.

2.6 Similar view has been taken by the Tribunal in all above referred decisions. Accordingly, following the earlier decisions of this Tribunal, we direct the AO/TPO to adopt 0.5% as arm’s length guarantee commission charges in respect of the guarantee provided by the assessee for obtaining the loan by the AE. Thus, in view of above findings of Tribunal in assessee’s group concern and the nature of transaction in the present case being similar, the ground No.6 of the appeal is decided against the assessee, for parity of reasons.

Interest under section.234B,234C & 234C:-

“ On the facts and in the circumstances of the case and in law, the learned AO has erred in charging interest u/s 234B, 234C & 234D. The learned AO be directed to delete / reduce the interest u/s 234B, 234C & 234D accordingly”

17.1 Charging of interest under section. 234B,234C & 234D is mandatory and consequential. Accordingly, the ground No. 7 is dismissed sans-merit.

. Penalty under section 271(1)(c)

“ On the facts and in the circumstances of the case and in law, the learned AO has erred in initiating penalty proceedings u/s 271(l)(c) of the Income Tax Act, 1961. The learned AO be directed to drop the penalty proceedings initiated u/s 271(l)(c)”

18.1 The ground No.8 of the appeal assailing initiation of penalty under section 271(1)(c) of the Act, is premature at this stage. Hence, the same is dismissed as such.

Education Cess: (Additional Ground No.3)

Education Cess and Secondary Higher Education Cess on income tax. Rs.1,74,67,120 Education Cess and Secondary Higher Education Cess on Dividend Distribution Tax Rs. 12,91,630 Total claim of Education Cess Rs. 1,87,58,750”

23. Grounds No.1:

1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A), relying on submissions of the assessee, erred in directing the AO to restrict the disallowance u/s 14A of the I. T. Act at Rs. 17,04,69,294/- without appreciating the fact that, the AO has computed the disallowance correctly as per provisions of section 14A r.w.r. 8D of the I. T. Act."

23.1 Ground No.1 of appeal is corresponding to Ground No.1 and Additional ground No.1 & 2 of the assessee’s appeal. Since, the ground No.1 and additional grounds No. 1 &2 of the assessee in respect of disallowance under section 14A r.w.r. 8D, have been allowed for statistical purposes, the ground No.1 of the appeal by Revenue is also allowed for statistical purpose.

2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in deciding that the TDS provisions were not applicable for the provisions made at the year-end relying on the decision the Hon'ble Tribunal in assessee's own case for A. Y. 2006-07 which interalia relied upon the cases of the Hon'ble Tribunals namely, Mahindra & Mahindra Ltd ('Mahindra') and Industrial Development Banking Company ('IDBI'), ignoring the fact that, the facts and circumstances of the relied upon cases of Mahindra & IDBI were completely different from that of the assessee."

24.1 The ground No.2 of the appeal by Revenue is with respect to disallowance under section 40(a)(ia) of the Act on the provision made at the end of the year Rs.5,84,07,299/-. The ld.Authorized Representative for the assessee pointed that identical issue was raised in the appeal by the Revenue in assessment year 2009-10, decided on 20/12/2019.

We find that the Co-ordinate Bench of the Tribunal following the decision in assessee’s own case in for assessment year 2008-09 decided on 09/12/2015 deleted the disallowance made under section 40(a)(ia) of the Act. The ld.Departmental Representative has not been able to distinguish the findings of the Co-ordinate Bench of the Tribunal on this issue in immediately preceding Assessment Year in assessee’s case. The CIT(A) has deleted the addition by following the order of Tribunal in assessee’s case in ITA No. 8427/Mum/2010 for A.Y. 2006-07 decided on 17-09-2014. We observe that this issue is recurring and the Tribunal has been consistently deciding the issue in favour of assessee. Since, the facts in impugned A.Y. are similar, we see no reason to take a different view. We uphold the findings of the CIT(A) and dismiss ground No.2 of the appeal by Revenue in the light of Tribunal order in assessee’s case for A.Y. 2009-10..

3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 1,72,54,631/- made on account of CENVAT credit ignoring the fact that the addition was made on net basis and the assessee, itself, for the AY 2006-07 withdrew its ground before the ITAT."

25.1 The Assessing Officer made addition of Rs.17,57,56,385/- on account of CENVAT credit in respect of closing stock. The CIT(A) allowed assessee’s claim by following the decision of his predecessor in assessment year 2005-06 to 2008-09, wherein the CIT(A) had in turn followed the decision of the Hon’ble Apex Court in the case of CIT vs.Indo Nippon Chemical Co. Ltd., reported as 261 ITR 275(SC). The ld. Authorized Representative for the assessee further pointed that the Tribunal in assessment year 2008-09 in had decided this issue in favour of the assessee.

We do not find any infirmity in the findings of CIT(A) in deleting the addition by following the decision of Hon’ble Apex Court. The Co-ordinate Bench of the Tribunal in assessee’s own case for assessment year 2008-09 has affirmed the finding of CIT(A) in deleting the addition in the past. No material has been brought before us by the ld.Departmental Representative distinguishing facts or the findings of Tribunal on this issue in A.Y. 2008-09. We see no reason to interfere with the findings of CIT(A) on this issue. Accordingly, the same are confirmed and ground No.3 of appeal is dismissed.

26.1 The ld. Authorized Representative for the assessee submitted that ground No.4 of the appeal by the Revenue is against provision made for leave salary under section 43B(f) of the Act. The ld. Authorized Representative for the assessee submitted that this issue is perennial in nature. The Tribunal has considered this issue in the appeals by the assessee for A.Y. 2002-03 to 2008-09, respectively and has deleted the disallowance. Of Provision of leave salary under section 43B(f). This issue had again emerged in assessment year 2009-10. The Tribunal in the appeal by the assessee had restored this issue to the file of Assessing Officer for fresh adjudication in the light of decision of Hon'ble Supreme Court of India in the case of Exide Industries Ltd. vs. Union of India in Special Leave to Appeal(Civil) No.CC 22889/2008 dated 08-05-2009. The ld. Authorized Representative for the assessee further submitted that a bare perusal of provision of section 43B(f) would show that deduction is allowable where the sum is payable by the assessee as employer in lieu of any leave at the credit of the employee. Explanation-2 to section 43B of the Act further clarifies that “any sum payable” means a sum for which the assessee incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law. The ld. Authorized Representative for the assessee submitted that though the provisions of clause (f) have been struck down by the Hon’ble Calcutta High Court in the case of Exide Industries vs. Union of India reported as 292 ITR 470(Cal), the said judgment has now been stayed by Hon'ble Supreme Court of India. Even if the provisions of clause(f) are held to be valid still the assessee would be entitled to relief in the light of Explanation -2.

“7.Next ground is about disallowance of Rs.2.07 crores u/s.43B(f), being provision made for leave salary.The AR and the DR agreed that identical issue was stands decided in favour of the assessee by the Tribunal by earlier years orders. We find that the Tribunal had dealt the issue as under,while deciding the appeal for the AY.2006-07(ITA/8427 & 8483/Mum/10 dt.17/09/2014): “4.Ground no.4 deals with disallowance of Rs. 1.73 crores,made u/s.43B(f) of the Act,being provision made for leave salary.We find that similar issue had arisen in the AY 2002-03, 2003-04, 2004-05 and 2005- 06 also.While deciding the appeal for the last three AY.s.,the Tribunal had dealt the issue as under: 4.Second common Ground is about disallowance of provisions made for the leave salary u/s.. 43f of the Act and the amount involved are Rs. 2.48 crores, 1.76 crores and 2.6 crores.During the course of hearing before us,Representatives of both the sides conceded that issue was decided by the Tribunal in the year 2002-03 (supra). 4.1.We find that Tribunal in its order has decided the issue as under: "15.7.We have carefully perused the orders of the lower authorities and the claim of the assessee vis-à-vis Sec.43B(f).A perusal of Sec. 43B(f) shows that the explanation to Sec. 43B referring to the amendment of the word any sum payable is applicable only for clause (a) of Sec.43B which means that it is not applicable for clause (f).Hon’ble Andhra Pradesh High Court in the case of Srikakollu Shubbarao & Co.173 ITR 708 has held that in order to apply the provisions of Sec. 43B not only should be the liability to pay the tax or duty be incurred in the accounting year but also should be statutorily payable in the accounting year. In our considered opinion, the provision for leave salary is not a statutory liability but only a contractual liability which is payable only if the employees resigns or retired from the services.We also find that the Hon’ble Calcutta High Court in the case of Excide Industries Ltd. (supra) has struck down Sec. 43B(f) being arbitrary, unconscionable and dehors the Apex Court decision in the case of Bharat Earth Movers 245 ITR 428. It is relevant to state that the Tribunal in the case of CIT Vs Universal Medicare in has followed the decision of the Hon’ble Supreme Court in the case of Bharat Earth Movers and directed the AO to allow the amounts so claimed. Respectfully following the afore discussed decisions, we direct the AO to allow the claim of provisions for leave salary. Ground No. 6 is accordingly allowed.” Respectfully following the above,grounds no.4,2 and 2 for the AY.s.under appeal are decided in favour of the assessee-company. In view of the above,ground no.4 is decided in favour of the assessee.” Respectfully,following the above decision,Ground no.3 is decided in favour of the assessee .”

“4. We have heard rival submissions. Both the parties fairly agreed that this issue is covered by the order of this Tribunal in assessee’s own case in dated 09/12/2015 for A.Y.2008-09. But we find that though the Hon’ble Calcutta High Court in the case of Exide Industries Ltd. vs Union of India reported in 292 ITR 470 (Cal) had struck down the provisions of Section 43B Clause (f) of the Act as unconstitutional, the revenue had carried the matter further to the Hon’ble Supreme Court which initially in Special Leave to appeal (Civil) CC12060/2008 dated 08/09/2008 had held as under:- “The petition was called on for hearing today. Upon hearing the Counsel, the Court made following order. Issue Notice In the meantime, there shall be stay of the impugned judgment, until further orders.” 4.1. Later, the Hon’ble Supreme Court in Special Leave to Appeal (Civil) No.(s) CC22889/2008 dated 08/05/2009 had held as under:- “The petition was called on for hearing today. Upon hearing the Counsel, the Court made following order. Delay condoned Leave granted. Upon hearing the final disposal of the Civil Appeal, the department is restrained from recovering penalty and interest which has accrued till date. It is made clear that as far as the outstanding interest demand as on date is concerned, it would be open to the department to recover that amount in case civil appeal of the department is allowed. We further make it clear that the assessee would during the pendency of this civil appeal pay tax as if Section 43B(f) is on the statute book but at the same time it would be entitled to make a claim in its returns 4.2 Hence, from the aforesaid Hon’ble Supreme Court judgment, it can be inferred that the Hon’ble Supreme Court in the subsequent order had not stayed the judgement of Hon’ble Calcutta High Court. We find that the Hon’ble Supreme Court had passed an interim order giving the aforesaid observations. Hence, we deem it fit and appropriate, in the interest of justice and fair play, to remand this issue to the file of the ld. AO to pass orders based on the outcome of the main appeal on merits by the Hon’ble Supreme Court as stated supra. Accordingly, the ground No.3 of original grounds of appeal raised by the assessee is allowed for statistical purposes.”

30. We observed that that the Co-ordinate Bench of the Tribunal while deciding the appeal of the assessee for assessment year 2008-09 decided the issue on merits in turn by placing reliance on Tribunal order for A.Y. 2008-09. The Tribunal allowed relief to the assessee by following the decision of the Hon’ble Apex Court in the case of Bharat Earth Movers vs. CIT reported as 245 ITR 428(SC). Dehors the issue of constitutional validity of clause(f) to section 43B of the Act, the Co-ordinate Bench after considering the issue on merits has deleted the addition. Taking into consideration, entirety of facts we respectfully follow the decision of Tribunal in assessee’s own case for assessment year 2008-09 and confirm the findings of CIT(A) in deleting the disallowance. Consequently, ground No.4 of the appeal by the Revenue is dismissed.

31. Ground No.5:

5. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the Head Office expenses cannot be allocated to profits derived from 100% export oriented units falling under section 1OB and in directing to reduce interest income?"

31.1 This issue is identical to the one already adjudicated by the Tribunal in assessee’s own case for assessment year 2009-10 (supra). The relevant extract of the finding of the Tribunal read as under:-

“5. We have heard rival submissions. We find that this issue is already covered in favour of the assessee by the orders of this Tribunal from A.Yrs 2003-04 to 2008-09. We also find that for A.Y.2006-07, the revenue had carried this matter to the Hon’ble Jurisdictional High Court and the Hon’ble Jurisdictional High Court in Income Tax Appeal No.433/2015 dated 15/01/2018 had held that the question raised by the revenue does not give raise to any substantial question of law and accordingly, did not entertain the same. This goes to prove that the order passed by this Tribunal on the impugned issue had attained finality. Respectfully following the same, the ground No. 4 raised by the assessee is allowed.” The CIT(A) has allowed relief to the assessee by following the decision of Tribunal in assessee’s own case for assessment year 2003-04 to 2006-07. We find no infirmity in the impugned order. Accordingly, ground No.5 of the appeal is dismissed.

6. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the depreciation of Rs. 33,42,442/- on goodwill on account of acquisition of Madura Garments Division from Madura Coats Ltd in the A. Y. 2000-01 without appreciating the facts of the case."

32.1 This issue is identical to the one already adjudicated by the Tribunal in assessee’s own case for assessment year 2009-10. The relevant extract of the finding of the Tribunal read as under:-

“15. The ground No.2 raised by the revenue is with regard to deletion of depreciation on goodwill amounting to Rs.1,11,98,382/-. We find that this issue has already been decided in favour of the assessee in assessee’s own case by the order of this Tribunal in dated 09/12/2015 wherein it was held as under:-

“11.Ground No.9 deals with disallowance of depreciation on goodwill on acquisition of Madura garments Division. As agreed by the AR and the DR, the issue has been dealt with by the Tribunal, while deciding the appeal for the AY.2006-07(supra).Paragraph 6 of the said order reads as under: "6.Next ground is about disallowance of depreciation on goodwill on acquisition of Madura Garments Division ongoing concern basis. We find that in the earlier identical issue had been decided in favour of the assessee as following: 3.1.We find that sum of Rs. 3.33 crores,Rs.2.50 crores and Rs.1.87 crores was found to be incurred by the assessee for the AY.s.2003-04.2004-05 and 2005-06 respectively on account of marketing and knowhow incurred on acquisition of Madura Garments division.We find that the identical issue was deliberated upon by the Tribunal while deciding the appeal for earlier AY. We are reproducing the relevant paragraph of that order and same reads as under: 18.Ground No. 8 reads as under: "That, on the facts and in the circumstances of the case and in law, the learned AO has erred in disallowing depreciation of Rs. 3,33,86,719 claimed by the appellant on goodwill of Rs.20.35 crores acquired on acquisition of 'Madura Garments' division from Madura Coasts Ltd. on a going concern basis and learned CIT (A) has erred in confirming the order of the learned AO. The learned AO be directed to allow the depreciation on goodwill and to reduce the total income accordingly." 18.1.We find that this issue has already been allowed in assessee's own case in M/05 for A.Y.2000-01.Respectfully following the decision of the Co ordinate Bench, we direct the AO to allow the claim of depreciation on Goodwill. Ground No. 8 is accordingly allowed." Following the above order of the Tribunal for earlier years,ground no.5,9,and 3 for the AY.2003 -04,2004-05,2005-06 are decided in favour of the assessee. In view of the above,ground no.6 is decided in favour of the assessee." Considering the above, we are deciding ground no.9 in favour of the assessee.” 15.1. Respectfully following the said decision, we do not find any infirmity in the action of the ld. CIT(A) granting relief to the assessee. Accordingly, the ground No.2 raised by the revenue is dismissed.” 32.2 The CIT(A) has granted relief to the assessee by following the order of his predecessor in assessment year 2009-10, The findings of CIT(A) in A.Y. 2009-10 have now been upheld by the Tribunal. We find no infirmity in the impugned order. Accordingly, ground No.6 of the appeal is dismissed.

7. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the proceedings from sale of certified emission reduction of Rs. 4,11,58,512/- relying upon the decision in the case of My Home Power Ltd vs. DCIT, Central Circle - 7 (2012) 27 taxmann.com.27, without appreciating the facts of the case." 33.1 This issue is identical to the one already adjudicated by the Tribunal in assessee’s own case for assessment year 2009-10. The relevant extract of the finding of the Tribunal on this issue read as under:-

“16. The ground No.3 raised by the revenue is with regard to challenging the action of the ld. CIT(A) in treating the receipt on account of sale of certified emission as capital receipt (Carbon Credit receipts). We find that the Hon’ble Andhra Pradesh High Court in the case of CIT vs. My Home Power Ltd. reported in 365 ITR 82; Hon’ble Karnataka High Court in the case of CIT vs. Subhash Kabini Power Corporation Ltd reported in 385 ITR 592; Hon’ble Allahabad High Court in the case of PCIT vs L.H. Sugar Factory Pvt. Ltd. reported in 392 ITR 568 had held that Carbon Credit receipts are to be construed as capital receipts. When this was put to the ld. DR, the ld. DR fairly conceded that this issue is covered in favour of the assessee by various High Courts, but he however, prayed for verification of these figures by the ld. AO. The ld. AR also fairly agreed that verification of the figures by the ld. AO be made. Accordingly, we deem it fit and appropriate, to set aside this issue to the file of the ld. AO, to verify the actual figures of carbon credit receipts and decide the taxability of the same in the light of the aforesaid decisions of the Hon’ble High Courts. Accordingly, the ground No.3 raised by the revenue is allowed for statistical purposes”

The CIT(A) in the impugned Assessment Year granted relief to the assessee by following the order of his predecessor for assessment year 2009-10, which has now been confirmed by the Tribunal. Since, there has been no change in the facts in the Assessment Year under consideration, this ground of appeal by Revenue is dismissed for similar reasons.

34. Ground No.8

8. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in reducing the total income by Rs.11,32,604/- being reversal of the provision for pension liability ignoring the fact that similar issue was disallowed by the Ld. CIT(A) for A. Y. 2008-09 and the assessee is contesting the issue before the Hon'ble ITAT." 34.1 The ld. Authorized Representative for the assessee fairly submitted that the Co-ordinate Bench of the Tribunal in the appeal by the assessee for assessment year 2007-08 in has allowed the pension liability. Therefore, the write back of the provision ought to be treated as its income.

34.2 The Department has challenged the order of Tribunal for assessment year 2007-08 before the Hon’ble High Court in an appeal. However, the appeal is still pending at admission stage.

34.3 Both sides heard. The ld. Authorised Representative has fairly admitted that the Provision for Pension was allowed to the assessee as deduction by the Tribunal in Assessment Year 2007-08. Hence, write back of said provision would amount to income of assessee. We observe that the impugned order of CIT(A) granting relief to the assessee (dated 31-03- 2015) was passed prior to the order of Tribunal for Assessment Year 2007- 08 (dated 24-11-2015) allowing assessee’s claim of deduction in respect of provision for pension liability. The CIT(A) had no occasion to consider the order of Tribunal on this issue. Since, the assessee got benefit of deduction at the time when provision was created in the Assessment Year 2007-08, the reversal of provision would amount to income of the assessee. If the reversal of provision is not taxed, it would result in double deduction to the assessee. Thus, in view of undisputed facts, the findings of CIT(A) on this issue are reversed. The ground No. 8 of the appeal by Revenue is allowed.

9. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the ALP of guarantee fees in respect of corporate guarantee given by the assessee to its AE viz. Aditya Birla Minacs Worldwide to enable the AE to borrow funds from foreign banks to 0.5% as against 2.42% as held by the AO/TPO."

10. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the ALP of performance guarantee fees in respect of performance guarantee given by the assessee to its AE viz. Aditya Birla Minacs Worldwide to enable the AE to borrow funds from foreign banks to 0.5% as against 1.74% as held by the AO/TPO”.

35.1 The ld. Authorized Representative for the assessee submitted that by virtue of various judicial pronouncements it is a well settled that the ALP of Corporate guarantee fee/performance guarantee as a norm has been accepted at 0.5%. In support of his contention, the ld. Authorized Representative for the assessee referred to the decision of Hon’ble Bombay High Court in the case of CIT vs.Everest Kanto Cylinder Ltd., reported as 58 taxmann.com254(Bom). The ld. Authorized Representative for the assessee submitted that CIT(A) in a very reasoned and fair manner has restricted the adjustment for corporate guarantee commission and performance guarantee to 0.50%.

11. "On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in directing to treat the interest subsidy of Rs. 15,23,25,727/- as capital in nature."

38.1 In ground No.11 the Revenue has assailed the findings of CIT(A) in holding interest subsidy from Technology Upgradation Fund(TUF) Rs.15,23,25,727/- as capital in nature. The ld. Authorized Representative for the assessee submitted that the Hon’ble Rajasthan High Court in the case of PCIT vs. Nitin Spinners Ltd. in DB Income Tax appeal No.31/2019 decided on 19/09/2019 has held subsidy received under TUF as capital in nature. Similar view has been taken by Mumbai Tribunal in the case of ACIT vs. SVG Fashions Ltd. in for assessment year 2012-13 decided on 17/07/2018. The ld. Authorized Representative for the assessee to further buttress his submissions placed reliance on the following decisions:-

(1) CIT vs. Gloster Jute Mills Ltd. ,96 taxmann.com 303 (Cal)

(2) CIT vs. Sshyam Lal Bansal, 200 Taxman 14 (P&H)

38.2 The ld. Authorized Representative for the assessee further submitted that CIT(A) has decided this issue after seeking remand report of Assessing Officer and examining TUF scheme in details. The ld. Authorized Representative for the assessee further submitted that the Tribunal in assessee’s appeal for assessment year 2009-10 (supra) has admitted this issue raised in additional ground of appeal and has restored to Assessing Officer for fresh adjudication.

Order pronounced in the open court on Monday the day of February,2020.