THE DCIT CIR 3(1), MUMBAI vs. M/S. GUJARAT AMBUJA CEMENTS LTD, MUMBAI

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 आयकर अपीलीय अिधकरण “ए” "ायपीठ मुंबई म"। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI माननीय "ी महावीर िसंह, "ाियक सद" एवं माननीय "ी मनोज कुमार अ"वाल ,लेखा सद" के सम"। BEFORE HON’BLE SHRI MAHAVIR SINGH, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं./ I.T.A. No.7486/Mum/2007 (िनधा"रण वष" / Assessment Year:2004-05) ACIT-(LTU)-1 Ambuja Cements Limited बनाम/ World Trade Centre [Earlier known as Gujarat Ambuja Cements Ltd.] Elegant Business Park Centre-1, 29th Floor, Vs. MIDC Cross road “B”, Off Andheri-Kurla Road Cuffe Parade, Mumbai-05. Andheri (E), Mumbai-400 059. "थायीलेखासं./जीआइआरसं./PAN/GIR No. AAACG-0569-P (अपीलाथ"/Appellant) (""थ" / Respondent) : & आयकरअपील सं./ I.T.A. No.7494/Mum/2007 (िनधा"रण वष" / Assessment Year:2004-05) Ambuja Cements Limited DCIT–Range-3(1) [Earlier known as Gujarat Ambuja Cements Ltd] बनाम/ Aaykar Bhavan, M.K. Road Elegant Business Park Mumbai-400 020. Vs. MIDC Cross road “B”, Off Andheri-Kurla Road Andheri (E), Mumbai-400 059. "थायीलेखासं./जीआइआरसं./PAN/GIR No. AAACG 0569 P (अपीलाथ"/Appellant) (""थ" / Respondent) : & C.O. No.222/Mum/2017 [Arising out of ITA No. 7494/Mum/2007] (िनधा"रण वष" / Assessment Year:2004-05) ACIT-(LTU)-1 Ambuja Cements Limited बनाम/ [Earlier known as Gujarat Ambuja Cements Ltd.] World Trade Centre Elegant Business Park Centre-1, 29th Floor, Vs. MIDC Cross road “B”, Off Andheri-Kurla Road Cuffe Parade, Mumbai-05. Andheri (E), Mumbai-400 059. "थायीलेखासं./जीआइआरसं./PAN/GIR No. AAACG-0569-P (अपीलाथ"/Appellant) (""थ" / Respondent) :

Revenue by : Shri Anadi Varma-Ld.CIT-DR & Shri Harshad Vengurlekar-Ld. DR Assessee by : S/Shri Yogesh Thar, Hardik Nirmal & Chaitanya Joshi - Ld. ARs

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 सुनवाई की तारीख/ : 29/11/2019 Date of Hearing घोषणा की तारीख / : 06/01/2020 Date of Pronouncement आदेश / O R D E R

Manoj Kumar Aggarwal (Accountant Member) 1.1 Aforesaid cross-appeals for Assessment Year [in short referred to as ‘AY’] 2004-05 contest the order of Ld. Commissioner of Income-Tax (Appeals)-XXVII, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-XXVII/DC-3(1)/133/05-06 dated 24/09/2007 on certain grounds of appeal. Against assessee’s appeal, the revenue has preferred cross- objections in view of the fact that the assessee has preferred additional ground & additional evidences vide letter dated 15/05/2017. Although the registry has noted a delay of 3573 days in filing of cross-objections by the department, however, it has been explained that the said cross- objections arises out of additional grounds filed by the assessee on 15/05/2017 and therefore, counting from the date of receipt of additional ground, the delay is only for 63 days. The condonation of the same has been sought by the revenue on the strength of condonation petition dated 22/08/2017 explaining the facts that led to delay. The delay has been attributed to annual general transfer and change of incumbency in Large Taxpayer Unit [LTU]. Finding the reasons to be plausible one, the bench formed an opinion that the delay was to be condoned and the matter was to be proceeded on merits. 1.2 The name of erstwhile entity namely Gujarat Ambuja Cement Ltd. has undergone change to M/s Ambuja Cements Ltd. and accordingly,

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 revised appeal memo has been filed by the revenue. Finding the same in order, we proceed to adjudicate the same. 1.3 The assessee being resident corporate assessee stated to be engaged in manufacturing of cement was assessed u/s. 143(3) of the Act on 30/09/2005 wherein the income of the assessee was determined at Rs.90.25 Crores under normal provisions after certain additions / disallowances as against returned income of Rs.62.92 Crores filed by the assessee on 27/10/2004. The Book Profit u/s 115JB were assessed at Rs.338.39 Crores as against Rs.303.13 Crores offered by the assessee in the return of income. 1.4 The Ld. Authorized Representative for Assessee, at the outset, placed on record a chart to submit that substantial issues are covered by earlier orders of the Tribunal & higher judicial authorities in assessee’s own case and facts being pari-materia the same, similar view may be taken in the matter. Both the representatives broadly converge on this point. The copies of the various orders have been placed on record, which we have considered. The latest order has been passed by Tribunal in cross-appeals / objections for AYs 2002-03 & 2003-04 vide ITA Nos.7092/Mum/2015 & ors., common order dated 10/08/2018. 1.5 The decisions rendered in assessee’s own case for various Assessment Years, for ease of reference, could be tabulated in the following manner: - No. Citation Appeal By AY Date of Order 1. Assessee 1988-89 03/06/2005 2. ITA No.2690/Mum/1993 & Ors. Cross-Appeals 1989-90 20/12/2002 3. ITA No.2292/Mum/1993 & Ors. Cross-Appeals 1990-91 04/08/2003 4. Revenue 1992-93 03/11/2003 5. Assessee 1992-93 29/06/2006 6. Revenue 1993-94 27/10/2004 7. Assessee 1993-94 27/10/2004

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 8. Revenue 1994-95 09/06/2005 9 Assessee 1994-95 24/02/2006 10. Assessee 1994-95 27/02/2008 11. ITA No.942 & Ors. Cross-Appeals 1995-96 27/10/2008 & 1996- 97 12 ITA No.1859/Mum/2004 & Ors. Cross-Appeals 1997-98 15/05/2009 13. ITA No.2654/Mum/2005 & Ors. Cross-Appeals 1998-99 05/08/2016 14. ITA No.2653/Mum/2005 & Ors. Cross-Appeals 1999-00 30/05/2016 15. ITA No.4373/Mum/2005 & Ors. Cross-Appeals 2000-01 21/10/2016 16. ITA No.4374/Mum/2005 & Ors. Cross-Appeals 2001-02 18/01/2017 17. ITA Nos.7092/M/2005 & Ors. Cross-Appeals 2002-03 10/08/2018 & 2003- 04 18. Hon’ble High Court –ITA (L) Revenue 1988-89 22/04/008 No.2401 of 2007 19. Hon'ble Supreme Court –SLP(Civil) Revenue 1988-89 17/07/2009 No.2822/2009 20. Order of Hon'ble High Court –ITA Revenue 1989-90 16/04/2007 No.936 of 2003 21. Order of Hon'ble High Court –ITA Revenue 1995-96 22/10/2012 No.6186 of 2010 22. Order of Hon'ble High Court –ITA Revenue 1996-97 22/10/2012 No.6195 of 2010 23. Order of Hon'ble High Court –ITA Revenue 1997-98 22/10/2012 No.2176 of 2010

1.6 In the above background, we proceed to adjudicate the revenue’s appeal ITA No.7486/Mum/2007. The ground raised by revenue read as under: - 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of community welfare expenses of Rs.48,71,746/-. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of temple expense of Rs. 6,85,908/- 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of prior year's expenses of Rs.58,16,022/-. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on mines prospecting expenses of Rs.32,38,016/-. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the taxes on foreign exchange gain of Rs. 43,52,74,643/-. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of employees’ stock option expenses of Rs.4,51,821/-. 7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of expenses on powerline, marine structure, road and railway sidings amounting to Rs.1,08,416/-, Rs.20,00,000/- and Rs.2,09,15,649/- respectively." 8. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the disallowance made u/s 14A of the I.T. Act to Rs. 50,000/- as against

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 Rs. 21,65,213/- made by the AO for the expenses incurred in earning the dividend income being exempt under the I.T. Act. 9. On the facts and in the circumstances of the case and in law, the Ld. ClT(A) in deleting the disallowance u/s 35D regarding preliminary expenses of Rs. 19,89,83,520/- and Rs. 41,74,223/- for A.Yrs. 2001-02 & 2002-03 respectively. 10. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to include the excise duty and sales tax amounting to Rs.334,52,74,729/- and Rs. 72,34,31,000/- respectively in the total turnover for the purpose of computation of deduction u/s 80HHC. 11. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing credit for MAT paid u/s 115JA for the purpose of charging interest u/s 234B. 12. The appellant prays that the order of CIT(A) on the above grounds to set aside and that of the Assessing Officer be restored. 13. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. Our adjudication to these grounds would be as follows: - 2.1 Gr. No.1: Deletion of disallowance of Community Welfare Expenses for Rs.48.71 Lacs These expenses were stated to be incurred by the assessee towards smooth functioning of the factory and to enable the employees staying in the factory to avail the basic needs. During assessment proceedings, the attention was drawn to the fact that similar expenses incurred by assessee in AYs 1989-90 & 1990-91 were allowed by Tribunal. The said decision was followed by Tribunal in AY 1993-94. However, finding that the department was under appeal before High Court against the decision of the Tribunal, the said expenditure was disallowed by Ld. AO. The learned CIT(A) deleted the same by following the Tribunal order for AYs 1989-90 & 1990-91. It was observed that following Tribunal order, similar view was taken by first appellate authorities in AYs 1995-96 to 2003-04. It is admitted position before us that the departmental appeal, on this issue, against appellate orders for AYs 1995-96 to 2003-04 has been dismissed by the Tribunal. Further, the question on this issue raised by the department for AYs 1988-89 & 1989-90 was not admitted

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 by Hon’ble Bombay High Court. No Appeal has been preferred by the department on this issue before Hon’ble High Court for AYs 1990-91, 1991-92 & 1993-94. Therefore, respectfully following the consistent stand of Tribunal, we dismiss this ground of appeal. 2.2 Gr. No.2: Deletion of disallowance of Temple Exp. for Rs.6.85 Lacs These expenses were stated to be incurred on temple for the purpose of employees staying in the assessee’s factory. The attention was drawn to the fact that similar expenses incurred by assessee in AYs 1989-90 & 1990-91 were allowed by Tribunal. The said decision was followed in AY 1993-94. However, finding that the department was under appeal before High Court against the decision of the Tribunal, the said expenditure was disallowed. The learned first appellate authority deleted the same by following the order of Tribunal for AYs 1998-99 to 2002-03. It is admitted position that this issue is squarely covered by earlier decisions of Tribunal right up-to AY 2003-04. No Appeal has been preferred by the department on this issue before Hon’ble High Court for AYs 1990-91, 1991-92 & 1993-94. We find that this question raised by the revenue before Hon’ble High Court has been admitted in few earlier years, however, the same is still pending for adjudication vide ITA No. 6186 of 2010, ITA No. 6195 of 2010 & ITA No. 660 of 2011. Therefore, as of now, the issue is covered in assessee’s favor by the earlier decisions of the Tribunal. Respectfully following the same, we dismiss this ground of appeal. 2.3 Gr. No.3: Deletion of disallowance of Prior Years Expenses for Rs.58.16 Lacs

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 The Tax Audit Report for the year under consideration reported that the assessee debited previous years expenses of Rs.58.16 Lacs in the Profit & Loss Account. The assessee defended the same by submitting that the said expenditure crystalized during the year and arose due to late submission of bills by parties, disputed bills settled in current year, short provisions etc. It was submitted that similar claim was allowed by first appellate authority in AYs 1989-90 to 1991-92 and upon revenue’s appeal, the Tribunal restored the matter back to the file of Ld. AO since supporting evidences were not available. However, the said plea was rejected by Ld. AO and the expenditure was disallowed. The Ld. CIT(A) observed that this issue was allowed by first appellate authorities in AYs 1995-96 to 2002-03. Upon perusal of details submitted by the assessee, the Ld. CIT(A) held that the said expenditure had crystalized during the year and therefore, the same was an allowable deduction. We find that this issue is squarely covered by the decision of Tribunal for AYs 2002-03 & 2003-04, common order dated 10/08/2018. The Tribunal confirmed the stand of Ld. CIT(A) in view of the clear finding that the expenses had crystalized during the year. Similar findings have been given by learned first appellate authority in this year. Therefore, respectfully, following the same, we dismiss this ground of appeal. 2.4 Gr. No.4: Deletion of disallowance of Mines Prospecting Expenses for Rs.32.38 Lacs The said expenditure was stated to be incurred on various site locations to check the availability of limestone which was major raw material for manufacturing of cement. It was pleaded that similar expenditure was AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 allowed by Tribunal for AYs 1989-90 which was followed in 1990-91 and similar claim was allowed in AY 1994-95 also. However, finding the department was under appeal to Hon’ble High Court against the decision of Tribunal for AYs 1989-90 & 1990-91, the said expenditure was disallowed, being capital in nature. Since no new asset was created, the depreciation on the same was also denied to the assessee. The learned first appellate authority, following appellate orders of earlier years, deleted the same. We find that this issue is squarely covered in assessee’s favor right up-to AY 2003-04. The revenue has chosen not to file appeal on this ground before Hon’ble High Court for AY 1989-90 & 1994-95 whereas this question has not admitted by Hon’ble Court in AYs 1988-89, 1995-96 to 1997-98. Respectfully following the consistent view, this ground stand dismissed. 2.5 Gr. No.5: Foreign Exchange gains for Rs.4352.74 Lacs The assessee offered foreign exchange gain of Rs.4352.74 Lacs in the Profit & Loss Account. Till AY 2002-03, the assessee claimed deduction of forex loss which was denied to the assessee treating it as a notional loss. Therefore, the assessee submitted that the gain should also not be taxed since the claim of notional loss was not accepted by the department in earlier years. However, the said plea could not find favor with Ld. AO who denied the adjustment of the same. The learned first appellate authority confirmed the same since forex loss disallowance made in earlier years was deleted in those years and therefore, the gain would be fully taxable.

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 We find that this issue is already decided against the assessee by Ld. CIT(A) and therefore, there could be no occasion of grievance for revenue. Consequently, this ground stand dismissed as being infructuous. 2.6 Gr. No.6: Deletion of disallowance of employees stock option expenses for Rs.4.51 Lacs The assessee credited a sum of Rs.1.10 Lacs, being ‘Employees remuneration and Benefits Account’ since expenditure on this account in earlier years was claimed as expense / loss. However, it was noted by Ld. AO that deduction claimed for AYs 2000-01 to 2003-04 was denied considering the same to be notional loss and therefore, the gains should be deducted from the total income. Further, during the year 372425 shares were actually exercised by the employees and therefore, the proportionate amount of Rs.4.51 Lacs would be allowable to the assessee. Finding the same in order, the said amount was also reduced from total income. In other words, aggregate amount of Rs.5.62 Lacs was reduced from total income. This ground was not pressed by assessee before learned first appellate authority. Upon perusal of Tribunal order for AY 2003-04, it transpires that ESOP expenditure has fully been allowed as per the claim of the assessee. In other words, the assessee has been allowed ESOP expenses as claimed in the Profit & Loss Account and therefore, the resultant surplus / gains would be fully taxable, applying the same analogy. Accordingly, the reduction of income by Rs.5.62 Lacs (including surplus of Rs.1.10 Lacs) as done by Ld. AO would not be warranted. We direct Ld. AO not to reduce the total income by Rs.5.62 Lacs. We find that this ground is AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 badly drafted since there was no disallowance made by Ld. AO but, in fact, a relief was granted to the assessee. Nevertheless, to settle the things as per earlier decisions, we direct Ld. AO not to reduce the total income by Rs.5.62 Lacs. This ground may be deemed to be allowed. 2.7 Gr. No.7: Deletion of disallowance of expenses on Powerline, Marine Structure, Road & Railway Sidings for Rs.1.08 Lacs, Rs. 20 Lacs & Rs.209.15 Lacs respectively The assessee claimed these expenditure u/s 37(1) by submitting that the ownership of powerline, marine structures and road do not belong to the company but belong to government authorities and therefore, the expenditure was an allowable revenue expenditure. However, the deduction of the same was denied treating the expenditure to be capital in nature and since no new asset was created, depreciation was also denied. The Ld. CIT(A), following the order of its predecessor for AYs 1995-96 and 2002-03, granted relief to the assessee. We find that Tribunal confirmed the order of first appellate authority for AY 2002-03 following the decision of Tribunal in AY 2001-02. Therefore, respectfully following the consistent stand of Tribunal, we dismiss this ground of appeal. 2.8 Gr. No.8: Restriction of disallowance u/s 14A from Rs.21.65 Lacs to Rs.0.50 Lacs The assessee earned exempt dividend income of Rs.107.60 Lacs which led the Ld. AO to invoke disallowance u/s 14A. The Ld. AO, as done in earlier years, estimated the disallowance @2% which resulted into addition of Rs.2.15 Lacs in the hands of the assessee. Upon further appeal, Ld. CIT(A) estimated the same at Rs.0.50 Lacs.

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 We find that in AY 2002-03, Tribunal has confirmed the estimation of Rs.2 Lacs as made by Ld. CIT(A), finding the same to be fair and reasonable. Applying the same logic, we dismiss this ground of appeal. 2.9 Gr. No.9: Deletion of disallowance u/s 35D being preliminary expenses of Rs.1989.83 Lacs & Rs.41.74 Lacs for AYs 2001-02 & 2002-03 respectively We find that this ground is wrongly drafted since the perusal of quantum assessment order would reveal that the assessee has been saddled with disallowance of Rs.406.31 Lacs only u/s 35D, being 1/5th of expenditure incurred on issue of foreign currency convertible bonds. The expenses were stated to have been incurred in AYs 2001-02 & 2002-03 and disallowed in those years relying upon the decision of Apex Court in Kodak India Ltd. (253 ITR 445). Therefore, the same were disallowed in this year also. The Ld. CIT(A) allowed the same since in earlier AYs, it was held by first appellate authorities that the expenses were incurred for extension of business and therefore covered by Sec. 35D(2) of the Act. However, it was held that the deduction would start from year in which the project starts commercial production. Since, the project had started commercial production in June, 2002, the deduction of the same would be allowable to the assessee. We find that similar ground raised by the revenue in AYs 2002-03 has been dismissed by the Tribunal. Therefore, following the same, we dismiss this ground of appeal. 2.10 Gr. No.10: Inclusion of Excise Duty and Sales Tax amounting to Rs.334.52 Crores and Rs.72.34 Crores in total turnover for the purpose of computation u/s 80HHC

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 The assessee claimed deduction u/s 80HHC for Rs.717.50 Lacs on the strength of accountant’s certificate. Upon perusal of working, it was noted that excise duty for Rs.334.52 Crores was excluded from gross turnover. Similarly, Sales Tax of Rs.72.34 Crores was not passed through Profit & Loss Account. The Ld. AO, referring to provisions of Sec. 145A, held that these two items would be includible while working out the deduction. The working in the aforesaid manner reduced the deduction u/s 80HHC to Rs.558.39 Lacs. The learned CIT(A) following the decision in AYs 2000-01 to 2002-03, directed for exclusion of these two items while computing deduction u/s 80HHC. We find that Tribunal dismissed similar ground raised by revenue in AY 2002-03 by following the order for AY 2001-02 and upheld the stand of Ld. CIT(A). Facts being pari-materia the same, following consistent view of the Tribunal in earlier years, we confirm the stand of Ld. CIT(A) and dismiss this ground of appeal. 2.11 Gr. No.11: Credit for MAT for the purposes of Charging interest u/s 234B From perusal of paras-23 & 24 of quantum assessment order, it is evident that the tax payable on normal income was more than tax payable on Book Profits computed u/s 115JB and therefore, the assessee has paid normal tax in this year. The assessee was found eligible to claim MAT credit of Rs.585.04 Lacs as per Sec.115JAA and therefore, the credit of the same was allowed. However, interest u/s 234B was computed before adjusting MAT credit. The Ld. CIT(A), accepting assessee’s submissions and relying upon various decisions of AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 Tribunal, held that interest was to be charged only after adjustment of tax credit. We find that the adjudication of Ld. CIT(A) is in line with following binding judicial pronouncements: - i) CIT V/s Tulsyan NEC Ltd. [2011 330 ITR 226(SC)] ii) CIT V/s Apar Industries Ltd. [(2010)323 ITR 411(Bombay HC)] iii) CIT V/s Shiv Texyarn Ltd. [(2009) 182 Taxman 1(Madras HC)] iv) CIT V/s. Gujarat Mitra (P.) Ltd. [(2013) 214 taxman 35(Gujarat HC)] v) Chemplast Sanmar Ltd. V/s DCIT [(2004) 83 TTJ 427 (Chennai Tribunal)] vi) Phillips India Ltd. V/s. ACIT [(2005) 92 ITD 441 (Chandigarh Tribunal)] vii) Synthetic Ind. chemicals Ltd. V/s DCIT [(2004) 270 ITR 98 (Cochin Tribunal)] viii) ACIT V/s BSL Ltd. [(ITA No.1757 of 2005 (Kolkatta Tribunal)] ix) ACIT V/s Graphite India Ltd. [ITA No.1176 of 2006 (Kolkatta Tribunal)

No contrary decision has been placed on record and therefore, no interference is called for in the impugned order. This ground stand dismissed. 2.12 Ground Nos. 12 & 13 are general in nature which do not require any specific adjudication. 2.13 Resultantly, the appeal stands partly allowed to the extent as indicated in the order. The learned AO is directed to recompute the income of the assessee in terms of our adjudication. Assessee’s Appeal, ITA No. 7494/Mum/2007 3. The grounds raised by the assessee read as under: - 1. That on the facts and in the circumstances of the case, the Learned Commissioner of Income Tax (Appeals) [here in after referred to as Ld. CIT (Appeals)] was not justified in confirming the disallowance of expenditure incurred for Pooja/ function expenses amounting to Rs.28,42,057/- by holding that the same was not incurred wholly and exclusively for the purpose of business. 2(a) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified in confirming the disallowance of Consultancy Charges amounting to Rs. 32,52,000/- by holding that the said expenditure is capital in nature. 2(b) That on the facts and in the circumstances of the case and without prejudice to Ground No.2(a), taken here-in-above, having held that the impugned

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 expenditure is capital in nature, the Ld.ClT (Appeals) erred in not allowing depreciation on the same. 3(a) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified in confirming the disallowance of charges for service amounting to Rs. 1,93,960/- by holding that the said expenditure is capital in nature. 3(b) That on the facts and in the circumstances of the case and without prejudice to Ground No. 3(a), taken here in above, having held that the impugned expenditure is capital in nature, the Ld. CIT(Appeals) erred in not allowing depreciation on the same. 4. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) erred in not excluding gain on exchange due to decrease in Rupee Liability on account of fluctuation in Rate of Exchange, from the computation of total income irrespective of the stand taken by the department in earlier years to treat the exchange loss as notional, hence not allowable. 5. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified in estimating Rs.50,000/- as expenses incurred towards earning dividend income u/s 14A, when no such expenses were actually incurred by the appellant. 6(a) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified in confirming the decision of the A.O. in assessing Interest Income of Rs. 38,41,56,750/- and Truck Hire Charges of Rs. 2,79,759/- (Net) as income under the head "Income from Other Sources". 6(b) That on the facts and in the circumstances of the case, and without prejudice to ground no.6(a) taken here-in-above, having held that the said income were to be assessed under the head "income from other sources", the Ld. CIT(Appeals) ought to have allowed the actual expenditure incurred to earn the aforesaid income. 6(c) That on the facts and in the circumstances of the case, and without prejudice to ground no. 6(a) & 6(b) taken here-in-above, having held that Truck Hire Charges were to be assessed under the head "income from other sources", the Ld. ClT(Appeals) ought to have allowed depreciation on trucks. 7(a) That on the facts and in the circumstances of the case, the Ld. ClT (Appeals) was not justified in not admitting the additional ground inspite of the fact that all the materials for adjudicating the issue were already available on record. 7(b) That on the facts and in the circumstances of the case, and without prejudice to ground no.7(a) taken here-in-above, the Ld. ClT (Appeals) was not justified in not allowing deduction u/s 35D amounting to Rs. 82,860/- being 1/10th of the Tradable Warrant Issue Expenses. 8(a) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified in confirming disallowance of the proportionate amount of premium on leasehold land of Rs. 30,73,872/- written off during the year as revenue expenditure by treating the same as capital expenditure. 8(b) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) failed to appreciate the fact that the Premium paid on Leasehold Land, essentially bears the character of rent paid in advance which does not entails acquisition of any asset. 9(a) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified in confirming addition of unutilized MODVAT credit as on last

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 day of accounting year being 31st March 2004 as adjustment under section 145A disregarding the fact that the appellant himself has already carried out necessary adjustment u/s 145A which was duly certified by Tax Auditors and hence any further adjustment was not warranted. 9(b) That on the facts and in the circumstances of the case, and without prejudice to the ground no. 9(a) taken here in above, even if adjustment u/s 145A in respect of unutilized MODVAT credit is carried out, deduction for the same is available to the appellant under provisions of Section 43B since the appellant had paid excise duty payable on closing stock of cement as on last day of accounting year before filing of return of income for Assessment Year 2004- 05 by adjusting unutilized MODVAT credit and necessary proofs for payment of excise duty are on the records of assessing officer. 10. That on the facts and in the circumstances of the case, the Ld. ClT(Appeals), was not justified and rather grossly erred in confirming the non-exclusion of Capital Profit on sale of investment amounting to Rs. 3,11,81,125/- in computing Book Profit as per provisions of Sec 115JB. 11(a) That on the facts and in the circumstances of the case, the Ld, CIT(Appeals) was not justified and rather grossly erred in not admitting the additional ground inspite of the fact that all the materials for adjudicating the issue were already available on record. 11 (b) That on the facts and in the circumstances of the case, and without prejudice to the ground no.11(a) taken here in above, the Ld. ClT(Appeals) was not justified in confirming the addition of dividend distribution tax in computing Book Prof it u/sll5JB. 12. That on the facts and in the circumstances of the case, on disposal of this appeal, material adjustments would be required in computing total income, deduction under chapter VIA, Book profit, interest, brought forward and set off of MAT credit and tax and necessary direction may be given to the A.O. on this front. 13. That the appellant craves leave to add, amend, modify, rescind, supplement, or alter any of the grounds stated here-in-above, either before or at the time of hearing of this appeal. Our adjudication to this appeal would be as given in succeeding paragraphs. 4.1 Gr. No.1: Disallowance of Puja / function expenses for Rs.28.42 Lacs These expenses were in the nature of Pooja expenses incurred by assessee during festivals. The assessee pleaded for allowance of the same relying upon favorable decisions of Tribunal for AYs 1988-89 to 1990-91 & 1993-94. However, since the department was under appeal

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 before Hon’ble High Court, the expenditure was disallowed. The learned CIT(A), following earlier years’ order opined that performing pooja in the temple was purely an individual matter and there could not be any element of staff welfare in it. Therefore, the said item would fail the test of Sec. 37(1) and hence, not allowable. We find that this issue in covered in assessee’s favor by the decision of Tribunal up-to AY 2003-04. The question raised by revenue, in this regard, in AYs 1989-90 & 1997-98 before Hon’ble High Court was not admitted whereas no further appeal was preferred by revenue against the order of Tribunal in AYs 1988-89 & 1996-97. Respectfully following the same, we allow this ground of appeal. 4.2 Gr. No.2: Disallowance of consultancy charges for Rs.32.52 Lacs The assessee claimed deduction of said sum which was stated to be paid for civil construction. It was submitted that the expenses were in the nature of repairs and maintenance of civil structures and hence, allowable. The attention was drawn to the fact the similar expenditure was allowed by Ld. CIT(A) in earlier years. The attention was also drawn to favorable order of Tribunal for AY 1990-91. However, since the department was in further appeal in AY 1990-91, the said expenditure was disallowed, holding the same to be capital in nature. Since no new asset was created, depreciation was also denied. The learned CIT(A), following the orders for AYs 1995-96 to 2003-04, held the same to be capital in nature. We find that this ground is covered in assessee’s favor by the decision of Tribunal up-to AYs 2003-04. Nothing contrary is on record. Respectfully

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 following the same, we allow this ground of appeal. Consequently, the plea of allowance of depreciation against the same becomes infructuous. 4.3 Gr.No.3: Disallowance of Service Charges for Rs.1.93 Lacs The charges represent service charges paid to Sh. L. H.Hirani. The attention was drawn to the fact the similar expenditure was allowed by Ld. CIT(A) in earlier years up-to AY 1994-95. The attention was also drawn to favorable order of Tribunal for AY 1992-93. However, disregarding the same, the expenditure was disallowed. Since no new asset was created, depreciation was also denied. The learned CIT(A), following the orders for AYs 1995-96 to 2003-04, held the same to be capital in nature. We find that this ground is covered in assessee’s favor by the decision of Tribunal up-to AYs 2003-04. Nothing contrary is on record. Respectfully following the same, we allow this ground of appeal. Consequently, the plea of allowance of depreciation against the same becomes infructuous. 4.4 Gr. No.4: Exclusion of foreign gains This ground is connected with Ground No. 5 of revenue’s appeal. As already noted, the assessee offered foreign exchange gain of Rs.4352.74 Lacs in the Profit & Loss Account. Till AY 2002-03, the assessee claimed deduction of forex loss which was denied to the assessee treating it as a notional loss. Therefore, the assessee submitted that the gain should also not be taxed since the claim of notional loss was not accepted by the department in earlier years. However, the said plea could not find favor with Ld. AO who denied the adjustment of the same.

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 The learned first appellate authority confirmed the same since forex loss disallowance made in earlier years was deleted in those years and therefore, the gain would be fully taxable. We are of the opinion that similar treatment would be given to losses as well as gains. Since the deduction of the losses has already been allowed to assessee in earlier years, similar gains would be chargeable to tax. Therefore, by confirming the stand of Ld. CIT(A), we dismiss this ground of appeal. 4.5 Gr.No.5: Disallowance u/s 14A This ground is connected to Gr. No. 8 of revenue’s appeal. Therefore, respectfully following the stand of Tribunal in earlier years, we confirm the estimation made by Ld. CIT(A). This ground stand dismissed. 4.6 Gr. No.6: Treatment of Interest income of Rs.3841.56 Lacs and Truck Hire Charges for Rs.2.79 Lacs as Income from other sources These items were treated as Business Income by the assessee which eventually led to higher claim of deduction under Chapter VI-A. The assessee submitted that the stated income was arising out of business operations. However, as held in earlier years, these items were treated as income from other sources. The same upon confirmation by Ld. CIT(A), is under challenge before us. We find that this ground would be remitted back to the file of Ld. AO on similar lines as done by the Tribunal in its latest order for AYs 2002-03 & 2003-04. Accordingly, Ld. AO is directed to re-adjudicate the same as directed by Tribunal in AY 1999-2000 after providing due opportunity of hearing to the assessee. This ground stand allowed for statistical purposes.

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 4.7 Gr. No.7: Disallowance u/s 35D and non-admission of additional ground This issue was not subject matter of quantum assessment order and was raised before Ld. CIT(A) for the first time as additional ground. The assessee claimed deduction of Rs.0.83 Lacs, being 1/10th of tradeable warrant issue expenses since the said claim was omitted to be lodged in the return of income. However, Ld. CIT(A) declined to admit the same. Drawing analogy from the decision of Hon’ble Bombay High Court in CIT V/s Pruthvi Shares & Stockbrokers Pvt. Ltd. (349 ITR 336), we direct Ld. AO to admit this claim and adjudicate the same after providing due opportunity of hearing to the assessee. This ground stand allowed for statistical purposes. 4.8 Gr. No.8: Premium on Leased land for Rs.30.73 Lacs The assessee claimed deduction of premium on leasehold land. The assessee submitted that it obtained various lands on lease basis and paid premium from time to time. The period of lease was in the range of 30 to 99 years and therefore, the lease premium was to be written-off over such a period. The attention was drawn to the fact that similar deduction was allowed up-to AY 1997-98. However, following the stand taken in AYs 1998-99 to 2003-04, the expenditure was held to be capital in nature and the depreciation was also denied since land was not entitled for depreciation under Income Tax Act. The stand of Ld. AO, upon confirmation by first appellate authority, is under challenge before us. In line with the latest order of the Tribunal for AYs 2002-03 & 2003-04, we confirm the stand of Ld. CIT(A) and dismiss this ground of appeal.

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 4.9 Gr. No.9: Addition of unutilized MODVAT credit It was noted that the assessee did not add MODVAT credit to closing stock. Similar adjustment was made while framing assessment for AYs 1990-00 to 2003-04. Referring to provisions of Sec. 145A, the value of closing stock was increased by Rs.576.59 Lacs, being closing unutilized MODVAT Credit. However, at the same time, the credit of opening MODVAT credit for Rs.775.13 Lacs was allowed as deduction. In other words, the net income was reduced to the extent of differential of opening and closing MODVAT credit i.e. Rs.198.54 Lacs. The learned first appellate authority, relying upon earlier years, confirmed the same. In line with the latest order of the Tribunal for AYs 2002-03 & 2003-04, we reverse the stand of lower authorities and hold that no such adjustment would be warranted. In other words, the total income of the assessee would not be reduced by Rs.198.54 Lacs. This ground stand allowed. 4.10 Gr. No.10: Adjustment of Capital Gain on Sale of investment for Rs.311.81 Lacs u/s 115JB The assessee, while computing income u/s 115JB, reduced an amount of Rs.311.81 Lacs, being gain on sale of investments. This item was routed through Profit & Loss Account. As per stand taken in AYs 1998- 99 to 2003-04, the said amount was added back while computing book profits u/s 115JB. The learned first appellate authority, relying upon earlier years, confirmed the same. In line with the latest order of the Tribunal for AYs 2002-03 & 2003-04, we confirm the stand of Ld. CIT(A) and dismiss this ground of appeal.

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 4.11 Gr. No.11: Adjustment of Dividend Distribution Tax u/s 115JB and non-admission of additional ground This issue was not subject matter of quantum assessment order and was raised before Ld. CIT(A) for the first time as an additional ground. The assessee challenged addition of Dividend Distribution Tax for Rs.1393 Lacs while computing Book Profit u/s 115JB. However, Ld. CIT(A) declined to admit the same. Drawing analogy from the decision of Hon’ble Bombay High Court in CIT V/s Pruthvi Shares & Stockbrokers Pvt. Ltd. (349 ITR 336), we direct Ld. AO to admit the said claim and adjudicate the same after providing due opportunity of hearing to the assessee. This ground stand allowed for statistical purposes. 4.12 Gr. No.12 & 13 are general in nature and do not require any specific adjudication. 4.13 Resultantly, the appeal stands partly allowed to the extent as indicated in the order. The learned AO is directed to recompute the income of the assessee in terms of our adjudication. Assessee’s Additional Ground of Appeal & Revenue’s Cross- objections 5.1 The assessee, vide petition dated 15/05/2017, has pleaded for admission of an additional ground of appeal which read as under: - 1. That on the facts and in the circumstances of the case, sales tax incentive/subsidy of Rs.1,28,25,66,755/- availed during the year under consideration be treated as capital receipt and hence not taxable in computing total income under the normal provisions of the Act. 2. That on the facts and in the circumstances of the case, sales tax incentive/subsidy of Rs.1,28,25,66,755/- availed during the year under consideration be treated as capital receipt and hence be excluded in computing book profit u/s 115JB of the Act.

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 3. That the appellant craves leave, to add, to amend, modify, rescind, supplement, or alter additional grounds taken here-in-above, either before or at the time of hearing of this appeal. The assessee, in the pleading, have submitted that the incentives were granted for setting up or expansion of existing units in the backward areas / specified areas and for generation of employment and therefore, the same would be capital in nature. In the above background, a plea has been raised to admit the said additional ground of appeal. Reliance has been placed on the decision of Hon’ble Apex Court in Jute Corporation of India Ltd. V/s CIT (187 ITR 688), decision of jurisdictional High Court in Ahmedabad Electricity Co. Ltd. V/s CIT (199 ITR 351) and the decision of this Tribunal in Nivea India P.Ltd. V/s DCIT (2017 189 TTJ 422). 5.2 Au Contraire, the revenue has filed cross-objections, against admission of additional ground of appeal, at this stage. The objection raised by revenue read as under: - Whether on the facts and in the circumstances of the case, the assessee is right in filing additional ground of appeal in respect of sales tax incentive/subsidy of Rs.1,28,25,66,755/- availed during the year under consideration before Hon'ble ITAT at this stage, whereas there is no disclosure of the same in audit report as well as before the AO during assessment proceedings and the Id. CIT(A) during the appellate proceedings. 5.3 Upon perusal of latest Tribunal order for AY 2002-03, ITA No. 7092/Mum/2005 dated 10/08/2018, we find that under similar factual matrix, the additional ground raised by the assessee was admitted by the co-ordinate bench by observing as under: - 67. We have considered rival submissions and perused materials on record. Undisputedly, the assessee has not claimed the Sales Tax incentives received by it as capital in nature either in the return of income filed for the impugned assessment year nor in course of proceedings before the Departmental Authorities. In fact, the assessee itself has treated the Sales Tax incentive received by it as revenue in nature by including it in the sales as reflected in the books of account and audited

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 financial statements. It is only at the second appellate stage before the Tribunal the assessee has claimed the Sales Tax incentives received by it as capital in nature by raising the additional grounds. Thus, the first issue which is to be decided is, whether the additional grounds raised by the assessee at this stage are to be admitted or not. It is the contention of the assessee before us that on the basis of ratio laid down in certain judicial precedents, wherein, it is held that Sales Tax incentive received is capital in nature, the assessee has raised the additional ground. On a careful analysis of the decisions relied upon by the learned Authorised Representative in support of admission of additional ground, we find that if the basic facts relating to the issues raised in the additional grounds are available on record and it does not require investigation into fresh facts and the issue raised is a legal issue the additional ground raised can be admitted even if such additional grounds are raised by the assessee on the basis of decisions rendered subsequently. If we examine the facts of the present case, it is seen that the fact that the assessee has received Sales Tax incentive which forms part of the sales is evident from the audited financial statements of the assessee filed before the Assessing Officer. The only thing which requires to be decided is a purely legal issue as to whether the receipt is of revenue or capital nature keeping in view the relevant Sales Tax incentive schemes as well as the nature of incentive granted. Once such facts are examined from the relevant Sales Tax incentive schemes and for what purpose the Sales Tax incentive is to be utilized, then, the nature of such receipt can be decided by applying the principles laid down in the judicial precedents relied upon by the assessee. Article–265 of the Constitution of India mandates that no tax shall be levied and collected except by authority of law. It is also accepted legal position that all receipts are not in the nature of income. Under the provisions of Income Tax Act, 1961, receipts which are capital in nature are not taxable. Therefore, it needs to be examined in the touchstone of the judicial precedents relied upon by the assessee whether the Sales Tax incentive received are of capital or revenue nature. That being the case, we cannot shut the door on the assessee from raising the additional grounds. That being the case, we are of the considered opinion that the additional grounds raised by the assessee have to be admitted. Accordingly, we do so. However, it is a fact on record, the issues raised in the additional grounds were never raised by the assessee in course of proceedings before the Departmental Authorities. In fact, the assessee itself has treated the Sales Tax incentives as a revenue receipt in its books of account. Moreover, the nature of subsidy granted have to be determined keeping in view the relevant Sales Tax incentive schemes of the State Governments and specific purpose for which such subsidies / incentives were granted. These facts have not been examined by the Departmental Authorities, since, the assessee did not raise the issue earlier before them. Therefore, on over all consideration of facts and material on record and also keeping in view the fact that the Department should be given an fair and reasonable opportunity to examine assessee’s claim, we are inclined to restore the issues raised in the additional grounds to the file of the Assessing Officer for fresh adjudication keeping in view the relevant Sales Tax incentive schemes and the decisions relied upon by the assessee. Needless to say, the Assessing Officer must afford reasonable opportunity of being heard to the assessee before deciding the issues through a speaking order. Both the additional grounds are allowed for statistical purposes.

AMBUJA CEMENTS LIMITED Assessment Year: 2004-05 Similar additional ground was admitted for AY 2003-04 also. Facts being pari-materia the same, following the consistent view of the Tribunal, we admit the additional ground of appeal as raised by the assessee and remit the same back to the file of Ld. AO on similar lines. The additional ground stand allowed for statistical purposes whereas the cross- objections filed by the revenue stand dismissed. Conclusion 6. The assessee’s appeal as well as revenue’s appeal stand partly allowed to the extent indicated in the order. The cross-objection filed by the revenue stand dismissed.

Order pronounced in the open court on 06th January, 2020. (Mahavir Singh) (Manoj Kumar Aggarwal) "ाियक सद" / Judicial Member लेखा सद" / Accountant Member मुंबई Mumbai; िदनांक Dated : 06/01/2020 Sr.PS, Jaisy Varghese आदेशकी"ितिलिपअ"ेिषत/Copy of the Order forwarded to : अपीलाथ"/ The Appellant 1. ""थ"/ The Respondent 2. आयकरआयु"(अपील) / The CIT(A) 3. आयकरआयु"/ CIT– concerned 4. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. गाड"फाईल / Guard File 6. आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt.