NOVRTIS INDIA LTD, MUMBAI V. ADDL CIT CIR 7(1), MUMBAI

CO 190/MUM/2011

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3313 (ITAT-MUMBAI)
• Duration Of Justice: 12 year(s) 4 month(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 19-03-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-01-2024
• Assessment Year: 2002-2003
• Appeal Filed On: 17-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: WAY OF EXCISE DUTY; SALES TAX CANNOT BE TAKEN
• Keywords: Capital asset; Business income; Depreciation; Transfer pricing; Business expenditure; International transaction; Rule of consistency; Earning of tax free income; Retrospective amendment; Question of law; Cost of acquisition; Fair market value; Bad and doubtful debts; Valuation report; Condonation of delay; Revised return; Revenue expenditure; Capital expenditure; TDS; Rule 8D; Set aside; Capital Gains; CHAPTER IV
• Section: 147; 132; 154; 80C; 143(3); 2(14); 142(1); 80HHC; 153A; 14A; 37(1); 80G; 143(1); 195; 143(2); 64; 113; 43; 48; 10(33); 10(33); 2(A); 73; 72; 13; 119; 22; 153C; 255(4); 92CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “B”, MUMBAI BEFORE SHRI AMIT SHUKLA, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA NO.6832/MUM/2010(A.Y. 2002-03) M/s. Novartis India Limited 6 th & 7 th Floor Inspire BKC “G” Block, BKC Main Road Bandra Kurla Complex, Bandra (E) Mumbai – 400051 PAN: AAACH2914F v. Asst. Commissioner of Income –Tax - 7(2)(2) {Earlier Addl. Commissioner of Income –Tax – 7(1)} 1 st Floor, Aayakar Bhavan M.K. Road, Mumbai - 400020 (Appellant) (Respondent) ITA NO.6772/MUM/2010 (A.Y. 2002-03) Addl. Commissioner of Income –Tax – 7(1) Room No. 622, Aayakar Bhavan M.K. Road, Mumbai - 400020 v. M/s. Novartis India Limited {Earlier Known as Hindustan Ciba Giegy Ltd.,} Sandoz House, Dr. A.B. Road Worli, Mumbai – 400018 PAN: AAACH2914F (Appellant) (Respondent) CO NO.190/MUM/2011 [ARISING OUT OF ITA NO.6772/MUM/2010 (A.Y. 2002-03)] M/s. Novartis India Limited {Earlier Known as Hindustan Ciba Giegy Ltd.,} Sandoz House, Dr. A.B. Road Worli, Mumbai – 400018 PAN: AAACH2914F v. Addl. Commissioner of Income –Tax – 7(1)} Room No. 622, Aayakar Bhavan M.K. Road, Mumbai - 400020 (Appellant) (Respondent) ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 2 Assessee Represented by : Shri J.D. Mistry & Shri Nitesh Joshi Department Represented by : Shri S. Srinivasu Date of conclusion of Hearing : 18.01.2024 Date of Pronouncement : 20.03.2024 O R D E R PER S. RIFAUR RAHMAN (AM) 1. These appeals are filed by assessee and revenue against order of the Learned Commissioner of Income Tax (Appeals)-13, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 20.05.2010for the A.Y.2002-03. Cross objection is filed by the assessee against the appeal of the revenue. 2. Since the issues raised in all the above appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. ITA No. 6832/MUM/2010 (A.Y. 2002-03) – ASSESSEE APPEAL 3. At the outset, we observe from the record that assessee has raised following additional grounds of appeal: - ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 3 “1. On the facts and in the circumstances of the case, the assessment order dated 22 March 2005 passed by the Additional Commissioner of Income Tax ('Addl. CIT') under section 143(3) of the Income-Tax Act, 1961('the Act') is bad in law, illegal and without jurisdiction and/or in the excess of jurisdiction, on the grounds amongst others, that he did not possessed legal and valid jurisdiction under the Act to pass the assessment order and consequently the Hon'ble tribunal he pleased to quash the said order. 2. On the facts and the circumstances of the case, the Addl. CIT lacked jurisdiction to pass the assessment order under section 143(3) of the Act dated 22 March 2005 and to exercise the powers of performing the functions of an assessing officer, without establishing that he possess such jurisdiction conferred on him under section 120(4)(b) of the Act. Accordingly, in the absence of an order under Section 120(4)(b) conferring jurisdiction on the Addl. CIT the assessment order dated 2 August, 2010passed by him needs to be quashed. 3. On the facts and the circumstances of the case, the assessment proceedings have been initiated by issuing of a notice under section 143(2) of the Act by the Assistant Commissioner of Income Tax (lower authority), without establishing that the fact of an order transferring jurisdiction under section 127 of the "Act to the Addl. CIT, the order of assessment passed by the Addl. CIT (higher authority), is withoutjurisdiction and needs to be quashed.” 4. At the time of hearing, Ld.AR of the assessee brought to our notice relevant facts relating to the additional grounds and filed his written submission, he relied on his written submissions. For the sake of clarity, the written submissions filed by the Ld. AR are reproduced below: - 1. In the said additional grounds, the Assessee has challenged the validly of the assessment order passed by the Additional Commissioner of Income-tax- Range-7(1), Mumbai (the Addl. CIT) as without jurisdiction. This is because: a. the Addl. CIT did not qualify to be the Assessing officer (the AO) in terms of section 2(7A) read with section 120(4)(b) of the Income-tax Act 1961 (‘the Act’); and b. Assuming without admitting that he could be considered as the AO, in the absence of transfer of jurisdiction in his favour as per section 127 of the Act, he could not have passed the said assessment order. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 4 It is submitted that, a favourable view being taken by the Tribunal on either of the aforesaid aspects would render the assessment order for AY 2002-03 impugned herein to be illegal and bad in law. In the present case, it is submitted that none of the aforesaid conditions have been fulfilled. 2. The brief facts, as may be relevant for deciding the aforesaid issues, are as stated hereafter: Sr. No. Dates Events 1 31.10.2002 The Appellant filed its Return of income (‘ROI’) for the assessment year (‘AY’) 2002-03 with the Assistant Commissioner of Income- tax-7(1), Mumbai (the Asstt. CIT) being the then jurisdictional Assessing Officer (the AO) exercising jurisdiction over the assessee for making an assessment under the Act (see page 1 of Factual paper book-1) 2 21.02.2003 The aforesaid return of income was processed by the Deputy Commissioner of Income-tax–7(1), Mumbai(the Dy. CIT), pursuant to which he issued an Intimation under section 143(1) of the Act (see page 2 of Factual paper book-1). 3 12.03.2003 In response to a rectification application dated 06.03.2003 filed by the Assessee for short grant of credit of TDS, the Dy. CIT had passed an order under section 154 of the Act (see pages 3-5 of Factual paper book-1). 4 25.08.2003 The Dy. CIT issued a notice under section 143(2) of the Act, selecting the Assessee’s ROI for scrutiny (see page 6 of Factual paper book-1). 5 17.10.2003 The Addl. CIT (Transfer Pricing -II) issued notice under section 92CA(2) of the Act wherein it is mentioned that the Dy. CIT vide letter dated 14.10.2003 referred the case for determination of Arm’s Length price for international transaction (Copy of notice submitted during the course of hearing on 11.01.2024) 6 29.03.2004 The Assessee filed a revised ROI with the Asstt. CIT (see pages 7-8 of Factual paper book-1). 7 20.09.2004 The Asst CIT issued notice under section 143(2) of the Act (see page 9 of Factual paper book-1). 8 09.11.2004 The Addl. CIT issued notices under sections 143(2) and 142(1) of the Act (see pages 10 to 13 of Factual paper book-1). It is the Assessee's submission that, it has not been shown by the Revenue despite repeated opportunities being provided by the ITAT that the Addl. CIT qualified as an AO as per section 2(7A) read with section 120(4)(b) of the Act. In any event, assuming without admitting that he would qualify as an AO, it has not been shown that the jurisdiction which admittedly vested with the Dy. CIT/Asstt. CIT was transferred in his favor in accordance with section 127 of the Act. It is hence submitted that, the entire assessment proceedings thereafter and the passing of the assessment order are without jurisdiction. 9 22.11.2004 The Addl. CIT again issued notices under section 143(2) and 142(1) of the Act (see page 14 to 18 of Factual paper book-1). ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 5 Sr. No. Dates Events 10 20.01.2005 The Addl. CIT (Transfer Pricing-II) passed the assessment order under section 92CA(3) of the Act. In the said order, it is mentioned that a reference under section 92CA(1) of IT Act was received on 16.10.2003 from the Dy. Commissioner of Income- tax, Circle 7(1), Mumbai. (Copy of the said order is submitted during the course of hearing on 11.01.2024) 11 09.03.2005 The Addl. CIT called for clarification from the valuer whose valuation report has been relied upon by the Assessee in respect of the issue relating to determination of cost of acquisition of an asset as on 01.04.1981 (see page 19 of Factual paper book-1) 12 22.03.2005 The Addl. CIT passed the assessment order under section 143(3) of the Act. As stated hereinabove, it is submitted that this order is nonest, as it has been passed by an authority without jurisdiction. 13 05.05.2008 In the assessment order for the AY 2006-07, it has been observed by the Addl. CIT that the case was assigned to him for completion of the assessment vide order dated 05.05.2008 passed under section 120(4)(b) of the Act. Though the Assessee denies the validity of the jurisdiction of the Addl. CIT for AY 2006-07 (which will be argued in the appeal for that year), it is submitted that admittedly on 22.03.2005 i.e., the date on which the assessment order for the year under consideration was passed, the Addl. CIT had no jurisdiction as an AO. The extract of assessment order for the AY 2006-07 is submitted during the course of hearing on 18.01.2024. In the written submissions dated 05.08.2021 filed by the then Ld. DR before the Tribunal, he has referred to communication dated 02.07.2021 from the Asstt. CIT (see pages 3 and 5 of the said submission) wherein, it is an accepted position that this order allegedly assigning jurisdiction in favor of the Addl. CIT is not available on record. Therefore, the presumption should be that even this order does not exist. It also clarifies that for the year under consideration, no document conferring jurisdiction in favour of Addl. CIT is available on record. 3. Section 143 of the Act which lays down the procedure for assessment identifies the assessing officer as the authority responsible for scrutinizing the return of income and passing the assessment order. The expression 'Assessing Officer' has been defined in section 2(7A) of the Act to inter-alia mean the Asst. Commissioner or the Dy. Commissioner, who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub- sections (1) or (2) of section 120 or any other provisions of the Act. Based thereon, the jurisdiction to assess the assessee's income vested with the Dy. CIT/the Asstt. CIT pursuant to which the assessee had filed its return including the revised return of income with them. The intimation under section 143(1) of the Act was issued by them and the notices under section 143(2) of the Act were also issued by them. Insofar as relevant, the Addl. Commissioner of Income-tax could be regarded as an assessing officer under the Act, only if he is directed under section 120(4)(b) of the Act to exercise or perform all or any of the powers and functions conferred on or assigned to an assessing officer under the Act. Therefore, it is essential that the pre-conditions referred to in section 120(4)(b) of the Act are fulfilled before the Addl. CIT is conferred with the jurisdiction to act as an assessing officer. A bare perusal of section 120(4)(b) of the Act shows that the following twin conditions need to be fulfilled :. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 6 (a) the Central Board of Direct Taxes (the CBDT) by an order empowers the Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner to issue orders in writing that the powers and functions conferred on or as the case may be assigned to the assessing officer by or under the Act in respect of any specified area or persons or classes of person or income or classes of income or cases or class of cases shall be exercised or performed by the Addl. Commissioner; (b) Pursuant to the aforesaid authorization by the CBDT, the specified authority issues orders conferring such powers on the Addl. CIT. The Assessee submits that, as stated hereinabove in greater detail, none of the aforesaid conditions have been fulfilled. It is well settled by now that, if the jurisdiction of an authority is challenged, then, the said authority has to show that the jurisdiction validity vested in him. In the present case, the Revenue has not discharged this burden despite repeated opportunities being provided to them. In view thereof, the notice dated 09.11.2004 issued by the Addl. CIT and the subsequent assessment proceedings carried out by him is without jurisdiction. Consequently, the assessment order dated 22.03.2005 passed by him under section 143(3) of the Act for assessment year 2002-03 is also non est and bad in law. 4. As stated hereinabove, in the assessment order passed by the Addl.CIT for A.Y.2006-07 a reference has been made to an order dated 05.05.2008 assigning such jurisdiction in favor of the Addl. CIT (which is now admitted by the Revenue as not available in the assessment record.). The assessee submits that validity of the said assignment order is a subject matter of and would be decided by the ITAT while deciding the additional ground raised in the appeal for AY2006-07. However, for the present purpose, it is relevant to note that if the jurisdiction was admittedly assigned in favor of the Addl.CIT on 05.05.2008, then, he had no authority to carry out the assessment proceedings and pass the assessment order dated 22.03.2005 for AY 2002-03. 5. Apart therefrom, the above referred chronology of facts shows that upto 20.09.2004, the jurisdiction over the Appellant’s case was exercised by the Dy. CIT /the Asst. CIT and thereafter, by the Addl. CIT. For transfer of the jurisdiction from the Dy. CIT/Asst. CIT to the Addl. CIT there has to be a valid order passed under section 127 of the Act vesting such jurisdiction in his favor. Assuming without admitting that the Addl. CIT could be regarded as the AO, in the absence of any valid transfer of jurisdiction from Dy. CIT/Asst. CIT to him, the assessment order dated 22.03.2005 passed by him is without jurisdiction. 6. Based on the above factual and legal position, it is respectfully submitted that similar issues have been considered by other co-ordinate Benches of the ITAT in the following sixteen (16) orders holding the assessment orders passed by the Addl. CIT to be without jurisdiction and, hence, illegal and bad in law: Sr no Name of the case AY ITA no Legal Paper book-1 Page no 1 Tata sons Ltd 2001-02 ITA no. 4497/Mum/2205 1-37 2 Tata Communication Ltd 2002-03 ITA no 7071/Mum/ 2005 38-86 3 Tata Communication Ltd (MA order) 2002-03 MA no 785/Mum/2017 87-91 4 Tata sons Ltd 2002-03 ITA no: 92-142 ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 7 Sr no Name of the case AY ITA no Legal Paper book-1 Page no 193/Mum/ 2006 5 Tata Sons Ltd 2004-05 ITA no: 2519/Mum/2009 and 2639/Mum/2009 143-169 6 Tata Sons Ltd 2005-06 ITA no: 5090/Mum/2012 170-187 7 Tata Communication Ltd 2003-04 and 2004-05 ITA no: 2891/Mum/2010 & ITA no 1015/ Mum/2010 188-229 8 Tata Power Co Ltd 2004-05 & 2005-06 ITA no: 3081/Mum/2009 & ITA no 3082/Mum/2009 230-303 9 Sabras Investment (Tata Chemicals Ltd) 1996-97 to 1998-99 ITA no 915 to 918/Mum/ 2012 304-385 10 Tata Communication 2005-06 & 2006-07 ITA no 4452 & 3460/Mum/2011 & ITA no 8768/Mum/2010 386-429 11 Tata Sons Ltd 2006-07 & 2007-08 ITA no 4893,2545, 4543 & 2487/Mum/2012 430-465 12 The Indian Hotel Company Ltd 2007-08 to 2009-10 ITA no 8570/Mum/2011 & 565/Mum/2013 & 2049/Mum/2014 466-501 13 Kishore Vithaldas 2006-07 & 2007-08 ITA no 5661/Mum/ 2017 & ITA no 8768/Mum 2010 502.1 to 502.51 14 Tata Communication 2007-08 ITA No -7514/MUM/2011 Copies submitted during the course of hearing on 5.08. 2022 15 Vertiv Energy Pvt Ltd 2009-10 & 2010-11 ITA no. 1975/Mum/2014 & 1771/ Mum/ 2015 16 Sandoz Private Limited 2005-06 & 2006-07 ITA no. 3871/ Mum/ 2013 & 3780/Mum/ 2013 Copy submitted during the course of hearing on 21.03. 2023 17 Tata International Limited 2006-07 ITA No.1605/Mum/2012 Copy submitted during the course of hearing on 11.01.2024 18 Nuclear Power Corporation of India Ltd 1998-99 to AY 2005-06 ITA Nos. 202, 114, 4413/M/2004, 3867/M/2008, 4743 to 4745/M/2007, 2452/M/2011 5. On the other hand, Ld DR submitted his objections towards the additional grounds raised by the assessee and also relied on the written ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 8 submission dated 12.08.2022 objecting to the issue raised by the assesse in the additional grounds, for the sake of clarity the same are reproduced below: “In addition to the original grounds of appeal made before the Hon'ble Bench, the Appellant vide letter dated 10.03.21 filed an additional ground of appeal challenging the jurisdiction of the Addl. CIT and the validity of the Assessment Order passed 143(3) of the Act. Further, in addition to the oral arguments made before the Hon'ble Bench during the physical hearing, the following written submission in the above referred case may also kindly be considered- 1. The grievance of the assessee appellant is that the assessment order passed u/s 143(3) by the Addl. Commissioner of Income Tax is without jurisdiction as there is no order u/s 120(4)(b) r.w.s. 2(7A) or u/s 127 of the I.T. Act. 2. The undersigned wishes to contest the above additional ground of the assessee on Five (5) broad propositions, which are as under- I. The additional ground is not fit to be admitted by the Hon'ble Tribunal; II. There exist notifications of the Board giving power of the Assessing Officer to the jurisdictional Addl. CIT; Identical issue decided in favour of Revenue by the Hon'ble Mumbai High Court in the case of N. Rajgopal (Appeal No. 1454/2016) and the Delhi High Court in the case of Pr. CIT vs Mega Corporation (ITA no. 128/2016) dated 23.02.2017. The decision of the Mumbai High Court has a binding on the Hon'ble Mumbai Tribunal being the Jurisdictional High Court decision on the issue. Besides there is a decision of the coordinate Bench, Mumbai in ITA No. 4493/Mum/2003 dated 11.07.2018 in ACIT Vs Stock Traders Pvt. Ltd which dismissed the additional ground of appeal on similar jurisdiction issue. IV. Bar on the Assessee in raising jurisdictional issue beyond one month as per the provisions of Sec.124(3) of the I.T. Act; V. Existing Hon'ble ITAT decisions, on the issue, cannot be followed as these are per incuriam or sub-silentio; 3. Admission of an additional ground by the Honble Tribunal In the case of National Thermal Power Corporation (229 ITR 383), the question of laws raised before the The Honble Supreme Court was as under:- "Whether Tribunal has jurisdiction to examine a question of law which arises from facts as found by authorities below and having bearing on tax liability of assessee even though such question was not raised before authorities below nor in grounds of appeal but raised by way of additional issue in a forwarding letter" ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 9 3.1 The Hon'ble Supreme Court has decided this issue as under:- "Under section 254, the Tribunal may after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is, thus, expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. There is no reason why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier." 3.2 The Hon'ble Supreme Court has clearly observed that the additional ground is to be admitted by the Tribunal to assess the correct tax liability in accordance with law. If in a subsequent judicial decision, certain item is decided to be allowed, the assessee can raise this issue in the additional ground to claim the relief if this benefit was not allowed to the assessee. In a nutshell, additional ground is to be admitted if it is a pure question law and for determination of correct tax liability. In the assesee's case, these both aspects are missing. Firstly, challenging the jurisdiction of assessing officer after 16 years after completion of assessment, is not a pure question of law. This needs to verify the facts from the case records. Hence, factual verification of existence of jurisdiction at the time of assessment is required to be done. Secondly, the assessee has not demonstrated how the assessee is seeking the levy of correct tax liability by raising such an additional ground. There is no issue of determining the correct tax liability in challenging the jurisdiction of the AO after 16 years time lapse. Hence in view of the decision of Hon'ble Supreme Court in the case NTPC (229 ITR 383), the additional ground raised by the assesee challenging the jurisdiction of AO after 16 years of completion of assessment order is non- maintainable. 4. The additional ground is not fit to be admitted by the Hon'ble Tribunal - I. The additional ground filed on 10.03.2021 i.e., after a lapse of 16 years is not admissible due to inordinate delay to the facts and circumstances of the case II. No prejudice is caused to the Assessee by passing an assessment order by the Additional CIT. III. Raising of jurisdictional issue cannot be considered as pure "question of law" that can be raised for the first time before the Hon'ble Tribunal; ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 10 IV. Such a jurisdictional issue being raised with respect to existence of an order u/s 120, u/s 124 or u/s 127 is not appealable under section 253 of the I.T. Act; 5. Delay in filing an additional ground: The additional ground of appeal should not be admitted due to inordinate delay in filing the ground. Taking example of A.Y.2002-03, the assessment order was passed on 22.03.2005. The assessee did not question the jurisdiction of the Assessing Officer before CIT(A). The assessee filed the instant appeal before the Tribunal. Even at the time of filing of appeal, the ground relating to the jurisdiction of Addl. CIT was not raised. The additional ground was filed the first time before the Tribunal on 10.03.2021. There is a delay of more than 16 years. Under these circumstances, the Assessee is required to give a satisfactory explanation before the Tribunal for the delay. The sequence of events from the stage of initiation of assessment proceedings to till the date of filing of additional ground, show that all along the assessee had participated and was satisfied that the Additional CIT was having valid jurisdiction to pass the assessment order. 5.1 It is submitted that the additional grounds raised by the assessee were different from the ordinary additional grounds arising from the orders of the authorities below. This is a different ground altogether where the validity of the assessment order is being challenged on account of lack of jurisdiction of the Addl.CIT for the first time after the gap of more than 16 years of filing the appeal. 5.2 In support of the above argument, the undersigned relies on the reference of Black's Law Dictionary - (i) Estoppel by acquiescence: estoppels arising from a party's failure to respond to a claim within a reasonable time after receiving notice of the claim, thereby giving rise to presumption of acceptance; (ii) Estoppel by laches: an equitable doctrine by which some courts deny relief to a claimant who has unreasonable delayed or been negligent in asserting a claim etc. Reliance is further placed on the following decisions: (i) State of Punjab vs. Bhatinda Dist. Co-operative Milk Producers Union Ltd. (2007) 11 SCC 363 (ii) State of Gujarat vs. Patel Raghav Natha and others AIR 1960 SCC 1297 (iii) Santosh Kumar Shivgonda Patil & Ors vs. Balasaheb Tukarams hevale (2009) 9 SCC 352 (iv) CIT vs. NHK Japan Broadcasting Corporation (2008) 305 ITR 137 (Del) (v) CIT vs. Hutchison Telecom Ltd. (2010) 323 ITR 320 (Del). 5.3 Although no time limit is prescribed for filing additional ground, it does not mean that it can be filed after any lapse of time in a reckless manner. Even when no time limit is provided for filing additional grounds, they need be filed within a reasonable time. In my respectful submission, if the entire ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 11 order is quashed after such a long time without deciding the merits of the case, there may be substantial loss of revenue to the Department on such an issue. It is further submitted that doctrine of laches needs to be invoked for unreasonable delay in asserting the claim. Accordingly, the additional ground should not be admitted. 5.4 This issue of delay in raising an additional ground after lapse of substantial time is covered by the decision of Honble Coordinate Bench of ITAT Mumbai in the case of ACIT 2(3), Mumbai Vs. Stock Traders Pvt. Ltd. In ITA No. 4493/Mum/2003 dated 11.07.2018. The Honble Tribunal has decided on the additional ground challenging the jurisdiction of Additional CIT as not having valid authority to perform and exercise the powers and functions of an Assessing Officer, as per the provisions of Section 2(7) r.w.s. 120(4)(b) of the Act. The Hon'ble ITAT held that the assessee's assertions, in the additional ground, after 15 years has no cogent basis, whatsoever and dismissed the additional ground. The relevant extract from the said order is as below: "20. In this case, the only reason for the assessee's allegation that the above provisions are not complied with is that the notice u/s.143(2) was issued by the ACIT. However, the assessment order has been passed by the Addl.CIT. We note that that the assessment order was passed on 22.03.2003. Since then the assessee has got no information whatsoever and has never ever had reason to challenge the jurisdiction of the Assessing Officer in this case. However, suddenly on 13.04.2018, the assessee has filed an additional ground that the Assessing Officer in this case did not have any jurisdiction. We note that there is no information in the possession of the assessee that the internal procedure of the department regarding the transfer and posting of officers has not been complied with. The assessee in this case after a lapse of 15 years is making a wild guess. In our considered opinion, there is no cogent reason to accede to this request of the Id. Counsel of the assessee. The case laws referred by the Id. Counsel of the assessee were rendered on the facts of those cases where the bench upon the facts has gone into the specifics and particulars of that case. In the present case, we have already held the assessee's assertion after 15 years has no cogent basis whatsoever. Hence, we are unable to accept the assessee's request that the assessment deserves to be quashed in as much as the Assessing Officer did not have the authority of law. Hence, the additional ground raised by the assessee stands dismissed." 5.5 During the hearing, the Id. AR of the assessee has relied on the judgement of the Hon'ble ITAT, J Bench in the case of M/s. Vertiv Energy Pvt. Ltd. (ITA No. 1975/MUM/014 and ITA No. 1771/MUM/2015 dated 22.06.2021. The Id. AR has emphasised on para no. 3.6 of this order. In this para, the Hon'ble ITAT has stated as under:- "We find under similar facts and circumstances, this Tribunal had indeed admitted the additional grounds raised by the assessee after a long gap of ten years or 15 years, as the case may be. And adjudicated those additional grounds". The AR contended that, the Hon'ble Tribunal has decided the issue of condonation of delay in filing an additional ground. 5.5.1 It is to be noted that the delay in filing of an additional ground in this case i.e. Vertiv Energy Pvt. Ltd. is only 5 years, whereas, in the assessee's ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 12 case, it is 16 years. Further, the Hon'ble Tribunal has not decided the issue of condonation of delay on merit. Hence, this decision is not applicable in the Assessee's case. The facts in the assessee's case are different. The delay in filing of an additional ground is 16 years and no cogent evidence or no explanation has been filed by the assessee to justify the substantial delay of 16 years. In fact, the decision of Hon'ble Tribunal, L Bench, in the case of Stock Traders Pvt. Ltd. as discussed in the above para is directly applicable in the assessee's case. In para 20 of this order, the Hon'ble Tribunal has discussed the delay of 15 years in filing an additional ground and on merit, the contention of the assessee is rejected. The delay in filing of an additional ground in the case of Stock Traders P. Ltd. Was of 15 years and in the case of assessee it is 16 years. Hence facts in the case of M/s, Stock Traders P. Ltd. and in case of the assessee are similar. Therefore, the decision of Hon'ble ITAT in case of Stock Traders Pvt. Ltd. is directly applicable in the assessee's case. 5.5.2 During hearing, the Id. AR of the assessee has also tried to differentiate the decisions in case of Stock Traders P. Ltd. It was argued that in the case of Stock Traders P. Itd., there was no cogent basis. However, in assessee's case, there is a ground as there are 10 to 15 orders of Hon'ble ITAT on this issue. Thus, the AR tried to contend that the reason for delay in raising additional ground after 16 years is mainly the decisions of Honb'le ITAT Mumbai in the case of Tata Sons & Other cases. It is to be noted that the decision of Hon'ble ITAT in the case of Stock Traders Pvt. Ltd. is dated 11.07.2018 and all theses decisions quoted by the AR were available before the order passed by the Hon'ble ITAT. Hence, the decision of Hon'ble ITAT in the case of Stock Traders Pvt. Ltd. is on the same facts and is directly applicable in the assesee's case. 5.6 The above stated decision in M/s. Stock Traders Pvt. Ltd. (supra) was rendered on 11.07.2018 which is much later to the decisions in M/s. Tata Sons Ltd. (76 Taxmann.com 126-Mumbai-Trib.)(A.Y. 2001-02) (Date of order 31.10.2016) and M/s. Tata Communications Ltd. (ITA No. 7071/Mum/2005) dated 30.06.2017. Therefore, it is submitted that the Co-ordinate Bench of Hon'ble Tribunal has not followed the decisions stated above and dismissed the additional ground on jurisdiction of Additional Commissioner to perform the functions of an Assessing Officer. The main principle laid down in this decision of M/s. Stock Traders Pvt. Ltd. (supra) is that an additional ground filed after 15 years has no cogent basis whatsoever. In the instant case of the assessee, as stated above, the additional ground challenging the jurisdiction of the Additional CIT has been filed after more than 16 years needs to be quashed on this ground of inordinate delay. 6. Additional Ground raised is not a pure question of Law- The additional ground raised is not a pure "question of law" as contended by the assessee. According to the assessee, this being pure "question of law" can be raised for the first time before the Hon'ble Tribunal in view of Hon'ble Supreme Court decision in the case of NTPC Ltd. vs CIT (1990) 229 ITR 383 (SC) and host of other judgments. 6.1 It is respectfully submitted that the first appellate authority and the AddI. CIT (AO) being lower authorities to the Hon'ble ITAT, had no occasion to examine the facts regarding jurisdiction which arise from notifications passed u/s 120 or existence of any defect in the assignment order u/s 124 as this issue was never agitated before them by the Assessee appellant. In my ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 13 humble submission, it certainly require further verification of facts at the level of lower authorities. Hence, the same cannot be considered as pure "question of law", where no further examination of records is required. 6.2 Even in the judgment of Mega Corporation Ltd. (2015) 62 taxmann.com 351 (Del.- Trib.), the first judgment on the identical issue, the Hon'ble Delhi Tribunal had set- aside the examination of the jurisdictional issue to the CIT(A) in the first round. In the said judgment, the Hon'ble Tribunal has also referred to the judgment of Mukti Properties (P.) Ltd. v. CIT [2012] 344 ITR 177/[2011] 12 taxmann.com 215/201 Taxman 23 (Cal.) (Mag.). In the said judgment Hon'ble Calcutta High Court has held that once an issue where examination of certain facts is required, has not been raised before the first appellate authority then the appellant is stopped from raising the said issue at a later stage. 6.3 In view of the above, it is submitted that in the present case, the jurisdictional issue is not pure "question of law" and hence should not be admitted. 7. Transfer of jurisdiction order is for administrative convenience of the Department/No Prejudice caused to the Asseessee 7.1 On this issue, the Hon'ble Madras High Court in the case of Advantage Strategic Consulting P. Ltd. Vs. PCIT (124 Taxmann.com 511) has given findings as under:- "Having heard the Id. Counsel for the parties, we are of the opinion that the writ appeal has become infructuous in view of the assessment order having been passed by the assessing authority in pursuance of the impugned transfer order u/s. 127 of the I.T. Act, 1961 dated 24.06.2016. We are further of the opinion that the transfer order passed u/s. 127 of the IT Act, 1961 is more in the nature of and administrative order rather than quasi judicial order and the assessee cannot have any right to choose his assessing authority, as no prejudice can be said to have been caused to the assessee depending upon which authority of the department passes ses the assessment order. The assessee can only be concerned with getting an opportunity of hearing before the concerned assessing authority and adduce is evidence and make his submissions before the concerned authority" 7.2 The Hon'ble Supreme Court of India in the case of Kashiram Aggarwalla Vs. Union of India & Ors. Has given findings as under:- Where, as in the present proceedings, assessment cases pending against the appellant before an office in one word are transferred to an officer in another ward in the same place, there is hardly any occasion for mentioning any reasons as such, because such transfers are invariably made on grounds of administrative conveniences, and that shows that on principle in such cases neither can the notice be said to be necessary, nor would it be necessary to record any reasons for the transfer. The Hon'ble High Court and Supreme Court have given clear findings that the jurisdiction issue is an administrative decision of the department. No prejudice is caused to the assessee depending upon which authority of the department passes an assessment order. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 14 7.3 In this case also, the Assessee has not demonstrated how any prejudice is caused to the Assessee by completion of an assessment by the Addl. Commissioner instead of Asstt. Commissioner/Dy. Commissioner. In view of this fact, the additional ground raised by the assessee is not maintainable and hence the same should not be admitted after the delay of 16 years. 8. To decide jurisdiction is an administrative matter and mistake, if any, is curative in nature. It is respectfully submitted that the power of conferment of jurisdiction to different authorities by the Board or the Commissioner of Income Tax is purely an administrative act of policy and convenience and hence has to be seen in that manner. As held in a number of judicial decisions, Sec. 120/124/127 are procedural in nature and defect, if any, is curative. Some judicial authorities are discussed as under:- 8.1 under:- Hon'ble Calcutta High Court in the case of Ashok Glass Works (1980) 125 ITR 491 has held as "The power of withdrawal or conferment of jurisdiction envisaged under ss. 123 and 124 by the Commissioner on appropriate authorities either as an original act or by realignment of jurisdiction is, being a general administrative act of policy and convenience, practically absolute and suffers from no fetters like the power u/s. 127. It is thus also open to the Commissioner to divest the jurisdiction of an existing authority either wholly or partially and confer the same on another appropriate authority if it is considered expedient by him for administrative or policy reasons. When such act is done, the cover of jurisdiction is withdrawn from the existing authority while the same cover is spread over to the other authority who thereby acquires jurisdiction over such matters specifically mentioned, which automatically comes before him for appropriate action under the Act from the stage it was before the original authority. This general power of conferment of jurisdiction by the Commissioner to different authorities under the Act under s. 123 or s. 124, which is obviously an administrative act of policy and convenience, is the power of the Government conferred on him as a delegated authority under the provisions of the statute. The power u/s.127 to transfer any case is much limited in scope as being limited to cases and subject to statutory fetters where an assessee has a right to be heard under certain conditions while the reasons for transfer are to be recorded." (emphasis supplied) 8.2 Apart from the above, the Hon'ble Delhi High Court in the decision of CIT vs. S.S. Ahuluwalia(2014) 47 taxman.com 169 (Del)has held as under :- "It is also clear that question of jurisdiction cannot be made subject matter of appeal, as the issue has to be decided on the administrative side by the Commissioner/Commissioners/ Board. Appeal can, however, be filed questioning the action of the Assessing Officer in not following the procedure mentioned/stipulated in Section 124. In Wallace Brothers & Co. Ltd. v. CIT [1945] 13 ITR 39, Federal Court had held that the objection to place of assessment could not be raised in an appeal against the assessment under the Income Tax Act, 1922. This view was affirmed by the Supreme Court in RaiBahadur Seth Teomalv. CIT [1959] 36 ITR 9 holding that the objection as to the place of objection under the 1922 Act could not be made a subject or issue before the appellate forums including the Tribunal and reference to the ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 15 High Court. Thus, the question of place or authority of the particular Assessing Officer was the matter of administrative convenience and not strictly a matter of subject matter jurisdiction and where there was an error or erroneous exercise by the Assessing Officer/Commissioner notwithstanding the challenge within stipulated time, it could be corrected by way of writ jurisdiction. The position is no different under the Act i.e. Income Tax Act 1961, as was elucidated by a Division Bench of this Court in Kanji Mal & Sons v. CIT [1982] 138 ITR 391/[1983] 12 Taxman 34 (Delhi), wherein reference to said two decisions was made and it was observed that if the assessee fails to raise objection before the Income Tax Officer within the time, he will be shut out from raising the question altogether. Further, if the issue was raised and decided by the Commissioner, the decision would be final and cannot be questioned in the appellate forums but where the Income Tax Officer does not refer the question to the Commissioner" (emphasis supplied) The aforesaid aspect has also been reiterated in para 35 in following words :- "35.......Sub-section (4) and (6) of Section 124 and for that matter sub- section (2) and (4) of Section 124 after amendment w.e.f. 1st April, 1988 are procedural sections. They relate to administration and exercise of powers/authority by the Assessing Officers/Income Tax Officers and are not part of the substantive law. That the Act i.e. Income Tax Act 1961 being complete code deals with substantive and procedural aspects. Section 120/124/127 govern the process of procedure for assessment and not the subject matter or its purpose. They relate to conduct of the Assessing Officer/Income Tax Officers and the assessees in respect of the assessment proceedings. It is a matter of merely a process. A irregularity in procedure need not result in annulment unless the statute specifically stipulates to the contrary. The appellate authorities have right to put a clock back and direct the Income Tax Officer/Assessing Officer to follow the procedure notwithstanding the difference between mandatory and directory procedural norms. In Grindlays Bank Ltd. v. ITO [1980] 122 ITR 55/3 Taxman 38 (SC), the Supreme Court quashed the assessment order but then issued directions to make fresh assessment in the circumstances of the case. The said principle has been followed in cases of violation of principles of natural justice wherein an order of remit/remand when justified are passed. The courts have taken recourse of pragmatism and exigencies of the situation rather than legalistic approach of void and voidable (see Principle of Administrative Law, M.P. Jain and S.N. Jain, Fifth Edition, 2007 at pages 592- 95)." (emphasis supplied) 8.3 The Punjab and Haryana High Court in the case of Subhash Chander (218 CPR 191) held that the question with regard to jurisdiction should have been determined by the Director General or the Chief Commissioner or the Commissioner and not by the Tribunal or the Commissioner (Appeals) in terms of Section 124(3)(b). Thus, the ITAT cannot entertain this ground of appeal on jurisdiction and it is a matter which can only be decided u/s 124(3)(b). 8.4 Further, while quoting the decision of Hindustan Transport Co. v. Inspecting Asstt. CIT [1991] 189 ITR 326/[1992] 63 Taxman 246 of the Hon'ble Allahabad High Court-Lucknow Bench, Hon'ble Delhi High Court in S.S.Ahuluwalia (2014) 47 taxman.com 169 (Del) has observed as under:- "A survey of the above provisions of the Act highlights the following situations. After creating the various Income Tax authorities, the Act does ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 16 not prescribe their respective jurisdiction or functions. Any case can be dealt with by any Income Tax authority with the possible exception of the Board. Accordingly, the various Income Tax authorities are of co-ordinate jurisdiction. What function or functions, which authority or officer, shall perform is left to be decided either by the Board or by the Commissioner. On what principles the Board and the Commissioner will allocate the functions is not indicated in the Act. The principle is, however, apparent from the nature of the enactment. The Act has been enacted with a view to collect revenue. Income Tax is the main source of revenue for the State. It is through revenue that the machinery of the State is run. It is desirable that the tax should be collected as early as possible. Collection of tax is preceded by assessment thereof. It is consequently desirable that the assessment proceedings should be completed expeditiously but expeditious disposal of an assessment does not mean that the assessee may be put to unwarranted harassment or prejudice. Therefore, the Board and the Commissioner shall take into account the convenience of the assessee also. It is with this purpose in view that it has been provided in Sub-section (1) of Section 127 that, whenever possible, an opportunity of hearing may be given to the assessee while transferring a case from one place to another. Since the assessee does not suffer any inconvenience or prejudice if a case is transferred locally, no such opportunity has been prescribed. From these provisions it is obvious that the Board and the Commissioner will exercise the power of allocation of functions to various authorities or officers in the exigency of tax collection with due regard to the convenience of the assessee. In other words, the allocation is a measure of administrative convenience. In such a situation, the concept of jurisdiction cannot be imported and, certainly, not in the sense of invalidating the resultant action on account of the defect in the exercise of functions. Being an enactment aimed at collecting revenue, the Legislature did not intend collection of revenue to be bogged down on account of technical plea of jurisdiction. It has, therefore, prescribed the limit up to which the plea of jurisdiction may be raised. As provided in Section 124(5)(a), the right is lost as soon as the assessment has been completed. Even where the right is exercised before the assessment is completed, the question is to be decided by the Commissioner or by the Board. Courts do not come into the picture. From the above provisions of the Act, it is apparent that the Act does not treat the allocation of functions to various authorities or officers as one of substanceIt treats the matter as one of procedure and a defect of procedure does not invalidate the end action. The answer to the first question, therefore, is that the power is administrative and procedural and is to be exercised in the interest of exigencies of tax collection and the answer to the second question is that, under the Act, a defect arising from allocation of functions is a mere irregularity which does not affect the resultant action." 8.5 What emerges from the above judicial decisions is that, the allocation of functions to various Authorities under the Income Tax Act is one of procedure and not of substance. Hence, any defect in procedure will not invalidate the end action i.e. even if any defect is found, this is an irregularity which is curable in nature. For this alternative argument, reliance is placed on the landmark decision of Hon'ble Supreme Court in Pr. CIT-4, Mumbai vs S.G. Asia Holdings (India) Pvt. Ltd. (ITA No. 6144 of 2019) dated 13-08-2018 (TS-775-SC-2019-TP) ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 17 where administrative issues of similar nature came for consideration of the Hon'ble Apex Court. In this case, the Hon'ble Tribunal had noted that when the mandatory instructions issued by the CBDT for making reference to the TPO was not followed by the AO, the T.P. adjustments were bad in law. The Hon'ble Tribunal held as under- "16.2 Before parting with this issue, the Ld. DR has emphasized that if the AO has not followed the mandatory directions, the case may be set aside to the file of the AO so that he may refer the matter to the TPO. We do not subscribe to this argument of the Ld. DR for the simple reason that the Tribunal is an Appellate Authority and therefore cannot interfere in the administrative matters which are mandatory as per the provisions of the Act. Reference to the TPO is an administrative matter, which was supposed to be followed by the AO, which he has failed to do so. The Tribunal cannot make any good to such lapse made by the AO." The Hon'ble Jurisdictional High Court affirmed the aforesaid view taken by the Hon'ble Tribunal. On further appeal by the Revenue, Hon'ble Supreme Court after analyzing the issue in detail, concluded as under- "8. However, the Tribunal ought to have accepted the submission made by the Departmental Representative as quoted in para 16.2 of its order and the matter ought to have been restored to the file of the Assessing Officer so that appropriate reference could be made to the TPO. It would, therefore, be upto the authorities and the Commissioner concerned to consider the matter in terms of Sub-Section (1) of Section 92CA of the Act." 9. Administrative order is not an appealable order The question of existence of an order u/s 120, u/s 124 or u/s 127 is non- appealable u/s 253 of the I.T. Act as there is no mention of these sections i.e., 120, 124 and 127 under section 253 where an appeal can be filed before the Hon'ble Tribunal. For the sake of clarity, sec. 253 is reproduced as under. "Appeals to the Appellate Tribunal. 253. (1) Any assessee aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order- (a) an order passed by a Deputy Commissioner (Appeals)] before the 1st day of October, 1998or, as the case may be, a Commissioner (Appeals)] under section 154], section 250, section 270A, section 271, section 271A,section 271J or section 272A; or (b) an order passed by an Assessing Officer under clause (c) of section 158BC, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30th day of June, 1995, but before the 1st day of January, 1997; or an order passed by an Assessing Officer under sub-section (1) of section 115VZC; or (c) an order passed by a Principal Commissioner or] Commissioner under section 12AAor under clause (vi) of sub-section (5) of section 80G or under section 263or under section 270Aor under section 271or under section 272Aor an order passed by him under section 154 amending his order under ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 18 section 263or an order passed by a Principal Chief Commissioner or Chief Commissioner or a Principal Director General or] Director General or a Principal Director or] Director under section 272A; or (d) an order passed by an Assessing Officer under sub-section (3), of section 143 or section 147or section 153A or section 153C in pursuance of the directions of the Dispute Resolution Panel or an order passed under section 154 in respect of such order; (e) an order passed by an Assessing Officer under sub-section (3) of section 143 or section 147 or section 153A or section 153C with the approval of the Principal Commissioner or] Commissioner as referred to in sub-section (12) of section 144BA or an order passed under section 154 or section 155 in respect of such order; (f) an order passed by the prescribed authority under sub-clause (iv) or sub- clause (v) or] sub- clause (vi) or sub-clause (via) of clause (23C) of section 10. (2) The Principal Commissioner or] Commissioner may, if he objects to any order passed by a Deputy Commissioner (Appeals)) before the 1st day of October, 1998 or, as the case may be, a Commissioner (Appeals)] under section 154 or section 250, direct the Assessing] Officer to appeal to the Appellate Tribunal against the order. (2A) *** (3) Every appeal under sub-section (1) or sub-section (2) shall be filed within sixty days of the date on which the order sought to be appealed against is communicated to the assessee or to the Principal Commissioner or] Commissioner, as the case may be : 9.1 From the provisions of section 253, it is apparent that there is no mention of any appeal that may be filed against an order passed u/s 120, u/s 124 or u/s 127 in the said section. Provided that in respect of any appeal under clause (b) of sub-section (1), this sub-section shall have effect as if for the words "sixty days", the words "thirty days" had been substituted." 9.2 As seen from the additional ground of appeal, the Assessee has challenged the existence of any order u/s 120(4)(b) or u/s 127 in favour of the Addl. CIT. However, the assessee has never challenged the existence of the assignment order either before the Addi. CIT or before the CIT (A). 9.3 Once the Act clearly prohibits filing of appeal against such jurisdictional orders, the same can not be challenged before the Hon'ble Tribunal u/s 253. Thus, clearly, the additional ground of appeal is not admissible at this stage. Hon'ble Supreme Court in the case of Rai Bahadur Seth Teomal v. CIT [1959] 36 ITR 9 (SC), while deciding the issue of "place of assessment" u/s sec. 64 of 1922 Act, the corresponding provision related to jurisdiction under sec. 124 of the 1961 Act, has held as under- The question then arises whether the objection as to the place of assessment, i.e., by the Income-tax Officer of Calcutta, could be challenged in appeal to the Appellate Assistant Commissioner and then before the ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 19 Appellate Tribunal. In our opinion it could not be. The scheme of the Act shows that no appeal in regard to the objection to the place of assessment is contemplated under the Act. Under proviso (iii) of section 64(3) of the Act a question as to the place of assessment, when it arises, is determined by the Commissioner. Any such order cannot be made a ground of appeal to the Appellate Assistant Commissioner under section 30 of the Act which provides for appeals against orders of assessment and other orders enumerated in section 30 but no appeal is there provided against orders made under section 64(3). Similarly appeals to the Appellate Tribunal which lie under section 33 of the Act also do not provide for any appeal on the question of the place of assessment. In Wallace Brothers' case (supra)at page 79 Spens, C.J., after referring to section 64(3) and the proviso thereto said: "These provisions clearly indicate that the matter is more one of administrative convenience than of jurisdiction and that in any event it is not one for adjudication by the court...This confirms us in the view that the scheme of the Act does not contemplate an objection as to the place of assessment being raised on an appeal against the assessment after the assessment has been made. As we have already pointed out, the objection was not raised in the present case even before the Appellate Income-tax Officer but only before the Appellate Tribunal." 9.4 The aforesaid ratio laid down by the Hon'ble Supreme Court is later followed by Hon'ble Delhi High Courtin the case of S.S. Ahluwalia [2014] 46 taxmann.com 169 (Delhi) in the following words- "It is also clear that question of jurisdiction cannot be made subject matter of appeal, as the issue has to be decided on the administrative side by the Commissioner/Commissioners/ Board, Appeal can, however, be filed questioning the action of the Assessing Officer in not following the procedure mentioned/stipulated in Section 124. In Wallace Brothers & Co. Ltd. v. CIT [1945] 13 ITR 39, Federal Court had held that the objection to place of assessment could not be raised in an appeal against the assessment under the Income Tax Act, 1922. This view was affirmed by the Supreme Court in Rai Bahadur Seth Teomal v. CIT [1959] 36 ITR 9 holding that the objection as to the place of assessment under the 1922 Act could not be made a subject or issue before the appellate forums including the Tribunal and reference to the High Court. Thus, the question of place or authority of the particular Assessing Officer was the matter of administrative convenience and not strictly a matter of subject matter jurisdiction and where there was an error or erroneous exercise by the Assessing Officer/Commissioner notwithstanding the challenge within stipulated time, it could be corrected by way of writ jurisdiction. The position is no different under the Act i.e. Income Tax Act 1961, as was elucidated by a Division Bench of this Court in Kanji Mal & Sons v. CIT [1982] 138 ITR 391/[1983] 12 Taxman 34 (Delhi), wherein reference to said two decisions was made and it was observed that if the assessee fails to raise objection before the Income Tax Officer within the time, he will be shut out from raising the question altogether. Further, if the issue was raised and decided by the Commissioner, the decision would be final and cannot be questioned in the appellate forums..." 9.5 The aforesaid decision is further followed in the case of Abhishek Jain (2018) 94 taxamnn.com 355 (Delhi HC). In view of the above judicial precedence, it is submitted that the additional ground challenging the ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 20 jurisdiction of the Add!. CIT deserved to rejected at the admission stage itself as non-maintainable. 10. Bar on the assessee in raising jurisdictional issue beyond one month as per the provisions of sec. 124(3) of the I.T. Act 10.1 It is respectfully submitted that the Supreme Court has held in Seth Hiralal Patni Vs. Sri Kali Nath, vide its decision on 4th May 1961 (1962 AIR 199), that the appellant was stopped from challenging the jurisdiction of the Bombay High Court to entertain the suit and to make a reference to the arbitrator; and he was equally stopped from challenging the authority of the arbitrator to render the award. Similar finding was recorded in Sushil Kumar Jalan Vs. ITO ITA 34/GAU/2011 order dt.03.02.2012 of the Guwahati Bench of ITAT. Thus, participation in proceedings amounts to acquiescence and thereby the assessee is stopped from contending the issue further. In the present case too, the assessee cannot, after order u/s 143(3) was passed, question jurisdiction in 2019. 10.2 The Punjab and Haryana High Court in the case of Subhash Chander (218 CPR 191) held that the question with regard to jurisdiction should have been determined by the Director General or the Chief Commissioner or the Commissioner and not by the Tribunal or the Commissioner (Appeals) in terms of Section 124(3)(b). Thus, the ITAT cannot entertain this ground of appeal on jurisdiction and it is a matter which can only be decided u/s 124(3)(b). 10.3 The Hon'ble High Court of Allahabad in the case of British india Corporation Ltd. (337 ITR 64), has held that any question of jurisdiction of the Assessing authority cannot be disputed after the completion of the assessment proceedings and that it has been specifically provided in the Act that the question of jurisdiction of the assessing authority can be gone into either by the Commissioner or by the Board as the case may be. An appeal to the Appellate Authority under the Act lies on the grounds as enumerated in Section 246. None of the clauses in section 246 show that an appeal on the question of jurisdiction of the assessing authority is maintainable. Subsequent change in jurisdiction, if any, unless brought to the notice of authority concerned, would not in any manner vitiate the assessment order in the absence of any objection with regard to lack of jurisdiction by the assessee. It is also held therein that the Tribunal at the most should have remitted the matter back to the IAC for completing the assessment and that it was not justified in annulling the assessment order. Thus, jurisdiction of the Assessing Officer can only be questioned u/s 124 of the I.T. Act. The concluding paragraph of the Hon'ble High Court is as under:- "18. It is reasonable to deduce that the question of jurisdiction of the assessing authority cannot be disputed after the completion of the assessment proceedings. Alternatively, if such a question arises, the said question can be addressed by the Commissioner or the Board, as the case may be, in view of sub-section (4) of section 124 and this by necessary corollary excludes the jurisdiction of the first appellate authority or the court." 10.4 The Hon'ble High Court of Calcutta in Elite Pharmaceuticals (73 taxmann.com 69) has held that assessee had lost right to raise objection to territorial jurisdiction by efflux of time that is beyond the time prescribed in ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 21 Sec. 124(3). In para 11, the High Court agreed with the view expressed by the Hon'ble Delhi High Court in the case of Shri Shyam Sunder Infrastructure (P) Ltd. relied on by Counsel for Revenue (kindly see para 16 of the decision) that "facially, section 124(3) stipulates a bar to any contention about of lack of jurisdiction of an AO. It is not as if the provisions of the Act disable an assessee form contending that in the given circumstances, the AO lacks jurisdiction, rather Sec. 124(3) limits the availability of those options at the threshold. The assessee upon receipt of the kind mentioned in Clause (a) and (b) of section-3 has the option to urge the question of jurisdiction. The expressed tenor and terms of the provisions clarify that such objections are to be articulated at the threshold or at the earlier points of time. The two points of time are stipulated in section 124(3)(a). () within one month from the date of service of notice or (ii) After completion of assessment - whichever is earlier In the present case, there is no dispute that the re-assessment notice was issued by the A.O. on 22/03/2010, upon its receipt, the assessee reiterated its earlier return on 21/04/2010. Since its response led to objection as to the jurisdiction, it lost the capacity to urge the ground by virtue of the provision u/s.124(3)(a). This condition has been obviously overlooked by the ITAT which proceeded to set aside the assessment and completed the re- assessment proceedings." 10.5 The Hon'ble ITAT Chandigarh in Punjab Urban Development Authority, Mohali (42 taxmann.com 160) held that once a notice u/s 143(3) is issued by a particular officer and if assessee wishes to object to such jurisdiction then objection has to be raised in terms of section 124(3)(a) within 30 days of issue of such notice and, in absence of such objection, the assessee cannot challenge jurisdiction later on. Kindly see para 21 for the decision thereon. 10.6 Moreover, on the identical question of facts and law, Hon'ble Delhi High Court in the case of Pr.CIT Vs. Mega Corporation Ltd (ITANo.128/2016; order dated 23-02-2017) has clearly laid down the law that sec. 124(3)(a) enacts a statutory bar to the question of jurisdiction. This principle has been clearly laid down by the Hon'ble High Court in the following words :- "Para 7 Secondly, even if for some reason, the assessee were unaware of the notification, it became aware that the ACIT was exercising jurisdiction when it received notice from that official in August 2008. Since that was in continuation of the proceeding by the DCIT it could well have been urged by the assessee within the stipulated time that the said officer, ACIT did not possess jurisdiction. Ifs failure to do so within the stipulated time i.e. one month after receipt of notice which was in fact a condition of sec. 143(2) proceeding and was treated as such by the assessee precluded it from urging lack of jurisdiction." In the said decision, Hon'ble High Court has used the abbreviation ACIT for Addl. Commissioner of Income Tax and DCIT for Dy. Commissioner of Income Tax. The above decisions of various High Courts and Tribunal uphold the ratio that jurisdiction has to be questioned and settled u/s 124 of the I.T. Act within the time limits prescribed therein and that is it not an appealable matter. Further, having subjected oneself to jurisdiction, the assessee cannot ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 22 question the same when the time for such relief is barred by limitation as available u/s 124. 11. Additional CIT is also an Assessing Officer. It is respectfully submitted that Sec. 2(7A) which defines Assessing Officer always meant Joint Commissioner who was directed under Sec. 120(4)(b) to exercise or perform all or any of the powers and functions conferred or assigned to an Assessing Officer (Joint Commissioner was substituted for "Deputy Commissioner or Deputy Director" by the Finance Act, 1998 w.e.f. 1- 10- 1998. Section 2(28C) was brought on the statute by Finance Act, 1998 w.e.f. 1-10-1998 and this section gives the definition of Joint Commissioner of Income Tax; Joint Commissioner means a person appointed to be a Joint Commissioner of Income Tax or an Addl. Commissioner of Income Tax under Sec. 117(1). Thus, a Joint Commissioner always meant an Addl. Commissioner from 1-10-1998 itself. Consequently, an Assessing Officer as in Sec. 2(7A) always meant Addl. Commissioner authorized u/s 120(4)(b) right from 1-10-1998. Further, "Addl. Commissioner" has been inserted by Finance Act, 2007 with retrospective effect from 1-6-1994 in sec.2(7A). The amendment to Sec.2(7A) issued in Circular No.3/2008 dated 12-3-2008 which is explanatory notes to the Provisions of Finance Act 2007 reads that it is a clarificatory amendment to the definition of Assessing Officer and definition of certain other Income Tax authorities. It is stated that Addl. Commissioner was not specifically mentioned in Sec. 2(7A) [definition of Assessing officer] because it was already included in the definition of Joint Commissioner u/s 2(28C); and in order to further clarify the intention of the legislator with regard to the meaning of the term "Assessing Officer", amendments have been carried out through Finance Act, 2007 and will be effective from 1st June, 1994; similar amendments were also carried out in Sec. 120(4)(b). Therefore, AO always meant Addl. Commissioner from 1-6-1994 and in any event definitely from 1-10-1998. This is a definition of Assessing Officer, which is on the statute; it is reiterated that this is on the statute and not an interpretation of the statute. 11.1 Having established that A.O mean Addl. Commissioner, the undersigned shall now proceed to demonstrate that the Addl. Commissioner, was authorized under clause 120(4)(b) to be an Assessing Officer per section 2(7A) of the I.T. Act. Gazette Notification dated 31-07-2001 in SO732(E) authorized the Commissioners of Income Tax to issue orders in writing for the exercise of powers and performance of the functions by Joint Commissioners of Income Tax in respect of persons, classes of persons and territories and also authorized the Joint Commissioners of Income Tax to issue orders in writing for the exercise of the powers and performance of the functions by the Assessing Officers who are subordinate to them in respect of persons, classes of persons and territories. Further, vide Gazette Notification dated 17th September, 2001 in SO 889E, the CBDT u/s 120(4)(b) directed that the Joint Commissioners of Income Tax can exercise the powers and functions of Assessing Officers in respect of territorial area etc. in respect of which such Joint Commissioners of Income Tax are authorized by the CIT vide Government of India, CBDT Notification No. SO 732E dated 31-07-2001 and other notifications published in the Gazette of India. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 23 11.2 Thus, a conjoint reading of the Notification u/s 120(4)(b) with the SO 732E unambiguously establish that the Addl. Commissioner mentioned therein has been authorized to function as Assessing Officers u/s 120(4)(b). Therefore, these Gazette Notifications establish that the Addl. Commissioner had jurisdiction as Assessing Officer over the assessee as per Sec.120(40(b) r.w.s. 2(7A) of the Act. 11.3 It is respectfully submitted that the first judicial decision, where the jurisdictional issue of Addl. CIT, identical to the additional ground as raised in the present case, is that of the Hon'ble Delhi Tribunal in the case of Mega Corporation Ltd. vs. Addl. Commissioner (2015) 155ITD 1019/62 Taxmann.com 351. In that case, the assessee raised identical additional ground i.e., in the absence of any order u/s 120(4)(b) or u/s 127 the assessment order passed by the Additional Commissioner of the Income Tax is bad in law. The Hon'ble Tribunal allowed the appeal of the assessee based on the following facts- (1) The order issues by the CIT, Delhi-II, New Delhi conferring jurisdiction of the case to the concerned AddI. CIT is an order u/s 120(2) of the Act and not u/s 120(4)(b) of the Act. (Kindly refer to para 6-7/page 12-14 of the order) (2) As observed in para 8.1/page 14 of the order, since the issue relates to lack of jurisdiction of the AddI CIT, the ratio of the judgment in CIT vs British India Corpn. Ltd. (2011) 337 ITR 64/(2012) 20 taxmann.com 446 (All.) is applicable, wherein it is held that the question of jurisdiction of the Assessing Authority cannot be disputed after the completion of the assessment proceedings as contemplated under section 124. According, to the Hon'ble High Court, if such a question arises, the said question can be addressed by the Commissioner of Income Tax or the Board. The concluding paragraph of the Hon'ble High Court is as under- "18. It is reasonable to deduce that the question of jurisdiction of the assessing authority cannot be disputed after the completion of the assessment proceedings. Alternatively, if such a question arises, the said question can be addressed by the Commissioner or the Board, as the case may be, in view of sub-section (4) of section 124 and this by necessary corollary excludes the jurisdiction of the first appellate authority or the court." (3) The notification no. 267/2001 dated 17.9.2001, issued by CBDT u/s 120(4)(b) of the Act, directs the Joint Commissioner of income Tax to exercise the power and function of an Assessing Officer. However, the said notification is applicable in respect of Joint Commissioner and not to the Additional Commissioner. No further notification is brought to the notice of the Hon'ble Tribunal. (Please refer to para 7.1/page 14 of the order) (4) After the initiation of assessment proceedings, any other authority can take over the proceedings only by an order of transfer u/s 127(1) or 127(2) of the I.T. Act. (Please refer to para 9.1/page 16 of the order) 11.4 On appeal by the Revenue, the aforesaid decision of the Hon'ble Tribunal in Mega Corporation Ltd. (supra) is reversed by the Hon'ble High Court of Delhi in ITA 128/2016 in Pr. CIT- 6 vs. Mega Corporation Ltd. in its order dated 23-02-2017. Hon'ble High Court has considered the following question of law: ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 24 "Did the Income Tax Appellate Tribunal (ITAT) fall into error in interpretation of provisions of Section 124(3)(a) and holding that the ACIT could not have completed the assessment by virtue of Section 120(4)(b)." 11.5 In the question of law, the word "ACIT" is the abbreviated to the Additional Commissioner of Income Tax as mentioned in para 2 of the HC order. Similarly, the abbreviation "DCIT" is used for the Deputy Commissioner of Income Tax. The Hon'ble High Court in para 2 has noted that "the ITAT, however, considered the material on record, including the notification dated 01.08.2007, under Section 120(2) and proceeded to hold that in the absence of specific notification under section 120(4)(b), the ACIT could not have acted as an AO. It however, did not deal with the second or rather the alternative argument made by the assessee, i.e., that even the notice issued under section 143(2) was by an incompetent officer since the DCIT did not possess jurisdiction at that stage." 11.6 While rejecting the findings of the Hon'ble Tribunal, Hon'ble High Court held that (i) The notice issued by the DCIT was by a competent officer who always had jurisdiction in view of section 120 r.w.s 2(7A) that includes DCIT as an AO. (Para 5 of the decision) (ii) Reference to an incorrect provision per se cannot invalidate the authority conferred in the present case under section 120(2) instead of section 120(4)(b). Hence, the assessee's argument that the Additional Commissioner of Income-tax (ACIT) did not possess jurisdiction, cannot be countenanced (allowed). (Para 6 of the decision) (iii) In the instant case, the provisions of sec. 124(3) bars raising of the jurisdictional issue within one month of the receipt of the notice. The relevant portion of the judgment in para 7 is reproduced as under- "Secondly, even if for some reason, the assessee was unaware of the notification, it became aware that the ACIT was exercising jurisdiction when it received notice from that official in August 2008. Since that was in continuance of the proceedings by the DCIT, it could well have been urged by the assessee within the stipulated time that the said officer, ACIT did not possess jurisdiction. Its failure to do so within the stipulated time i.e., one month after receipt of notice which was in fact a condition of section143(2) proceeding and was treated as such by the assessee preclude it from urging lack of jurisdiction." (emphasis supplied) ) There is no relevance to the section 127 in such an issue, as held in para 8, in the following words- "8. As far as the section 127 goes, we are of the opinion that having regard to the findings rendered, that question does not arise." 11.7 Accordingly the Hon'ble High Court held the question of law in favour of the Revenue by stating that "9. The parties are directed to appear before the ITAT for further hearing on the merits on 27.03.2017. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 25 10. In view of the above discussion that the question of law framed has to be answered in favour of the Revenue and against the assessee. The appeal is accordingly allowed." 11.8 In my humble opinion, once Hon'ble Delhi High Court has rejected and reversed the judgment of the Tribunal on the issue raised before it, what subsists is the judgment of the Superior Court (that of the Delhi High Court), particularly the ratio laid down on the question of law before it, in view of the well-known Doctrine of Merger. The Hon'ble Apex Court in the case of S. Shanmugavel Nadar vs State of T.N. (2002) 8 SCC 361 367 has held that "..as a general rule the judgment order having been dealt with by a superior forum and having resulted in confirmation, reversal or modification, what merges is the operative part i.e., the mandate or decree issued by the court which may have been expressed in a positive or negative form" 11.9 Once it is held so, the reliance of any judgment on the findings of the Delhi Tribunal in Mega Corporation Ltd. vs. Addl. Commissioner (supra) has no relevance and will be against the binding ratio laid down by the Hon'ble Delhi High Court on the question of law before it. 11.10 It is further submitted that the Hon'ble High Court of Mumbai in N. Rajgopal Vs AddI CIT- 23(3), Mumbai (supra) addressed the question of jurisdiction of Assessing officer u/s 2(7A) of the Act and held at Para 4 of the order as under: "4. We would first deal with the question of jurisdiction of the Assessing Officer. We notice that Section 2(7A) of the Act defines the term "Assessing Officer" as to mean every Revenue officers mentioned therein. Reference to "Additional Commissioner" in the list of such officers was included by an amendment made under Finance Act, 2008 but with retrospective effect from 01.06.1994. Thus, by virtue of this amendment, an Additional Commissioner of Income Tax was included in the definition of "Assessing Officer". It is true, as pointed out by the learned counsel for the assessee that when the Additional Commissioner passed the order of assessment, Section 2(7A) did not contain a specific reference of an Additional Commissioner, However, when the statute has been amended with retrospective effect, the effect of such amendment must be applied to the pending proceedings as in the present case. Non-applying such amendment in the present proceedings would destroy the retrospectivity granted to it by the legislature. This contention of the assessee is, therefore, rejected." 11.11 In the light of above factual position and adherence to the settled position of law, it is respectfully submitted that the binding precedence of Hon'ble Bombay High Court in N. Rajgopal (supra), being jurisdictional High Court and Hon'ble Delhi High Court in Pr. CIT-6 vs. Mega Corporation Ltd. (supra), being High Court decisions on the issue of jurisdiction of the Addl. CIT in passing the assessment order, will prevail over other ITAT decisions. 12. Analysis of the Decisions of Honble Coordinate benches on the issue It is also added that various Co-ordinate benches of Hon'ble Tribunal has followed the Hon'ble Delhi Tribunal decision in Mega Corporation Ltd. vs. AddI. CIT (supra), notwithstanding the fact that some of the co-ordinate benches had the privilege of the decision of Hon'ble Delhi High Court (where the Hon'ble High Court reversed the decision of the Tribunal's decision) on ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 26 the identical issue. Such decisions can only be termed as per incuriam or sub-silentio. Hence, the same cannot be followed. The validity of such decisions is discussed in the following paragraphs- Tata Sons Ltd. vs Asstt. CIT (2016) 76 taxmann.com 126 (Mumbai- Trib.) (A.Y. 2001-02) (Date of Order- 31-10-2016) i. In para 3.7, the Hon'ble Tribunal has noted that the assessee filed the additional ground since the Delhi Tribunal in the case of Mega Corporation Ltd. (ITA no. 102/Del/2014) on the facts similar to the facts in the aforesaid appeals has held the assessment order to be invalid and bad in law, which was recently reported. Thus, it can be seen that the basis of filing the additional ground, the issue was the outcome of the decision of Delhi Tribunal in the case of Mega Corporation Ltd., which was subsequently overturned by the Hon'ble Delhi High Court as discussed above, ii. Reliance of Delhi Tribunal's decision in Mega Corporation Ltd was further made in para 3.15 and 3.22 (where this decision was extensively quoted) and in para 3.23, the observation made is "In the case before us, the facts are identical." Thus, it can be said that this decision of Hon'ble Mumbai Tribunal has the genesis as well as complete reliance on the Delhi Tribunal decisions in MegaCorporation Ltd (supra). iii. It is also worth mentioning here that the Hon'ble Tribunal order in the case of Tata Sons Ltd (supra) was delivered on 31/10/2016 prior to the decision of Hon'ble Delhi High Court in the case of Pr.CIT vs. Mega Corporation Ltd (supra) (date of order 23/02/2017). Hence, this Tata Sons Ltd decision cannot be relied upon after 23/02/2017. iv. It is further informed that the decision of the Tribunal in M/s Tata Sons Ltd (supra) has since been admitted by the Hon'ble High Court of Bombay vide appeal no. 1403 of 2017 dated 09.03.2022. The substantial questions of law admitted by the Hon'ble High Court are as under: "1. Whether on the facts and in the circumstances of the case, the Tribunal was justified in admitting the additional ground when the assessee had not raised issue of jurisdiction of the Assessing Officer before the Assessing Officer and CIT(A)? II. Whether on the facts and in the circumstances of the case, the Tribunal was justified in coming to the conclusion that the Additional Commissioner of Income Tax, Range 2(3), Mumbai, has no jurisdiction to pass the assessment order?" II. Tata Communication Ltd. vs Asstt. CIT (ITA No.6981/Mum/2005) (Mumbai- Trib.) (A.Y. 2002-03) (Date of Order- 30-06-2017) i. In this case too, the same issue of competence & jurisdiction of the Addl.CIT to pass the assessment order dated 21/02/2005, was raised. The Hon'ble Mumbai bench was of the view that the orders passed by the Tribunal in cases of Mega Corporation Ltd (supra) and Tata Sons Ltd (2016) 76 taxman.com 126 have already considered the notifications issued by CBDT and relied upon by the DR and thereafter the issue was decided in ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 27 favour of the assessee. Kindly refer to page 25 of the said order. In the subsequent page No.26, the Hon'ble Tribunal has extensively quoted the decisions of Tata Sons Ltd (supra) for A.Y.2001-02 and came to the conclusion that the ratio laid down in that decision applies to the facts of that case and allowed the appeal in favour of the assessee. ii. It is respectfully submitted that the Delhi High Court judgment in the case of Mega Corporation Ltd was not brought to the notice of the Hon'ble Mumbai Tribunal and hence the Hon'ble Bench had no occasion to follow the non jurisdictional High Court jurisdiction on identical issue which was ruled the Delhi Tribunal decision. Therefore, the decision of Tata Communication Ltd cannot be followed as it is a sub silentio with respect to the binding precedence of a higher forum decision on identical issue. Tata Sons Ltd. vs Asstt. CIT (ITA No.193&374/Mum/2006) (Mumbai- Trib.) (Α.Υ. 2002-03) (Date of Order-27-11-2017) - i.This decision was rendered subsequent to the Hon'ble Delhi High Court decision in Mega Corporation Ltd (supra). However, the Hon'ble Tribunal did not follow the said binding decision of Delhi High Court notwithstanding the fact that this was the only non-jurisdictional High Court decision available at that time. ii. The Hon'ble Tribunal in its conclusion in para 12& 13 has taken note of the identical issue decided by the Coordinate Benches in the case of the assessee for A.Y.2001-02 vide its order dated 31-10-2016 and in the case of Tata Communication Ltd in ITA No.6981&7071/Mum/2005 for A.Y.2002-03. As discussed in the preceding paragraphs, these decisions were rendered in the absence of Hon'ble Delhi High Court on identical issue in Mega Corporation Itd (supra), which was decided in favour of the Revenue. iii The reason for non adherence of the decision of Delhi High Court in the case of Mega Corporation Ltd (supra), as cited in para 15 was that various High Courts have taken a contrary view on this issue. According to the Hon'ble Tribunal, when there is contrary decision of the jurisdictional High Court (the Hon'ble Bombay High Court decision in the case of Thane Electricity Supply Ltd 206 ITR 727), the decision of Delhi High Court in not binding. Taking reliance of the Hon'ble Bombay High Court decision in Thane Electricity Supply Ltd (supra), it was held that the decision of non- jurisdictional High Court is neither binding decision for another High Court nor for Courts or Tribunals outside its territorial jurisdiction. Instead the Hon'ble Tribunal relied on the decision of Gujarat High Court in case of Ramesh D Patel (362 ITR 493) (Guj) wherein it was held that the provisions of sec. 124 of the IT Act are clearly concerning with territorial jurisdiction of the officer and has not relevance in so far as the inherent jurisdiction for passing an assessment order of assessment u/s.153 of the Act is concerned, when no such an authorisation u/s.132 was issued or requisition u/s.132A of the Act was made. In para 17, the Hon'ble Tribunal has also relied on the decision of Hon'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd (88 ITR 192) to the effect that when the language of a taxing provision is ambiguous, or capable of more meaning than one, then the Court has to adopt an interpretation which favours the assessee. In view of the above, the Hon'ble Tribunal did not follow the Hon'ble Delhi High Court decision in the case of Mega Corporation Ltd (supra). ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 28 iv. In this regard, it is respectfully submitted that there is no direct High Court decision on the identical issue as raised in the present appeal other than the Hon'ble Delhi High Court in the case of Mega Corporation Ltd (supra). Therefore, there is no substance in the observation of the Hon'ble Tribunal that various High Courts have taken contrary view on the issue. In the case of Ramesh D Patel (supra) Hon'ble Gujarat High Court was seized with the matter as to when no search authorisation u/s.132 or requisition u/s.132A of the I.T. Act was issued, there was no occasion for the Assessing officer to pass assessment order u/s.153 of the Act. Thus, the facts of the case decided by Hon'ble Gujarat High Court was entirely different than the issue under consideration in the present case. With respect to Bombay Hon'ble High Court decision in Thane Electricity Supply Ltd (supra), Hon'ble Pune Bench of Tribunal in the case of ACIT vs. Aurangabad Holiday Resorts Pvt Ltd supra) and the Co-ordinate Bench decision in Page International Pvt Ltd vs. DCIT (supra) as observed by Hon'ble Mumbai Tribunal in the case of Kaybee Pvt ltd vs. ITO (supra) have extensively discussed this Hon'ble Bombay High Court judgment. In para 13, Hon'ble Pune Tribunal in ACIT vs. Aurangabad Holiday Resorts Pvt Ltd (supra) has resolved the issue in following words :- "13. It is thus clear that while the issue before the Hon'ble High Court in Thana Electricity Co. Ltd.'s case (supra) was whether or not a High Court should follow another High Court, whereas in Godavari Devi Saraf's case (supra), Their Lordships dealt with the issue whether or not a non- jurisdictional High Court is to be followed by a Bench of the Income-tax Appellate Tribunal. To that extent, and irrespective of some casual observations on the applicability of non-jurisdictional High Court judgments on subordinate courts and Tribunals, these two decisions deal in two different areas. As we have noticed earlier also, in Thana Electricity Co. Ltd's case, a note was taken of Godavari Devi Saraf's judgment and neither the said judgment was dissented nor overruled. In any event, in Thana Electricity Co. Ltd.'s case, Hon'ble Court was alive to the fact, which was acknowledged in so many words, that a Co-ordinate Bench decision cannot be overruled. In this view of the matter, it is difficult to hold, as has been strenuously argued before us by the learned Departmental Representative, that the Hon'ble Bombay High Court's judgment in the case of Godavari Devi Saraf's cases stands overruled by Their Lordship's judgment in the case of Thana Electricity Co. Ltd.'s case. The only way in which we can harmoniously interpret these judgments is that these decisions deal with two different issues and ratio decidendi of these decisions must be construed accordingly". V. Further emphasizing the importance of non-jurisdiction High Court decisions, Hon'ble Bombay High Court in the cases of Humayun Suleman Merchant (2016) 73 taxmann.com 2 (Bombay) and Earnest Business (P.) Ltd. (2017) 80 taxmann.com (Bombay), have held that- 25. It is a settled position in law that the decisions of another High Court though not binding upon us, would deserve the highest respect and normally be followed for the sake of uniformity and comity of Courts, unless the judgment is rendered, per incuriam or sub- silentio. vi. As far as the reliance of the Hon'ble Tribunal on the decision of Hon'ble Supreme Court in CIT vs. Vegetable Products Ltd (supra) is concerned, it is submitted that the scope of interpretation in favour of the assessee will arise only when there is an ambiguity in the language of taxing provision or where it is capable of more than one meaning. As held in full bench judgment of ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 29 Hon'ble Guwahati High Court in the case of Smt. Sohani Devi Jain (1977) 109 ITR 130 (Guwahati) Sec. 124(3) has no relationship to territorial jurisdiction since the provisions of sec. 124 is clear and unambiguous. In page No.7/4th para Hon'ble High court has held as under :- It is urged by the assessee that the question is not whether the ITO Jorhat had or had not territorial jurisdiction, the question is whether he had the jurisdiction to make assessment for 1960-61, for which assessment had been made by the ITO, Calcutta. Section 124 has not used the word “territorial”. When a provision of law is clear and unambiguous, it is not permissible to add a word to, or omit a word from, it. In my opinion, the word "territorial" cannot be read into section 124 of the Act. The section speaks only of jurisdiction of the ITO Jurisdiction includes both territorial and other kinds of jurisdiction. In my opinion, therefore, the objection raised by the assessee only at the appellate stage is hit by sub-section (5) of section 124 of the Act. The ITO Jorhat, cannot be said to have lacked jurisdiction". (Emphasis supplied) vii.In view of the above discussion, the Hon'ble Mumbai Tribunal decision in Tata Sons Ltd vs. ACIT for A.Y.2002-03 cannot be followed as (i) As it did not follow the binding non-jurisdictional Delhi High Court decision on the identical issue (ii) It did not take into account the retrospective amendment made in the section 2(7A) of the I.T. Act (iii) It chose to follow Tata Sons Ltd decision, for A.Y.2001-02 completely ignoring the fact that the said decision was rendered in the absence of Hon'ble Delhi High Court decision in Mega Corporation Ltd (supra). IV. Tata Sons Ltd. vs Asstt. CIT (ITA No.2519/Mum/2009) (Mumbai-Trib.) (A.Y. 2004-05) (Date of Order-11-03-2019 and Tata Communications Ltd. vs Addl.CIT (ITA No.3972/Mum/2007) (Mumbai- Trib.) (A.Υ. 2003-04 & 2004-05) (Date of Order- 16-08-2019) i. In both the decisions, the Hon'ble Tribunal while deciding the identical issue has completely relied on the decisions of Tata Sons Ltd (2016) 76 taxman.com 126 (Mumbai) and Tata Communications Ltd (A.Y.2002-03) and came to the conclusion that in the absence of an order u/s.120(4)(b) as well as section 127(1) of the I.T. Act, the Addl. CIT cannot exercise powers of an Assessing Officer. ii. As stated above, these judgments cannot be followed since the Hon'ble Tribunal (a) Did not follow the binding non-jurisdictional Delhi High Court decision on the identical issue (b) Did not take into account the retrospective amendment made in the section 2(7A) (c) It chose to follow the decisions of Tata Sons Ltd (supra) and Tata Communications Ltd (supra), ignoring the fact that the said decisions were ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 30 rendered in the absence of Hon'ble Delhi High Court decision in Mega Corporation Ltd (supra). Therefore, these decisions cannot be followed as it is a sub silentio with respect to the binding precedence of a higher authority on the identical issue. V. Sabras Investment (Tata Chemicals Ltd.) - ITA No. 915 to 918/Mum/2012 dated 05.09.2019 i. In the decision, the Hon'ble Tribunal while deciding the identical issue has completely relied on the decisions of Tata Communications Ltd. (supra) and came to the conclusion that in the absence of an order u/s.120(4)(b) as well as section 127(1) of the I.T. Act, the Addl. CIT cannot exercise powers of an Assessing Officer. ii. As stated above, this judgment cannot be followed since the Hon'ble Tribunal (a) Did not follow the binding non-jurisdictional Delhi High Court decision on the identical issue (b) Did not take into account the retrospective amendment made in the section 2(7A) (c) It chose to follow the decisions of Tata Sons Ltd (supra) and Tata Communications Ltd (supra), ignoring the fact that the said decisions were rendered in the absence of Hon'ble Delhi High Court decision in Mega Corporation Ltd (supra). iii. Therefore, these decisions cannot be followed as it is a sub silentio with respect to the binding precedence of a higher authority on the identical issue. iv. This decision did not consider the order of Hon'ble High Court of Bombay in the case of N Rajgopal (supra) dated 29.01.2019 nor did it consider the decision of Hon'ble Delhi High Court in Mega Corporation Ltd. (supra). VI Shri Kishore Vitthaldas vs JCIT (ITA No.7397/Mum/2016) (Mumbai- Trib.) (A.Y. 2007-08) (Date of Order- 16-10-2019) i. Identical issue of the jurisdiction of Addl. CIT in passing assessment order has been decided in this order too. The Hon'ble Tribunal in para 13 has come to the conclusion that in the absence of order u/s.124(b) of the I.T. Act, the re-assessment order passed by the JCIT, Rg-17, Mumbai is void ab initio since the said officer did not possess valid jurisdiction and authority to pass such order. The Hon'ble Tribunal has noted in para 14 that the issue is squarely covered in favour of the assessee by the decision of Coordinated benches in the case of Tata Communications Ltd for A.Y.2003-04 in order dated 16/08/2019 and Tata Sons Ltd in ITANo.6981&7071/Mum/2005. These decisions have been extensively quoted the Coordinated Bench judgment from page Nos.17 to 45. ii.The Hon'ble Tribunal has also stated in para 16 that the Delhi High Court decision in the case of Pr. CIT Vs. Mega Corporation Ltd (supra) is not applicable to the facts of the present case since the matter before the Hon'ble High Court was whether the DCIT who passed the assessment order was having valid jurisdiction / authority in the absence of separate order ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 31 u/s.120(4)(b) of the Act. This observation of the Hon'ble Tribunal is contrary to the law point and facts decided by the Hon'ble High Court. As stated in the preceding paragraphs, the question of law before the Hon'ble Delhi High Court in the case of Pr.CIT Vs. Mega Corporation Ltd (supra) was as under :- "Did the Income Tax Appellate Tribunal (ITAT) fall into error in interpretation of provisions of Section 124(3)(a) and holding that the ACIT could not have completed the assessment by virtue of Section 120(4)(b)." (Here 'ACIT' is the abbreviation of AddI.CIT) While rejecting the findings of the Hon'ble Tribunal, Hon'ble High Court held that (1) Reference to an incorrect provision per se cannot invalidate the authority conferred in the present case under section 120(2) instead of section 120(4)(b). Hence, the assessee's argument that the Additional Commissioner of Income-tax (ACIT) did not possess jurisdiction, cannot be countenanced (allowed). (Para 6 of the decision) (2) In the instant case, the provisions of sec. 124(3) bars raising of the jurisdictional issue within one month of the receipt of the notice. The relevant portion of the judgment in para 7 is reproduced as under- "Secondly, even if for some reason, the assessee were unaware of the notification, it became aware that the ACIT was exercising jurisdiction when it received notice from that official in August 2008. Since that was in continuance of the proceedings by the DCIT it could well have been urged by the assessee within the stipulated time that the said officer, ACIT did not possess jurisdiction. Its failure to do so within the stipulated time i.e., one month after receipt of notice which was in fact a condition of section 143(2) proceeding and was treated as such by the assessee preclude it from urging lack of jurisdiction." (emphasis supplied) (3) There is no interplay of section 127 as held in para 8, in the following words- "8. As far as the section 127 goes, we are of the opinion that having regard to the findings rendered, that question does not arise." iv. Moreover, in the present case, the Commissioner of Income Tax-2, Mumbai vide his order No.CIT-2/Assignment/2009-10 dated 04/08/2009 for A.Y.2007-08 has assigned the jurisdiction of the case to the Addl.CITRg-2(2), Mumbai for completion of the assessment. This assignment can only be u/s.120(4)(b) or u/s. 127(1) of the I.T. Act as there is no other provision in the Act for transfer of jurisdiction from one Assessing officer to another Assessing officer. V. The Hon'ble Tribunal has also relied on the judgment of Hon'ble Bombay High Court in the case of Bansilal B Raisoni vs. ACIT (2019) 260 taxman 281 (Bom)to come to the conclusion that the time limit provided u/s.124(3) of the Act has a relation to the A.O. territorial jurisdiction and would not apply to the cases where the assessee contents that the action of the A.O.is without authority of law. In this regard my respectful submission is that in Bansilal B Raisoni vs. ACIT (2019) 260 taxman 281 (Bom), the case of the assessee, a partnership firm, was that the Assessing Officer could not have issued notice ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 32 u/s.153A of the Act, without carrying out search at the premises of the partnership firm. In this background, the assessee raised the following questions of law before the Hon'ble High Court:- (1) No search was initiated against the partnership firm. Notice under Section 153A of the Act, therefore, could not have been issued. He pointed out that there is a difference between search authorization and initiation of search, by relying on the decision of the Karnataka High Court in the case of CIT v. Wipro Finance Ltd. [2009] 176 Taxman 233/[2010] 323 ITR 467. He agreed that in the present case, search authorization was issued against the partnership firm but according to him since no search was actually carried out, it cannot be stated that the search was initiated against the partnership firm. (ii) Learned Counsel submitted that for the purpose of the Income Tax Act, a partnership firm and its partners are treated as separate independent entities. The search carried out at the premises of the partners cannot be equated with the search against the partnership firm. In this context, the learned Counsel relied on the observations made by the Supreme Court in the case of CIT v. A. W. Figgies&Co. [1953] 24 ITR 405. (iii) Counsel further submitted that the objection of limitation of the Department is wholly fallacious. Section 124 of the Act relates to territorial jurisdiction of the Assessing Officer. The time limit provided under sub- section (3) of Section 124, therefore, must be seen in the light of such issue. Vi. In the light of the above peculiar facts and questions of law put up, the Hon'ble Bombay High Court agreed with the assessee that the objection to the jurisdiction of the Assessing officer (that once no search was initiated, notice u/s.153(A) of the Act could not be issued) cannot be curtailed on the ground that such objection was not raised within the period mentioned u/s.124(3) of the Act. The relevant paragraph of the decision is reproduced as under :- "7. We are also in agreement with the contention of the Counsel for the petitioner that the petitioner's objection to the jurisdiction of the Assessing Officer on the ground that if no search was initiated, notice under Section 153A of the Act could not have been issued, cannot be curtailed on the ground that such objection was raised beyond the period referred to in sub- section (3) of Section 124 of the Act. Section 124 of the Act pertains to jurisdiction of Assessing Officers. Sub-section (1) of Section 124 lays down territorial jurisdiction of the Assessing Officer. Sub-section (2) of Section 124 provides that where the question arises under said section, as to whether an Assessing Officer has jurisdiction to assess any person, such question shall be determined by the authority prescribed under the said sub-section. Sub- section (3) of section 124 provides time limits for a person to call in question jurisdiction of an Assessing Officer. Clause (c) of sub-section (3) of section 124 provides that no person shall be entitled to call in question jurisdiction of an Assessing Officer where an action has been taken under Section 132 or section 132A, after the expiry of one months from the date on which he was served with a notice under sub-section (1) of Section 153A or sub-section (2) of Section 153C of the Act or after the completion of the assessment, whichever is earlier. In clear terms, the time limit for raising objection to the jurisdiction of the Assessing Officer prescribed under sub-section (3) of section 124 has a relation to the Assessing Officer's territorial jurisdiction. The time limit prescribed would not apply to a case where the assessee ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 33 contends that the action of the Assessing Officer is without authority of law and, therefore, wholly without jurisdiction." vii. In the light of the above peculiar fact where the jurisdiction of the Assessing Officer is questioned by the assessee u/s.124(3)(c) i.e., when no search action was initiated as in its case but notice for assessment u/s 153A was issued, Hon'ble High Court held that sec. 124(3) has a relation to its territorial jurisdiction. The facts of the present case are entirely different. vi. Moreover, the Hon'ble Delhi High Court in the case of Pr. CIT vs. Mega Corporation Ltd (supra) has clearly held (on the identical question as in the present case) that the time limitation u/s.124(3) will be applicable where jurisdiction of Addl. CIT making the assessment u/s.143(3) is under question. Finally, as held by the Hon'ble full bench of Guwahati High Court in the case of Smt. Sohani Devi Jain (1977) 109 ITR 130 (Guwahati) Sec. 124(3) has no relationship to territorial jurisdiction since the provisions of sec. 124 is clear and unambiguous. as jurisdiction has been challenged u/s.124(3)(a) and not u/s.124(3)(c). While the former provisions u/s.124(3)(a) relates to jurisdiction of the Assessing Officer where notices u/s.142(1) or 143(2) issued, as in the present case, the latter provision (u/s.124(3)(c) relates to the jurisdiction where search action u/s.132 or requisition u/s.132A was initiated and notices u/s.153A or 153Cissued by the Assessing officer. Since the question before the Hon'ble Bombay High Court was related to challenge of jurisdiction u/s.124(3)(c), the answer was also given accordingly. Hence, the mention of "territorial jurisdiction in the decision, is confined to sub section (c) and not sub-section (a) of Section 124(3) of the I.T. Act. It is worth mentioning here that when the decision of Smt. Sohani Devi Jain (1977) (supra) was given, there exists no sub-section (c) to sec. 124(3). Even for the present assessment order viz. for A.Y.2007-08 where the assessment order was passed on 24-10-2011, there existed only sub- sections(a) and (b) to section 124(3). It was only by Finance Act, 2016 (w.e.f. 01-06-2016), sub- section (c) was substituted to section 124(3). In the Bansilal B Raisoni vs. ACIT (2019) (supra) case, the amended provisions of sec. 124(3) were before the Hon'ble Bombay High Court and the decision of the Hon'ble High Court was related to sub-section (c) of sec. 124(3) as can be seen from the discussions made in para 7 (as reproduced above). Hence, it is humbly submitted that the decision of Hon'ble Bombay High Court in Bansilal B Raisoni vs. ACIT (2019) (supra) had not applicability on the facts of the case of Kishore Vitthaldas Vs. JCIT (supra) or the present case, as these are prior to amendment of sec. 124(3) by the Finance Act, 2016. Thus, in my respectful submission there is no precedence value as far as this decision is concerned as it has totally over looked the binding precedence of the Hon'ble Delhi Court in the case of Mega Corporation Ltd (supra) on the identical question of law and facts. VII. The Indian Hotels Co. Ltd. (ITA Nos. 8570/Mum/2011, 565/Mum/2013, 2049/Mum/2014 and 1910/Mum/2014) date of order 21.05.2021. i. In the decision, the Hon'ble Tribunal while deciding the identical issue has completely relied on the decisions of Tata Communications Ltd. (supra) and Kishore Vitthaldas (supra) and came to the conclusion that in the absence of ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 34 an order u/s.120(4)(b) as well as section 127(1) of the I.T. Act, the Addl. CIT cannot exercise powers of an Assessing Officer. ii. The above stated decision has already been discussed in detail in relevant paragraphs above. 13. Reliance is also placed on the decision of the Hon'ble Supreme Court in the case of Padma Sundar Rao Vs. State of TN (2002) 255 ITR 147 SC, wherein the Hon'ble Supreme Court has observed as under: "9. Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. There is always peril in treating the words of a speech or judgement as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morris in Herrington v. British Railways Board [Sub nom British Railways Board v. Herington (1972) 1 All ER 749 (HL). Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases." From the above observations of the Hon'ble Supreme Court, it is humbly submitted that considering the factual situation and the decision of the Hon'ble Bombay High Court in N. Rajgopal (Supra), the decision should be based on the wholistic appreciation of the provisions of the Act, and the subsequent notifications in this regard and judicial precedence cited above. It can be seen that there are different High Court decisions, including jurisdictional High Court in N. Rajgopal (supra) and the Hon'ble Delhi High Court's decision in Mega Corporation Ltd (supra) on the identical question of law and similar set of facts as in the instant case, therefore, the decisions of coordinated benches of Tribunal on this issue are either per incuriam or sub silentio, lacking any precedence value, thus need to be rejected.” 6. In the rejoinder, Ld.AR filed a rebuttal for the issues raised by the Ld.DR in the tabular form, the same is reproduced below: Sr. No. Ld. DR's Submissions Assessee's Rebuttal 1 The additional ground ought not to be admitted as it falls beyond the principle laid down by the Hon`ble Apex Court in the case of National Thermal Power Corporation Ltd 229 ITR 383 as the additional ground in the present case, neither raises a pure question of law nor does it relate to determination of correct tax liability. That jurisdiction of the Addl. CIT to act as an assessing officer as per section 2(7A) read with section 120(4)(b) of the Act and existence of a valid transfer of jurisdiction from the Dy.CIT/the Asst. CIT to the Addl. CIT under section 127 of the Act raises a pure question of law which goes to the root of the matter. The relevant facts, if any, being the notifications/orders issued/ passed under the aforesaid sections has to necessarily form part of the record. Considering these circumstances, in each of the above referred Tribunal's order, where the assessee had questioned the validity of jurisdiction by an additional ground has been admitted and adjudicated by the ITAT. In this regard, the following references would be relevant. i. Tata Sons Ltd - ITA no. 4497/Mum/2205 – (see ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 35 Sr. No. Ld. DR's Submissions Assessee's Rebuttal Para nos. 3.11 to 3.17 at page nos. 10 to 13 of Legal paper book no -1) ii. Tata Communications Ltd -ITA no 7071/Mum/ 2005 –(see Para nos. 4 to 6 at page nos. 42 to 44 of Legal paper book no -1) iii. Tata Sons Ltd -ITA no: 2519/Mum/2009 and 2639/Mum/2009 (see Para no 2 at page no 144-145 of Legal paper book no -1) iv. Tata Sons Ltd – ITA no ITA no:5090/Mum/2012 (see Para nos. 3-4 at Page nos. 171 -172 of Legal paper book no-1) v. Tata Communications Ltd - ITA no: 2891/Mum/2010 & ITA no 1015/ Mum/2010 (see Para nos. 3.2 - 3.3 at page nos. 195 - 197 of Legal paper book no- 1) vi. Tata Power Co Ltd -ITA no:3081/Mum/2009 & ITA no 3082/Mum/2009 (see Para nos. 3-8 at page nos. 234- 237 of Legal paper book no -1) vii. Sabras Investment (Tata Chemicals Ltd) ITA no 915 to 918/Mum/ 2012 (see Para nos. 3 to 7 at Page nos. 307 to 311, Para no 3.11 to 3.16 at Page no 325 to 330, Para no 11 at Page no 378 to 379 of Legal Paper book Page no 1) viii. Tata Communications Ltd -ITA no 4452 & 3460/Mum/2011 & ITA no 8768Mum/2010 (see Para nos. 5 to 6.2 at page nos. 391 to 425 of Legal paper book no-1) ix. Tata Sons Ltd- ITA no 4893,2545, 4543 & 2487/Mum/2012 – (see Para 3 to 8 at page nos. 432 to 435 of Legal paper book no -1) x. The Indian Hotels Company Ltd - ITA no 8570/Mum/2011 & 565/Mum/2013 & 2049/Mum/2014 – (see Para nos. 2 and 2.1 at page no 468 of Legal paper book no -1) xi. Kishore Vithaldas - ITA no 7397/Mum/ 2016 & ITA no 5661/Mum/ 2017 (see Para nos. 3 to 6 at Page nos. 502.3 to 502.5 of Legal paper book no 1) xii. Tata Communications Ltd-ITA No - 7514/MUM/2011 – (see Para 8 at internal Page 9 of order-copy submitted separately) xiii. Vertiv Energy Pvt Ltd -ITA no. 1975/Mum/2014 & 1771/ Mum/ 2015 – (see Para nos. 2 – 2.1 at internal Page no 2 of the order copy provided ) xiv. Sandoz Pvt Limited – ITA no 3733 /Mum / 2013, ITA no 3740/ Mum/2013 – (see Para nos. 9 to 11 at internal Page nos. 5 to 7 of the order copy provided) xv. Tata International Limited ITA No.1605/Mum/2012 - (see Para nos. 2 to 3 at internal Page nos. 2 to 3 of the order copy provided) xvi. M/s Nuclear Power Corporation ITA Nos. 202, 114, 4413/M/2004, 3867/M/2008, 4743 to 4745/M/2007, 2452/M/2011 & Ors ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 36 Sr. No. Ld. DR's Submissions Assessee's Rebuttal (see Para nos. 4 to 6.6 at internal Page nos. 7 to 27 of the order copy provided) The jurisdictional High Court in the case of Inventors Industrial Corporation Ltd. 194 ITR 548 has held that additional ground challenging the jurisdiction of an officer could be raised at any stage of the appellate proceeding including the second round though the said issue had not been raised in the first round of proceeding. Issues raised by the additional grounds in the present case questions the validity of the assessment order passed by the Addl. CIT as without jurisdiction which also goes to the root of the matter. Hence, the additional ground may be admitted. 2 That the additional grounds have been filed on 10.03.2021 which is after a lapse of sixteen (16) years and ought not to be admitted in view of the inordinate delay in raising such ground. In this regard reliance was also placed by him on the Tribunal order in the case of Stock Traders Pvt. Ltd. The assessee has filed the present appeal before the Tribunal on 29.09.2010 challenging the appellate order passed by the CIT(A) on 20.05.2010. The additional grounds have been filed in the said appeal on 10.03.2021.Hence the delay, if any, is of (10) ten years and (5) five months approximately and not 16 years Under the Act, an additional ground can be raised by a party litigant at any stage of the appeal proceedings. There is no limitation prescribed for raising any additional ground. In this regard, reliance is placed on judgment of Rajasthan High Court in Shilpa Associate vs ITO 263 ITR 317. Hence, the said period has no relevance. In any event, the time taken by the assessee's in the above referred Tribunal orders for filing of the additional grounds are as under: i. Tata sons Ltd - ITA no. 4497/Mum/2205 - Appeal filed in 2005 and additional ground filed on 15 Jan 2016 ii. Tata Communication Ltd - ITA no 7071/Mum/ 2005 - Appeal filed in 2005 and additional ground filed on 29 Dec 2015 iii. Tata sons Ltd - ITA no:193/Mum/ 2006 - Appeal filed on 12 June 2006 and additional ground filed on 17 Nov 2016 iv. Tata Sons Ltd - ITA no:2519/Mum/2009 and 2639/Mum/2009 - Appeal filed in 2009 and additional ground filed on 17 Mar 2017 v. Tata Sons Ltd - ITA no:5090/Mum/2012 - Appeal filed in 2012 and additional ground filed on 16 March 2017 vi. Tata Communication Ltd - ITA no: 2891/Mum/2010 & ITA no 1015/ Mum/2010 - Appeal filed in 2010 and additional ground filed on 15 Nov 2016 vii. Tata Power Co Ltd - ITA no:3081/Mum/2009 & ITA no 3082/Mum/2009 - Appeal filed in 2009 and additional ground filed on 20 January 2017 viii. Sabras Investment (Tata Chemicals Ltd) - ITA no915 to 918/ Mum/ 2012 - Appeal filed in 2012 and additional ground filed on 5 January 2018 ix. Tata Communication Ltd - ITA no 4452 & 3460/Mum/2011 & ITA no 8768/Mum/2010 - Appeal filed in 2011 and additional ground filed on 25 July 2017 x. Tata Sons Ltd –ITA no 4893,2545, 4543 & ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 37 Sr. No. Ld. DR's Submissions Assessee's Rebuttal 2487/Mum/2012 - Appeal filed in 2012 and additional ground filed on 22 February 2017 xi. Kishore Vithaldas- ITA no 7397/Mum/ 2016 & ITA no 5661/Mum/ 2017 -Appeal filed in 2017 and additional ground filed on 8 March 2019 xii. Tata Communication Ltd- ITA No - 7514/MUM/2011 - Appeal filed in 2011 and additional ground filed on 10 September 2020 xiii. Vertiv Energy Pvt Ltd - ITA no 1975/Mum/ 2014 & ITA no 1771/ Mum/2015 – Additional ground is raised after a gap of 10 years or 15 years (see Para 3.6 at internal page 23 of order) xiv. Sandoz Pvt Ltd – ITA no 3733/Mum/2013 & 3740/Mum/2013 – Appeal filed in 2013 and additional ground filed on 12 October 2021 xv. M/s. Tata International Ltd ITA No.1605/Mum/2012 - Appeal filed in 2012 and additional ground filed on 19 October 2022 xvi. Nuclear Power Corporation ITA Nos. 202, 114, 4413/M/2004, 3867/M/2008, 4743 to 4745/M/2007- Appeal filed in 2004 to 2011 and additional ground filed on 23.07.2018 It is hence, submitted that this issue already stands concluded by the Tribunal in these orders. The additional ground has been raised in the present case by letter dated 10.03.2021 which came to be filed on 17.03.2021 as the assessee became aware of the jurisdictional issue at a later point of time when it came across the above referred Tribunal orders. When filing the present appeal on 29.10.2010, it had no knowledge of such an issue arising in the present appeal. With reference to the Tribunal’s Order in the case of Stock Traders Pvt Ltd, the Tribunal has observed that the assessee therein had not laid any material to show that the Additional CIT could not be regarded as its assessing officer. It is submitted that, in the aforesaid orders it has been clearly held that the burden to show that the assessing officer validly assumed jurisdiction was on the Revenue and not on the assessee. Therefore, this order is clearly distinguishable on facts. In any event, the said order has been considered and not followed in the case of Vertiv Energy Pvt Ltd.(supra) at internal page 21 of the Tribunal order 3 That the Addl. CIT was exercising concurrent jurisdiction and therefore no transfer of jurisdiction as contemplated by section 127 of the Act was required. As stated hereinabove, in the present case, the Addl. CIT could not be regarded as the assessing officer for the purposes of section 2(7A) read with section 120(4)(b) of the Act as the jurisdictional pre-conditions contained therein have not been satisfied. Hence, there is no question of him exercising concurrent jurisdiction with the Dy.CIT/the Asst. CIT obviating transfer of jurisdiction under section 127 of the Act. In any event, nothing has been placed before the Tribunal to show that concurrent jurisdiction for passing of the assessment order vested with the Addl. CIT in the present case. This issue also stands considered by the above referred Tribunal orders in the following cases: ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 38 Sr. No. Ld. DR's Submissions Assessee's Rebuttal i. Tata Sons Ltd – ITA no 4497/Mum/2005 wherein the Revenue’s submission have been referred to in para 3.18 at Page no 15 of the Legal paper book no.1 and the Bench’s conclusion is in paragraph 3.22 at pages 18 and 19 thereof ii. Tata Communication Ltd - ITA no 7071/Mum/ 2005 wherein the Revenue’s submission have been referred to in para 11 at Page no 51- 52 of the Legal paper book no.1 and the Bench’s conclusion is in paragraph 15 at pages 58 to 63 thereof iii. Tata Sons Ltd – ITA no 193/Mum/ 2006 wherein the Revenue’s submission have been referred to in para 8 at Page no 103 of the Legal paper book no.1 and the Bench’s conclusion is in paragraph 18 at pages123-124 thereof 4 Relying on section 124(3) of the Act, it was urged that - Firstly orders conferring jurisdiction are not appealable and in any event such orders could be challenged only in accordance with the said provisions i.e. before the Principal Director General or Director General or the Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commissioner and such question cannot be raised after the expiry of one month from the date on which such order was served. That section 124 of the Act deals with conferring of territorial jurisdiction on an assessing officer. However, the present case raises the fundamental issues of whether the Addl. CIT who has passed the assessment order could be regarded as the AO in accordance with section 2(7A) read with section 120(4)(b) of the Act. Further, assuming without admitting that the Addl. CIT is to be regarded as the AO, there is no transfer of jurisdiction under section 127 of the Act in this favour. This issue has nothing to do with territorial jurisdiction. The jurisdictional High Court in Bansilal B. Raisoni& Sons V ACIT (2019) 101 Taxman.com 20 has accepted that the limitations under section 124(3) of the Act with respect to the authority before whom an order could be challenged and the bar of limitation for such challenge would be applicable only when question relates to territorial jurisdiction of an assessing officer and not otherwise. In any event, even this issue has been considered by the above referred Tribunal orders, wherein, the relevant references are as under: i. Tata sons Ltd - ITA no. 4497/Mum/2205 – (see Para no 3.15 at page nos 12-13 of Legal paper book no -1) ii. Tata Communication Ltd - ITA no 7071/Mum/ 2005 -(see Para no 18 at page nos 83-84 of Legal paper book no -1) iii. Tata Sons Ltd -ITA no:2519/Mum/2009 and 2639/Mum/2009 -(see Para no 3.15 at page nos 148-149 of Legal paper book no -1) iv. Tata Sons Ltd - ITA no:5090/Mum/2012(see Para no 3.15 at page nos 174-175 of Legal paper book no -1) v. Kishore Vithaldas - ITA no 7397/Mum/ 2016 & ITA no 5661/Mum/ 2017 – (see Para 17 at page nos 502.47 – 502.48 of Legal paper book no -1) vi. VertivEngery Pvt Ltd – ITA no 1975/ Mum/ 2014 & ITA no 1771/ Mum/2015 – (see Para -6.4 to 6.6, 17 page nos 16-18 and Para 5- page no 21) 5 Reliance has been placed on judgment of the Delhi High Court in the case of PCIT V. Mega Corporation, wherein, the Court has reversed the view taken That a bare perusal of the said judgment shows that the conclusion reached therein is based on section 124(3) of the Act. The jurisdictional High Court in the case of Bansilal B. Raisoni (supra) has clearly held that section ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 39 Sr. No. Ld. DR's Submissions Assessee's Rebuttal by the Tribunal. Based on this judgment, it is also urged that the above referred Tribunal orders do not lay down the correct position as they have overlooked the said judgment. 124(3) of the Act and the limitations contained therein would have no application to a case, other than the one dealing with territorial jurisdiction of an assessing officer. Since, section 124(3) of the Act has no application to the present case, the conclusion reached by the Delhi High Court in the case of Mega Corporation will not apply. Further, the impact of the said judgment has been considered by the above referred Tribunal orders in the following paragraphs- i. Kishore Vithaldas -ITA no 7397/Mum/ 2016 & ITA no 5661/Mum/ 2017 – (see Para 16 at page nos 502.46 – 502.47 of Legal paper book no 1) ii. Tata Communications Ltd – ITA no – 7514/Mum/2011 (see Para 11 at internal page no 12 of the order copy submitted separately) iii. Vertiv Energy Pvt Ltd – ITA no 1975/Mum/ 2014 and 1771/Mum/ 2015 – (see Para b at internal pages 14 to 20 of the order copy submitted separately) 6 With reference to the application of the limitation in section 124(3) of the Act, reliance has been placed on judgment of the Delhi High Court in Abhishek Jain Vs ITO 405 ITR 1, Allahabad High Court in CIT Vs British India Corporation and the Calcutta High Court in Elite Pharmaceuticals Vs ITO (2016) 73 Taxman.com 69. Based thereon, it is urged that the additional ground need not be entertained. In Abhishek Jain (supra), the Court was concerned with a case where the dispute was whether the assessing officer in Delhi or in Noida had jurisdiction over the assessee's case. In that case, the officer in Noida has been held to assume concurrent jurisdiction over the assessee's case because the addition related to deposit of cash in a bank account at Noida, especially, when the assessee had not disclosed his permanent account number and also not responded to any notices. Therein, distinction has been drawn between irregular exercise of jurisdiction and complete lack of jurisdiction and it was held that it was a case of irregular exercise of jurisdiction to which the provision of section 124 of the Act would apply. Similarly, the judgment of the Allahabad High Court in the case of British India Corporation Ltd. (supra) was again concerned with a dispute relating to territorial jurisdiction. Therein, in paragraphs 25 to 27 of the judgment distinction has been drawn between lack of jurisdiction and irregular exercise of jurisdiction observing that lack of jurisdiction would make an order to be nullity whereas that was a case where the dispute related to irregular exercise of jurisdiction. Further Calcutta High Court in Elite Pharmaceuticals was also concerned with a case of territorial exercise of jurisdiction. In the present case, the fundamental issues which require consideration are whether the Addl. CIT could be regarded as an AO in terms of section 2(7A) and section 120(4)(b) which goes to the root of the matter. It is submitted that non fulfillment of the conditions specified therein would mean that the Addl. CIT in the present case has no jurisdiction to pursue with the assessment proceeding and pass the assessment order. In any event, these judgments or the principle laid down therein already stands considered by the above referred Tribunal orders as under - i. Tata sons Ltd - ITA no. 4497/Mum/2205 – (see Para 3.24 – 3.26 at page nos 23 to 26 of Legal paper book no -1) ii. Tata Communication Ltd -ITA no 7071/Mum/ 2005(see ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 40 Sr. No. Ld. DR's Submissions Assessee's Rebuttal para nos 13 to 15 and 18 at page nos 54 to 61 and 83-84 of Legal paper book -1) iii. Tata Communication ltd – ITA no 3927/Mum/2017 – (see Para no 5 to 6. at page nos 197 to 227 of Legal paper book no -1) iv. Kishore Vithaldas - ITA no 7397/Mum/ 2016 & ITA no 5661/Mum/ 2017 – (see Para 12 and 13 at page nos 502.14 to 502.15 of Legal paper book no-1) v. VertivEngery Pvt Ltd – ITA 1975/Mum/2014 and 1771/Mum/2015 – (see para 3.2 -3.3. 3.5 (b & d) and 3.6 at Internal page nos 4 – 7, 11,22-23 of order copy submitted separately) vi. Sandoz Pvt Limited - ITA 3733/Mum/2013 & ITA no 3740/Mum/2013 (see para 17-18 at internal page nos 12 of the order copy submitted separately.) vii. Tata International Ltd. - ITA No.1605/Mum/2012 (see para 10 at internal page nos 24 of the order copy submitted separately.) 7 Relying on the judgment of the Delhi High Court in CIT v S.S. Ahuluwalia (2014) 47 taxman.com 169 it has been urged thatjurisdiction is an administrative matter and mistake, if any, in exercising such administrative powers is curable. It is also urged that such administrative matters cannot be taken up in appeal. The said case was also concerned with territorial jurisdiction under section 124 as the question was whether the assessing officer in Delhi or the one in Dimapur would exercise jurisdiction over the assessee in that case. The substantial questions of law arising in that case are reproduced in paragraphs 24 to 29. In paragraph 36 thereof, referring to judgment of the Hon`ble Apex Court in the case of Budhai Swain vs Gopinath Dev (1999) 4 SCC 396 distinction has been drawn between lack of jurisdiction and error in exercise of jurisdiction and it has been observed that "Lack of jurisdiction strikes at the very root of the action and want of jurisdiction might vitiate proceedings rendering the orders passed and exercise thereof a nullity. But a mere error in exercise of jurisdiction would not vitiate the legality and validity of the proceedings and the said order was valid unless set-aside in the manner known to law..........' .Ultimately, in the summary of propositions in paragraph 1 in sub-paras (16) to (18) thereof, both the assessing officer at Delhi and Dimapur were held to have concurrent jurisdiction since the assessee therein also had a place of residence in Delhi. Therefore, the issue arising on the facts of that case were different from the present one. The said judgment has been considered in the following above referred Tribunal decision. i. Sandoz Private Limited (ITA no 3722/ Mum/ 2013 & ITA no 3740/ mum/2013) (see Para 16 at internal page nos 11 and 12 of the order copy submitted separately) 8 Reliance has been placed on the judgment of the Calcutta High Court in the case of ITO vs Ashoke Glass Works 125 ITR 491, the Madras High Court in Advantage Strategic Consulting (P) Ltd. v PCIT 430 ITR 1 and the Hon`ble Apex Court in KashiramAggarwalla v UOI 56 ITR 14 for the proposition that transfer order under section 127 of the Act are administrative orders and when no prejudice is caused to the assessee such orders cannot be challenged. As stated above, insofar as the additional ground relating to transfer of jurisdiction from the Dy.CIT/Asst.CIT to the Addl. CIT is concerned, the assessee is challenging existence of such order and not the correctness of a transfer order/s. It is the assessee's case that when there is no order under section 127,there cannot be any transfer of jurisdiction from one authority to another. Further, assuming without admitting that a transfer order exists in the present case the transferring authority should qualify as an assessing officer. In the present case, the primary submission is that the Addl.CIT cannot be treated as the assessing officer in the absence of fulfillment of the jurisdictional pre-conditions as specified in section ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 41 Sr. No. Ld. DR's Submissions Assessee's Rebuttal 120(4)(b) of the Act. Further, the fact that no prejudice has been caused to the assessee would not justify passing of an assessment order by an authority without jurisdiction. This would be contrary to the express provisions of the Act. The said judgments and the principles laid down therein have been considered by the following above referred Tribunal orders. i. Tata Sons Ltd -ITA no. 4497/Mum/2205(see para 3.22 -3.23 of page no 18 to 23 of Legal paper book no 1) ii. Tata Communications Ltd - ITA no 7071/Mum/ 2005(see Para 18 of page no 83 of Legal paper book no 1) iii. Tata Power Co Ltd –ITA no:3081/Mum/ 2009 & ITA no 3082/Mum/2009 – (see Para 7 at page no 237 of the Legal paper book-1) iv. Sabras Investment (Tata Chemicals Ltd) - ITA no 915 to 918/Mum/ 2012– (see Para 6-8 at page nos 311 to 312 of Legal paper book no-1) v. Tata Sons Ltd - ITA no 4893,2545, 4543 & 2487/Mum/2012(see Para 7-10 at page nos 434 to 437 of Legal paper book no -1) vi. VertivEngery Pvt Ltd – ITA 1975/Mum/2014 and 1771/Mum/2015 – (see Para 2(a) & 2(c) & 3.8 at internal page nos 9-10 of order copy submitted separately) vii. Sandoz Private Limited - ITA no 3722/ Mum/ 2013 & ITA no 3740/ mum/2013) – (see Para 15-18 at internal page nos 10 to 12 of order copy submitted separately) 9 The Tribunal order in the case of Vertiv Energy Pvt. Ltd. v ACIT being order dated 22.06.2022 as relied upon by the assessee does not reflect independent application of mind by the Tribunal as the ultimate conclusion is contained only in one paragraph. A bare perusal of the said judgment shows that after referring to necessary fact in paragraphs 3 and 3.1,the issues have been summarized in paragraph 3.2. Paragraph 3.5 reproduces the contention as raised by the Ld. DR and the assessee's rebuttal in respect of each of them. It is submitted that all the above referred issues were similarly raised by the Revenue before the Tribunal in that case. The conclusion reached by the Tribunal in that case is contained in paragraphs 3.6 to 3.8. In paragraph 3.7 it has specifically observed" 3.7 We find that all the oral and written arguments of the ld. DR have been met in detail by the ld. AR before us as detailed supra. The issue indispute is already addressed by the various decisions of the Tribunal which are reproduced in the ld. AR’s rebuttal referred to supra. The same are not reiterated herein for the sake of brevity. As stated earlier, the issue is already settled by various decisions of the Tribunal in favour of the assessee." .Hence, the Tribunal has considered each and every aspects raised by the Ld. DR and gave a findings in favor of the assessee. by relying upon the conclusion reached by the earlier benches of the Tribunal. In such a scenario they need not reproduce the findings therein on each of the aspects. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 42 Sr. No. Ld. DR's Submissions Assessee's Rebuttal 10 Referring to section 292B of the Act reliance was placed on judgment of the Delhi High Court in the case of Skylight Hospitality LLP 405 ITR 296, where the Hon'ble Apex Court has dismissed the assessee's SLP (2018) 92 Taxman.com 93 In that case, reassessment notice was issued in the name of erstwhile private limited company which had ceased to exist after its conversion into an LLP. The conclusion reached by the High Court in that case was based on its peculiar facts because of the large scale tax evasion in which the assessee had engaged. Further, the entire line of documents including the tax evasion petition, the reasons recorded before reopening the assessment, the approvals granted by the specified authority had referred to the assessee as a LLP. In fact, the assessee therein also did not have any confusion in its mind with respect to the name. In a later judgment in PCIT v Maruti Suzuki India Ltd.416 ITR 613/265 taxman 515, the Hon`ble Apex Court has considered this judgment in the context of an assessment order being made on an amalgamating company after its amalgamation and found the facts in that case to be peculiar and hence, distinguishable (see paragraph 27 at pages 631 to 633 of the Report). The facts and issues arising in that case has no resemblance to the present case. Further, the complete lack of jurisdiction in the Addl.CIT in view of non compliance with the jurisdictional pre- conditions in section 120(4)(b) of the Act cannot be regarded as a mistake, defect or omission in the procedure where in substance and effect the action is in conformity with and according to the intent and purpose of the Act. In the following Tribunal decision, the revenue had relied on section 292B which has been found to be inapplicable 11 Lastly, reference has been made to the following notifications 267/2001 dated 17-09-2001 and 228/2001 dated 31-7-2001 to urge that the pre- conditions as specified in section 120(4)(b) have been fulfilled in the present case. In this regard, reference is invited to the following above referred Tribunal's order where these very notifications have been considered and it has been held that they do not fulfill the requirement as laid down in the said section. Case ITA no Legal paper book-1 and Para reference Tata Sons Ltd ITA no. 4497/Mum /2205 Page 17 para 3.20 and ITAT discussed about the power and authority between Pages 26 to 38 Paras 3.27, 3.28, 3.30 Tata Communications Ltd ITA no 7071/Mum/ 2005 Pages 58 - 61 Para 15 and Reproduced Tata sons - Pages 74 - 82 Paras 3.28, 3.30 Tata Sons Ltd ITA no: 193/Mum / 2006 Reproduced Tata sons - Pages 129 - 139 Paras 3.28, 3.30, Tata Sons Ltd ITA no: 2519/Mum /2009 and 2639/Mum /2009 Reproduced Tata sons - Pages 158 - 159 Paras 3.27, 3.28, 3.30 Tata Sons Ltd ITA no: 5090/Mum /2012 Reproduced Tata sons - Pages 180 - 186 Paras 3.27, ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 43 Sr. No. Ld. DR's Submissions Assessee's Rebuttal 3.31 Tata Communications Ltd ITA no: 2891/Mum /2010 & ITA no 1015/ Mum /2010 Co filed Page 194 para 3.1, Pages 200-202 paras 5.3 Reproduced Tata sons - Pages 219 – 226 Paras 3.27, 3.28, 3.30 Kishore Vithaldas ITA no 5661/Mum/ 2017 & ITA no 8768/Mum 2010 Page 502.16 para 14, Reproduced Tata Communications – Page 502.33 Para 3.27, 3.28, 3.30 Vertiv Energy Private Limited ITA No. 1975/ MUM/ 2014 Page 11 para d Sandoz Private Limited ITA No. 3871/ Mum/2013 Page 10 para 14 12 In paragraphs 9 to 9.5 of the written submission filed on 12.08.2022 by the Ld. DR. before the Tribunal refeence has been made to section 253 of the Act and it has been urged that the orders to be passed under section 120/127 are not appealable before the Tribunal That the assessee had not filed any appeal in respect of any order passed under section 120/127 of the Act. In the present appeal arising out of assessment order passed for AY2002-03, it is urging that in the absence of any orders passed under section 120/127, such assessment order being passed by the Add. CIT is without jurisdiction. Therefore the said submission has no application to its case. 13 In paragraph 11 of the written submissions dated 12.08.2022 filed by the Ld. DR reliance has been placed on the definition of Jt. Commissioner of Income tax to urge that the said authority would include an Addl. Commissioner, which amendment has brought in by Finance Act, 1999 w.e.f.01.10.1998 It is submitted that mere treating of an Addl. Commissioner of Income-tax to be a Jt. Commissioner of Income-tax would not qualify them to be an assessing officer, unless the pre-conditions in section 120(4)(b) of the Act are fulfilled. Further, the pre-conditions for a Jt. Commissioner of Income-tax to be regarded as an assessing officer is also similar to that of an Addl. Commissioner. This issue has also been considered by the following above referred Tribunal orders: i. Tata Sons Ltd - ITA no. 4497/Mum/2205–(see Para 3.24 to 3.26 at page nos 23-25 of Legal paper book no-1) ii. Tata Communications Ltd - ITA no. 7071/Mum/ 2005– (see Para 14 to 15 at page nos 56-63 of Legal paper book no-1) iii. Kishore Vithaldas - ITA no 5661/Mum/ 2017 & ITA no 8768/Mum 2010 (see Para 12 to 13 at page nos 502.14 to 502.16 of Legal paper book no-1) 14 In paragraph 11.10 reference has been made to judgment of the Hon`ble Bombay High Court in N. Rajgopal vs Addl.CIT (Appeal no 1454/2016) for the proposition that an Addl. Commissioner would qualify as an assessing officer. That, in that case the assessee nowhere challenged and there is no discussion of fulfillment of condition in section 120(4)(b) of the Act. In fact, that aspect was never challenged by the assessee in that case. Hence, the said judgment has no application. This judgment has been considered by the following above referred Tribunal order: Vertiv Energy Pvt. Ltd. (pages 12 & 13 thereof) 7. Apart from the above, the Tribunal vide is order dated 29 November 2023 in the case of Nuclear Power Corporation Limited has upheld exercise of such jurisdiction by the Additional ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 44 Commissioner of Income-tax on the facts of that case. It is submitted that the said order proceeds on the basis that in that case the Joint Commissioner of Income-tax had been promoted to the post of Additional Commissioner. In any event, undisputedly, the present case the assignment of jurisdiction in favour of Additional Commissioner of Income-tax is on 5 May 2008 while the Assessment order was passed on 22 March 2005. Lastly, it is also submitted that the said order does not lay down that the provision of section 120(4)(b) of the Act need not be complied with. 8. In view of the above, the Appellant submits that the Tribunal may be pleased to allow the Assessee's appeal and CO and dismiss the Revenue's appeal only based on this preliminary issue.” 7. Considered the rival submissions on the issue of additional ground raised above, challenging the jurisdiction and validity of the assessment order passed under section 143(3) by the Addl. Commissioner of Income Tax on the ground that there was no order under section 120(4)(b) or 127 of the Act, authorizing the Addl. Commissioner of Income Tax to act as an Assessing Officer and jurisdiction to pass the assessment order. 8. In this case, the assessment order was passed on 22.03.2005. Before this Tribunal the appeal proceedings started way back on 30.05.2012 and thereafter almost more than 40 hearings had taken place. On 10.03.2021 almost after lapse of 16 years from the date of the passing of the order, additional ground has been raised, challenging the jurisdiction of the Addl. Commissioner of Income Tax to pass the assessment order on the ground that there is no notification or order under section 120(4)(b) or 127 of the Act. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 45 9. After filing of the additional ground, this Tribunal has called for the records from the department to verify, whether there was any such order under section 120(4)(b) or 127 of the Act passed by the concerned authority assigning the case to the Addl. Commissioner of Income Tax from DCIT. However, department could not produce the record on the ground that same is not traceable, because of lapse of time and after so many restructurings in the jurisdiction and field officers the concerned records are not available/traceable. 10. Before us, the Ld. Senior counsel had submitted that, if once the department could not be able to produce the records, then it is to be presumed there is no such order, because onus is upon the department to show that there is an order by the concerned authority authorizing the Addl. Commissioner of Income Tax for passing the order. 11. It was also pointed out that the originally the return of income was filed with Asst. CIT – 7(1), Mumbai, who was then jurisdictional Assessing Officer and thereafter Dy. CIT- 7(1), Mumbai had issued notices under section 143(2) of the Act and he also referred it to Transfer Pricing Officer for determination of Arm’s Length Price for the international transactions in the case of the assessee vide letter dated 14.10.2003. It ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 46 was only on 22.11.2004 Addl. Commissioner of Income Tax has again issued notice under section 143(2) of the Act. If there is no such order available authorizing, the Addl. Commissioner of Income Tax then he could not have acted as an Assessing Officer. In support, of his contentions he relied upon series of judgments by this Tribunal on similar issue, wherein the Tribunal has quashed assessment holding that once there is no such order authorizing the Addl. Commissioner of Income Tax to act as an Assessing Officer by the concerned authority, then that assessment order is invalid and assessments have been quashed on this count. 12. Before us, Ld. DR had objected to the very admission of additional ground on the ground of delay in filing the additional ground and submitted that since the Addl. Commissioner of Income Tax had issued notice under section 143(2) of the Act on 28.09.2004 and even after passing the assessment order on 22.03.2005, this issue was never raised either before the Assessing Officer or before the Ld. CIT(A) or even for 10 years before the Tribunal. Now admitting of additional ground after delay of 16 years, and without any satisfactory explanation for the reason for such a delay right from the stage of initiation of assessment proceedings till the date of filing of additional ground same cannot be ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 47 admitted. If once assessee has not objected and participated in the proceedings and never raised this issue that is Addl. Commissioner of Income Tax did not have valid jurisdiction, now after a lapse of 16 years such a ground cannot be entertained. Thus, he objected to the very admission of the additional ground. 13. We have heard both the parties on admission of the additional ground. Though, it is a well settled law that point of jurisdiction or legality of any order can be raised at any stage and there is no time limit prescribed for raising such issue as long as “lis” is pending. However, in order to appreciate the admission as well as the legality of the issue challenged, it is imperative that such a plea or ground should be available from the records, so as to give a categorical finding of fact that there is no such order was passed under section 120(4)(b) or 127 of the Act by the CIT or DCIT or Pr.CIT, etc., and therefor assessment order should be declared invalid. 14. Now, whether the benefit can be given to the assessee because the department could not trace the records after a lapse of 16 years for the reason that due to restructuring and change in several jurisdictions the records are not traceable. If such a plea or legal issue would have been ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 48 raised at a reasonable time, perhaps the records would have been verified by the First Appellate Authority itself and given some kind of finding, so as to decide the issue. 15. We are of the opinion that, such an inordinate delay and in absence of records being available, the “Principle of Estoppel of Latches” can be applied in such a situation, which lays down an equitable doctrine, where the court could deny the relief to claimant who has unreasonably delayed the claim or has been negligent in ascertaining the claim. Can the claim of claimant be condoned to raise the issue after lapse of 16 years. In our opinion it cannot be. 16. Further, doctrine of “Estoppel of Acquiescence” which is a estoppel for the party’s failure to respond to claim within a reasonable time after receiving the notice of claim and thereby gave rise to presumption of exceptions. If for 16 years assessee as acquiesce to the order passed by the Addl. Commissioner of Income Tax and did not challenge the validity of the order or to exercise the jurisdiction as an Assessing Officer for 16 years, then it would not be proper to by-pass the estoppel by acquiescence. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 49 17. We are aware that in some matter, merely by acquiesce, assessee cannot be precluded from making a claim which is otherwise legally allowable to him. However, one has to consider the conduct of the assessee and the reason for delay while adjudicating the issue raised, even it might be a legal and jurisdictional issue, but there has to be a reasonable and plausible explanation as to why this matter was not raised for 16 years and whether the benefit of doubt can be given to the assessee simply because department could not produce the records and we are also not able to verify as a matter of fact that there is no such order on record. 18. Though additional ground can be raised if it is a pure question of law, but for adjudication such question of law, ascertainment of facts are necessary, then without those facts coming on record it is difficult to decide the question of law itself. Though we are aware that in some of the decisions by the Coordinate Bench have been admitted such an additional ground after inadvertent delay and decided the issue. However, in the present case, in absence of the records being available before us, we are not able to adjudicate this issue. Had the records being made available then perhaps such delay would have been condoned, being the point of jurisdiction. However, without actual ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 50 records coming on record because of bonafide reasons given by the department that after lapse of so many years and that to be when this issue was not raised at any point of time, we cannot quash the assessment simply on the presumption that no such order would have been passed. 19. As we have already observed above there is a difference between order not available on record for transferring the jurisdiction from DCIT to Addl. CIT and not available on record due to lapse of time and latches on part of the assessee. Thus, we agree with the contention of the Ld.DR that additional ground cannot be admitted due to inadvertent delay and accordingly, the petition for admission of additional ground is rejected. 20. Accordingly, we proceed to adjudicate the original grounds raised by the assessee and they are adjudicated ground wise. 21. In Ground No.1, assessee has raised following grievance: - “GROUND NO. 1 (a) The CIT(A) erred in holding that the appellant would not be eligible for depreciation on assets that stood vested in Ciba Specialty Chemicals (India) Ltd., (CSCIL) pursuant to the scheme of demerger as the appellants had ceased to be the owner of the assets and had ceased to use the assets ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 51 for the purpose of its business. The CIT(A) failed to appreciate that having regard to the amended scheme of depreciation, the appellant was entitled to the allowance as claimed. (b) The CIT(A) erred in holding that a consideration had flowed to the appellant for the transfer of the assets to CSCIL.” 22. At the time of hearing, Ld.AR of the assessee brought to our notice the relevant facts relating to the issue arising in this ground of appeal are on allowability of depreciation under section 32 of the Income-tax Act, 1961 (‘Act’) on the assets relating to the specialty chemicals division after demerger of the said undertaking by the Appellant to Ciba Specialty Chemicals (India) Ltd. The Assessee was initially carrying on business of manufacture and/or sale of Pharmaceuticals, Specialty Chemical, Animal Health products, eye-care products and generics products. Based on section 2(11) and section 32 of the Act, it had common block of assets of all its business. The Assessee had transferred the Specialty Chemicals division to Ciba Specialty Chemicals (India) Ltd. by way of a demerger with the appointed dated as 1 April 1996 pursuant to the order of the Hon’ble Bombay High Court dated 25 July 1997. 23. It was submitted that as per section 32 of the Act, depreciation is allowable on the written down value of the block of assets. Section 43(6) defines the expression written down value as under: - ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 52 “written down value" means— (a) in the case of assets acquired in the previous year, the actual cost to the assessee; (b) in the case of assets acquired before the previous year, the actual cost to the assessee less all depreciation actually allowed 63 to him under this Act, or under the Indian Income-tax Act, 1922 (11 of 1922), or any Act repealed by that Act, or under any executive orders issued when the Indian Income-tax Act, 1886 (2 of 1886), was in force: Provided that in determining the written down value in respect of buildings, machinery or plant for the purposes of clause (ii) of sub-section (1) of section 32, "depreciation actually allowed" shall not include depreciation allowed under sub-clauses (a ), (b) and (c) of clause (vi) of sub-section (2) of section 10 of the Indian Income-tax Act, 1922 (11 of 1922), where such depreciation was not deductible in determining the written down value for the purposes of the said clause (vi) and Section 43(6)(c)(i) (B) provides for the circumstances in which the written down value can be reduced and manner thereof as under: (B) by the reduction of the moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year together with the amount of the scrap value, if any, so, however, that the amount of such reduction does not exceed the written down value as so increased; 24. Since, the Assessee’s case did not fall within any of the circumstances mentioned above, it continued to claim depreciation on the written down value of the block of assets including those relating to the demerged undertaking. 25. The Assessing Officer denied Assessee’s depreciation claim for the first time in the previous year relevant to assessment year 1997-98, whereby he reduced the book written value of the demerged assets from the written down value of the block of assets. Upon further appeal, the ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 53 Ld.CIT(A) has accepted the conclusion of the Assessing Officer however directed the reduction of the tax written down value of the block of assets as against book value. Thereafter, the same stand has been taken by the Assessing Officer / Ld.CIT(A) in all the later years including the year under consideration. 26. In this regard, it was submitted before us that disallowance of depreciation on assets transferred on account of demerger has been deleted by the Hon’ble Income-Tax Appellant Tribunal in the Assessee’s own case for AY 1997-98 in ITA No 5283/Mum/2003 and ITA No 6224 and 6225/Mum/2004, Ld AR brought to our notice the relevant paras 8.2 and 8.3 of the Order. 27. Further, it was submitted that aforesaid order has been followed in the orders for AY 2000-01 (ITA 6226 & 5981/ MUM/2004) and AY 2001-02 (ITA 3379 & 3046/MUM/2009). The relevant Para no. 3.7 of AY 2001-02 was brought to our notice in which the coordinate benches have allowed the relevant grounds raised by the assessee and the relevant orders are placed on record. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 54 28. Further, it was submitted that in respect of similar issue arising in Assessee’s own case for the subsequent year i.e. AY 2008-09 (ITA No. 7644/MUM/2012 dated 28 July 2022), the Tribunal has directed a one time allowance of depreciation carried forward by the assessee towards the non existing assets in the block of assets in the opening balance of the written down value of such assets as on 1 April 2007 as loss arising due to discarding of assets. The relevant extract of the said order is reproduced as under: “22. We intended to follow the same, however, we considered reading the section 43(6) of the Act and observe that as per provisions contained in section 43(6)(c) with regard to block of assets, it says that in respect of any previous year relevant to the assessment year, the aggregate of the written down values of all assets falling within that block of assets at the beginning of the previous year and adjusted, -- (A) by the increase of the actual cost of assets falling within that block, acquired during the year. (B) by the reduction of the moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year together with the amount of the scrap value, if any,so, however, that the amount of such reduction does not exceed the written down value as so increased; and (C) ........ From the above provision, it is clear that every year the block of assets has to be adjusted in case if there are any changes in the composition of the assets within the block. This exercise has to be done every assessment year. In the given case, it is fact on record that the impugned assets are not in existence with the organization. The ITAT has come to the conclusion in A.Y.2000-01 interpreting the provisions as applicable at that point of time. In our view the assets in the block has to be evaluated every assessment year and as per provision 43(6)(C)(B), it clearly indicates that the value has to be reduced of the moneys payable in respective of any assets falling within that block which is sold/discarded/demolished or destroyed. In the given case, the block does not consist the assets, which are transferred in the demerger in ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 55 the A.Y. 1997-98. However, these particular assets are not in existence in the beginning of the year and it can be considered as discarded in the provisions with “NIL” value. This issue needs to end some point of time. In that case, the value of the assets has to be written off this year and to be claimed as loss in the statement of income (instead of depreciation). Therefore, we are inclined to direct the Assessing Officer to treat the opening balance of the assets to the extent of assets, which was already transferred to the demerged company as loss of assets or discarded. Accordingly, this ground of appeal filed by the assessee is partly allowed. 29. It was submitted before us that in order to effectively follow the above direction given in the order for the AY 2008-09, it was prayed that the claim of depreciation for the period 2002-03 be allowed by following the earlier order of Tribunal in AY 2000-01 and 2001-02, the Assessee must be granted depreciation on written down value of the demerged assets so that the opening written down value as on 1 April 2007 can be allowed as a loss for the AY 2008-09 in compliance of the Tribunal’s order. Further it was also submitted that the Assessee has not accepted the ruling of Tribunal for AY 2008-09 in respect of treatment of allowing the opening written down value as on 1 April 2007 as one-time loss and have filed further appeal before the Bombay High Court against the same which is pending for admission. However, it was prayed before us that the order for AY 1997-98 may be followed for the subsequent assessment years till AY 2007-08. Further it was submitted that even otherwise, in order to compute the opening written down value of the ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 56 assets transferred for the AY 2008-09 and claim the same as one-time loss/ allowance, for the AY 2002-03 to AY 2007-08, the Tribunal may kindly direct the Assessing Officer to allow the depreciation claimed on assets vested in Ciba Specialty Chemicals (India) Ltd pursuant to demerger amounting to ₹.73,68,241. 30. On the other hand, Ld. DR relied on the order of the lower authorities. 31. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 1997-98. While deciding the issue, the Coordinate Bench in ITA.No. 5238/Mum/2003 dated 25.01.2017 held as under: - “8. Ground No.8 deals with non eligibility of the assessee for depreciation on assets that stood vested in Ciba Speciality Chemicals (India) Ltd.(CSCIL).During the assessment proceedings the AO came to the conclusion that the book value of the transferred assets shall be adopted from block of assets for the purpose of depreciation. He was of the opinion that since consideration had flowed to the assessee for the transfer of assets to CSCIL the assessee was not entitled to claim of depreciation. 8.1. Before the FAA, the assessee contended that Demerger was not a sale-transaction, that consequently no money was payable as defined u/s.41(4) of the Act, that no adjustment was to be made to WDV of block of assets while computing depreciation claims. It further argued that what was required to be reduced from the block was money value received from the sale of assets. It relied on the decision of Kasturi & Sons(237ITR24) of the Hon'ble Supreme Court wherein the Hon’ble Court had defined the words “moneys payable” and had held that the phrase included actual currency form and not money’s worth. It was, therefore, contended that since no money in actual currency was received by the assessee on account of ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 57 demerger, no adjustment was required to be done to the WDV with reference to assets in question. It further submitted that reliance placed by the AO with regard to the treatment given by another assessee in its own case was irrelevant and also that the observation made by the AO that the assessee had fraudulently claimed excess depreciation was wholly unjustified, that it had fully disclosed the stand taken by it in the return filed. After considering the submissions of the assessee and the order of the AO, he held ,that an assessee had to be the owner of a particular asset on which depreciation had been claimed, that the said assets had to be used for the purpose of its business, that the assessee was neither the owner of the assets transferred nor were same used for the business purposes during the year under consideration, that it had failed to satisfy the basic condition prescribed u/s.32 of the Act on the assets transferred to CSCIL, that the assessee was not justified in claiming that nothing should be reduced from its block of assets and that depreciation should be granted on the full block of assets as existing prior to the transfer of assets, that the reliance placed by the assessee on section 43(6)(c)(i)(B) of the Act was no help to it, that it could not be said that it had not received any consideration or moneys payable as envisaged under section 43 (6), that the AO had rightfully held that the assets transferred by the assessee were not without any consideration, that the shareholders of the assessee company received shares of CSCIL as per the scheme of arrangement sanctioned by the Hon’ble, High Court, that CSCIL had paid consideration to the shareholders of assessee, that the transfer of shares was in respect of the assets transferred by the assessee. He further held that AO was not justified in adopting the book value of the assets transferred while reducing the assessee’s claim for depreciation, that he should have reduced from the block of asset that the WDV of the transferred assets as per the income tax records and not as per the book value of the assets. He directed the AO to substitute the written down value of the transferred assets by the WDV of the book value of such assets while reducing the value of assets from the block before allowing the assessee’s claim for depreciation. 8.2. During the course of hearing before us, the AR argued that whole business was transferred under the scheme of demerger, that the assessee did not receive any money, that the share holders of the company had received the shares in pursuance of the merger, that the arrangement was about whole business and not in respect of any asset, that nothing was sold/ discarded, that for claiming depreciation the ownership of a particular asset is not mandatory, that after the block concept has come into existence, individual assets would lose their independent character, that the provisions of section 43(6) were not applicable to the facts of the case. He relied upon the cases of Kastur i& Sons (supra),Motors and General Stores(66ITR692)and Bharat Bijlee Ltd.(46taxmann.com 257). The DR supported the order of the FAA. The DR stated that entire chemical business was not transferred, that only one division was transferred , that the AO had made enquiry with other concern, that he found that the assets were taken on book value, that requirement of ownership of assets was a must, that it was not a case of ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 58 slump sale, that the cases relied upon by the assessee were distinguishable on facts. 8.3. We find that in the case of Kastur i& Sons(supra)the Hon’ble Apex Court has interpreted the phrase money’s worth and applicability of section 41(2)of the Act as under: “ 19. We are unable to accept the contention that the word `money' should be interpreted as `money's worth'. The reasons given by us earlier are sufficient and we need not add to them. The reason for introducing a fiction in S.41 (2) of the Act as explained in Bipinchandra Maganlal& Co. Ltd. (41 I.T.R. 290) quoted in Artex Manufacturing Co. (1997) 6 S.C.C. 437 that it is for the purpose of recoupment by the Revenue of the benefit allowed to the assessee in the previous years does not alter the situation. 20. In the result, we do not find any error in the view expressed by the High Court in the judgment under appeal.We are in agreement with the reasoning and conclusion of the High Court in this case.” Respectfully, following the above, we reverse the order of the FAA. We find that what was transferred, in the transaction in question, was not money. In our opinion, facts of the above case are quite similar to the case under appeal. We have also taken note of fact that it is a case of demerger, not of sale or exchange. Last ground of appeal, raised by the assessee, is decided in its favour.” 32. The above decision of the coordinate bench was followed by the other benches for the subsequent assessment years upto AY 2001-02. However, while dealing with the same issue in AY 2008-09, the coordinate bench has modified the decision as under: “22. We intended to follow the same, however, we considered reading the section 43(6) of the Act and observe that as per provisions contained in section 43(6)(c) with regard to block of assets, it says that in respect of any previous year relevant to the assessment year, the aggregate of the written down values of all assets falling within that block of assets at the beginning of the previous year and adjusted, -- (A) by the increase of the actual cost of assets falling within that block, acquired during the year. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 59 (B) by the reduction of the moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year together with the amount of the scrap value, if any,so, however, that the amount of such reduction does not exceed the written down value as so increased; and (C) ........ From the above provision, it is clear that every year the block of assets has to be adjusted in case if there are any changes in the composition of the assets within the block. This exercise has to be done every assessment year. In the given case, it is fact on record that the impugned assets are not in existence with the organization. The ITAT has come to the conclusion in A.Y.2000-01 interpreting the provisions as applicable at that point of time. In our view the assets in the block has to be evaluated every assessment year and as per provision 43(6)(C)(B), it clearly indicates that the value has to be reduced of the moneys payable in respective of any assets falling within that block which is sold/discarded/demolished or destroyed. In the given case, the block does not consist the assets, which are transferred in the demerger in the A.Y. 1997-98. However, these particular assets are not in existence in the beginning of the year and it can be considered as discarded in the provisions with “NIL” value. This issue needs to end some point of time. In that case, the value of the assets has to be written off this year and to be claimed as loss in the statement of income (instead of depreciation). Therefore, we are inclined to direct the Assessing Officer to treat the opening balance of the assets to the extent of assets, which was already transferred to the demerged company as loss of assets or discarded. Accordingly, this ground of appeal filed by the assessee is partly allowed.” 33. In the above decision, the coordinate bench has directed the Assessing Officer to allow the outstanding value of block of assets as on 1.4.2007 as loss in the AY 2008-09. In order to follow the above recent decision on this issue, the depreciation disallowed by the Assessing Officer has to be allowed in favour of the assessee relying on the earlier decision of the coordinate bench prior to AY 2001-02 and issue involved in this appeal is relating to AY 2002-03, therefore, we direct the Assessing Officer to allow the depreciation similar to the decision in the ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 60 case of the assessee in the AY 2001-02. Accordingly, the ground raised by the assessee is allowed. 34. In Ground No.2, assessee has raised following grievance: - GROUND NO. 2 (a) The Commissioner of Income-tax (Appeals)-13 (hereinafter referred to as the CIT(A)] erred in upholding the action of the Deputy Commissioner of Income- tax, Circle 7(1), Mumbai (AO) in disallowing expenditure of Rs. 55,01,084/- in connection with Software treating the same as capital expenditure and granting depreciation at the rate of 25% instead of 60%. (b) The CIT(A) ought to have directed the AO to allow depreciation on software expenses disallowed in earlier years. 35. Brief facts relating to the issue are, during the year under consideration, the Assessee has incurred an expenditure of ₹.55,01,084 on account of computer software packages, implementation charges and upgradation of existing software. The said expenses pertained to maintenance charges and license fees for various Microsoft Packages (like MS Word, Excel, power point, lotus notes etc). [Refer page 27 to 31 of Factual paper-book -2]. The software packages are frequently outdated and thus requires frequent upgradation. Accordingly, the Assessee follows a policy of capitalizing expenses incurred on software systems related to hardware of a computer whilst charging the costs incurred on application software to the Statement of Profit & Loss. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 61 36. During the assessment proceedings for the captioned assessment year, the Assessing Officer has disallowed the Assessee’s claim of ₹.55,01,084 towards expenditure incurred on computer software/ license fees by treating it to be capital in nature as against revenue expense. Consequently, the Assessing Officer has allowed depreciation @25% on the same i.e ₹.13,75,271. (Refer para no 7 page 11-13 of Assessment order) 37. Aggrieved, assessee preferred an appeal before Ld. CIT(A) and filed submissions. After considering the submissions of the assessee Ld. CIT(A) upheld the order of the AO. (Refer para no 5.1 – 5.4 page 29- 32 of CIT(A)’s order). Aggrieved, Assessee has filed an appeal before us. 38. At the time of hearing, Ld.AR brought to our notice relevant facts relating to the ground and submitted that the Hon’ble Tribunal in its own case for AY 1991-92 in ITA No.9679/Mum/1995, in AY 2001-02 as well as in AY 2008-09 in ITA No 7644/Mum/2012 held in favour of the assessee and he brought to our notice the relevant paras 28 to 33 of the order. In view of the above, Ld.AR of the assessee prayed to direct the Assessing Officer to allow the expenditure incurred on computer software / license ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 62 fees as revenue expenditure for the captioned AY relying on Assessee’s own orders for similar nature of software / license fees. 39. On the other hand, Ld. DR relied on the order of the lower authorities. 40. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 1997-98. While deciding the issue, the Coordinate Bench in ITA.No. 5238/Mum/2003 dated 25.01.2017 held as under: - “12. Fourth ground of appeal is with regard to expenditure incurred on computer software of Rs. 25.54 lakhs. The AR and the DR agreed that similar issue was decided in favour of the assessee by the Tribunal while deciding the appeals for the AY.s.1991-92,1995-96 and 199697 and that the Department had not challenged the orders of the Tribunal before the Hon’ble High Court. The AR further referred to the cases of Raychem RPG Ltd.(346ITR148) and Asahi India Safety Glass Limited(245CTR529) 12.1 We find that while deciding the appeal for the AY.1996-97 the Tribunal has dealt the issue as under: “11. First ground of appeal is about expenditure incurred on computer software, amounting to Rs.19.45 lakhs. First ground of CO also deals with the identical issue. During the assessment proceedings, A.O held that the expenditure incurred by the assessee was of capital nature, whereas FAA was of the opinion expenditure was of revenue nature. 11.1. Before us, DR supported the order of the AO.AR contended that similar issue was decided in favour of the assessee by the Tribunal while deciding the appeal for the year 91-92 and 9596.He referred to pages 236-37 of the paper book. He relied upon the case of Ashi Glass safety India Ltd.(245CTR)delivered by the Delhi High Court. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 63 11.2. We find that while deciding the appeal for the year 1995- 96(ITA/1749/mum/2003-25.09. 2013),Tribunal has dealt the issue as under: “The AO was of the opinion that the benefits of the software are long term or of enduring nature arid accordingly treated this expenditure as capital and allowed the depreciation and disallowed the remainder. Assessee strongly agitated this issue before CIT(A). The CIT(A) has considered this grievance of the assessee at para 8 and para 30 of its order. The CIT(A) was convinced that the application software of computers get outdated in no time. Hence, such expenditure cannot be treated as capital expenditure. The CIT(A) further observed that in immediately two preceding assessment years , his predecessors have treated similar expenditure as revenue expenditure, following the findings of his predecessors, the C1T(A) directed the AO to delete the entire disallowance. However, at the same time he directed the AO to withdraw the depreciation allowed. Aggrieved by this revenue is before us. The ld.DR strongly supported the findings of the AO, Counsel for the assess strongly relied upon the decision of the Hon’ble Delhi High Court in the case of Asahi India safety glass limited 245 CTR 529.We have considered the rival submissions and perused the orders of the lower authorities. It is not in dispute that the expenditure has been incurred on application software The Hon’ble Delhi High Court in the case of Asahi Safety Glass ltd.(Supra) has held that application software arc of revenue in nature as the AO has not doubted that the expenses were on application software therefore respectfully following the decision of the Hon ’ ble Delhi High Court, findings of the CIT(A) are confirmed. Appeal of the revenue is dismissed.” Following the same, ground no.1 filed by the AO, is decided against him. As the ground has been decided in favour of the assessee, so, first ground of CO become infructuous.” Respectfully following the orders of the Tribunal for the earlier years and judgment of Raychem RPG Ltd.(supra) of the Jurisdictional High Court, we decide Ground No.4 against the AO.” 41. Further, in assessee’s own case for the A.Y. 2001-02 the Coordinate Bench of the Tribunal in ITA.No. 3379/Mum/2009 dated 30.04.2021, held as under: - “8.1 The assessee incurred an amount of Rs.27.31 Lacs towards purchase of various computer software packages as detailed in the assessment order. Majority of the expenses consisted of license fee or use of Microsoft packages (excel sheet, word document, power point presentation etc.) and ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 64 Oracle software for developing accounting software at C & F locations. The assessee submitted that software expenses were for software packages which get frequently outdated and have to be replaced and therefore, the expenditure was revenue in nature. The assessee further stated that operating software is treated as capital expenditure whereas application software which gets outdated early, is revenue in nature. However, following the stand taken in AYs 1995-96 to 2000-01, the expenditure was said to be enduring in nature and thus capital expenditure. Accordingly, depreciation of 25% was allowed against the same. The action of Ld. AO resulted into an addition of Rs.20.48 Lacs. Consequently, similar depreciation of earlier years for Rs.18.98 Lacs was allowed to the assessee disregarding the depreciation on assets pertaining to demerged division. 8.2 The Ld. CIT(A) noted that the payments were in the nature of license fees or for right to use certain packages which have normally longer periods of life, usage and validity and therefore, the benefits would be enduring in nature. Accordingly, the action of Ld. AO was upheld. Aggrieved, the assessee is in further appeal before us. 8.3 We find that this issue has been adjudicated in Tribunal’s order for AY 2000-01, para nos.2 to 5. The bench, following earlier years, held that the expenditure was revenue in nature. Upon perusal, we find that this ground is covered in assessee’s favor in several earlier years and the department has accepted the ruling of the Tribunal in those years and has not preferred further appeal, on this issue. This being the case, we direct Ld. AO to allow the expenditure fully and reverse the depreciation adjustment thus made in the assessment order. Ground No.1(a) of assessee’s appeal stands allowed whereas Ground No.1(b) has been rendered infructuous.” 42. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in assessee’s case for the preceding assessment years are respectfully followed, accordingly, ground raised No.2 raised by the assessee is allowed. 43. In Ground No.3, assessee has raised following grievance: - GROUND NO. 3 (a). The CIT(A) erred in holding that Rs 30,37,642/- being 20% of total foreign traveling expenses were not allowable ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 65 (b). Without prejudice to above, the appellants submit that in case foreign travel expenses are held as capital in nature, depreciation should be allowed on such expenditure. 44. Brief facts relating to adhoc disallowance of 25% of total foreign travelling expenses are, Assessee has incurred an expenditure of ₹.1,51,88,207 towards air fare, boarding / lodging and other expenses related to foreign travel and claim the same as allowable business expense (details of foreign travel including reasons for foreign travel are filed at page no. 32 to 41 of the Factual Paper-book no 2). However, the Assessing Officer followed the practice of disallowance from earlier years and disallowed 25% of the expenditure with the allegation that the Assessee is unable to prove that the foreign travel is wholly and exclusively for its business. (Refer para no 8 page 13 of Assessment order) 45. Aggrieved, assessee preferred an appeal before Ld. CIT(A). After considering the submissions of the assessee Ld. CIT(A) upheld the order of the Assessing Officer. However, relying on the earlier years CIT(A)’s order, the Ld.CIT(A) restricted the disallowance to 20% instead of 25%. (Refer para no 6.1 – 6.6 page 32-33 of CIT(A)’s order). Aggrieved, Assessee has filed an appeal before us. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 66 46. At the time of hearing, Ld.AR of the assessee submitted that the Hon’ble Tribunal in its own case for assessment years 1991-92 to 1999- 00, also in AY 2000-01 on similar nature of expenditure held that the expenses are wholly in connection with Assessee’s business and should be allowed as business expenses in respective AY 1991-92 to 1999-00, also in AY 2000-01. In view of the above, Ld. AR prayed to direct the Assessing Officer to allow entire expense as allowable business expense by deleting the ad-hoc disallowance of 20% of the foreign travel expenses. 47. On the other hand, Ld. DR relied on the order of the lower authorities. 48. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 1997-98. While deciding the issue, the Coordinate Bench in ITA.No. 5238/Mum/2003 dated 25.01.2017 held as under: - “2. Second Ground deals with disallowance of 20% of foreign travelling expenses (Rs.33, 89,997/-)on the ground that it is capital in nature. It was brought to our notice that while deciding the appeal for the AY.s 1991-92- 1996-97(ITA/9566/Mum/1995, dt. 04.11.10; ITA No. / 1584/Mum/1999, dt.12.10.2011; ITA/334/Mum/1997, dt.29.06.2012; ITA/2874/Mum/99/ dt.31. 10.2012; ITA/2951/Mum/2000, dt.13.06.2014) respectively, the Tribunal had dealt with the said issue. We would like to reproduce the ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 67 relevant portion of the said order (ITA/ 2951/Mum/2000, dated 13.06.2014) and it reads as under:- “6. Next ground is about disallowance of Rs.22,73,715/-,being 1/5th of the foreign travelling expenses. During the assessment proceedings, AO held that details of foreign travel expense were not furnished. Following the order for the year l995-96, he made the disallowance of 25% of foreign travel expenses. Before the FAA, it was argued that the details of foreign travel expenses were furnished as annexed to the return of Income. A copy of the same was also filed before the FAA, during the hearing of the appeal. He held that the details filed by the assessee contained the name of the persons who undertook the foreign travel expenses, places visited, period of visit and purpose of visits. Further, during the hearing of the appeal papers were filed along with the sample copies of the tour reports as submitted by the touring officers. He held that the details contained certain foreign visits which were to Kathmandu, Nepal against which the only purpose ‘given was ‘Business discussion’, that expenses of such visits totaled to Rs.7,70,051. He held that some of the visits were personal in nature, that the foreign travel expenses could not be allowed in full as claimed by the assessee. Following the orders for the year 1993-94 and 1991-92 he upheld disallowances of 20% of the foreign travel expenses claimed by the assessee. 6.1. Before us, AR and DR agreed that issue has been dealt by the Tribunal in earlier AY.s. 6.2. We have heard the rival submission and perused the details filed by assessee in this regard. We find the in the year 1991-92 Cross appeals were filed by the assessee and the AO against the partial allowance/ disallowance of foreign travel expenses. Deciding the appeal, Tribunal held as under: “The disallowance has been made on assumptions and presumptions. The very basis on which the disallowance has been made is found to be not correct. In fact in AY 74-75, 64-65 76-77 and 77-78 similar disallowance of expenses has been deleted by the Tribunal. Copies of the said orders are in the paper book. In view of the above, we direct that the disallowance sustained by the CIT(A) be deleted. Ground No.4(a) is allowed and therefore Ground No.4(b) and (c) do not require any adjudication. Ground No.2 of the Revenue is dismissed.” Following the same, we decide the issue in favour of the assessee. As ground no.5(a) has been decided in favour of the assessee, ground no. 5(b) becomes infructuous.” Respectfully following the above Tribunal order Ground No.2, raised by the assessee, is allowed.” ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 68 49. Further, in assessee’s own case for the A.Y. 2001-02 the Coordinate Bench of the Tribunal in ITA.No. 3379/Mum/2009 dated 30.04.2021, held as under: - “9.1 In AY 1993-94, 25% of foreign travel expenses incurred by assessee were disallowed on the ground that the assessee has not proved that the time and energy spent by directors and executives was devoted wholly and exclusively for business and not in connection with the business of the parent company or foreign shareholders. In AY 199192, the addition of 20% was confirmed by Ld. CIT(A). Therefore, similar disallowance of 25% was made in this year which resulted into disallowance of Rs.45.29 Lacs out of total expense of Rs.181.19 Lacs claimed by the assessee. 9.2 The ld. CIT(A), following appellate orders for AYs 1997-98 to 200001, directed Ld. AO to restrict the additions to the extent of 20%. Aggrieved, the assessee is in further appeal before us. 9.3 We find that this issue has been adjudicated in Tribunal’s order for AY 2000-01, para nos.6 to 9. The bench, following earlier years, fully allowed the claim of the assessee. Upon perusal, we find that this ground is covered in assessee’s favor in several earlier years also and the department has accepted the ruling of the Tribunal in those years and has not preferred further appeal, on this issue. This being the case, we direct Ld. AO to delete the additions as sustained by Ld. CIT(A). Grounds No. 2(a) of assessee’s appeal stands allowed which makes ground no. 2(b) infructuous.” 50. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in assessee’s case for the preceding assessment years is respectfully followed, accordingly, ground raised No.3 raised by the assessee is allowed. 51. In Ground No.4, assessee has raised following grievance: - GROUND NO.4 The CIT(A) erred in upholding the disallowance of Hotel and airfare expenses incurred on foreign visitors to India amounting to Rs.2,81,567/- on the ground that these expenses were not for the purpose of the business, ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 69 notwithstanding that the expenses were incurred for executive committee meeting and training. 52. Brief facts relating to the Disallowance of travel expenses of foreign visitors ₹.2,81,567/- are, Assessee has incurred an expenditure of ₹.2,81,567 towards travel expenses of foreign visitors visiting India for board meetings, management specialist etc. (details of foreign travel including reasons for foreign travel are filed at page no. 42 to 44 of the Factual Paper-book 2). These personnel are either from group Companies or are third parties who regularly comes to India in order to conduct discussions on the company's business, finance, technical matters, etc. However, the Assessing Officer followed the practice of disallowance from earlier years has disallowed the expenses on the grounds that such visits are in connection to the business of the parent company and not the Assessee’s business. (Refer para no 9 page 13-14 of Assessment order). 53. Aggrieved, assessee preferred an appeal before Ld. CIT(A). After considering the submissions of the assessee Ld. CIT(A) relying on earlier years appellate order, the CIT(A) has upheld the order of the Assessing Officer. (Refer para no 7.1 – 7.4 page 33-34 of CIT(A)’s order). Aggrieved, Assessee has filed an appeal before us. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 70 54. At the time of hearing, Ld.AR of the assessee submitted that the Hon’ble Tribunal in its own case for various earlier AYs has decided that similar expenses are to be allowed as business expenses. In view of the above, Ld.AR of the assessee prayed to direct the Assessing Officer to allow the travel expenses of foreign visitors as same are incurred for purpose Assessee’s business by deleting the ad-hoc disallowance. 55. On the other hand, Ld. DR relied on the order of the lower authorities. 56. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 1997-98. While deciding the issue, the Coordinate Bench in ITA.No. 5238/Mum/2003 dated 25.01.2017 held as under: - “4. Next Ground raised by the assessee is with regard to disallowance of an amount of Rs. 36,25,189/- towards hotel expenses and air fares of foreign visitors coming/visiting to India. The Tribunal had dealt with the said issue in the assessee’s own case for the AY.1996-97. The relevant portion of the order in ITA No.2951/Mum/2000 dated 13.06.2014 reads as under :- “7. Ground no.6(a) is about disallowance of Rs. 46,34,888/- towards the total expenses and Air Fair of foreign visitors company of India, ground no. 6(b), 6(a) and 6(c) are alternative grounds. Additional ground of appeal no.2 of 12.05.2012 is also related to the same issue. The disallowance was made by the AO on the basis of the order for the AY.1995-96. In that year identical claim was disallowed on the ground that the expenditure was incurred for nonbusiness purposes. The assessee argued before the FAA that the foreign visitors coming to India were world-wide Division heads of Chemical formulations, information and technology, detergents, marketing, financial operation etc., that those senior and experience personnel came to India in order to impart training, conduct discussions on ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 71 business finance and marketing strategies, solution of computer related problems, that the expenses were wholly and exclusively for the purpose of business. FAA upheld the order the AO. 7.1. Before us, representatives of both the sides stated that the identical issue has been dealt with by the Tribunal, while deciding the appeals for earlier years. 7.2. We have heard the rival submissions and perused the material before us. We find that in the year 1992-93 issue of hotel and airfare expenses was decided by the Tribunal as under: “31. We have considered the rival contention and perused the relevant material on record. We note that for the AY 1983-84, the Tribunal following the order for the AY 1981-82 to 82-83 has decided the issue in para 11 as under: 11. Ground no.3 is in respect of deletion of an addition of Rs. 83,202/- made on account of entertainment expenses incurred on foreign national. In assessee’s own case in the past i.e. Assessment Year 1981-82 and 1982-83, cited supra, this issue has been decided in favour of the assessee. Our attention was drawn on the order of I Bench Mumbai in assessee’s own case for the Assessment Year 1982-83 bearing ITA No.2091 & 2077/B/94 order dated 17.12.02 wherein it was held as under: “3. The second ground is that the CIT(A) erred in deleting the addition of Rs. 51,375/- made on account of entertainment expenses incurred on foreign nationals. This issue is discussed in page 6, paras 9 & 10 of the assessment order. The brief facts in this connection are that the assessee incurred expenditure in respect of visitors to India, in connection with its business. Such expenditure amounted to Rs. 51,375/-. The assessee furnished the details of such expenditure. The Assessing Officer took the view that the expenditure represented hospitality extended to the visitors and therefore, disallowed the same as entertainment expenses. On appeal the CIT(A) noted that the foreign visitors had come to India for the purpose of attending Board meeting, general discussion, finance, reporting etc. The assessee contended that this expenditure cannot therefore, be considered to be entertainment expenditure. An order of the Bombay Bench of the Tribunal in the case of R H Windsor India Ltd vs ITO was relied upon the CIT(A), finding that the facts of the present case are nearly similar, held that the expenditure cannot be treated as entertainment expenditure. The revenue is in appeal. In view of the finding recorded by the CIT(A) that the foreign victors came to India for purposes of attending the board meetings, general discussion, finance, reporting etc. It is considered that the expenditure represented predominantly business expenditure. This decision of the CIT(A) is accordingly upheld and the ground is dismissed.” ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 72 31.1. Therefore, following the order of the Tribunal for the AY 83- 84, we decide the issue in favour of the assessee. Respectfully following the orders of the earlier years, Including the order for the year 1992-93 we decide ground no.6(a) in favour of the assessee.” Respectfully following the orders passed by the Tribunal of the earlier years, we decide the issue in favour of the assessee .” 57. Further, in assessee’s own case for the A.Y. 2001-02 the Coordinate Bench of the Tribunal in ITA.No. 3379/Mum/2009 dated 30.04.2021, held as under: - “10.1 The assessee claimed expenditure on foreign visitors by submitting that foreign visitors were worldwide financial specialist in pharmaceuticals, formulations, marketing, information and technology, members of Board etc. They were senior executives coming to India and were experienced personnel to impart training and to conduct discussions on company’s business, finance and marketing strategies, technical matters, solutions of computer related problems etc. Hence, the expenditure was incurred wholly and exclusively for the purpose of company’s business. However, in the absence of any satisfactory evidences forthcoming from assessee, an amount of Rs.0.47 Lacs as claimed by the assessee was disallowed as being non- business expenditure. The Ld. CIT(A), following earlier years‟ appellate order, confirmed the action of Ld. AO. Aggrieved, the assessee is in further appeal before us. 10.2 We find that this issue has been adjudicated in Tribunal’s order for AY 2000-01, para nos.10 to 13. The bench, following earlier years, deleted the disallowance. Upon perusal, we find that this ground is covered in assessee’s favor in several earlier years also and the department has accepted the ruling of the Tribunal in those years and has not preferred further appeal, on this issue. This being the case, we direct Ld. AO to delete this addition. Ground No.3 stands allowed.” 58. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in assessee’s case for the preceding assessment years are respectfully followed, accordingly, ground raised No.4 raised by the assessee is allowed. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 73 59. In Ground No.5, assessee has raised following grievance: - GROUND NO. 5 (a) The CIT(A) erred in holding that the provisions of Rule 8D were applicable to the assessment year in appeal. (b) Without prejudice to the above, the CIT(A) ought to have directed the AO not to disallow any expenditure with respect to investments made in the past years. (c) Without prejudice to above, the CIT(A) erred in not giving a finding on the ground of appeal filed by the appellants on the disallowance originally made by the AO 60. Brief facts relating to Disallowance under section 14A read with rule 8D of I.T. Rules, during the year under consideration, the Assessee has earned dividend of ₹.5,17,808 and claimed as exempt under section 10(33) of the Act and interest of ₹.3,87,51,817 exempt under section 10(15) of the Act, both of these incomes were claimed as exempt from tax while filing the return of income. The Assessing Officer adopted the view that the exemption under section 10(15) and 10(33) should be the net income by way of interest/ dividend and not the gross amount. Thereafter, the Assessing Officer raised a query further query why expenses pertaining to exempt income should not be disallowed as per the provision of section 14A of the Act. Against the query raised by the Assessing Officer, the Assessee filed its submission dated 30 November 2004 (Refer page no 45-46 of Factual Paper book -2) that the dividend and interest income claimed exempt in the return of income is 0.77% of ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 74 the total sales and other income. Hence, if one needs to consider some cost attributable to exempt income, in that case, 0.77% could be applied to the cost of treasury related function which includes cost of salary, travel, conveyance, miscellaneous etc amounting to ₹.40.52 lakhs which amount to Rs 31,200. Assessing Officer rejected the same by cconsidering the quantum of the investment, he did not accept for disallowance of ₹.31,200 proposed by the assessee without giving any proper reason and proceeded to make an adhoc disallowance of 2% of the exempt income ie Rs 7,85,393. (Refer para 11 at Page no 11-17 of the Assessment order) 61. Aggrieved, assessee preferred an appeal before the Ld. CIT(A) and filed detailed submissions. After considering the submissions of the assessee Ld.CIT(A) has not adjudicated the submission made by the assessee regarding restricting the 14A disallowance to ₹.31,200 and proceeded to enhance the disallowance by directing the Assessing Officer to work out expenses attributable to earning the dividend income as per Rule 8D read with Section 14A (inserted subsequently in the Act) on the basis that the Ruling of Mumbai ITAT in the case of Daga Capital Management Private Limited (119 TTJ (Mum SB). (Refer para no 8i to 8vi at page no 34-35 of CIT(A)’s order) has held Rule 8D to be ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 75 retrospective in nature. Aggrieved, Assessee has filed an appeal before us. 62. At the time of hearing, Ld.AR of the assessee brought to our notice the summary of the balance sheet for the year ended 31 March 2002 as under: Liabilities Amount in Rs’000 Assets Amount in Rs’000 Share capital & Reserves 20,86,199 Fixed Assets & Capital WIP 11,37,315 Loan funds 1,06,458 Investment 3,70,162 Def tax liability 75,130 Net Current Assets 7,60,310 Total 22,67,787 Total 22,67,787 63. It is submitted that as evident from the above summary, fixed assets and investment collectively is less than the share capital & reserves. The investments are made in past with own funds and no borrowed funds are used. Further there are no specific expenses or any interest expenses incurred for earning tax free income. 64. Therefore, the Assessee submits that there ought not to be any disallowance under section 14A of the Act and if at all any disallowance is required to be made, the Assessee relies, without prejudice, on the submission vide letter dated 30 November 2004 (supra). However, the Assessing Officer compared the exempt income claimed by the Assessee ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 76 vis-a vis the quantum of the investment held by the Assessee and rejected the above alternate submission of disallowance of ₹.31,200 being 0.77 of cost of treasury function without recording dissatisfaction. Based on Supreme Court Ruling in the case of Godrej & Boyce Manufacturing Company Ltd 81 Taxmann. com 111, unless Assessing Officer is dissatisfied with the working of disallowance as made by the Assessee, same cannot be rejected. 65. Further, it is submitted that Ld.CIT(A) without adjudicating the submission of the Assessee for computing ₹.31,200 as disallowance directed the Assessing Officer to enhance the disallowance by applying Rule 8D to Section 14A of the Act without appreciating the fact that Rule 8D is not applicable for AY 2001-02 and only applies w.e.f AY 2007-08 onwards. 66. Ld. AR of the assessee relied on the order of the Tribunal in assessee’s own case for various assessment years held as under: a. AY 1998-99 and AY 1999-2000, the ITAT restricted the disallowance to 0.05% of exempt income (Refer page no 721 to 722 of Legal paper book 2) by stating that: “24.3. We have heard the rival submissions. We find that the FAA had referred to the order of the then FAA for the AY.1995-96, that in that year the issue was of deduction u/s.80M. Considering the facts of the case we want to restrict the disallowance to 0.05% of the exempt income. Ground of appeal No.8 is decided in favour of the AO, in part. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 77 b. In the orders for AY 2000-01 (ITA 6226 & 5981/ MUM/2004) (Page no. 765to 767 Legal Paper-book -2), AY 2001-02 (ITA 3379 & 3046/MUM/2009) (Page no. 849 to 851 of Legal Paper-book -2), to estimate the disallowance @ 2% of the exempt income and it is settle position that the provision of Rule 8D are not applicable for this year. Further, the stand of the CIT(A) is reversed. 67. In view of the above submissions, Ld.AR of the assessee prayed as under: - - No disallowance ought to be made as investments earning exempt income were made from own funds and in any case no dissatisfaction is recorded by AO/ CIT(A) while rejecting the without prejudice disallowance amount under section 14A as computed by the Assessee; - Rule 8D r.w.s 14A does not apply to AY 2001-02 and hence cannot be invoked - Without prejudice, your Honours ought to reject the disallowance made by the AO, on inter alia, the basis of the ITAT orders of earlier AYs, to avoid prolonged litigation and considering the low quantum in captioned assessment year may direct the AO to restrict the disallowance to 2% of exempt income. However, we urge that this stand should not be considered as precedent for subsequent years.” 68. On the other hand, Ld. DR relied on the order of the lower authorities. 69. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 1998-99. While deciding the issue, the Coordinate Bench in ITA.No. 6224/Mum/2004 dated 25.01.2017 held as under: - “24. Next independent ground (GOA-8) for the year under appeal is about deleting the disallowance on account of expenditure incurred in connection with earning of interest income exempt u/s.10(15) of the Act. During the assessment proceedings the AO found that the assessee had claimed an amount of Rs.2.70 crores relating to receipt of interest on tax free bonds as exempt, that it had also claimed exemption for Rs.45,448/- u/s.10(33), that ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 78 the deductions under both the provisions were claimed on gross amount of interest /dividend. He held that only net income by way of interest/dividend and not the gross amount received by the assessee was eligible for deduction. He called for an explanation from the assessee in that regard. Finally, he made a disallowance of Rs.5.41 lakhs-calling it a ‘reasonable estimate’ towards earning exempt income. 24.1. Before the FAA the assessee argued that no administrative/overhead expenses were incurred for earning tax free interest /dividend, that the AO had wrongly observed that certain managerial and administrative time/expenses must have been spent/devoted by assessee for managing large investment portfolio, that there had been no change in investment during the year under appeal, that in the AY 1995-96 the AO had attributed 2% of the dividend income towards administrative /overhead expenses while computing deduction u/s.80M of the Act. The assessee relied upon the case of General Insurance(254ITR203); Ingersoll Rand (I) Ltd. (ITA/1178/Bom/93) and United Collieries(203ITR 857-AT).After considering the submission of the assessee, the FAA ,following the order of his predecessors for AY.1995-96, deleted the addition made by AO. 24.2. Before us, the DR stated that the issue before the then FAA was deduction u/s. 80M, that the AO had invoked the provisions of section 14A of the Act for the year under consideration. The AR supported the order of the FAA. Alternatively, it was argued that disallowance should be restricted to reasonable limits. 24.3. We have heard the rival submissions. We find that the FAA had referred to the order of the then FAA for the AY.1995-96, that in that year the issue was of deduction u/s.80M. Considering the facts of the case we want to restrict the disallowance to 0.05% of the exempt income. Ground of appeal No.8 is decided in favour of the AO, in part.” 70. Further, in assessee’s own case for the A.Y. 2000-01 the Coordinate Bench of the Tribunal in ITA.No. 6226/Mum/2004 dated 07.07.2017, held as under: - “39. The next issue ITA No. 5981/Mum/2004 for AY 2000-01 of Revenue’s appeal is against the order of CIT(A), deleting the disallowance made by the AO on account of expenditure in relation to exempt income under section 14A of the Act. For this Revenue has raised flowing ground No. 6: - “6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance made by the AO on account of the expenditure incurred in connection with earning of interest income exempt u/s. 10(15) ignoring the fact that the ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 79 Bombay High court in the case of CIT vs. General Insurance Corporation (125 Taxman 374) had decided the issue regarding deduction u/s.80M. In the instant case, the disallowance has been made in respect of expenditure incurred on earning exempt income and such expenditure is expressly disallowable vide the provisions of Sec.14A of the I.T. Act which have been introduced by the Finance Act 2001 with retrospective effect from 1.4.1962.” 40. After hearing both the sides and going through the facts, we find that the CIT(A) following the decision of Hon’ble Bombay High Court in the case of CIT v. General Insurance Corpn. of India (No.1) (2002) 254 ITR 203 (Bom), restricting the disallowance at 2% by observing in Para 10.4 as under: - “10.4 On a consideration of the matter I am inclined to agree with the appellant. As pointed out by the appellant a similar issue had arisen in the case of this appellant for AY 1995-96. There, CIT(A)- XXIV on the facts of the instant case and relying upon the decision of the Bombay High Court in the case of General Insurance Corporation (supra) had deleted a similar disallowance of 2% made by the AO. Following the decision of CIT(A)-XXIV I had held likewise in AYs 1998-99 and 1999-00. Since the facts during the year under consideration are similar, following the view taken by me in AYs 199899 and 1999-00 and for the same reasons the disallowance of 2% is deleted. The appellant gets relief of Rs 6,86,182/-.” 41. We keeping in view factual matrix of the case, equity, fair play and justice to both the parties are of considered opinion that in the instant year the end of justice will be met if the order of the AO is upheld as the disallowance u/s 14A of the 1961 Act of Rs. 6,86,182/- made by the AO being 2% of exempt income (interest income and dividend income), falls within the arena of reasonability and Revenue’s appeal is allowed.” 71. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in assessee’s case for the preceding assessment years is respectfully followed, we direct the Assessing Officer to restrict the disallowance @2% of the exempt income. accordingly, ground raised No.5 raised by the assessee is partly allowed. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 80 72. In Ground No.6, assessee has raised following grievance: - GROUND NO. 6 (a) The CIT(A) erred in not appreciating that since the appellants were following the treatment with respect to this as per the recommendations of the Institute of Chartered Accountant (ICAI), no adjustment was required to be made on this account (b) The CIT(A) erred in holding that an addition was required to be made to the value of closing stock on account of unutilized modvat credit and in directing the AO to compute the amount as per his directions. (c) The CIT(A) erred in holding that the opening stock was not required to be adjusted on account of unutilized modvat credit. 73. Brief facts relating to the Disallowance of Unavailed Modvat Credit of ₹.40,89,753/-, assessee follows the exclusive method of accounting for valuation of closing stock. As per tax audit report for the AY 2002-03, the un-availed MODVAT credit on 31.03.2022 was ₹.40,89,753. Since the method of accounting of closing stock is recommended by the Institute of Chartered Accountant of India, no adjustment of un-availed MODVAT credit was required to be made. The Assessing Officer adopted a view that it was in violation of the provisions of Section 145Aof the Act and the value of ₹.40,89,753 was required to be added to value of closing stock as on 31 March 2002. (Refer para no 15 at Page no 20 of the Assessment order). 74. Aggrieved, assessee preferred an appeal before the Ld. CIT(A). After considering the submissions of the assessee Ld. CIT(A) upheld the ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 81 view of the Assessing Officer (Refer para 11 at Page no 38-42 of the CIT(A)’s order) observing stating as under: - “The addition on account of duty following the provisions of Section 145A is principally called for. No adjustment in the opening stock is possible as held in the case of Melmould corporation v/s CIT 202 ITR 789. Besides, tax provisions under section 145A came into effect from 1.4.98 AY 2003-04 cant be said to be transitional year. Hence, the judgement of Mahavir Aluminum Ltd 297 ITR 77 shall not apply and hence directed to verify the facts and make the addition as per aforesaid directions 75. Aggrieved, Assessee is in appeal before us. At the time of hearing, Ld.AR of the assessee brought to our notice the orders of the Tribunal in assessee’s own case for AY 2000-01, AY 2001-02 and AY 2008-09. In view of the above, Ld.AR of the assessee prayed to direct the Assessing Officer that since an adjustment of un-availed MODVAT credit is made to the closing stock as on 31.03.2002, similar adjustment should be made to the opening stock as on 1.04.2001, as per the orders of the Tribunal in earlier years. 76. On the other hand, Ld. DR relied on the order of the lower authorities. 77. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 82 assessee for the A.Y. 2000-01. While deciding the issue, the Coordinate Bench in ITA.No. 6226/Mum/2004 dated 07.07.2017 held as under: - “12. The next issue in ITA No. 6226/Mum/2004 for AY 2000-01 of assessee’s appeal is against the order of CIT(A) in confirming the action of the AO in adding the value of closing stock on account of MODVAT. For this assessee has raised following ground No.5 which reads as under: - “5. The CIT(A) erred in upholding the action of the ACIT in adding an amount of Rs.97,99,187 to the value of closing stock on account of MODVAT.” 19. Brief facts are that the AO made an addition of Rs. 97,99,187/- to the value of closing stock on account of MODVAT. The CIT(A) also confirmed the action of the AO by observing in Para 11.3 of his appellate order which reads as under: - “11.3 I have considered the submissions but am not inclined to agree with the same. Section 145A was enacted to undo judgments which upheld the accounting of purchases as per the exclusive method without taking into account the excise duty paid. The exclusive adopted by the appellant is not in line with the provisions of s 145A. Even as per the extant guidelines of ICAI the appellant was required to carry out the adjustments specified in 145A(b). This has not been done. Further, even if both sides of the trading account are so adjusted by the excise duty actually paid, the unavailed MODVAT credit will still be includible in closing stock. The addition of Rs.97,99,187 is therefore confirmed. However, the alternative contention of the appellant that the opening stock of the following year should be increased by the MODVAT amount added to closing stock of the year under consideration is quite acceptable and the AO should accordingly adjust the opening stock of the following year.” Aggrieved, now assessee is in second appeal before the Tribunal. 20. At the outset, the learned Counsel for the assessee stated that this issue is squarely covered in favour of assessee and against Revenue by the decision of Hon’ble Supreme Court in the case of DCIT vs Indo Nippon Chemicals Co. Ltd. (2003) 261 ITR 275 (SC) and also of Bombay High Court in the case of CIT Vs. Mahalakshmi Glass Works Private Limited (2009) 318 ITR 116 (BOM) wherein Hon’ble Bombay High Court in the case of Mahalakshmi Glass Works Private Limited (supra) held as under: - “1. The substantial question of law as raised in this appeal is as under: "Whether, on the facts and circumstances of the case and in law, the Hon'ble Tribunal was justified in confirming the order of the Commissioner of Income-tax (Appeals) whereby he directed the Assessing Officer to make adjustment of unutilized Modvat credit to the opening stock and thus ignoring the ratio laid down in Melmould Corporation v. CIT [1993] 202 ITR 789 (Bom)wherein it was held ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 83 that changing the value of opening stock will lead to chain reaction and hence the same should not be done ?" 2. This question has been dealt with and answered by the Delhi High Court in the case of CIT v. Mahavir Alluminium Ltd. [2008] 297 ITR77 (Delhi). This question concerns the method of valuation of inventory as contemplated by section 145A of the Income-tax Act. In the case before the Delhi High Court, the Assessing Officer contended that section 145A did not permit the assessee to make a change in the valuation of the opening stock as on April 1, 1998, though it permitted a change in the closing stock as on March 31, 1999. The question before the Delhi High Court was that the adjustment of excise duty could be made in the opening stock also. In this connection, relying upon the decision of the Privy Council in the case of CIT v. Ahmedabad New Cotton Mills Co. Ltd. AIR 1930 PC 56, the Delhi High Court took a view that to give effect to section 145A, if there is any change in the closing stock at the end of the year then there must necessarily be a corresponding adjustment made in the opening stock of that year. It has been held that this would not amount to giving double benefit to the assessee and would be necessary to compute the true and correct profit for the purpose of assessment. 3. We may reproduce here, the relevant observation in the judgment of the Privy Council in the case of CIT v. Ahmedabad New Cotton Mills Co. Ltd. reported in AIR 1930 PC 56 which was relied upon by the Delhi High Court and which is as under (page 56): "If the method of altering both valuation is not adopted it is perfectly plain that the profit which is brought forward is not the real one. It may be more or it may be less, but it has no relation to the true profit if the stock is valued on one basis when it goes out without considering the value of the stock when it comes in. When, therefore, there is undervaluation at one end, the effect is to cause both a smaller debit in respect of the stock introduced into the next account and a larger sum for profits realised by the sale, change in market value being immediately reflected in the price obtained for the goods that are sold; in these circumstances to contend that there should be undervaluation at one end and not at the other is to raise an argument which their Lordships cannot accept." 4. We are in respectful agreement with the reasoning and the finding given by the Delhi High Court. 5. Apart from this, we find from the judgment of the Income- tax Appellate Tribunal that when counsel for the assessee contended that the closing stock of the previous year be taken as opening stock of the next year and that the Assessing Officer be directed to establish the valuation for closing stock as opening stock of the next year, the Departmental representative stated that he has no objection for the same. This concession has been recorded in the order.” 21. Respectfully, following the Hon’ble Bombay High Court Decision in the case of Mahalakshmi Glass Works Private Limited (supra) and also upon the decision of co-ordinate Bench of the tribunal in the case of Sunshield ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 84 Chemicals Private Limited v. ITO (2015) 64 Taxmann.com 161(Mum-trib.), we hold that unutilized MODVAT credit shall be added to the closing stock of the assessee as at year end which will also necessitate similar adjustments to opening stock in light of the aforesaid decisions cited by us. This issue of assessee’s appeal is disposed off as indicated above” 78. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in assessee’s case for the preceding assessment years are respectfully followed, we direct the AO to make the similar adjustment to opening stock as made to the closing stock towards the unutilized MODVAT credit, accordingly, ground raised No.6 raised by the assessee is allowed 79. In Ground No.7, assessee has raised following grievance: - GROUND NO. 7 (a) The CIT(A) erred in upholding the action of the ACIT in disallowing advances amounting to Rs. 26,01,978/- written off and charged to the profit and loss account by the assessee's for the previous year relevant to assessment year 2002-03. (b) Without prejudice to the above, the CIT(A) ought to have allowed the above under section 37(1) as business expenses. 80. Brief facts relating to Disallowance of advances written off amounting to Rs 26,01,978/- are, in the return of income for the A.Y.2002-03, the Assessee had claimed an amount of ₹.26,01,978 being write off of various advances / deposits, the details of which are as under: ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 85 No Name Amount Nature of transaction 1 W/off A/c 11327 2,30,000 Advances 2 W/off A/c 11327 40,000 Tender deposit 3 W/off A/c 11327 900 Tender deposit 4 Golf club 5,000 Deposit given to Golf Club 5 Stallion Dyestuff 23,26,078 Old outstanding for advance given Total 26,01,978 81. The above advance / deposits are in the nature of trade advances lying with third parties which has now become irrecoverable and therefore they were written off to the profit and loss account and claimed as revenue expenditure. (The details of the same is filed vide letter dated 3 February 2005, Refer page no 47-57 of Factual Paper book 2) 82. During the course of the assessment proceedings, Assessing Officer noted that the allowability of bad debts is governed by the provisions of section 36(1)(vii) and section 36(2) and disallowed the aforesaid claim stating that the debt has neither been taken into account while computing the income nor the advances given represent money lent in the ordinary course of business of banking or money lending. Hence the ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 86 said claim cannot be allowed. (Refer Para no 16 at Page no 20-21 of the Assessment order) 83. Aggrieved, assessee preferred an appeal before the Ld. CIT(A) and filed its submissions. After considering the submissions of the assessee, Ld. CIT(A) upheld the order of the Assessing Officer stating that specific provisions of Section 36(2) shall prevail over the general provision of section 37(1) (Refer para no 12.1- 12.6 at Page no 42.44 of the CIT(A)’s order). Aggrieved, Assessee has filed an appeal before us. 84. At the time of hearing, Ld.AR of the assessee brought to our notice owing to similar facts, the Hon’ble Tribunal in assessee’s own case for the AY 2001-02 (ITA 3379 & 3046/MUM/2009) (Page no. 851 to 853 of Legal Paper-book -2) has allowed the claim. In view of the above, for the AY 2002-03, the amount claimed as written off are old trade advances which are in relation to the business and the facts of balance written off are similar to earlier AYs. Hence, Ld.AR of the assessee prayed to direct the Assessing Officer to allow the claim of advances written off as the facts are similar to AY 2001-02. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 87 85. On the other hand, Ld. DR relied on the order of the lower authorities. 86. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2001-02. While deciding the issue, the Coordinate Bench in ITA.No. 3379/Mum/2009 dated 30.04.2021held as under: - 14.4 From factual matrix, it is quite discernible that the assessee made a claim of irrecoverable advances u/s 37(1) of the Act since the loss suffered by the assessee was in the course of carrying out its business. However, both the lower authorities adjudged the assessee’s claim merely in terms of Sec. 36(1)(vii) r.w.s. 36(2) which was not the case. The perusal of the details filed before us would show that the amounts written-off by the assessee was mostly in the nature of advance payments for procurement of goods from third parties, which have become irrecoverable over a period and are under dispute. Few of the write-offs represent MODVAT claims outstanding against third party manufacturers for more than 5 years. Majority of these amounts are stated to be outstanding prior to 01/04/1996. This being the case, we are of the considered opinion that the claim is allowable in terms of Sec. 37(1) as business expenditure or alternatively as business loss u/s 28. For the same, we draw support from the decisions of Hon’ble Bombay High Court in Lord Dairy Farm Ltd. V/s CIT (1955 27 ITR 700); IBM World Trade Corpn. V/s CIT (48 Taxman 11); the decision of Mumbai Tribunal ion ACIT V/s Sodexo Food Solutions India Private Ltd. (ITA Nos.5781/Mum/2016 &ors. dated 03/10/2018). The ratio of all the stated decisions support the conclusion that advances lost during the course of business would be business losses. Therefore, we are inclined to delete this addition. Ground No. 8 stands allowed.” 87. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in assessee’s case for the preceding assessment year is respectfully followed, accordingly, ground raised No.7 raised by the assessee is allowed. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 88 88. In Ground No.8, assessee has raised following grievance: - GROUND NO. 8 (a) The CIT(A) erred in confirming the action of the AO in excluding 90 per cent of the following receipts while working out the profits of the business by assuming that they are in the nature of receipts mentioned in explanation (baa) to section 80HHC. Interest on Employee loans Rs. 10,34,000 Interest on overdue debtors Rs. 19,39,000 Sales tax set off claims Rs. 3,38,46,000 Insurance claims realized Rs. 38,94,000 Scrap sales income Rs. 13,53,000 Excise duty refund Rs 12,62,000 Other miscellaneous write back of liabilities discounts etc Rs. 1,50,71,000 Cost of Services recovered Rs. 1,02,32,000 Profit u/s 41(3) on sale of R&D assets Rs. 52,98,588 (b) Without prejudice, it is submitted that 90% of net amount, as applicable of the aforesaid receipts should be excluded while computing "profits of business" for the purpose of deduction under section 80HHC. (c) The ACIT erred in not allowing deduction on Rs.89,93,000/- pertaining to incentive under the DEPB Scheme earned by the company 89. Brief facts relating to the ground are, while filing return of income, the Assessee has claimed deduction under section 80HHC of the Act of ₹.72,54,000. During the course of assessment proceedings, at paragraph 17.2 to 17.16 at pages 22 to 77 of the assessment order, the Assessing Officer relying on clause (baa) of the Explanation below section 80HHC(4C) of the Income-tax Act (the Act), excluded certain items of ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 89 income detailed hereafter from the profits of the business on which deduction was to be allowed under the said section. Particulars (Rs.) 1. Interest on Employee Loans 10,34,000 2. Interest on overdue debtors 19,39,000 3. Sales Tax Set-off 3,38,46,000 4. Insurance Claims realized 38,94,000 5. Scrap Sales Income 13,53,000 6. Excise duty Refund 12,62,000 7 Other Miscellaneous - write back of liabilities, recovery of expenses, discounts, etc 1,50,71,000 8. Profit u/s 41(3) on Sale of R & D Assets 52,98,588 Cost of Services recovered 1,02,32,000 90. Aggrieved, assessee preferred an appeal before the Ld. CIT(A) and filed its submissions. After considering the submissions of the assessee, Ld. CIT(A) in his appellate order (being paragraph 13 at pages 44 to 51) upheld the view of the Assessing Officer placing reliance on the earlier orders for AY 2000-01 and 2001-02 & by emphasizing on the expression "derived from" in section 80HHC(1) of the Act concluded that for a receipt to qualify for deduction under this section it should have ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 90 direct nexus with the exports. Aggrieved, Assessee has filed an appeal before us. 91. At the time of hearing, Ld.AR of the assessee brought to our notice in assessee’s own case the Tribunal for the AY 2001-02 (ITA 3379 & 3046/MUM/2009) (Page no. 859 to 870 of Legal Paper-book -2), for the items which are being litigated for captioned assessment year held as under:- “In respect of certain items of income excluded from the profits of the business by AO relying on clause (baa) of the Explanation below section 80HHC(4C) of the Income-tax Act (the Act), the ITAT held as under: Particulars (Rs.) ITAT direction for AY 2001-02 1. Interest on Employee Loans 10,34,000 We are of the considered opinion that all these items would form part of Profits of business and accordingly, not required to be reduced while computing deduction u/s 80HHC. (Para 18.3, internal page no. 39 onwards of ITAT order for AY 2001-02) 2. Interest on overdue debtors 19,39,000 3. Insurance Claims realized 38,94,000 4. Scrap Sales Income 13,53,000 5. Other Miscellaneous - write back of liabilities, recovery of expenses, discounts, etc 1,50,71,000 6. Profit u/s 41(3) on Sale of R & D Assets 52,98,588 7 Cost of Services recovered 1,02,32,000 8. Sales Tax Set-off 3,38,46,000 These two items would stand excluded in view of the fact that as per the impugned order, sales tax as well as excise duty would not form part of total turnover in the denominator. When denominator has been reduced by these two components, similar connected items would stand excluded from the numerator also. (Para 18.4, internal page no. 41 onwards of ITAT order for AY 2001-02) 9. Excise duty Refund 12,62,000 ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 91 92. Further, Ld.AR of the assessee submitted that while computing adjusted business profit for the purpose of section ‘80HHC, the assessee has claimed as deduction of 90% of ₹.89,93,000 pertaining to incentive under the DEPB scheme. 93. It is further submitted that, Assessing Officer while adjudicating this issue opined that as per proviso to Section 80HHC(3) and placing reliance on CBDT letter dated 8 September 2004 in Fno. 153/93 2004 – TPI (Refer Page 28 of the Assessment order), the sale of DEPB, DFRC and other license amounting to Rs 89,93,000 is not considered eligible for deduction under section 80 HHC of the Act. The Ld.CIT(A) upheld order of the Assessing Officer stating as under: (refer para 13.5 page no 51 of the CIT(A) order) “The entire sale consideration of DEPB would fall within the purview of Section 28(iii)(d) and not the excess of sale proceed over the face value. Accordingly face value of DEPB is not entitled to deduction under section 80HHC” 94. With regard to the various items spelt out in paras above, the Ld.AR of the assessee prays that the earlier order of the Tribunal for the AY 2001-02 be followed. Further, as regards issue of disallowance of reduction of 90% of DEPB receipts, attention was invited to Provisos 3 & 4 of section 80HHC(3) wherein by way of a retrospective amendment ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 92 w.e.f 01.04.1998, position on DEPB receipts for purpose of sec. 80HHC has undergone change, therefore, Ld.AR of the assessee prays that as the Return of income and/or assessment was completed before such retrospective amendment, he submitted that this issue may be remanded back to the file of the Assessing Officer. For the other items, he prayed that this may be allowed on the basis of earlier order for AY 2001-02. 95. On the other hand, Ld. DR relied on the order of the lower authorities. 96. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2000-01. While deciding the issue, the Coordinate Bench in ITA.No. 6226/Mum/2004 dated 07.07.2017 held as under: - “35. The next issue in ITA No. 5981/Mum/2004 for AY 2000-01 of Revenue’s appeal is against the order of CIT(A) in directing the AO to exclude sale tax and excise duty and scrap sale from the total turnover for the purpose of computing deduction under section 80HHC of the act. For this Revenue has raised following ground No.5: - “5(a) On the facts and in the circumstances of the case and in law, the CITA) erred in directing the AO to exclude the sales tax of Rs.23,06,07,000/- and excise duty of Rs.30,58,34,000/- and scrap sale of Rs.76,29,000/- from the total turnover for the purpose of computing the deduction u/s.80HHC. 5(b) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing that 90°/o of the net machinery hire receipts are to be excluded for computing the business for the purpose of deduction u/s. 8o HHC as against the action of the AO in reducing 90% of the gross machinery hire receipts.” ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 93 36. At the outset, the learned Counsel for the assessee stated that this issue of exclusion of excise duty and sales tax is squarely covered in favour of assessee and against Revenue by the jurisdictional High Court in the case of CIT vs. Sudarshan Chemicals Industries Ltd. (2000) 245 ITR 769 (Bom), wherein it is held as under: - “6. We find merit in the contentions of the assessee. Under section 80HHC, the Legislature intends that the profits from exports should not be taxed. For this purpose, a formula has been introduced whereby if the business is of composite nature then the proportionate profit relatable to the export business is to be found out by multiplying the profits of a business by export turnover and dividing the product by total turnover. This formula finds place in section 80 HHC (3) as it stood at the relevant time. Under clause (b) to the Explanation of section 80HHC, export turnover is defined to mean sale proceeds received in India by the assessee in foreign exchange. Under the said definition, export turnover is defined to mean the sale proceeds of any goods which are exported out of India but which will not include freight or insurance. Clause (ba) defines total turnover to exclude freight or insurance. This clause (ba) explains the turnover in a negative manner so as to exclude freight or insurance. Therefore, a combined reading of the above two clauses show that they include anything which has nexus with the sale proceeds. Correspondingly, they show that they exclude everything which has no nexus with the sale proceeds. Further, the meaning of export turnover in clause (b) of the Explanation to section 80HHC, therefore, clearly show that export turnover did not include excise duty and sales tax. Export turnover is the numerator in the above formula whereas total turnover is the denominator. The above formula has been prescribed to arrive at profits from exports. In the circumstances, the above two items, namely, sales tax and excise duty cannot form part of total turnover. In fact, if the denominator was to include the above two items and if the numeration excluded the above two items then the formula would become unworkable. In the circumstances, we are of the view that in order to ascertain the export profits, the above two items cannot be introduced to inflate total turnover artificially in order to reduce the benefit which an assessee is entitled to. Ultimately, the object of section 80HHC is required to be kept in mind in order to encourage exports. The Legislature has applied the above formula in order to find out profits derived from the exports. In this connection, section 80 HHC (1) may also be noticed. Under section 80 HHC (1), it is, inter alia, provided that where an assessee is engaged in business of exports of any goods, there shall be allowed in computing the total of income of the assessee, a deduction of the profits derived by the assessee from the export of such goods. In other words, in computing the total income of such an assessee, profits derived by the assessee from the exports are deductible. The above expression, namely, ‘profits derived from exports’ also finds place in section 80HHC(3)(a). It says that where the export is of goods, the profits derived from such export shall be the amount which bears to the profits of the business the same proportion as the export turnover in respect of such goods bears to the total turnover of the business. In fact, the earlier section 80 HHC (3) consisted of two parts, namely, whether the assessee carried on business as 100% exporter and, ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 94 secondly, whether the assessee carried on composite business. In the latter case, it was provided that the profits derived from exports shall be the amount which bears to the profits of the business as computed under the head ‘Profits and gains of business or profession’, the same proportion as the export turnover to the total turnover. The emphasis is on the words ‘profits derived from the exports’. Therefore, weightage must be given to such profits. Such profits cannot be reduced artificially by including statutory levies in the denominator, namely, total turnover. Therefore, the turnover should be restricted to such receipts which have element of profit in it. It is the only actual sale price which is relevant. Anything charged by the assessee by way of excise duty and sales tax cannot be taken into account as they do not have any element of profit. Even according to the accounting principles, such levies do not form part of profit and loss account. In fact, they are shown as liability in the balance sheet. In the circumstances, the above two items cannot be included in the total turnover. We prefer this interpretation as it advances the object sought to be achieved by the Legislature. Lastly, we are of the view that sales tax and excise duties are levied under separate enactments which have different objects. We are concerned with section 80HHC which is a separate code by itself. Hence, the general definition of the word ‘turnover’ or the case law dealing with the said definition under Sales Tax Act which is a State levy, cannot be imported into section 80HHC of the Act. Hence, we do not find any merit in these appeals.” 37. The learned Counsel for the assessee similarly in respect to scrap sale argued that the issue is covered by Hon’ble Supreme Court decision in the case of CIT vs Punjab Stainless Steel Industries (2014) 364 ITR 144 (SC), wherein it is held as under: “22. So far as the scrap is concerned, the sale proceeds from the scrap may either be shown separately in the Profit and Loss Account or may be deducted from the amount spent by the manufacturing unit on the raw material, which is steel in the case of the respondent-assessee, as the respondent-assessee is using stainless steel as raw material, from which utensils are manufactured. The raw material, which is not capable of being used for manufacturing utensils will have to be either sold as scrap or might have to be re- cycled in the form of sheets of stainless steel, if the manufacturing unit is also having its re-rolling plant. If it is not having such a plant, the manufacturer would dispose of the scrap of steel to someone who would re-cycle the said scrap into steel so that the said steel can be re-used. 23. When such scrap is sold, in our opinion, the sale proceeds of the scrap cannot be included in the term 'turnover' for the reason that the respondent unit is engaged primarily in the manufacturing and selling of steel utensils and not scrap of steel. Therefore, the proceeds of such scrap would not be included in 'sales' in the Profit and Loss Account of the respondent-assessee. 24. The situation would be different in the case of the buyer, who purchases scrap from the respondent-assessee and sells it to someone else. The sale proceeds for such a buyer would be treated ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 95 as "turnover" for a simple reason that the buyer of the scrap is a person who is primarily dealing in scrap. In the case on hand, as the respondent-assessee is not primarily dealing in scrap but is a manufacturer of stainless steel utensils, only sale proceeds from sale of utensils would be treated as his "turnover"” 35. According to the learned Counsel both the issues is covered in favour of assessee and against Revenue. We find that the issue is squarely covered in favour of assessee on both the grounds and against Revenue. Respectfully, following the Hon’ble Bombay High Court decision in the case of Sudarshan Chemicals Industries Ltd. (Supra) and Hon’ble Supreme Court decision in the case of Punjab Stainless Steel Industries (Supra). We allow the claim of the assessee and confirm the order of CIT(A). This issue of Revenue’s appeal is dismissed.” 97. Further, in assessee’s own case for the A.Y. 2001-02 the Coordinate Bench of the Tribunal in ITA.No. 3379/Mum/2009 dated 30.04.2021, held as under: - “17.1 The assessee claimed deduction u/s 80HHC for Rs.177.76 Lacs. It transpired that for the purpose of computation, the assessee did not include sales tax and excise duty in total turnover. The Ld.AO opined that these components would be includible as per the decision of Mumbai Tribunal in Ponds India Ltd. V.s DCIT (164 ITD 33). The department was in further appeal against the favorable decision of Hon’ble Bombay High Court in Sudarshan Chemical Industries Ltd. (245 ITR 769). Therefore, these items were to be included in computing the figure of total turnover in denominator. 17.2 It was further seen that while working out profits of the business, the assessee failed to exclude 90% of the following items on the ground that the same were not in the nature of receipts mentioned in explanation (baa) of Sec.80HHC: - No. Item Amount (Rs.) 1. Interest on Employee Loans 14.09 Lacs 2. Interest on overdue debtors 19.91 Lacs 3. Interest on MSEB deposits 2.03 Lacs 4. Interest on MIDC deposits 0.18 Lacs 5. Interest on Sales Tax Refund 2.69 Lacs 6. Interest on Income Tax Refund (gross) 158.18 Lacs 7. Sales Tax Set-off 553.86 Lacs 8. Insurance Claims realized 20.61 Lacs 9. Cash Discount 2.36 Lacs 10. Scrap Sales Income 13.58 Lacs ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 96 No. Item Amount (Rs.) 11. Misc. Claims 0.26 Lacs 12. Excise duty Refund 54.95 Lacs 13. PDC equipment Lease 53.34 Lacs 14. Conversion Charges 4.83 Lacs 15. Other Misc. write backs 136.38 Lacs 16. Profit on Sale of R & D Assets 37.62 Lacs 17. Cost of Services recovered from CSCIL 92.24 Lacs Total 2527.38 Lacs The assessee claimed that all these receipts were business receipts and not the receipts as mentioned in explanation (baa) of Sec.80HHC. Any income which necessarily flows from assessee’s business is not required to be reduced. All the receipts were stated to be arising out of assessee’s business activities and hence, not covered by explanation (baa) to Sec.80HHC. However, Ld. AO, interpreting the said explanation in the light of various juridical decisions, held that the items mentioned in explanation (baa) were only illustrative in nature and not exhaustive one. Reliance was also placed on CBDT Circular No. 621 dated 19/12/1991. Accordingly, all such receipts which do not have element of turnover would be excluded and all these items would fall under the expression “any other receipt of similar nature‟ as mentioned in explanation (baa) to Sec.80HHC. Accordingly 90% of above items aggregating to Rs.2527.38 Lacs was to be reduced while working out eligible profits for the purpose of Sec.80HHC. The said adjustment reduced the deduction u/s 80HHC from Rs.177.76 Lacs to Rs.167.14 Lacs. The working of the same has been made part of assessment order as „Annexure- 1‟. From the perusal of the same, it could be observed that the adjusted total turnover (net of export of trading goods) has been computed at Rs.46693.69 Lacs after adding back Sales Tax, excise duty and scrap sales. The profits of the business (after reducing profit from export of trading goods) and 90% of receipts (as tabulated above) has been computed at Rs.3038.16 Lacs. The adjusted export turnover of manufactured goods has been computed at Rs.423.05 Lacs. Finally, the deduction available u/s 80HHC(3)(c)(i) on export of manufactured goods has been computed at Rs.27.52 Lacs which is further increased by profit on trading goods for Rs.178.35 Lacs. Finally, deduction against 90% of export incentive has been added to arrive at total deduction of Rs.167.14 Lacs. 17.3 The Ld. CIT(A), following decision of Hon’ble Apex Court in Lakshmi Mills (290 ITR 667) directed Ld. AO not to include sales tax and excise duty in total turnover for the purpose of computing deduction u/s 80HHC. Regarding scrap sales, if the proceeds were out of scrap sales of raw material then they were to be excluded from total turnover. However, scrap sale of packing material was to be included as per the decision of Hon’ble Bombay High Court in Sudarshan Chemical Industries Ltd. (245 ITR 769). 17.4 Proceeding further, Ld. CIT(A), relying upon the decision of Hon’ble Apex Court in Pandian Chemicals Ltd. V/s CIT (262 ITR 278) which held that the term „derived from‟ must be understood as something which has a direct or immediate nexus with the assessee’s industrial undertaking, held that the tabulated receipts were not directly derived from export activities and therefore, the same should not form part of the eligible profits. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 97 Another plea that only net receipts should be reduced was also dismissed. Aggrieved, the assessee is in further appeal before us. Our findings & adjudication 18.1 Upon perusal of statutory provisions, we find that sub-section (1) of Sec. 80HHC provides for certain deduction to a person who is engaged in the business of exports. Such deduction is of profits derived by the assessee from the export of goods or merchandise. Sub-section (3) thereof provides the formula for determining such profits derived from exports. Clause (c) as applicable to manufacturer exporter as well as trading exporter, provides that profits derived from such exports shall be the amount which bears to the profits of the business, the same proportion as the adjusted export turnover in respect of such goods bears to the adjusted total turnover of the business carried on by the assessee. “Adjusted profits of the business” would mean the profits of the business as reduced by the profits derived from the business of export out of India of trading goods as computed in the manner provided in clause (b) of sub-section (3). Finally, the profits of the business as defined in Explanation (baa) below sub-section (4C) would mean as follows: - (baa) “profits of the business” means the profits of the business as computed under the head “Profits and gains of business or profession” as reduced by— (1) ninety per cent of any sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India ; In this appeal, the expressions „profits of the business‟ fall for our adjudication. The Ld.AO has opined that tabulated items do not have element of turnover and therefore, these would stand excluded from profits of the business as „any other receipt of similar nature‟ as mentioned in explanation (baa) to Sec.80HHC. The stand of the assessee is that these items, being arising out of operational business, would form part of profits of the business. 18.2 The Hon’ble Bombay High Court in CIT V/s Pfizer Ltd. (2010 233 CTR 521), considering its earlier decision in CIT V/s Dresser Rand India (P) Ltd. (2010 232 CTR (Bom.) 52—Ed.) as well as the decision of Hon‟ble Apex Court in CIT V/s K.Ravindranathan Nair (2007 165 Taxman 282), held as under: - Re : Question A 3. The assessee engages in the manufacture of Pharmaceuticals and animal health products. For the assessment year in question the assessee claimed a deduction under section 80HHC. The AO, while computing the deduction excluded 90 per cent of the amount of an insurance claim which was related to the stock-in-trade of the assessee. The CIT(A) ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 98 confirmed the order of the AO. The Tribunal noted that for assessment year 1998-99 it had come to the conclusion that there was no justification to exclude 90 per cent of the insurance claim. Besides this, the Tribunal held that the insurance claim formed part of the income of the business of the assessee and was liable to be considered as part of the profits of the business in view of Expln. (baa) to section 80HHC. The Tribunal was of the view that the insurance claim was not in the nature of brokerage, commission, interest, rent or charges, and therefore, was not any other receipt of a similar nature within the meaning of Expln. (baa). The Tribunal, therefore, held that 90 per cent of the insurance claim could not be excluded. 4. Counsel appearing on behalf of the Revenue submits that an insurance claim constitutes an independent income which is not relatable to the export turnover. Hence, it has been urged that 90 per cent of the insurance claim is liable to be excluded from the profits of the business under Expln. (baa) to section 80 HHC. Reliance was sought to be placed in this regard on the judgment of the Supreme Court in CIT v . K. Ravindranathan Nair [2007] 213 CTR (SC) 227 :[2007] 165Taxman 282 (SC).On the other hand it was urged on behalf of the assessee that a contract of insurance indemnifies the insured for a loss that has occurred, in the present case to the stock-in-trade. Learned counsel submitted that the claim for insurance on account of the stock-in-trade, hence, did not constitute an independent item of income similar to commission, interest, rent, brokerage or other charges: On this foundation it has been urged that the insurance claim would not be susceptible to a deduction of 90 per cent under Expln. (baa). 5. ( At the outset it would be necessary for the Court to advert to the judgment of this Division Bench dt. 8th April, 2010 in the CIT v. Dresser Rand India (P) Ltd. (IT Appeal No. 2186 of 2009) [reported at [2010] 39 DTR (Bom) 169: [2010] 232 CTR (Bom.) 52—Ed.]. The question of law which was formulated in the appeal by the Revenue was as follows: "Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that 90 per cent of recovery of freight, insurance and packing receipts amounting to Rs. 49,14,076, sales-tax set off refund amounting to Rs. 38,33,148 and service income of Rs. 2,89,17,545 are not to be excluded from profits of business within the meaning of clause (baa) of Explanation to section 80HHC of the Act for the purpose of computation of deduction under section 80HHC of the IT Act, 1961?" 6. This Court by its decision held that in terms of the judgment of the Supreme Court in Ravindranathan Nair (supra) the issue of processing, charges would stand covered by the decision. This Court noted that the Supreme Court had held that the processing charges, though they form a part of the gross total income, constitute independent income like rent, commission and brokerage and that hence 90 per cent of the same had to be reduced from the gross total income to arrive at business profits. The concluding para of the judgment of this Court records the concession of counsel appearing on behalf of the assessee that the discussion in respect of the issue in regard to processing charges as an independent income unrelated to export, would similarly apply to the other issues raised in the question of law framed by the Revenue viz. in regard to recovery of freight, insurance and packing receipts, sales-tax refund and service ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 99 income. The question of law was therefore answered in favour of the Revenue and against the assessee. From this it is apparent that insofar as the insurance claim was concerned, Dresser Rand (supra) proceeded on a concession by counsel appearing on behalf of the assessee. That apart the facts do not contain an elaboration of the nature of the insurance claim in that case. The judgment of the Division Bench in Dresser Rand (supra) would therefore not conclude the issue which has fallen for determination in this appeal. 7. Sub-section (1) of section 80HHC contemplates a deduction to an assessee, being an Indian company or a person resident in India and engaged in the business of export out of India of any goods or merchandise to which the section applies. The deduction is to be allowed in computing the total income of the assessee to the extent of the profits derived by the assessee from the export of such goods or merchandise. Clause (a) of sub-section (3) of section 80HHC provides the formula for determining the profits derived from the export of goods or merchandise to which the section applies. Where the export out of India is of goods or merchandise manufactured or processed by the assessee, the profits derived from such export "shall be the amount which bears to the profits of the business", the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee. In other words, the proportion between the export turnover and the total turnover of the business is applied to the profits of the business in order to determine the extent to which the profits are to be regarded as being derived from export. 8. It would be necessary to advert to Expln. (baa) which defines the profits of business as follows : "(baa) 'profits of the business' means the profits of the business as computed under the head 'Profits and gains of business or profession' as reduced by— (1) ninety per cent of any sum referred to in clauses (iiia), ( iiib) and (iiic) of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India." 9. Under Expln. (baa), the profits of business are defined to mean the profits of business as computed under the head of profits and gains of business or profession. This has to be reduced under clause (1) by ninety per cent of any sum referred to in clauses (iiia), (iiib) and (iiic ) of section 28 which are in the nature of incentive incomes or "of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits". Receipts by way of brokerage, commission, interest, rent or charges have been held, by the judgment of the Supreme Court in Ravindranathan Nair case (supra) to constitute independent incomes. Being independent incomes unrelated to export, Parliament contemplated that ninety per cent of such receipts would have to be reduced from the profits of business as defined in Expln. (baa). The rationale is explained in the following observations of the Supreme Court : ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 100 "That, profit incentives and items like rent, commission, brokerage, charges etc., though formed part of gross total income had to be excluded as they were 'independent incomes' which had no element, of export turnover. That, the said items distorted the figure of export profits." Again, in para 21 the Supreme Court observed as follows : "The said clause stated that 90 per cent of incentive profits or receipts by way of brokerage, commission, interest, rent, charges or any other receipt of like nature included in business profits, had to be deducted from business profits computed in terms of sections 28 to 44D of the IT Act. In other words, receipts constituting independent income having no nexus with exports were required to be reduced from business, profits under clause (baa). A bare reading of clause (baa)(1) indicates that receipts by way of brokerage, commission, interest, rent, charges, etc. formed part of gross total income being business profits. But for the purposes of working out the formula and in order to avoid distortion of arriving export profits clause (baa) stood inserted to say that although incentive profits and "independent incomes" constituted part of gross total income, they had to be excluded from gross total income because such receipts had no nexus with the export turnover." 10. In determining in each case as to whether a receipt which forms part of the profits of business is liable to undergo a reduction of ninety per cent as stipulated in clause (1) of Expln. (baa), it is necessary for the Court to consider whether the receipt is "of a similar nature included in such profits". The rationale for excluding ninety per cent of the receipts by way of brokerage, commission, interest, rent or charges is that these are independent incomes and their inclusion in the profits of business would result in a distortion. In determining whether any other receipt-is liable to undergo a reduction of ninety per cent the basic prescription which must be borne in mind is whether the receipt is of a similar nature and is included in the profits of business. To be susceptible of a reduction the receipt must be of a nature similar to brokerage, commission, interest, rent or charges. 11. In the present case, the insurance claim, it must be clarified, related to the stock-in-trade and it is only an insurance claim of that nature which forms the subject matter of the appeal. Now, it cannot be disputed that if the stock-in-trade of the assessee were to be sold, the-income that were to be received from the sale of goods would constitute the profits of the business as computed under the head of profits and gains of business or profession. The income emanating from the sale would not be sustainable to a reduction of ninety per cent for the simple reason that it would not constitute a receipt of a nature similar to brokerage, commission, interest, rent or charges. A contract of insurance is a contract of indemnity. The insurance claim in essence indemnifies the assessee for the loss of the stock-intrade. The indemnification that is made to the assessee must stand on the same footing as the income that would have been realized by the assessee on the sale of the stock-in-trade. In these circumstances, we are clearly of the view that the insurance claim on account of the stock-in- trade does not constitute an independent income or a receipt of a nature similar to brokerage, commission, interest, rent or charges. Hence, such a receipt would not be subject to a deduction of ninety per cent under clause (1) of Expln. (baa). ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 101 11A. Counsel appearing on behalf of the Revenue submitted that the insurance claim has no element of export turnover and that consequently it must sustain a reduction of ninety per cent under Expln. (baa). Now it is necessary to note that Expln. (baa) in terms does not refer to export turnover. Sub-section (1) of section 80HHC contemplates a deduction to the extent of profits derived by the assessee from the export of goods or merchandise to which the section applies. The basic issue therefore is to determine the extent of profits derived by the assessee from the export of such goods or merchandise. The formula in sub-section (3) of section 80HHC has been provided by the Parliament, for the purposes of sub- section (1) to compute the profits derived from the export of goods. Clause (a) of sub-section (3) specifies that where the export is of goods or merchandise manufactured or processed by the assessee the profits derived from the export shall be the amount which bears to the profits of business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee. In other words, in determining the profits derived from the export of goods or merchandise the proportion of the export turnover to the total turnover of the business is applied to the profits of the business. The profits of the business in turn are defined in Expln. (baa) to section 80HHC. Hence, the element of export turnover is a facet which has been taken care of by the legislature in the application of the formula which is referred to in sub-section (3) of section 80HHC. In determining the profits of the business for the purposes of Expln. (baa), the incomes which are susceptible to a reduction of ninety per cent are those which are specifically prescribed by the legislature. These are inter alia the incomes referred to in clauses (iiia), (iiib) and (iiic) of section 28 and receipts by way of brokerage, commission, interest, rent, charges or receipts of a similar nature included in such profits. Therefore, before a receipt is liable to be excluded to the extent of ninety per cent, it must be a receipt of a nature similar to brokerage, commission, interest, rent or charges. For the reasons which we have already indicated, we have come to the conclusion that the claim on account of insurance for the stock-in-trade did not constitute a receipt of a similar nature within the meaning of Expln. (baa) and was therefore not liable to be reduced to the extent of ninety per cent. The first question will therefore not raise any substantial question of law. In terms of above decision, the vital test to determine the exclusion or inclusion of an item would be whether it was an independent income having no nexus with export turnover. The objective was to avoid distortion in the figure of export profits. 18.3 In the background of statutory provisions as well as the principle laid down by Hon‟ble Courts as above, our adjudication to each of the item would be as follows: - Interest on employee’s loan-The interest arises from the fact that the assessee has granted loans to its employees as an incentive to retain their loyalty towards business enterprises. The employees are connected with the business of manufacture and sale of pharmaceuticals. Interest on overdue debtors- This income has arisen to the assessee because the customers have delayed the payment of debts within the stipulated credit period allowed to them. The interest so charged could not be said to be an independent source of income but could be said to have arisen only out of normal business operations only. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 102 Interest on deposit with MSEB & MIDC- The income arises on account of deposit placed by the assessee with MSEB for obtaining power connections to run the manufacturing facility. Similarly, deposits with MIDC have been placed for obtaining land on which manufacturing facility would be set up. Unless the deposits are placed the assessee would not be able to manufacture the goods. Thus, the deposits have been placed only out of business compulsion. Insurance Claims- These represents claims allowed by insurance company in respect of loss of trading goods. A contract of insurance is in the nature of indemnity and indemnifies the assessee for loss of stock-intrade. Had the goods not been destroyed, the same would have been sold at profits and therefore, the insurance claims are compensatory in nature. The claims could not be said to be an independent source of income for the assessee and could not be equated with „receipts of similar nature‟ as mentioned in explanation (baa). Scrap Sales Income- This income arises from the sale of packing material and other material realized during manufacturing process and directly related with manufacturing activities of the assessee. Cash Discount- This represent discount received by the assessee on early payment to suppliers in respect of purchase of goods. These are directly related to normal trading operations and could not be said to be an independent source of income. Equipment lease rentals- represent amount received by assessee on lease of packing machines & other equipment to licensed manufacturers who are carrying on the manufacturing activity for the assessee. Conversion Charges- These charges are directly related to assessee‟s manufacturing activity. Write back of liabilities- These are the write-back of expenditure which were early shown payable but no longer required to be paid. The writebacks are not in the nature of actual receipts but reversal of early provisions. Cost of Services Recovered- The cost of services refers to recovery of costs in the nature of Municipal Taxes, Security and Electricity Charges of a shares premises between the assessee and CSCIL. These expenses have first been paid by the assessee and later on recovered from CSCIL. These are mere recoveries of expenses from associate concern. Profit u/s 41(3) on sale of R & D Assets – The research & development activity is directly connected with manufacturing activities and could not be said to be independent source of income for the assessee. Misc. Claims- These are petty claims arising out of business activity. We are of the considered opinion that all these items would form part of Profits of business and accordingly, not required to be reduced while computing deduction u/s 80HHC. 18.4 The remaining items have been dealt with as under: - ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 103 Interest on Sales Tax Refund & Income Tax Refund (Gross)- It has been argued that these receipts would not be an independent source of income. Reliance has been placed on the decision of SMC bench of Jaipur Tribunal in Wolkem India Ltd. V/s CIT (65 TTJ (JP) 68). However, we are of the considered opinion that interest on Income Tax Refund arises to the assessee only because it has paid more taxes than what was required to be paid. The same accrues to the assessee as compensation for excessive payment to the revenue and has nothing to do with business operations. Similar is the situation with interest on sales tax refund. Both these items, in our opinion, would be covered by explanation (baa) and accordingly, required to be reduced to the extent of 90% while computing profits of the business. However, as per the decision of Hon‟ble Apex Court in ACG Associates Capsules Pvt. Ltd. V/s CIT (334 ITR 89), netting-off would be available to the assessee. The Ld. AO is directed to re-work the same. Sales Tax Set-off & Excise Duty refund- These two items would stand excluded in view of the fact that as per the impugned order, sales tax as well as excise duty would not form part of total turnover in the denominator. When denominator has been reduced by these two components, similar connected items would stand excluded from the numerator also. 18.5 The Ld. AO is directed to re-compute the deduction available to the assessee u/s 80HHC in the light of our adjudication on various issues effecting computations u/s 80HHC. Ground No.9 of assessee’s appeal stand partly allowed.” 98. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in assessee’s own case for the preceding assessment years are respectfully followed, accordingly, ground raised No.8 raised by the assessee is partly allowed as indicated above. 99. In Ground No.9, assessee has raised following grievance: - GROUND NO. 9 (a) The CIT(A) erred in confirming the action of the AO in computing the income from house property at a notional value. (b) The CIT(A) ought to have held that as the properties were not let, the provisions of section 23 are not applicable. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 104 c) Without prejudice the CIT(A) erred in holding that the AO was right in adopting the fair rent at Rs. 15 and Rs. 30 per square foot for residential and commercial premises respectively. (d) Without prejudice to above, the CIT(A) erred in confirming the action of AO in increasing the notional rent so computed by ad-hoc 5% allegedly under the reasoning of Inflation without furnishing any basis or facts (e) Without prejudice to above and in any event, as the amount recovered towards Municipal taxes, water charges, etc. was Rs. 1,02,32,000/-the amount to be considered for the purpose of annual value of the property cannot exceed the said amount (f) The CIT(A) further erred in not considering the Municipal Rateable Value for the purpose of arriving at the annual value of the property. (g) Assuming for the sake of argument an amount was to be assessed u/s 23 of the Act, the CIT(A) ought to have held that the amount could never exceed the standard rent of the property. 100. Brief facts relating to the ground are, during the year under consideration, the Assessee and Ciba Specialty Chemicals (India) Limited (‘CSCIL’) (demerged company from Assessee), basis of a mutual agreement, bears the costs related to a shared premises in the ratio of occupation by the CSCIL. The assessee incurs the cost and recovers the proportionate cost from CSCIL. 101. During the course of the assessment proceedings, Assessing Officer at para 18 page no 30 -35 of assessment order opined that property owned by Assessee was used by CSCIL for which no rent was reflected in the accounts of the Assessee and proceeded to work out notional rent in terms of Section 22 of the Act. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 105 102. Aggrieved, assessee preferred appeal before the Ld. CIT(A) and Ld. CIT(A) in its appellate order (paragraph 14 at pages 52 to 58) upheld the order of the Assessing Officer. Aggrieved, Assessee has filed this ground in its appeal before the us. 103. At the time of hearing, Ld.AR of the assessee brought to our notice the decision of the Tribunal in assessee’s own case for the AY 2001-02 (ITA 3379 & 3046/MUM/2009) (Page no. 854 to 859 of Legal Paper-book -2) following the rule of consistency for the earlier AYs he submitted that it was not a case where the property was actually let out by the assessee to a third-party but was a case wherein to facilitate demerger and to ensure smooth running of existing business, an arrangement was made between the assessee and its demerged entity so that the business premises would be shared with an understanding that the proportionate cost would be recovered from the demerged entity till the time an alternative facility was arranged by the demerged entity. This being the case, the ITAT held that it could very well be said that the premises was being used by the assessee only in furtherance of its business interest, the objective of which was to facilitate demerger. Therefore, the ITAT concluded that on the peculiar facts and circumstances, the action of Assessing Officer in bringing to tax notional ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 106 rental value of the common premises was not justified and hence, the addition ought to be deleted. 104. In view of the above submissions, Ld.AR of the assessee prayed for deletion of the notional house property income levied by the Assessing Officer as the facts remain the same as in AY 2001-02. 105. On the other hand, Ld. DR relied on the order of the lower authorities. 106. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2001-02. While deciding the issue, the Coordinate Bench in ITA.No. 3379/Mum/2009 dated 30.04.2021 held as under: - “16.1 Upon perusal of Profit & Loss account, it transpired that assessee reduced expenditure by Rs.92.24 Lacs by way of recovery of cost of services rendered. The same was stated to be recovery of expenses from third parties towards share of administrative and other expenses like water, electricity, security charges, municipal taxes, garden maintenance etc. as these expenses were stated to have been incurred on premises jointly occupied by the company with third parties. These were recovered at actual cost and claimed to be not in the nature of income. 16.2 On the basis of said submission Ld. AO formed an opinion that part of assessee’s immovable property was let out to third parties and accordingly show-caused assessee as to why rent receivable should not be taxed as rental income. The assessee explained that the assessee and Ciba Specialty Chemicals (India) Limited (CSCIL) jointly own the property. However, in the rejoinder, it was submitted that the assessee as well as CSCIL bears the costs related to the shared promises in the ratio of occupation of the premises. The assessee incurs the cost and recovers the proportionate expenditure from CSCIL. As a part of mutual agreement, the respective ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 107 companies had occupied the property jointly and shared the respective costs. The assessee by recovering the cost of shared premises does not stand to lose since occupation cost is recovered. However, Ld. AO opined that property owned by assessee was used by CSCIL for which no rent was reflected in the accounts of the assessee. The assessee owned the property and let out the same to CSCIL without charging any rent. No agreement was produced by assessee for use of premises by CSCIL. Therefore, the exact commercial consideration or the benefit other than rent, being derived by the assessee from the letting out of the premises, could not be ascertained. In the above background, Ld.AO proceeded to work out notional rent in terms of Section 22 of the Act. The assessee, without prejudice, contended that Municipal Rateable Value (MRV) of the premises was Rs.88,088/- for approx. 50,000 square feet of commercial and residential premises being used by CSCIL. However, Ld. AO opined that since the assessee had let out the property but did not charge the rent then in terms of decision of Hon‟ble Bombay High Court in M.V. Sonavala Vs. CIT (177 ITR 246) Bom.), it was possible for AO to take into consideration the amount for which the property might be let from year to year or AO could also consider the annual ratable value. Considering the market rate for commercial premises at Goregaon, the rates would be in the region of Rs.30/- per square feet per month and that of residential premises being Rs.15/- per square feet. Applying these rates to commercial area of 34,570 square feet and residential area of 15,278 square feet, Ld. AO arrived at ALV of Rs.124.45 Lacs for commercial space and Rs.27.50 Lacs for residential space. The total ALV was thus determined at Rs.151.95 Lacs. The statutory deduction u/s 24 would not be allowed separately since the assessee did not indicate depreciation claimed in respect of let out property and also did not indicate quantum of repairs & maintenance claimed for this property. Further, both these expenditure were already claimed in the computation of income. 16.3 The Ld. CIT(A), while confirming the stand of Ld. AO, directed him to grant statutory deduction u/s 24(a). Aggrieved, the assessee is in further appeal before us. 16.4 The Ld. Counsel explained that assessee prior to its merger with Sandoz (India) Limited in 1997 was known as M/s Hindustan CibaGeigy Limited and it was carrying on the business at various locations in Mumbai & Goa including residential and office premises at Goregoan (Mumbai). The assessee had various business units among them being Chemical business unit. In the year 1997, the chemical business unit was demerged to form Ciba Specialty Chemicals (India) Limited (CSCIL). Earlier all the businesses of assessee were being carried out jointly at various premises utilizing common facilities and infrastructure. As per the arrangement of demerger, the immoveable property situated at Goregaon came to the assessee. However, since the speciality chemical business was also carried on from the same premises, CSCIL was allowed to occupy the residential and office premises earlier used by them for a certain period till CSCIL was able to identify and acquire alternate facility. As per the arrangement, CSCIL was to pay to the assessee share of expenses incurred for the maintenance of the property. The total recovery of such costs for the year stood at Rs.92.24 Lacs which actually goes to reduce the expenditure debited to Profit & Loss Account. It was further explained that from AYs 1997-98 to 200001, the same arrangement continued and Ld. AO did not dispute the fact that the property stood occupied by the assessee for the purposes of its business and hence, ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 108 was not liable to be assessed as “Income from House Property‟. For this, the attention was drawn to the assessment orders for AYs 1997-98 to 2000-01. Therefore, there being no change in facts, it was not open for Ld. AO to take a different view in the matter. In terms of Sec. 23(1), the income could not be assessed as „Income from House Property‟ if the property was occupied by the assessee for its business. The buildings have been used by both the entities for their respective businesses. Upon demerger, CSCIL could not have been asked to vacate the said premises immediately. They were allowed to occupy the premises for the purpose of their business for a reasonable time till they were able to find an alternate facility. Therefore, the arrangement should be viewed as occupation of the property by assessee for its own business. In the alternative, Ld. Sr. Counsel submitted that the annual value could not exceed municipal retable value in terms of various judicial decisions and not in the manner as estimated by Ld. AO. Another alternative argument was that the amount of Rs.92.24 Lacs recovered by the assessee from CSCIL ought to have been reduced from notional rental value as computed by the Ld. AO. 16.5 We have carefully considered the peculiar facts of the case. It is noted that prior to its demerger, the assessee was carrying on various businesses from various premises including premises at Goregaon (Mumbai). In 1997, the chemical business got demerged from the assessee and new entity i.e. CSCIL came to existence to carry out the chemical business. Since the business was continuing, as a part of demerger arrangement, CSCIL was allowed to use the said premises on the basis that costs would be shared. M/s CSCIL has paid proportionate cost of Rs.92.24 Lacs to the assessee during the year which has actually gone to reduce the assessee’s expenditure under the head municipal taxes, water charges and security charges. Therefore, it was not a case where the property was actually let out by the assessee to a third-party but was a case wherein to facilitate demerger and to ensure smooth running of existing business, an arrangement was made between the assessee and its demerged entity that the business premises would be shared with an understanding that the proportionate cost would be recovered from the demerged entity till the time an alternative facility was arranged by the demerged entity. This being the case, it could very well be said that the premises was being used by the assessee only in furtherance of its business interest, the objective of which was to facilitate demerger. It is quite discernible that this similar arrangement is continuing since AYs 1997- 98 onwards and such an arrangement has never been disturbed by Ld. AO while framing assessment for AYs 199798 to 2000-01 which is evident from extract of assessment orders of those years as placed on record. Therefore, rule of consistency would operate in assessee’s favor and the facts being identical, Ld. AO was not justified in disturbing such an arrangement. Therefore, on the peculiar facts and circumstances, the action of Ld.AO in bringing to tax notional rental value of the common premises was not justified. We order so. Ground No. 10(a) stands allowed which makes Ground Nos. 10(b) &10(c) infructuous.” 107. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in assessee’s own case for ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 109 the preceding assessment year is respectfully followed, accordingly, ground raised No.9 raised by the assessee is allowed. 108. In Ground No.10 & 11, assessee has raised following grievance: - GROUND NO 10 (a) The CIT(A) erred in holding that the capital gains arising from the transfer of Plot no 1 amounted to Rs 12,74,45,549/- by adopting the fair market value of the asset transferred as at 01.04.1981 at the rate of Rs.5.85 per sq.ft (Rs.63 per sq.mtr) (b) The CIT(A) ought to have directed the AO to compute capital gain as a result of the transfer of Plot no 1 on the basis of a 01.04.1981 value of Rs.87 per sq.ft, or such lesser figure as may be finally upheld. GROUND NO 11 (a) The CIT(A) erred in holding that the capital gains arising from the transfer/sale of development right certificate in respect of certain portion of land amounted to Rs.2,07,05,323/- by adopting the fair market value of the asset transferred as at 01.04.1981 at the rate of Rs.5.85 per sq.ft (Rs.63 per sq.mtr) (b) The CIT(A) ought to have directed the AO to compute capital loss as a result of the transfer/sale of development right certificate in respect of certain portion of land on the basis of a 01.04.1981 value of Rs.87 per sq.ft, or such lesser figure as may be finally upheld. 109. Brief facts relating to determination of fair market value of plot no 1 (ground 10) & development rights of vacant land (non-slum) for computing cost (ground 11) as on 1.4.1981, Assessee owned gross land area of 2,96,713.20 sqmtr at Village – Dindoshi & Pahadi, Western express Highway, Goregaon (East), Mumbai, hereinafter referred to as the big land parcel. Over the course of 3-4 years, Assessee has sold the said land/ development rights therein in piecemeal. During the year ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 110 under consideration, the Assessee had sold part of the big land parcel, viz.: a) Land plot no: 1 (Ground no 10); and b) Development rights in respect of another vacant land (non- slum) (Ground no 11) c) Development rights in respect of slum land (Ground -12) – dealt separately in subsequent paragraphs 110. As a result of sale of land / development rights, the Assessee computed the capital gain/ loss as per provisions of section 48 of the Act. For the purpose of cost of acquisition of asset being land, Assessee relied on the provisions of Section 55(2)(b)(i) which states that where the capital asset became the property of the assessee before 1 st day of April, 1981, in that case, the assessee has option to adopt either of the following as cost of acquisition: 1) the actual cost of acquisition of the asset to the assessee; or 2) the fair market value of the asset on the 1st day of April, 1981 111. Therefore, in order to compute the capital gain under section 48 on the aforesaid transactions, read with provisions of section 55(2)(b)(i) of the Act the Assessee obtained fair market valuation as on 1.4.1981 from M/s Knight Frank (Ind) Pvt Ltd dated 8 th March 2002 (Page no 140 – 147 of Factual paper book no 3). As per the said valuation report, ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 111 the valuer determined the rate of Rs 63 per sqft basis of certain actual sale transactions listed therein. 112. Accordingly, in the return of income, the Assessee computed the capital gain / loss on vacant land and development rights of vacant land as under: Sr no Particular Amount of Gain//(loss) claimed in ROI 1. Gain on sale of plot no 1 4,01,04,787 2 Loss on transfer of development rights in case vacant land -3,31,95,813 113. During the course of assessment proceedings, the Assessing Officer called for the details of the sale transactions. The Assessee submitted the copy of sale agreements and the valuation of report obtained from M/s.Knight Frank (Ind) Pvt Ltd. Upon perusal of the valuation report of M/s Knight Frank (Ind) Pvt Ltd as on 1.04.1981, the Assessing Officer noticed that the transactions on which the valuer has placed reliance in order to determine the rate of Rs 63 per sqft, the area of the land mentioned in those instances was in sq meter and, hence, the value determined by the valuer ought to have been ₹.63 per sq meter instead of ₹.63 per sq feet. Hence, after applying the conversion factor to the rate per sq meter, the Assessing Officer was inclined to consider the ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 112 value of land as on 1.4.1981 at ₹.5.85 per sqft and not ₹.63 per sq ft. (para 20.2 – 20.7 page no 36 to 38 of the Assessment order). 114. In this regard, while the assessment was on-going, the Assessee approached the valuer (Knight Frank) and highlighted the issue of the error (as alleged by the AO) in the valuation report. As a result, the valuer (Knight Frank) issued a Letter dated 28.02.2005 – acknowledging the error in the Valuation report dt 8th March 2002 and thereafter issued a Revised Valuation Report stating the rate as on 1.04.1981 ought to have been Rs 80-90 per sqft computed based on values reported for residential and commercial property in “ Directory and Reference Book on Market value of Property in Mumbai as on 01.04.1981” and further, applied backward calculation to exclude construction cost (Page no 148 – 149 of Factual paper book no 3) 115. Upon receipt of the above letter, the Assessing Officer issued a show cause notice to the valuer M/s Knight Frank dated 9 March 2005 seeking justification why the value determined should not be rejected (Page no 162 – 163 of Factual paper book no 3). In response, M/s Knight Frank vide letter dated 11 March 2005 provided justification for the valuation at Rs 87 per sqft based on the “Directory and Reference ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 113 Book on Market value of Property in Mumbai as on 01.04.1981” and 5 fresh sale instances recorded with Sub registrar. (Page no 164 – 165 of Factual paper book no 3) 116. To supplement valuation report from Knight Frank, the Assessee, during the pendency of the assessment proceedings, submitted a fresh Valuation report by M/s Poonager Billimoria & Co arriving at/ justifying the value of Rs 63 per sqft as on 01.04.1981 based on 3 sale instances recorded with Sub-registrar between 1976 to 1983 and references made to Indian Valuers Directory & Reference book and Stamp duty Ready Reckoner 2000 (Page no 166 – 183 of Factual paper book no 3) 117. However, the Assessing Officer was not satisfied by the determination of the value per sq feet quoted in the valuation reports for below mentioned reasons: a) Valuation report from Knight Frank - stating that the rate has been arrived at by calculating the land component of the built-up residential properties which is per se not comparable to current land. Further, the AO went on to note that the calculation of actual land value is not acceptable as there was no scientific basis. b) Valuation report from M/s Poonager Billimoria & Co - the justification of rate of Rs 63 per sqft is based on 3 sales instances which are mix of built- up land and vacant land and hence not comparable to current land. 118. Based on the above observations, the Assessing Officer rejected the values determined/ justified in both valuation report and proceeded to ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 114 consider the cost of acquisition at the rate of ₹.5.85 per sqft instead of ₹.63 per sqft as adopted by the Assessee in their calculations. 119. Aggrieved, assessee preferred an appeal before the Ld. CIT(A) and filed detailed submissions. After considering the detailed submissions Ld. CIT(A) has (paragraph 16-20 at pages 59 to 76) upheld the order of the Assessing Officer. Aggrieved, Assessee has filed an appeal before us. 120. At the time of hearing, Ld.AR of the assessee submitted that even in subsequent assessment year (for AY 2003-04 to AY 2006-07) for sale of land from the big parcel of land admeasuring to 2,96,713.20 sqmtr , the assessee continued placing reliance on the valuation of report of M/s Knight Frank which determined cost of acquisition as on 01.04.81 at ₹.63 sq feet which was later revised with appropriate reasoning by M/s Knight Frank at ₹.80-90 per sq feet as supplemented by the fresh value report from Poonager Billimoria & Co to justify the fair market value as on 1 April 1981 at Rs 63 per sq feet. 121. It is submitted that similar to the captioned assessment year, even in subsequent assessment years from AY 2003-04 to AY 2006-07, the Assessing Officer rejected both valuations furnished by the assessee. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 115 However, to bring finality to the issue, in AY 2004-05, the Assessing Officer made a reference to the District Valuation officer (‘DVO’) for obtaining the fair market value of the plot as on 1.04.1981. 122. Basis the valuation undertaken by the DVO vide report dated 13 July 2007 (copy of the same is placed on record), the fair market value of open area land is determined at INR 765.21 Sq meter i.e. INR 71.12 sq feet (765.21/10.76 conversion factor). 123. Ld AR submitted that to put an end to prolonged litigation and considering the DVO valuation report determining the rate at ₹.71.12 per sq feet (765.21/10.76 conversion factor) for same big land parcel, it was prayed to direct the Assessing Officer without prejudice to the various reports of Knight Frank (dated 8 March 2002, 28 February 2005 and letter filed thereto dated 11 March 2005) and Poonager Bilimoria & Co dated 17 March 2005, as sale is arising out of the same land parcel which is valued by DVO, direct the Assessing Officer to accept the valuation at INR 71.12 per sq feet as determined by the DVO in his report dated 10 May 2007. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 116 124. On the other hand, Ld. DR relied on the order of the lower authorities and submitted that the submissions of the assessee are not consistent. 125. Considered the submissions and material placed on record, we observe from the record that the assessee has initially relied on the valuation report from Knight Frank, which was found to be defective and to substantiate the assesse once again filed the revised reports from Knight Frank and Poonager Billimoria & Co. The same was not acceptable to the assessing officer and the reasons recorded by the AO may be proper but in the subsequent AY 2004-05, the AO had referred and collected the DVO valuation, as per which the value of land is determined at Rs. 71.12 per sq. feet. Since, the valuation was conducted by the DVO, the same can be applied for the purpose under consideration considering the fact the valuation was conducted for the same land under the same vicinity of assessee own land. That means the valuation report submitted by the DVO to evaluate the same pieces of land which the assessee had sold on piecemeal basis. The valuation was done by the neutral agency, there should not be any issue for adopting the same in the assessment year under consideration. Therefore, we direct the AO to adopt the Fair Market value as on 01.04.1981 as determined by the DVO for the year ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 117 under consideration and determine the capital gains accordingly. In the result the grounds raised by the assessee are accordingly allowed. 126. In Ground No.12, assessee has raised following grievance: - GROUND NO 12 (a) The CIT(A) erred in holding that the capital gains arising from the transfer/sale of development right in respect of slum plot amounted to Rs.9,97,006/- by adopting the fair market vaue of the asset transferred as at 01.04.1981 at the rate of Rs.0.48 per sq.ft (Rs.5.25 per sq.mtr) (b) The CIT(A) ought to have directed the AO to compute capital loss as a result of the transfer sale of development right in respect of slum plot on the basis of a 01.04.1981 value of Rs.87 per sq.ft, or such lesser figure as may be finally upheld. GROUND NO 13 The CIT(A) failed to appreciate that in view of the facts and circumstances of the case, his action in upholding the AO's action in seeking to alter the computation of capital gains was not in accordance with law and hence void and of no legal effect. 127. Brief facts relating to determination of fair market value of development rights of slum plot for computing cost as on 1.4.1981, in addition to the sale of Plot no 1 and development rights of vacant land, during the year under consideration, the assessee also sold development rights in land occupied by a slum arising out of the same big land parcel. In order to compute the capital gain on the under section 48 of the Act on aforesaid transaction and for the purpose of section 55(2)(b)(i), the assessee relied on the same fair market valuation (‘FMV’)as on 1.4.1981 ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 118 as obtained from M/s Knight Frank (Ind) Pvt Ltd dt 8th March 2002 (Enclosed at Page no 140 – 147 of Factual paper book no 3). 128. As per the said valuation report, the valuer determined the rate of ₹.63 per sqft basis certain actual sale transaction listed therein. On this basis, Assessee computed a capital gain/ loss of ₹.13,17,49,949 (further expenses on transfer of ₹.31,44,090 to be reduced). To substantiate the cost as on 01.04.2001, Assessee relied on the same two independent valuations (Knight Frank and Poonager Bilimoria & Co) as mentioned in ground 10 and 11 above. 129. However, as the plot was occupied by a slum, during the assessment proceeding, the Assessing Officer opined that the sale consideration for such slum land would fetch lesser than that of Plot 1 and development rights in vacant land and therefore, the FMV as on 1.04.1981 thereof would be lesser than that for free land. 130. In response to the above contention of the Assessing Officer for lesser FMV, the Assessee filed a letter dated 1 March 2005 Page no 160 of Factual Paper book no -3 wherein the assessee provided revised working in relation to capital loss mentioning that ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 119  a reduction of 10% to 20% of the value as adopted on 01.04.1981 would be fair considering the encroachment by slum dewellers.  It was further submitted that the discounted cost as on 01.04.1981 should be considered only for the area of plot occupied by slum i.e. 5367.9 sqmtr only and not for open area comprised in the said land parcel ie 47346.50 sqmtr. 131. The Assessing Officer in the assessment order without considering the above distinction in the approach for FMV computation for 01.04.1981, concluded that since the Assessee has not given it’s own working of the cost of acquisition of slum plot and merely stated that 10%- 20% lesser FMV may be considered, the Assessing Officer adopted a pro-rata basis factoring in the sale value as mentioned under: Cost of acquisition of slum plot = Cost of acquisition of reservation X sale consideration of slum plot per sqmtr free plot sale consideration of reservation free plot per sqmtr. 132. Basis the above formulation applied on the FMV of ₹.5.85 per sqmtr, the Assessing Officer computed a rate of ₹.5.25 per sq meter instead of ₹.63 per sq meter as adopted for plot 1 and development rights on vacant land. In summary, the reduction in fair market value as on 1 April 1981 considered by the AO is approx 92% without gaining any ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 120 understanding of whether there was actually any existence of slum dwellers on this land as on 1.4.1981. 133. Aggrieved with the above order, assessee preferred an appeal before the Ld. CIT(A). After considering the submissions of the assessee Ld. CIT(A) upheld the stand of the Assessing Officer and agreed with the valuation of ₹.5.25 per sqmtr. 134. Aggrieved, assessee is in appeal before us. At the time of hearing, Ld.AR of the assessee submitted that the methodology adopted by the Assessing Officer is arbitrary and not justified as the reduction to the cost made by the Assessing Officer is 92% visa vis 10 to 20% as mentioned by the assessee in its submission. 135. Further it is submitted that, while considering the value of slum land as on 01.04.81, the Assessing Officer failed to consider that majority of land was free land and not encroached by slum at the relevant point of time in 1981. In fact only a small portion of the land actually had slum dwellings (ie 5367.9 sqmtr) as on AY 2002-03. However, the Assessing Officer failed to appreciate that for the purpose of FMV as on 1.04.1981 there is no evidence of existence of any slum. Therefore, it is not correct ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 121 to de-value the land by 92% as against 10% to 20% mentioned by Assessee during assessment proceedings. 136. In view of the above submissions, Ld.AR of the assessee prayed to direct the Assessing Officer relying on independent valuer reports as mentioned in ground 10 & 11 consider the rate of ₹.63 per Sq feet and/or without prejudice at ₹.71.12 per Sq feet as computed by DVO and further: I. consider the reduction in the cost of only 10%-20 % instead of 92% done by the AO limited to the land occupied by the slum (5367.90 sqmtr) II. Continue to consider 100% of value for open land ie 41978.60 sqmtr (47346.5 sqmtr less 5367.9 sqmtr)” 137. On the other hand, Ld. DR relied on the order of the lower authorities. 138. Considered the submissions and material placed on record, we observe that the issue under consideration is exactly same as adjudicated in Ground Nos 10 and 11, therefore, the same is applicable mutandis mutatis. Accordingly, we direct the AO to adopt the FMV as determined by the DVO for the issue under consideration. Hence, the grounds raised by the assessee are allowed as indicated above. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 122 139. In Ground No.14, assessee has raised following grievance: - GROUND NO.14 The CIT(A) erred in treating incremental amount, over and above the amount offered to tax u/s 41(3), arising from sale of buildings used for research and development purpose as revenue receipts and in not allowing appellants claim for allowance of Capital Loss thereon as claimed in the return of income. 140. Brief facts relating to Capital Gain on sale of Assets used of research and development are, during the year under consideration, the Assessee had sold a building used for research and development for ₹.11,50,000. The cost of the said building of ₹.7,15,622 has already been written off and claimed as deductible under section 35 in the year in which the building was constructed. Hence, for AY 2002-03, the Assessee offered ₹.7,15,622 as business income under section 41(3) of the Act. Further, the Assessee computed and claimed a capital loss on sale of said building as under: Sr no Particular Amount (Rs) 1 Sale price 11,50,000 2 Less: Index cost (30,48,550) 3 Capital loss 18,98,550 (The working of the said computation handed over during the course of hearing on 18 January 2024) 141. During the course of the assessment proceedings, Assessing Officer rejected the capital loss claimed by the Assessee stating that the ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 123 assessee has already claimed the value of assets as deductible u/s 35 as revenue expenditure. Therefore, there is no asset in the books of assessee and hence no capital loss can be claimed. Further, the Assessing Officer taxed the balance consideration ie ₹.4,34,378 (ie ₹.11,50,000 less ₹.7,15,622) as income under section 41(3) of the Act. (Page 41 -42 of the Assessment order) 142. Aggrieved, assessee preferred an appeal before the Ld. CIT(A). After considering the submissions of the assessee, the Ld.CIT(A) upheld the AO’s order without assigning any reasons. 143. Aggrieved, Assessee has filed an appeal before us. At the time of hearing, Ld.AR of the assessee brought to our notice the provision of section 41(3) which is reproduced below: - “The provision of section 41(3) is reproduced as under: Where an asset representing expenditure of a capital nature on scientific research within the meaning of clause (iv) of sub-section (1), or clause (c) of sub-section (2B), of section 35, read with clause (4) of section 43, is sold, without having been used for other purposes, and the proceeds of the sale together with the total amount of the deductions made under clause (i) or, as the case may be, the amount of the deduction under clause (ia) of sub- section (2), or clause (c) of sub-section (2B), of section 35 exceed the amount of the capital expenditure, the excess or the amount of the deductions so made, whichever is the less, shall be chargeable to income-tax as income of the business or profession of the previous year in which the sale took place. Explanation.—Where the moneys payable in respect of any asset referred to in this sub-section become due in a previous year in which the business is no longer in existence, the provisions of this sub-section shall apply as if the business is in existence in that previous year. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 124 144. Ld.AR of the assessee submitted that in view of the provision of section 41(3) of the Act, out of the sales proceeds of ₹.11,50,000, the Assessee had offered ₹.7,15,622 to tax under section 41(3) of the Act (being the deduction of capital expenditure under section 35 of the Act claimed and allowed in past). Accordingly, the balance consideration ie ₹.4,34,378 (ie ₹.11,50,000 less ₹.7,15,622) should be charged to tax under section 45 of the Act as capital gain as arising on sale of capital assets. Once the same is done, the Assessee shall be entitled for capital loss as under: Particular Amount Balance full value of consideration 434,378 Indexed cost of acquisition 715622 x 426/100 3,048,550 Long term capital loss (2,614,172) 145. Reliance is placed in case of Pharmason Pharmaceuticals Ltd vs DCIT (2003) 87 ITD 668 (AHD) wherein the cost of the acquisition of assets earlier claimed as deduction under section 35 was allowed as cost of acquisition while computing capital gain under section 48. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 125 146. In view of the above submissions, Ld.AR of the assessee prayed as under: - a) “The excess amount of Rs 4,34,378 (ie Rs 11,50,000 less Rs 7,15,622) taxed by the AO under section 41(3) as business income may be deleted; and b) Rs 4,34,378 may be considered for computation of capital gain under section 45 of the Act and cost of acquisition of Rs 7,15,622 be allowed to be indexed in order to determine the capital loss on the transaction.” 147. On the other hand, Ld. DR relied on the order of the lower authorities. 148. Considered the submissions and material placed on record, we observe that the assessee has acquired the building which is depreciable asset for the purpose of scientific research and the same was allowed to claim as an expenditure u/s 35 of the Act. Even though the above building was allowed 100% deduction but it continued to be used by the assessee in its business. It is to be noted that it is part of block of assets with the value of ‘nil’ and continued to be used in the business. During this year the assessee has sold the same and recovered the value more than the cost of the acquisition. Hence the provisions of section 41(3) is attracted to the extent of the benefit availed by the assessee under section 35 of the Act. Even the assessee has declared his income under ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 126 section 41(3) of the Act to the extent of exemption claimed under section 35 of the Act as business income. The additional proceeds received by the assessee over and above the value of cost of acquisition of the building which assessee has declared as income under the head Capital Gains. The next issue raised before us is whether the assessee can apply the indexation cost on the value of cost of acquisition while declaring the income under the head capital gain. Since it is a capital assets transferred by the assessee the provisions of section 45 to 48 of the Act is attracted, since the assessee has claimed the benefit under section 35 of the Act to the extent of the benefit claimed by the assessee under section 35 of the Act, the provisions of the section 41(3) are attracted to that extent, we observe that the assessee has also complied by declaring the sale proceed as business income. Since it is a capital assets transferred, the provisions of section 48 of the Act is attracted to the portion of the sale proceed over and above the exemption claimed by the assessee under section 35 of the Act. Therefore, as per the provisions of section 48 of the Act, the income of the assessee under the head capital gains has to be determined for the value of excess consideration received by the assessee. Strictly speaking, the computation of capital gain has to done as under: - ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 127 Sl.No. Particular Amount 1. Value of sale consideration received by the assessee : 11,50,000/- 2. Indexed Cost of Acquisition 715622 X 426/100 : 30,48,550/- Long Term Capital Loss : 18,98,550/- #Exemption claimed under section 35 of the Act is to be declared as business income to the extent of ₹.7,15,622/- 149. In our view, the above said loss is allowed to be carry forward under section 74 of the Act. We came to the conclusion by relying on the decision of the Pharmason Pharmaceuticals Ltd. v. DCIT (supra) wherein it was held as under: - “8. We have heard the parties and considered the rival submissions. The capital expenditure was stated to have been incurred by the assessee for acquiring these assets namely the equipment and furniture and the building. These assets were the properties and, therefore, capital asset within the meaning of s. 2(14) of the Act. It is true that the deduction of the entire cost thereof has been allowed under s. 35(1)(iv) r/w s. 35(2), it being expenditure of capital nature on scientific research related to the business carried on by the assessee, but the mere fact that it has been allowed as a deduction under s. 35 does not mean that the asset used for scientific research ceases to be an asset or a capital asset within the meaning of s. 2(14) of the Act. We may usefully refer to the decision of the Andhra Pradesh High Court in the case of Warner Hindustan Ltd. (supra) wherein the Court observed at p. 227 of the report as under : "The fact that deduction is given for the purpose of computing taxable income under s. 35 for expenditure on scientific research does not mean that it ceases to be capital employed or an asset." These observations were approved by Their Lordships of Gujarat High Court in the case of Sarabhai Sons (P) Ltd. (supra) by stating "hence ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 128 the fact that deduction is given for the purpose of computing taxable income under s. 35 or the expenditure on scientific research does not mean that it ceases to be capital employed or an asset and, therefore, in computing the total value of assets under r. 19A(2) of the IT Rules, 1962, capital expenditure on scientific research which has already been allowed should be included." It is true that these were the observations in regard to assessee’s claim under s. 80J wherein the cost of scientific research assets were to form part of capital employed was the question but they apply with equal force to the present case where the question is for computation of scientific research assets for the purposes of capital gain. As a fortiori the cost of the asset also does not cease to be the cost of acquisition of the asset to the assessee. Therefore, by the mere fact that the entire cost of the asset has been allowed as a deduction under s. 35 of the Act neither the asset ceases to be capital asset nor the cost thereof ceases to be cost of acquisition. The observations of the Departmental authorities that by allowance of 100 per cent deduction under s. 35, the cost becomes zero has no force. 9. The submission of the Revenue that, if the entire cost which has been allowed as deduction under s. 35 is again allowed as cost of acquisition while computing capital gain, it would amount to double deduction in the light of Supreme Court decision in the case of Escorts Ltd. & Anr. vs. Union of India (supra) has also no force. In the said decision the Court held at p. 58 of the reports as under : "......There is a basic legislative scheme, unspoken but clearly underlying the Act, that two allowances cannot be, and are not intended to be, granted in respect of the same asset or expenditure....." 10. In the headnote it is observed that "Where a capital asset used for scientific research related to the business of the assessee is also ipso facto an asset used for the purpose of the business, it is impossible to conceive of the legislature having envisaged a double deduction in respect of the same expenditure, one by way of depreciation under s. 32 of the IT Act, 1961, and the other by way of allowance under s. 35(1)(iv) of a part of the capital expenditure on scientific research, even though the two heads of deduction do not completely overlap and there is some difference in the rationale of the two deductions." It is further observed that. "There is a fundamental, though unwritten, axiom that no legislature could have at all intended a double deduction in regard to the same business outgoing; and, if it is intended, it will be clearly expressed. In other words, in the absence of clear statutory indication to the contrary, the statute should not be read so as to permit an assessee two deductions both under s. 10(2)(vi) and s. 10(2)(xiv) of the 1922 Act or both under s. 32(1)(ii) and s. 35(1)(iv) of the 1961 Act." It is also held that "The deduction of the allowance on scientific research asset and the depreciation are basically of the same nature intended to enable the assessee to write off certain items of capital expenditure against his business profit". ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 129 11. On a careful reading of the decision of supreme Court, it would be noticed that the Court itself made an exception by stating that "if in absence of clear statutory indication to the contrary". In other words, the legislature may provide for allowance of the same amount of expenditure for various purposes. We may mention a few cases which come under s. 80J and the inclusion of scientific research assets allowed fully under s. 35, were again held includible in computing capital employed. The cost of acquisition is includible in computing capital employed. The cost of acquisition is included in value of assets while computing the capital employed under s. 80J. It is not an allowance as such. It is included to determine the capital employed to grant deduction under s. 80J. It is value on the 1st day of the computation period and irrespective of its disposal in the midst of the year it is not to be diluted. These considerations along with others as pointed out by three High Courts aforesaid are clear indications of legislature having contemplated additional benefit under s. 80J over and above the normal allowance of deduction of cost. It fell in Chapter VI-A of the Act. 12. The two decisions of the Andhra Pradesh High Court and Gujarat High Court were such decisions. In these two decisions referred to above and the other decisions of Bombay High Court, Karnataka High Court referred to above and another decision of Bombay High Court in the case of CIT vs. Pyrene Rai Metal Treatment Ltd. (1993) 112 CTR (Bom) 431 : (1993) 203 ITR 752 (Bom) the cost of such assets was held to be includible in computing the capital employed irrespective of the fact that the entire cost thereof has been allowed as a deduction under s. 35 of the Act and in spite of the fact that Expln. 1 to s. 43(1) specifically excludes the amount of deduction under s. 35 from the cost of acquisition and the meaning of the term Cost of acquisition as defined in s. 43(1) has been adopted as ‘cost of the assets’ for the purposes of capital employed under s. 80J of the Act. In the judgments of A.L.A. Chemicals (P) Ltd. of the Bombay High Court and of Sarabhai Sons (P) Ltd. of Gujarat High Court, the decision in the case of Escorts Ltd. (supra) was considered and distinguished on the ground that the deduction for depreciation under s. 32 and for cost of scientific research assets under s. 35 both are under Chapter IV to be taken into consideration while computing income under s. 28 of the Act, whereas s. 80J deduction is under Chapter VI-A which provides for the additional deduction from the total income of the assessee. The two deductions are different and, therefore, it was held that there is no question of double deduction like the one as considered by the Supreme Court in the case of Escorts Ltd. (supra). The Bombay High Court observed in this connection as under : "In such a situation, there is no question of any double deduction of the nature contemplated by the Supreme Court ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 130 in Escorts Ltd. & Anr. vs. Union of India & Ors. (1992) 108 CTR (SC) 275 : (1993) 199 ITR 43 (SC). In fact, the Supreme Court has made this clear (p. 874 of (1922) 2 Scale) when it says that the two deductions, i.e., deductions under ss. 32 and 35 are (at p. 59 of 199 ITR) : "basically of the same nature intended to enable the assessee to write off certain items of capital expenditure against his business profits". A deduction under s. 80J is not of the same nature as a deduction under s. 35. Therefore, in our view, the ratio of the Supreme Court judgment in Escorts Ltd.’s case (supra) will not apply to the computation of capital under s. 80J for the purpose of determining the quantum of deduction under s. 80J." 13. The observations of Gujarat High Court in the case of Sarabhai Sons (P) Ltd. (supra) in this connection are at p. 733 of the report as under : "Sec. 80J falls in Chapter VI-A of the Act. Sec. 80A, as it then stood, provided that, in computing the total income of the assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of the Chapter, the deductions specified in ss. 80C to 80U. Clause (5) of s. 80B defined "gross total income" as the total income computed in accordance with the provisions of the Act before making any deduction under the Chapter or under s. 280-O. Sec. 2(45) defines "total income" to mean the total amount of income referred to in s. 5, computed in the manner laid down in the Act. One of the heads which is chargeable to income-tax is "profits and gains of business or profession". Sec. 29 provides that the income referred to in s. 28 shall be computed in accordance with the provisions contained in ss. 30 to 43A. Thus, while computing the income from profits and gains of business or profession, the expenditure incurred for scientific research becomes a permissible deduction. Deduction by way of depreciation is permitted as the capital asset depreciates in value as a result of its use. Such deduction is permitted while computing the total income of the assessee. Sec. 80J was enacted for the purpose of giving an incentive to enterpreneurs to establish new Industrial undertakings and for certain other purposes. It provided for deduction, no doubt, while computing the total income of the assessee, but on a different basis. The deduction was provided to encourage establishment of new industrial undertakings and for that reason, the deduction was related to the capital employed in the new industrial undertakings. Whereas expenditure on scientific research is made deductible under s. 35 on the ground that it is expenditure incurred for the purpose of scientific research related to the business of the assessee, the deduction contemplated by s. 80J is not because of the fact ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 131 that the assessee has incurred expenditure on scientific research related to his business but because he has employed capital in establishing a new Industrial undertaking, though the capital employed by the assessee may also be for the purpose of acquiring an asset for scientific research. Thus, not only are the heads under which the deductions are provided different but the nature of these deductions is also different as the objects for which the deductions are granted are also different. This is also borne out by the provisions of the Act. Sec. 80J appeared in Chapter VI-A and the Chapter was added in the Act; the legislature though it fit to define gross total income to mean total income computed in accordance with the provisions of the Act, but before making any deduction under that Chapter. Thus, for the purpose of that Chapter, the income as computed in terms of s. 28 to 43A was to be regarded as the gross total income. Having provided like this, the legislature then provided for a deduction under s. 80J. This is a clear indication in the Act itself to show that the deduction contemplated by s. 80J was to be granted in addition to other deductions that were available under other provisions of the Act." 14. The deduction claimed by the assessee is of the indexed cost which is the amount of the actual cost which is allowed under s. 35 and the amount of increase on account of inflation index. The cost of acquisition for the purposes of s. 48 as is generally understood in the common parlance is the price paid for the acquisition of an asset. Sec. 55(2) provides for some different amount to be the cost of acquisition in certain eventualities with which we are not concerned in this case. If the cost of acquisition of an asset is the price paid by the assessee that amount has to be allowed as a deduction under the main provisions of s. 48 of the Act. It has to be allowed at a higher amount as an indexed cost of acquisition by virtue of the second proviso to s. 48. Second proviso of s. 48 reads as under: "Provided further that where long-term capital gain arises from the transfer of a long-term capital asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of, an Indian company referred to in the first proviso, the provisions of cl. (ii) shall have effect as if for the words "cost of acquisition" and "cost of any improvement", the words "indexed cost of acquisition" and "indexed cost of any improvement" had respectively been substituted." The indexed cost of acquisition has been defined in cl. (iii) of the Explanation to s. 48 which reads as under : ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 132 "(iii) "indexed cost of acquisition" means an amount which bears to the cost of acquisition the same proportion as cost inflation index for the year in which the asset is transferred bears to the cost inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, 1981, whichever is later." The claim of allowance of this statutory increase in cost is not on account of double deduction but on account of inflation index and is contemplated and provided by the second proviso to s. 48 itself and to that extent, there cannot by any claim for double deduction. It is in fact not a cost of double deduction at all as the increase in cost on account of inflation index has never been subject-matter of any allowance earlier. The legislature itself has allowed the extra benefit to the assessee and those cases would fall in the category of decision dealing with deduction under s. 80J referred to above. We, accordingly, allow the loss of Rs. 19,82,845 under the capital gain. 15. The cost of acquisition is to be allowed to the assessee while computing capital gain under s. 48 and this section falls in computing the income in Part-E of Chapter-IV providing for computing capital gain which arises to an assessee on transfer of a capital asset. The deduction under s. 35 which allows the entire cost as capital expenditure on scientific research falls in Chapter-D providing for computation of profits and gains of a business or profession carried on by an assessee under ss. 28 to 43A of the Act. Both are grouped under the same Chapter-IV, and allow the cost of acquisition, as deduction, one for computing income by way of capital gain and the other for computing business income. The fact that a deduction of the entire cot of acquisition has been allowed to an assessee under s. 35 while computing the business income of the assessee may be a relevant consideration for not allowing the cost of acquisition while computing the capital gain arising on transfer of the capital asset, on the principle of prohibition for double deduction of the same amount of capital expenditure or the cost of acquisition. As both the sections deal with computing the income of the assessee under the same Chapter IV of the Act, it would be a case of allowing double deduction to the assessee of the same amount once while computing income under s. 28 and again under s. 45 of the Act and which may be held to be not contemplated by the legislature as envisaged by the Supreme Court in the case of Escorts Ltd. (supra). We, therefore, hold that the assessee is not entitled to deduction of cost of acquisition of the scientific research assets as the same has been allowed already as a deduction under s. 35. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 133 16. The further claim of the assessee that the said loss is to be allowed as a business loss, in our opinion, has no force. The loss is arising firstly because of the enhanced cost of acquisition by reason of the inflation index and that is the procedure provided under the head "capital gain". Such loss is not contemplated while working out the business loss of the assessee. Again, the loss is arising on account of sale of the capital asset and the capital gain or loss is specifically provided to be assessed under the head "capital gain" and, therefore, the same cannot be allowed as a business loss even though the asset was used for the purposes of business before its sale. The provisions of s. 71(2) are not applicable to such loss. Secondly, the provisions of s. 71(3) are clear which provide for the set off and carry forward of the loss arising under the head "capital gain" in a specific manner. For the sake of convenience, we reproduce here the provisions of s. 71(3) of the Act as under : "Where, in respect of any assessment year, the net result of computation under the head ‘capital gain’ is a loss and the assessee has income assessable under any other head of income, the assessee shall not be entitled to have such loss set off against the income under the other head." There is thus a specific ban for setting off the loss under the head "capital gain" against any other head which includes the head under which the business income is computed. We, therefore, do not find any merit in this claim of the assessee and the same is accordingly, rejected. The Supreme Court decision in the case of Western State Trading Co. (P) Ltd. (supra) and the Gujarat High Court decision in the case of Bhavnagar Trust Corpn. (P) Ltd. (supra) relied upon by the learned counsel of the assessee are the cases of a reverse situation. In those cases there was a profit/income which was assessed under the head "other sources" and the question of allowing the carry forward of the business loss was the subject-matter of consideration. In the present case, on the contrary, there is a loss under the head "capital gain" which the assessee wants to get set off against the business income. This type of situation would be contrary to the specific provisions of s. 71(3) referred to above. We, therefore, reject the alternative claim of the assessee. 17. The ground pertaining to investment allowance on plant and machinery written off is not pressed. It is accordingly, rejected. 18. The last ground is against upholding the view of the AO that the adjusted profit for the purposes of s. 80HHC of the Act is negative and, therefore, the assessee is not entitled to deduction thereunder. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 134 The assessee worked out the deduction under s. 80HHC at Rs. 20,523. The AO, however, observed that as per the provisions of s. 80HHC applicable from asst. yr. 1993-94 the adjusted profit, i.e., assessed profit minus 90 per cent of capital incentive of Rs. 79,400, interest received Rs. 29,27,678 and Rs. 76,00,986, rent and taxes amounting to Rs. 4,36,740 and financial charges of Rs. 12,15,450 worked out in a negative figure and, therefore, denied the claim of the assessee. The CIT(A) upheld the order of the AO as the assessee has not been able to explain as to how the action of the AO in this regard could be faulted. 19. Before us also, no material has been placed on record which would justify a contrary view. In these circumstances, we have no option but to uphold the orders of the authorities below. This ground of the assessee is rejected. 20. In the result, the appeal is partly allowed.” 150. Respectfully following the above decision, we are inclined to allow the ground raised by the assessee. Accordingly, Ground No. 14 raised by the assessee is allowed. 151. In Ground No.15, assessee has raised following grievance: - GROUND NO. 15 The CIT(A) ought to have held that interest under section 234D of the Act was not chargeable and the AO ought to have been directed to delete the same. 152. The above ground raised by the assessee is consequential in nature, accordingly the same is not adjudicated. 153. In the result, appeal filed by the assessee is partly allowed as indicated above. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 135 ITA NO. 6772/MUM/2010 (A.Y. 2002-03) – REVENUE APPEAL C.O. NO. 190/MUM/2011 (A.Y. 2002-03) – ASSESSEE APPEAL 154. At the time of hearing, both the counsels fairly agreed that the issues raised in this appeal are covered and adjudicated by the Coordinate Bench of the Tribunal in assessee’s own case for the previous Assessment Years. Copies of the orders are placed on record. 155. We proceed to dispose off the appeal by adjudicating the issue ground wise. 156. In Ground No. 1, Revenue has raised following grievance: - “1. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in directing the AO to adopt the WDV of the block of assets as per the IT. records for the A.Y.1997-98 for computing the depreciation during the relevant A.Y.2002-03 consequent to the decision of the orders of the CIT(A) for A.Y. 1997-98 to 2001-02 on the issue overlooking the fact that the issue has not attained finality and the departments appeal on the same issue is pending before the ITAT for the earlier assessment years." 157. This ground is similar to Ground No. 1 of grounds of appeal raised by the assessee for the A.Y. 2002-03 and we have adjudicated the issue in favour of the assessee by following the orders of the ITAT in assessee’s own case for the earlier assessment orders. Accordingly, Ground No.1 raised by the revenue is dismissed. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 136 158. In Ground No. 2, revenue has raised following grievance: - “2. "On the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs.44,45,792/- to the valuation of the closing stock towards estimated prorata freight on the stock lying at depots on the ground that the assessee has been allowed relief by the appellate authorities in the earlier assessment years without appreciating the facts and merits of the addition and the fact that the revenue has not accepted the decision of the appellate authorities on this issue for earlier years." 159. Further, in the cross objection filed by the assessee, assessee has raised following ground: - “1. The respondent submits that the AO be directed to increase the value of the opening stock of the subsequent year ie, assessment year 2003- 04 by a similar amount in case the AO's action of enhancing the value of closing stock on account of estimated pro- rate freight on stocks lying at depots is upheld.” 160. At the time of hearing, Ld. DR brought to our notice the relevant facts of the issues raised by the revenue and submitted that the issue brought on record by the lower authorities are proper and he justified the additions, at the same time, he has fairly agreed that the issue under consideration is similar to the issues raised in the earlier assessment years. 161. On the other hand, Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co-ordinate Bench of this tribunal in assessee’s own case and decided the issue in favour of the ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 137 assesse and against the department. Copies of the orders are placed on record. 162. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 1997-98. While deciding the issue, the Coordinate Bench in ITA.No. 5238/Mum/2003 dated 25.01.2017 held as under: - “13. Fifth Ground deals with deletion of an addition of Rs.71.70 lakhs made by the AO on account of estimated freight components in the closing stock. It was brought to our notice that identical issue was decided against the department by the Tribunal while adjudicating the appeals for the earlier AY.s(1992-93 to 1996-97).We are reproducing page 12-13 of the order of the Tribunal for 1996-97,dealing with the issue and it reads as under: “14. Ground no.4 is about deletion of Rs.33.58 lakhs on account of freight component of closing stock.Ground no.3 of CO also deals with same issue.Beforeus,DR supported the order of the AO.AR stated that similar issue arising in the earlier years had been decided in favour of the assessee by the Tribunal. 14.1. We find that in the year 1993-94 identical issue was raised by the Department before the Tribunal. Deciding the appeal, Tribunal (ITA.No.213/Mum/1997,AY.1993-94, dated 19/08/ 2005) held as under: “First issue is regarding the deletion of addition of Rs. 21,85,160/made to the valuation of closing stock as on 31.03.1993 attributable to estimate pro-rata freight on stock dispatched to various depots on the reasoning that the assessee company is regularly following the method of accounting and also the addition to the closing stock consequently increase the opening stock of next year which ultimately no benefit to revenue. As far as this issue is concerned, the Mumbai Bench ‘B’ of the Tribunal, vide Paras3,4 & 8, in ITA.No. 7894/ Mum/1995, the issue was been decided in favour of the assessee by holding as under: “We have considered the facts and the rival contentions. It is not disputed before us that the assessee has been consistently following the method of valuing the closing stock by excluding the expenses incurred pm freight and cartage outwards and packing of the goods for the purpose of enduring the transport from central distribution depot on ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 138 various depots across the country. Now, the departmental authorities are entitled to discord the consistent method following by the assessee, but only if the true profits of the business cannot be deducted therefrom. In the case of British Paints Ltd. (188 ITR 44), on which heavy reliance was placed by the departmental authorities as well as the ld.DR before us, the factory costs, which are undisputedly to be considered as part of the cost of the product, were not included in the closing stock valuation. It is for this reason that the Supreme Court held that the method adopted by the assessee in that case was not an acceptable or sound method from which the true profits could be deducted. It is in this context, that they held that a method of valuation of closing stock has been adopted by, it is erroneous or unsound or unacceptable or is against accounting or commercial practice, the same can be discarded. In case, this principle is not attracted because the incurring expenses on freight or cartage outward or packing expenses purposes of transporting the goods have not added any stock. They are post manufacturing expenses are to be as selling expenses. Normally, the manufacturing are debited to the manufacturing account whereas the expenses are debited to the profit & loss account. According to the Advanced Accounts by R.N.Carter (1939 Rev.Edn.,Page-32),carriage inwards increases the cost of the goods purchased and is hence debited to trading account whereas carriage outwards is a selling expenses and is debited to profit & loss account. In the present case, the goods manufactured by the assessee had to be distributed to the depots across the country from the centralized distribution depot at Bombay and the transporting cost is purely for the purpose of selling the goods. The packaging expenses are not the expenses are not expenses incurred in the primary wrapping of the products, but they have been incurred in packing them in boxes so as to facilitate easy transport to the various depots. The primary packing which makes the product marketable is no doubt part of the cost, but the further packaging carried out for the purpose of transporting the products is part of the selling. William Pickles in his 1960 edition of Accountancy has recognized this by observing at Page 88 of the his treatise that the direct and indirect expenses actually incurred, “having regard to the stage of manufacture condition or location of the goods may be added to the cost (underlining ours). It may possibly be argued that the carriage outwards and packaging expenses incurred for facilitation of the transport of the goods can be excluded from cost only if the goods have already been sold and that in the present case, the goods have not been sold, and therefore, such costs cannot be excluded. The answer to this argument is that these costs have been incurred after the manufacture of the products and though the goods have not been sold, the expenses will have to be considered as part of the selling expense. Certainly, while fixing ;the price, the assessee will take into account the selling expenses and recover the same in the pricing of the products, but that is not a satisfactory reason to hold that such expenses or costs ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 139 should be taken into account even while valuing the closing stock. In our opinion, there is no impediment to the deduction of true profits and gains of the business because of the method of valuation followed by the assessee consistently and which has also been accepted by the departmental authorities. A stray departure just for one year tends to upset the calculations. When the method has not been found fault with for a long period of years. It acquires fundamental character and forms a sound basis for the assessment of the profits especially when the method followed is not patently false or unacceptable, and any accepted fundamental feature of an assessment cannot be lightly tinkered with as held by the Supreme Court in the case of Radhasaomi Satsang Sabha (1993 ITR 321).” The same, was followed in ITA.No.7458/Mum/1997. The learned Departmental Representative did not dispute the same. In view of discussion, we are not inclined to interfere with the finding of The same is upheld.” In the year 1994-95 and 1995-96 identical issue was decided against the AO. Respectfully following the order of the Tribunal for earlier years, ground no.4, filed by the AO stands dismissed. Ground no.3 of CO is treated as infructuous.” Respectfully following the above Ground No.5 is dismissed” 163. Further, in assessee’s own case for the A.Y. 2001-02 the Coordinate Bench of the Tribunal in ITA.No. 3379/Mum/2009 dated 30.04.2021, held as under: - “5.1 The assessee did not include proportionate amount of freight component while valuing closing stock of finished goods. As against this, the assessee claimed full expenditure of freight as deduction. The AO opined that as per the decision of Hon'ble Apex Court in CIT Vs. British Paints (1991; 188 ITR 44), it is the real cost of stock which was to be taken into account to determine real income of the assessee. All costs incurred towards stock-in- trade were to be considered while valuing the closing stock and exclusion of any cost would result in distorted picture of taxable income. The freight component on closing stock came to be Rs.44.09 Lacs. However, similar adjustment made in AY 2000-01 resulted into increase in valuation of closing stock of that year by Rs.147.46 Lacs and therefore, opening stock for this year was to be increased by that amount. Consequently, the differential of the two i.e. Rs.103.36 Lacs was reduced from assessee’s income. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 140 5.2 The Ld. CIT(A), relying upon Tribunal’s decision for AY 1993-94 and appellate orders for AYs 1994-95 to 2000-01, deleted the adjustment made by Ld. AO. 5.3 We find that this issue is squarely covered in assessee’s favor by the various decisions of Tribunal right from AYs 1992-93 to AY 2000-01. The Ld. CIT(A) has also followed the appellate orders of earlier years. Therefore, this adjudication in the impugned order, on this issue, would not require any interference on our part. Ground No.3 of revenue’s appeal stand dismissed which render ground no.2 of assessee’s cross objections infructuous.” 164. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in assessee’s own case for the preceding assessment years are respectfully followed, accordingly, ground No.2 raised by the revenue is dismissed and the ground raised by the assessee in ‘CO’ is allowed. 165. In Ground No. 3, Revenue has raised following Grievance: - “3. "On the facts and in the circumstances of the case and in law, the CIT(A) has erred in directing the AO to allow the incremental liability for VRS amounting to Rs.3,51,50,586/- and also to allow that part of actual payment out of Rs.4,05,06,586/- which related to the provisions created during the F.Y.1992-93 but disallowed in A.Y.1993-94, by merely following the appellate orders of the earlier years without appreciating the facts and circumstances of the case." 166. Further, in the cross objection filed by the assessee, assessee has raised following ground: - “2. The respondent submits that the AO be directed to allow deduction for the full amount of Rs. 4,05,06,586 being the actual payment made if the action of the AO in not allowing deduction of Rs. 3,51,59,586, accrued on ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 141 account of pension under the Voluntary Retirement Scheme to the erstwhile workers of the respondents Bhandup unit is upheld.” 167. At the time of hearing, Ld. DR brought to our notice the relevant facts of the issues raised by the revenue and submitted that the issue brought on record by the lower authorities are proper and he justified the additions, at the same time, he has fairly agreed that the issue under consideration is similar to the issues raised in the earlier assessment years. 168. On the other hand, Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co-ordinate Bench of this tribunal in assessee’s own case and decided the issue in favour of the assesse and against the department. Copies of the orders are placed on record. 169. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 1997-98. While deciding the issue, the Coordinate Bench in ITA.No. 5238/Mum/2003 dated 25.01.2017 held as under: - “First ground of appeal, raised by the assessee, deals with upholding the disallowance on account of incremental liability (Rs.3,21,03,537/-)for payment of pension created on an actuarial basis. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 142 It was brought to our notice that while deciding the appeal for the AY.1995- 96(ITA/ 498/ Mum/2003,dt.25.09.2013)Tribunal had dealt with the same issue. We would like to reproduce the relevant portion of the said order and it reads as under:- “36. Ground no. 6 relates to the disallowance of Rs.3,90,12,431/- on account of incremental liability for payment of pension under the Voluntary retirement scheme (VRS) created on an actuarial basis in computing the assessee’s total income. The AO has discussed this issue on para 12 on page 32 of his order, wherein the AO followed order of 1993-94 and 1994-95 for disallowing the incremental liability of Rs.3.90 crores. When the matter was agitated before the CIT(A), the CIT(A) has considered this issue of the assessee at para 13 of page 33 of his order wherein the CIT(A) has followed the decision of his predecessors for A.Y. 1993-94 and 1994-95 and confirmed the disallowance made by the AO. Before us, the counsel for the assessee drew our attention to page 134 of the paper book which is internal page 15 of order of the Tribunal in assessee’s own case for A.Y. 1994-95 in ITA No. 2874/Mum/1999 and ITA No.2720/Mum/1999. It is a say of the counsel that the Tribunal in that order has restored this issue back to the file of AO. Following the findings of the Tribunal for A.Y. 1993-94, the Ld. DR also agreed to the submission of the counsel, we have carefully gone through the orders of the lower authorities and the order of the Tribunal. We find that the Tribunal in its order at para 40 has followed the findings given by the Tribunal in A.Y. 1993-94 and has restored this issue back to the file of AO to examine and verify the actuary valuation certificate and the agreement with the company and the employee and if he finds that the liability has been calculated on a scientific basis, may allow the claim of the assessee. Facts and circumstances being identical, respectfully following the afore stated direction of the Tribunal in assessee’s own case for A.Y. 1994-95, this issue is restored back to the file of AO. The AO is directed to decide in the light of A.Y. 1993-94 and 1994-95. Ground no. 6 is allowed for statistical purposes.” Respectfully, following the above order of the Tribunal, Ground of appeal No.1 is decided in favour of the assessee.” 170. Further, in assessee’s own case for the A.Y. 2001-02 the Coordinate Bench of the Tribunal in ITA.No. 3379/Mum/2009 dated 30.04.2021, held as under: - ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 143 “6.1 The assessee claimed an amount of Rs.253.73 Lacs towards incremental VRS (Voluntary Retirement Scheme) for Bhandup unit which was on the basis of actuarial valuation. As held in earlier years, the liability was a contingent liability. Similar disallowance made in AY 199394 was confirmed by Ld. CIT(A). Similar disallowance was in assessment order for AYs 1994-95 to 2000-01. However, actual payment of VRS payment made during relevant year was to be allowed. In this year, assessee made payment of Rs.417.76 Lacs which was to be allowed whereas the claim of Rs.253.72 Lacs as per actuarial valuation was to be disallowed. The said adjustment resulted into net relief of Rs.164.04 Lacs to the assessee. 6.2 The Ld. CIT(A) noted that in appellate order for AYs 1998-99 to 2000-01, Ld.AO was directed to allow the deduction of incremental liability of VRS and also allow that part of actual payment made during the year relating to the provision created during financial year 1992- 93 but disallowed in AY 1993-94. Similar directions were given by Ld. CIT(A) for this year, against which revenue is in further appeal before us. 6.3 We find that this issue has been adjudicated in Tribunal’s order for AY 2000-01, para nos.31 to 34. In concluding para-34, the bench restored the issue to the file of Ld. AO for re-adjudication as per directions given in Tribunal order for AY 1995-96. The assessee sought rectification of the directions vide MA No.50/Mum/2018. The Learned Judicial Member concurred with the submissions that Tribunal order for AY 1995-96 stood amended by MA order dated 27/02/2015 wherein deduction was allowed to the assessee. Accordingly, applying the amended order, the deduction would be allowable to the assessee. However, the Learned Accountant Member, vide separate order, opined that the issue was to be recalled and placed before regular bench for fresh adjudication. Keeping in view the contrary views, a reference was made u/s 255(4) to Hon’ble Vice President (third member) who concurred with the view of Hon’ble Judicial Member. Finally, following majority view, confirmatory order was passed by the bench on 27/09/2019 allowing assessee’s miscellaneous application. Thus, this issue has already attained finality in assessee’s favor in AY 2000-01 wherein the bench has upheld the stand of Ld. CIT(A). Respectfully following the same, we confirm the impugned order, on this issue. Ground No.4 of revenue’s appeal stand dismissed which renders ground no.3 of assessee’s cross-objection infructuous. The assessee’s cross objection stands dismissed as infructuous.” 171. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in assessee’s own case for ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 144 the preceding assessment years are respectfully followed, accordingly, ground raised No.3 raised by the revenue is dismissed and Ground No.2 raised by the assessee in ‘CO’ is allowed. 172. In Ground No.4, revenue has raised following grievance: - 4. "On the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting the disallowance of corporate entrance fees of Rs. 1,35,000/- paid by the assessee to the clubs by observing that the fees has been paid by the assessee as a corporate entity thereby disregarding the fact that the entrance fees have actually been paid by the directors to the clubs for their own use thereby deriving a benefit enduring nature on a long term basis which makes expenditure, capital in nature." 173. At the time of hearing, Ld. DR brought to our notice the relevant facts of the issues raised by the revenue and submitted that the issue brought on record by the lower authorities are proper and he justified the additions, at the same time, he has fairly agreed that the issue under consideration is similar to the issues raised in the earlier assessment years. 174. On the other hand, Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co-ordinate Bench of this tribunal in assessee’s own case and decided the issue in favour of the assesse and against the department. Copies of the orders are placed on record. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 145 175. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2001-02. While deciding the issue, the Coordinate Bench in ITA.No. 3379/Mum/2009 dated 30.04.2021, held as under: - “7.1 It transpired that the assessee paid membership fee of Rs.1.76 Lacs to certain club. The Ld. AO opined that the expenditure being enduring in nature, the same would be capital in nature. The assessee submitted that the amount was paid by company for use of club facilities by its employees for organizing meetings and conferences for its business associates and employees for legitimate business purposes. However, not convinced, Ld. AO disallowed the same and added back it to assessee’s income. 7.2 The Ld. CIT(A), relying upon various decisions, observed that club fees was paid by the assessee itself and not by its directors or employees and therefore, the expenditure was an allowable deduction. Aggrieved, the revenue is in further appeal before us. 7.3 We find that the findings that the expenditure was incurred by the assessee as a corporate entity remain undisputed before us. This being so, this issue is covered in assessee’s favor by the decision of Hon’ble Apex Court in CIT V/s United Glass Mfg. Co. Ltd. (28 Taxmann.com 429 12/09/2012) wherein Hon’ble Court has observed as under: - 3.3 ....... As far Question No. 2 is concerned, we find that a series of judgments have been passed by High Courts holding that club membership fees for employees incurred by the assessee is business expense under Section 37 of the Income Tax Act, 1961. We also find that none of the decisions have been challenged in this court. Even otherwise, we are of the view that it is a pure business expenses. ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 146 Similar is the decision of Hon’ble Bombay High Court in Otis Elevator Co. (India) Ltd. V/s CIT (1992 60 Taxman 215). Therefore, we do not find any infirmity in the impugned order, on this issue. Ground No. 5 of revenue’s appeal stand dismissed.” 176. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in assessee’s own case for the preceding assessment year is respectfully followed, accordingly, ground raised No.3 raised by the revenue is dismissed. 177. In the result, appeal filed by the revenue is dismissed and cross objection filed by the assessee is allowed. 178. To sum-up, appeal filed by the assessee is partly allowed, Appeal filed by the revenue is dismissed and CO filed by the assessee is allowed. Order pronounced in the open court on 20 th March, 2024. Sd/- Sd/- (AMIT SHUKLA) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 20/03/2024 Giridhar, Sr.PS ITA NO.6832 & 6772/MUM/2010 (A.Y. 2002-03) CO NO.190/MUM/2011 M/s. Novartis India Limited Page No. 147 Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum