DCIT CEN CIR 1(4), MUMBAI V. GRASIM INDUSTRIES LTD, MUMBAI

ITA 4069/MUM/2016

AI Insights

The case involves cross appeals by Grasim Industries Limited and the Deputy CIT against the order of the Commissioner of Income-tax (Appeals)-13, Mumbai, concerning various disallowances and deductions under the Income Tax Act, 1961 for the Assessment Year 2010-11. The appeals addressed issues such as the disallowance of deductions for amounts paid or written back, interest paid to the Income Tax Department, depreciation on certain properties, and the treatment of a subsidy received under the Technology Upgradation Fund Scheme. The Tribunal's decision was influenced by precedents from earlier years and judicial interpretations of relevant tax provisions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775319 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 14-06-2016
• Other Referred Cases: Srikakollu Subbarao & Co. vs. Union of India, Avaya Global Connect Ltd. vs. ACIT, Biocon Ltd. vs. ACIT, Dilip Kumar vs. CIT, Bharat Commerce & Industries Ltd. vs. CIT, Sadanand S. Varde vs. State of Maharashtra, New Kaiser-I Hind Spinning & Weaving Company Ltd. vs. CIT, Continental Construction Ltd. vs. CIT, Radhasoami Satsang vs. CIT, Cummins India Ltd. vs. ACIT, PCIT vs. Quest Investment Advisors Pvt. Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: J.D. MISTRY; MADHUR AGRAWAL; ARUN KANTI DATTA; HOLDING
• Keywords: Set aside; Business income; Capital asset; Revised return; Revenue expenditure; Transfer pricing; Retrospective amendment; Business expenditure; Depreciation; Cost of acquisition; Rule of consistency; Capital receipt; Capital expenditure; Capital Gains; Double taxation relief; Scheme of amalgamation; Residential status
• Section: 143(3); 263; 37; 43B; 37(1); 80G

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G”, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER AND SHRI ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A No.2897/Mum/2016 (Assessment Year: 2010-11) Grasim Industries Limited (Corporate Finance Division) A-2, Aditya Birla Centre S.K. Ahire Marge, Worli, Mumbai-400 030 PAN: AAACG4464B vs Deputy CIT, Central Circle- 1(4), Mumbai. Room No. 902, Old CGO Building, Mumbai, 400020 APPELLANT RESPONDENT I.T.A No.4069/Mum/2016 (Assessment Year: 2010-11) Deputy CIT, Central Circle- 1(4), Mumbai Room No. 902, Old CGO Building, Mumbai, 400020 vs Grasim Industries Limited (Corporate Finance Division) A-2, Aditya Birla Centre S.K. Ahire Marge, Worli, Mumbai- 400 030 PAN: AAACG4464B APPELLANT RESPONDENT Assessee by : Shri J.D. Mistry – Sr. Advocate & Shri Madhur Agrawal Respondent by : Shri Arun Kanti Datta - CIT DR Date of hearing : 17/07/2025 Date of pronouncement : 09/09/2025 Printed from counselvise.com 2 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. O R D E R Per Anikesh Banerjee (JM): These are cross appeal filed by the assessee and the revenue against the order of the Commissioner of Income-tax (Appeals)-13, Mumbai [for brevity, ‘Ld. CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in shot, ‘the Act) for the Assessment Year 2010-11, date of order 11/03/2016. The impugned order emanated from the assessment order u/s 143(3) of the Act passed by the Learned Additional Commissioner of Income-tax, Range-6(3), Mumbai, dated 24/02/2014. 2. The grounds taken by the respective parties are as follows: - Assessee: “The Appellant Company prefers an appeal against the order of the learned Commissioner of Income Tax (Appeals)-13 [hereinafter referred as \"CIT (A)\"] on the following amongst other grounds each of which is without prejudice to any other. 1. On the facts and the circumstances of the case and in law the CIT (A) erred in upholding the action of the AO in not allowing deduction for the amounts paid or written back during the previous year amounting to Rs. 14,43,27,418/-, which had already been disallowed in the past under clauses (b) to (f) of section 43B, consistent with the Department's stand. 2. On the fact and the circumstances of the case and in law, the CIT (A) erred in upholding the action of AO in making addition of Rs. 99,02,963/- towards interest paid to Income Tax Department during the previous year and failed to follow the decision of Mumbai ITAT in the Appellant's own case for AY 1976-77 wherein it is held that only net interest is either assessable to tax or liable to disallowance. 3. On the facts and the circumstances of the case and in law, the CIT (A) erred in upholding the action of the AO in not allowing depreciation allowance of Rs. 4,12,560/- in respect of certain properties. Printed from counselvise.com 3 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. 4. On the facts and the circumstances of the case and in law, the CIT (A) erred in upholding the action of the AO in not allowing deduction of Rs. 6,49,506/- towards expenses incurred on administration of retirement benefit trusts as business expenditure. 5. On the facts and circumstances of the case and in law, the CIT (A) erred in not directing the AO to re-compute the capital gain arising on transfer of the Sponge Iron Unit and allow deduction from the sale proceeds of claims if any payable by the Appellant Company in future towards liabilities, representation and warranties. 6. On the facts and circumstances of the case and in law, the CIT (A) erred in not holding that the gain arising on transfer of Sponge Iron Unit is not chargeable to tax u/s 45 of the Income Tax Act, 1961. The learned CIT (A) failed to appreciate that the transfer was not a sale transaction but resulted pursuant to the order of the High Court and failed to follow the decision of the Mumbai ITAT in the case of Avaya Global Connect Ltd. (26 SOT 397). 7. On the facts and circumstances of the case and in law, the CIT (A) erred in upholding the action of the AO in not allowing the claim of the Appellant Company for deduction u/s 801A of the Act of Rs. 17,26,15,757/-in respect of Water Treatment System at Kharach. 8. On the facts and circumstance of case and in law, the CIT (A) erred in upholding the action of the AO in excluding receipts of Rs. 70,475/- from profit of the units eligible for deduction u/s 801A of the Act, while computing income from business for the purpose of deduction u/s 801A of the Act and failed to appreciate that the receipt was profit derived by the eligible undertakings from business eligible for deduction u/s 801A(4).” Revenue: “1) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.11,93,07,615/- made u/s 43B of the Act relying upon the order of the ITAT in the assessee's own case for A.Y.1993-94 without appreciating that the department had not accepted the findings of the Hon'ble Tribunal and has preferred further appeal u/s 260A\". Printed from counselvise.com 4 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. 2) \"On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.4,39,259/- towards contribution towards local organizations, relying upon the CIT(A)' order in the assessee's own case for Α.Υ.1996-97 to 2008-09 which have not been accepted by the department and further appeal has been filed before the ITAT\". 3) \"On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.1,85,52,461/-towards rural development expenses relying upon the CIT(A)' order in the assessee's own case for Α.Υ.1996-97 to A.Y.2008-09 which have been contested by the department in further before the ITAT\". 4) \"On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to treat the production cost of advertisement films of Rs.66,76,397/- as a revenue expenditure by relying upon his earlier orders for Α.Υ.2001-02 to A.Y.2008-09 without appreciating that the department has not accepted the orders by filing appeal to ITAT\". 5) \"On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in treating the subsidy amount of Rs.26,35,44,589/- as non-taxable capital receipt, without appreciating the fact that the main objective of the scheme was to increase sales by giving sales tax incentive and that there was no capital objective of the scheme\". 6) \"On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the expenses of Rs.8,10,000/- incurred towards 'Software' as Revenue expenses without appreciating the fact that the Part B of new Appendix-1 specifically include Computer Software as intangible asset entitled for depreciation @ 25%\". 7) \"On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing the expenses of Rs.2,02,76,260/- to the assessee in respect of employee compensation cost under ESOP Scheme relying on the decision of the Special Bench of Hon'ble Tribunal in the case of Biocon Ltd. [TS-322-ITAT-2013(Bang)], without appreciating the fact that the decision of the Hon'ble Tribunal in the said case has not been accepted by the Department\". Printed from counselvise.com 5 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. 8) \"On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on account of dividend of Rs.7,05,20,187/- received from M/s. Alexandria Carbon Black Co., U.A.R. without appreciating the fact that the Article 11(2) of the India- UAR(Egypt) Tax Treaty, which says that the dividend distributed by the company resident in UAR to a personal resident of India 'may be' taxed in UAR and not 'shall be'. 9) \"On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of expenses of Rs.6,21,79,879/- incurred on the transfer of Vikram Ispat Unit as business expenditure, without appreciating the fact that the impugned expenses are not claimed by the assessee in the return and are directly related with the transfer of Vikram Ispat Unit and are covered by specific provision of section 48(i) of the I.T. Act and should have been added in the cost of Unit for working out capital gain\". 10) \"On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO not to reduce the claim of deduction of Rs.2,01,87,549/-u/s.801A by relying upon his earlier orders on the issue for A.Y.1996-97 to A.Y.2008-09 without appreciating that the department had not accepted the same by filing appeal to the ITAT\". 11) \"On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in in granting deduction u/s 801A of the I.T. Act in respect of the Rail System at Raipur of Rs.15,57,09,929/- and Rs.13,05,18,489/- at Hotgi, without appreciating the fact that the Rail System was not an infrastructure facility within the meaning of the Explanation to Section 80-IA(4) (i) of the I.T. Act, 1961 and that the assessee had not set up an enterprise to carry on the business of developing, operating and maintaining an infrastructure facility within the meaning of that section\". 12) \"On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing the TUF Subsidy of Rs. 17.42 Cr as Capital in nature even though this being interest subsidy as per the objects of TUF Subsidy Scheme, which is Revenue in nature\". 13) \"On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to re-compute the LTCG on transfer of the unit taking its net worth as on the date of the transfer, i.e. 22nd May, 2009 without appreciating the fact that to reduce the capital gains the assessee has increased Printed from counselvise.com 6 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. the net worth of the unit by about Rs.389.16 crs. after the sale consideration has been fixed, therefore, net worth of the unit should be taken as on date of the framework agreement i.e. 30.06.2008 and not the date of transfer i.e. 22.05.2009.\" 14. The Appellant craves leave to add, to amend and/or to alter any of the grounds of appeal, if need be 15. The Appellant, therefore, prays that on the grounds stated above, the order of the CIT(A)-13, Mumbai may be set aside and that of the Assessing Officer restored.” 3. The facts of the case are that the assessee, a public limited company, has filed its return of income on 29/09/2010 declaring total income at Rs.1891,64,73,085/- under normal provisions of the Act. The assessee revised its return of income on 04/03/2011 declaring revised income at Rs.1893,36,29,773/- and on 23/03/2012 revising the income to Rs.1888,48,00,776/-, both under the normal provisions of the Act. The regular assessment in assessee’s case was completed on 24/02/2014 determining total income at Rs.2404,70,06,534/- by making various additions, thereby raising a demand of Rs.183,42,83,411/- . The aggrieved assessee filed appeal before the Ld. CIT(A), who partially allowed the appeal filed by the assessee. Aggrieved, both the assessee as well as the revenue filed the appeals before the Tribunal with the above grounds of appeal. ITA No.4069/Mum/2016 (Revenue’s Appeal) The Ld. DR argued and filed a written note containing pages 1 to 27 which is kept in record. The argument of the Ld. DR & Ld. AR are adjudicated as follows:- Printed from counselvise.com 7 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. In relation to Ground No.1 – Disallowance under section 43B of the Act: 1. During the year under consideration, the assessee claimed a deduction of Rs.11,93,07,615/- comprising contributions payable to the approved gratuity fund, bonus and leave salary, which are covered under clauses (b) to (f) of section 43B of the Act. The assessee claimed a deduction of these amounts by placing reliance upon the ITAT decisions in own case for earlier years and decision of Hon'ble Andhra Pradesh High Court in the case Srikakollu Subbarao & Co. vs. Union of India (173 ITR 708) and contended that no disallowance under section 43B of the Act can be made in relation to liabilities that have not become payable under the relevant law, even though the same has accrued in the year under consideration. 2. The Ld. DR argued that the Ld. AO rejected the contention of the Assessee by placing reliance upon the findings given in the assessment order for the assessment year 1990-91, wherein it was held that any sum covered under section 43B of the Act were to be disallowed, if the liability to pay accrued in the previous year even though it may not be payable in that year under the relevant law. Even before the insertion of Explanation-2 to section 43B of the Act, the stand of the revenue has always been very clear to allow sums only on payment basis. Consistent with the stand of the department in earlier years, an amount of Rs.11,93,07,615/- is disallowed under section 43B of the Act. 3. The Ld. AR argued that the Ld. CIT(A) held that in the assessee’s own case, the Hon'ble Tribunal has examined this issue in the assessment year 1990-91 and held that Explanation-2 to section 43B of the Act does not govern the payment of the sums referred to in clauses (b), (c), or (d) of section 43B of the Act. Following the decision of the Tribunal in the assessee’s own case for assessment year 1990- Printed from counselvise.com 8 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. 91 to 2001-02, the Ld. CIT(A) decided the issue in favour of the assessee and directed the Ld. AO to delete the additions made under clauses (b) to (f) of section 43B of the Act. 4. We have heard the rival submissions and perused the documents placed on record. The assessee has submitted that the issue under consideration has consistently been decided in its favour by the coordinate benches of the ITAT, Mumbai. In particular, reliance has been placed on the decision of the Tribunal in the assessee’s own case for the immediately preceding assessment year 2009-10, in I.T.A. No. 2224/Mum/2016 dated 23rd May, 2025, wherein the Bench followed the ruling rendered in the assessee’s own case for assessment year 2007-08. Respectfully following the principle of judicial consistency and discipline, we hold that the issue is squarely covered in favour of the assessee. Accordingly, the ground raised by the revenue is dismissed. Thus, Ground No. 1 of the revenue’s appeal stands dismissed. In relation to Ground No.2 – Contribution to local organisations. 5. The assessee made contributions to various local organisations located in and around the areas where plants and offices of the assessee are situated aggregating to Rs.4,39,259/-. 6. The Ld. DR argued that the contention of the assessee that it is necessary to make contributions to ensure good relations and a good profile of the company may or may not be correct but does not entitle the assessee to claim a business expenditure under section 37(1) of the Act. The contributions are essentially in the nature of donations and since specific provisions exist in the Act to govern Printed from counselvise.com 9 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. allowability of payments made in the nature of donations, only such payment which satisfy the conditions laid down under section 80G of the Act can be allowed as a deduction. Expenditure incurred on various local organisations is not wholly and exclusively incurred for the purposes of assessee’s business. 7. The Ld. AR argued and relied on the order of the Ld. CIT(A). The Ld. CIT(A), following the decision of this Hon'ble Tribunal in the Assessee’s own case for assessment years 1994-95 to 2001-02, held the contributions are necessary for maintaining good relations for earning goodwill of the local population, which in turn ensures smooth functioning of the factories, and therefore, are allowable as a deduction. The Assessee submits that the issue is squarely decided in favour of the assessee by this coordinate bench of ITAT-Mumbai right up till the assessment year 2009-10 wherein this Hon'ble Tribunal relied upon the decision in the assessee’s own case for assessment year 2007-08 and it was held that from assessment year 1988-89 onwards, identical issue has been decided in favour of the assessee not only by the Hon'ble Tribunal but even by the Hon'ble High Court. The Ld. AR further submits that similar issue has been decided by the Hon'ble Tribunal in assessment years 1996-97 to 2003-04 & 2005-06, and no appeal has been filed before the Hon'ble High Court by the Revenue on this particular ground, even though other grounds have been agitated by the revenue. Therefore, it demonstrates that the revenue has accepted the findings of this Hon'ble Tribunal with respect to this issue. Once it has been accepted in earlier assessment years, revenue cannot be permitted to take a contrary stand in the year under consideration. 8. We have heard the rival submissions and perused the documents placed on record. The assessee has submitted that the issue under consideration has Printed from counselvise.com 10 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. consistently been decided in its favour by the coordinate benches of the ITAT, Mumbai. In particular, reliance has been placed on the decision of the Tribunal in the assessee’s own case for the immediately preceding assessment year 2009-10, in I.T.A. No. 2224/Mum/2016 dated 23rd May, 2025, wherein the Bench followed the ruling rendered in the assessee’s own case for assessment years 1996-97 to 2003-04 & 2005-06, and no appeal has been filed before the Hon'ble High Court by the revenue on this particular ground. Respectfully following the principle of judicial consistency and discipline, we hold that the issue is squarely covered in favour of the assessee. Accordingly, the ground raised by the revenue is dismissed. Thus, Ground No. 2 of the revenue’s appeal stands dismissed. In relation to Ground No.3 – Rural Development Expenses: 9. The assessee incurred an expenditure of Rs.1,85,52,461/-with respect to various rural development activities including health checkup camps, medicine distribution in nearby villages, free artificial limb camp, pulse polio and tailoring center, eye screening and operation camp, etc. The beneficiaries of these expenses include people residing nearby the plant area and other people directly or indirectly connected with the business of the assessee. Therefore, allowable as a deduction. 10. The Ld. DR argued that the expenses incurred by the Assessee on the aforesaid items cannot be considered as a business expenditure, as it is not wholly and exclusively incurred for the purpose of Assessee’s business. The expenditure is not intricately linked to the business of the Assessee. 11. The Ld. AR argued and relied on the impugned appellate order. The Ld. AR stated that the Ld. CIT(A), following the decision of this Hon'ble Tribunal in the Printed from counselvise.com 11 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. assessee’s own case for assessment years 1998-99 to 2001-02, held that the expenditure has been incurred for the purposes of business and therefore, is allowable as a deduction. The Assessee Ld. AR further stated that the issue is squarely decided in favour of the Assessee by this Hon'ble Tribunal right up till the assessment year 2009-10 wherein this coordinate bench of ITAT-Mumbai relied upon the decision in the assessee’s own case for assessment year 2007-08 and it was held that from assessment year 1988-89 onwards, identical issue has been decided in favour of the assessee not only by the Hon'ble Tribunal but even by the Hon'ble High Court. It is further argued that similar issue has been decided by the coordinate bench of ITAT-Mumbai in assessment years 1998-99 to 2003-04 & 2005- 06, and no appeal has been filed before the Hon'ble High Court by the revenue on this particular ground, even though other grounds have been agitated by the revenue. The issue is further covered by the order of coordinate bench of ITAT- Mumbai in assessee’s own case assessment year 2009-10, in I.T.A. No. 2224/Mum/2016 dated 23rd May, 2025. Therefore, it demonstrates that the revenue has accepted the findings of this Hon'ble Tribunal with respect to this issue. Once it has been accepted in earlier assessment years, revenue cannot be permitted to take a contrary stand in the year under consideration. 12. We have heard the rival submissions and perused the documents placed on record. The assessee has submitted that the issue under consideration has consistently been decided in its favour by the coordinate benches of the ITAT, Mumbai. In particular, reliance has been placed on the decision of the Tribunal in the assessee’s own case for the immediately preceding assessment year 2009-10, in I.T.A. No. 2224/Mum/2016 dated 23rd May, 2025, wherein the Bench followed the ruling rendered in the assessee’s own case for assessment years 1998-99 to Printed from counselvise.com 12 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. 2003-04 & 2005-06, and no appeal has been filed before the Hon'ble High Court by the revenue on this particular ground. Respectfully following the principle of judicial consistency and discipline, we hold that the issue is squarely covered in favour of the assessee. Accordingly, the ground raised by the revenue is dismissed. Thus, Ground No. 3 of the revenue’s appeal stands dismissed. In relation to Ground No.4 – Cost of production of advertisement films as a revenue expenditure: (Revenue’s ground) 13. During the year under consideration, the Assessee incurred an expenditure of Rs.66,76,397/- towards cost of production of advertisement films. 14. The Ld. DR argued that the assessee is in the business of manufacturing and selling various products and not in the business of producing ad films. Producing of ad films is an expenditure of capital nature, incurred to acquire an asset, namely, advertisement film. 15. The Ld. AR argued that the Hon'ble Tribunal has discussed this issue in the assessee’s own case for assessment year 1976-77 and the Hon'ble Tribunal in assessment year 2001-02, following the decision of the Hon'ble Tribunal in assessment year 1976-77, decided the issue in favour of the assessee by holding that advertisement film was made for advertisement purposes only and its useful life was very short and such films do not add to the capital structure of the company. Respectfully following the aforesaid decisions, the ground was decided in favour of the assessee. The Ld. AR submitted that the issue has been decided in favour of the assessee by this coordinate bench of ITAT-Mumbai right up till immediately preceding year that is assessment year 2009-10, I.T.A. No. Printed from counselvise.com 13 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. 2224/Mum/2016 dated 23rd May, 2025, wherein this Hon'ble Tribunal has followed the assessee’s own case for assessment year 1976-77 and subsequent assessment years and held that the bench has been taking a consistent view in the assessee’s own case. The Ld. AR argued that similar issue has been decided by the ITAT-Mumbai Bench in assessment years 2001-02 to 2003-04 & 2005-06, and no appeal has been filed before the Hon'ble High Court by the revenue on this particular ground, even though other grounds have been agitated by the revenue. Therefore, it demonstrates that the revenue has accepted the findings of this Bench with respect to this issue. 16. We have heard the rival submissions and perused the documents placed on record. The Ld. AR has submitted that the issue under consideration has consistently been decided in its favour by the coordinate benches of the ITAT, Mumbai. In particular, reliance has been placed on the decision of the Tribunal in the assessee’s own case for the immediately preceding assessment year 2009-10, in I.T.A. No. 2224/Mum/2016 dated 23rd May, 2025, wherein the Bench followed the ruling rendered in the assessee’s own case for assessment years 2001-02 to 2003-04 & 2005-06, and no appeal has been filed before the Hon'ble High Court by the revenue on this particular ground. Respectfully following the principle of judicial consistency and discipline, we hold that the issue is squarely covered in favour of the assessee. Accordingly, the ground raised by the revenue is dismissed. Thus, Ground No. 4 of the revenue’s appeal stands dismissed. Printed from counselvise.com 14 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. In relation to Ground No.5 – Sales tax subsidy treated as a capital receipt: (Revenue) 17. During the year under consideration, the assessee obtained a sales tax incentive under the Sales Tax Incentive Scheme for Industries (1990-95) (“the Scheme”) provided by the Government of Gujarat introduced with the objective of Rapid Industrialisation and to encourage a balanced growth of industries in the State of Gujarat. The Assessee had set up a Unit at Kharach, Taluka Hansot, Bharuch District. The Assessee was granted eligibility certificate vide Certificate No. G. R. No. INC-1090-1023(2)-1 dated October 16, 1990. The Government of Gujarat extended the Scheme from time to time and extended the eligibility of the Assessee for the Scheme vide Certificate dated May 17, 2006, for the period of 01/04/2006 to 14/01/2012 (Page 171 of FPB – I). In view thereof, the assessee treated an amount of Rs.20,82,47,634/- collected on sale of goods and Rs.5,52,96,955/- on the purchase of raw material as a capital receipt. 18. The Ld. DR argued that the sales tax subsidy granted by the State Government was for setting up of new undertaking. However, the assessee has been receiving a subsidy even after years of setting up. In the earlier assessment, the claim of the assessee was not accepted by following the decision of the Mumbai Tribunal in the case of Bajaj Auto Ltd. vs. DCIT (90 ITD 153). Further, the order of the CIT(A) for assessment year 2006-07 has not been accepted by the revenue and the appeal has been filed before the Hon'ble Tribunal. Consistent with the earlier stand on the issue the claim of the Assessee is rejected, and the sale tax incentive is treated as a revenue receipt. The Ld. DR relied upon the decision Sahney Steel Printed from counselvise.com 15 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. and Press Works Ltd. and Ors. V CIT (228 ITR 253) (SC) and PJ Chemicals [1994] 228 ITR 253 (SC). 19. The Ld. AR argued that the contention of the assessee is that the character of the receipt of the subsidy in the hands of the assessee is to be determined with respect to the purpose of the subsidy. In other words, the purpose test has to be applied. In support of this contention, various judicial pronouncements are available. Further, the amendment made in section 2(24)(xviii) of the Act, is effective from the assessment year 2016-17, as this appeal pertains to the assessment year prior thereto, the nature of the subsidy is to be determined as per the purpose test laid down by the Hon'ble Supreme Court. The Ld. AO has stated in the assessment order that the subsidy was available for setting up of a new undertaking. Once this fact is established, the subsidy would be held to be capital in nature, no further discussion is warranted on this point. While adjudicating the appeals of the assessee for the assessment years 2006-07 to 2008-09, the Ld. CIT(A) has held that the subsidy was indeed capital in nature. Agreeing with the decision of assessment years 2006-07 to 2008-09 and respectfully following the same, subsidy granted for setting up of an undertaking is held to be a capital in nature. The assessee submits that a consistent view has been taken in the assessee’s own case for right up till assessment year 2008-09 by the coordinate bench of ITAT- Mumbai in ITA No. 5982 & 6758/Mum/2011 date of pronouncement 21/05/2025 wherein this Bench has held that sales tax subsidy to be in the nature of a capital receipt and not liable to tax. The Ld. AR further submits that the allegation of the Ld. AO that the subsidy was granted for setting up a new unit, and the assessee’s unit has been set up long back, therefore, subsidy cannot be treated as a capital receipt is a complete non-starter. Printed from counselvise.com 16 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. 20. We have heard the rival submissions and perused the documents placed on record. The eligibility of the assessee for exemption under the Scheme was extended by the Govt. Of Gujarat till 14/01/2012. Therefore, the allegation of the Ld. AO has no legs to stand. It is the prerogative of the State Government whether the Assessee is eligible for the Scheme or not, and once the incentive under the Scheme has been extended to the assessee for a further period of time, the Ld. AO cannot dispute the same. In any case, the assessee submits that it has been settled by various judicial pronouncements, including the decision of the Hon’ble Supreme Court in Sahney Steel and Press Works Ltd. and Ors. V CIT (228 ITR 253) (SC), CIT Vs. Ponni Sugars & Chemicals Ltd. (306 ITR 392) (SC), the form of mechanism through which subsidy is given is irrelevant; the crucial determining factor is the purpose for which the subsidy is given. The purpose of the subsidy under which the assessee has been granted an incentive is accepted to be for rapid industrialisation and to encourage a balanced growth of industries in the State of Gujarat. The decision relied by the Ld. AO in the case of Bajaj Auto (supra) has been recently reversed by the Hon’ble Bombay High Court in the case of Bajaj Auto Ltd. vs. DCIT (176 taxmann.com 104) vide its order dated July 3, 2025, wherein the Hon’ble Court after considering the decision of Sahney Steel (supra) and PJ Chemicals (supra) held that since the purpose of the subsidy was setting up of new unit and not assisting in making the business more profitable, the subsidy was capital in nature. The Ld. AR has submitted that the issue under consideration has consistently been decided in its favour by the coordinate benches of the ITAT, Mumbai. In particular, reliance has been placed on the decision of the Tribunal in the assessee’s own case for the AY 2008-09, ITA No. 5982 & 6758/Mum/2011 date of pronouncement 21/05/2025. Respectfully following the principle of judicial consistency and Printed from counselvise.com 17 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. discipline, we hold that the issue is squarely covered in favour of the assessee. Accordingly, the ground raised by the revenue is dismissed. Thus, Ground No. 5 of the revenue’s appeal stands dismissed. In relation to Ground No.6 –Expenditure incurred towards software regarded as revenue expenditure: 21. During the year under consideration, the Assessee incurred an expenditure of Rs.8,10,000/- towards Business Intelligent Warehouse (BIW) software related to SAP ERP. It is an online integrated package covering various business applications for accounting, MIS, finance, controlling and costing, production planning, quality management etc. This software assists the unit in extracting information from SAP for the purpose of reporting to management. The expenses incurred are merely for the up gradation of an existing SAP and to facilitate the smooth and efficient running of the business. 22. Ld. DR argued that the assessee has capitalised such expenditure in the books of accounts. Therefore, the submission of the assessee cannot be accepted. The assessee should have charged such expenses as revenue expenses in books of accounts, and it cannot have two separate stands in the books of accounts and in the tax return. 23. Ld. AR argued and relied on the order of the Ld. CIT(A). He stated that the case of the assessee is that it has smoothly replaced the existing software and has not acquired any new assets. The Ld. CIT(A), following the decision of the Hon’ble Special Bench of the Hon’ble Tribunal in the case of Amway India Enterprise v. DCIT (111 ITD 112), held that the assessee is in the business of manufacture and Printed from counselvise.com 18 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. software is not a source of income as revenue generating asset. It is a tool to manage the activities of the business. Further, the assessee has not set up software system for the first time but has made modification in the existing software system of the business. Therefore, the expenditure under consideration is revenue in nature. The view of the assessee is supported by the decision of the Hon’ble Bombay High Court in the case of Raychem RPG Ltd. (346 ITR 138). The Ld. AR submits that the aforesaid issue has been decided in favour of the assessee consistently by this Hon’ble Tribunal. The coordinate bench of the ITAT Mumbai in the assessee’s own case for assessment year 2009-10 ITA No 2224/Mum/2016 date of pronouncement 23/05/2025 followed the decision for assessment year 2007-08, which in turn followed the decision in the assessee’s own case for assessment Years 2002-03 and 2003-04, and has allowed the claim of the assessee of the revenue expenditure. 24. We have heard the rival submissions and perused the documents placed on record. The Ld. AR has submitted that the issue under consideration has consistently been decided in its favour by the coordinate benches of the ITAT, Mumbai. In particular, reliance has been placed on the decision of the Tribunal in the assessee’s own case for the immediately preceding AY 2009-10, in I.T.A. No. 2224/Mum/2016 dated 23rd May, 2025, wherein the Bench followed the ruling rendered in the assessee’s own case for assessment years 2002-03 & 2003-04. The fact is identical with the alleged issue in impugned assessment year. Respectfully following the principle of judicial consistency and discipline, we hold that the issue is squarely covered in favour of the assessee. Accordingly, the ground raised by the revenue is dismissed. Printed from counselvise.com 19 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. Thus, Ground No. 6 of the revenue’s appeal stands dismissed. In relation to Ground No.7 – Expenditure incurred on Employees Stock Option (ESOP) amounting to Rs.2,02,76,260/-: 25. During the Financial Year 2007-08, the assessee formulated an ESOP Scheme 2006 in accordance with SEBI Guidelines and granted 2,18,0140 options to its employees. The scheme was formulated with the intention of attracting and retaining talent within the company and to motivate its employees to contribute to the Assessee’s growth and profitability. As per SEBI Guidelines, the excess market value of the shares over the exercise price of the option at the time of grant of the option was termed as “intrinsic value”. As per the SEBI Guidelines, the intrinsic value of the option was to be treated as employee compensation in the financial statement of the assessee, proportionately over the vesting period. The assessee, during the year, charged to its profit and loss, ESOP cost of Rs.2,02,76,260/- as employee compensation expense in accordance with the SEBI Guidelines. The assessee made the claim through notes to computation forming part of return of income. 26. The Ld. DR argued that the claim of the assessee cannot be allowed in view of the direct decision of the Hon’ble Delhi Tribunal in the case of Ranbaxy Laboratory Ltd. v. Additional CIT (124 TTJ 771), wherein it was held that benefit or income foregone cannot be considered as an expenditure. Further, the assessee had not incurred any expenditure and had merely received a lesser amount of share premium. The said cannot be characterised as expenditure within the meaning of section 37 of the Act. Printed from counselvise.com 20 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. 27. The Ld. DR has contended that the foregone share premium or discount to the value of the share can only be treated as a contingent liability and thus does not qualify for a deduction. It has further been contended that revenue has not accepted the decision of the Hon’ble Madras High Court in the case of CIT v. PVP Venture Ltd. (23 taxmann.com 286) and the decision of the Hon’ble Karnataka High Court in the case of CIT vs. Biocon Ltd.(430 ITR 151), which affirmed the decision of the Hon’ble Special Bench and has filed a Special Leave Petition before the Hon’ble Supreme Court, which has been admitted. The claim of ESOP deduction has not attained the finality. The Ld. CIT(A) ought not to have allowed the claim of the assessee. It was further submitted that the Ld. CIT(A) ought not to have permitted the assessee to raise an additional claim, though the claim for deduction of ESOP had not been made either in the original return or in the revised return. The Ld. CIT(A) has rendered contradictory findings with respect to the claim of deduction u/s 80IA in respect of Water Treatment plant and ESOP, and he ought to have applied the decision of the Hon’ble Supreme Court in the case of Goetze Ltd. vs. CIT (284 ITR 323), as followed in relation to other issues by the Ld. CIT(A). 28. The Ld. AR argued that, firstly, it is incorrect to say that the assessee has not made any claim in the return of income. The assessee, through the notes to the computation forming part of return of income, had made a claim of deduction of ESOP as an allowable expenditure. The Hon’ble Bombay High Court in the assessee’s own case in ITA No. No. 2325 of 2013 vide order dated February 02, 2016, has held that claim made by way of notes to computation of income is not a new claim. Therefore, the contention of the Ld. DR that the assessee has not made a claim in the return of income cannot be accepted. Printed from counselvise.com 21 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. Secondly, the Ld. AR argued that it is not even the case of the Ld. AO that the claim over and above the return of income had been made by the assessee and, therefore, it is not allowable. The Ld. AO has decided the allowability of the deduction on the merits of the deduction and, therefore, it is not open to the Ld. DR to make out a completely fresh case before this Hon’ble Tribunal that has never been raised by the Ld. AO. It is a settled position that the Ld. DR can only support or defend the case of the Ld. AO and cannot improve the case of the Assessing Officer, as the same would amount to usurpation of power of the Commissioner of Income Tax under Section 263 of the Act. In this regard, reliance is placed on the decision of the Hon’ble Special Bench of the Tribunal in the case of CIT vs. Mahindra & Mahindra Ltd. (122 ITD 216). In any case, the assessee submits that it is open to the Ld. CIT(A) to admit and adjudicate an additional claim made before the Ld. CIT(A) in view of the decision of the Hon’ble Bombay High Court in the case of CIT v. Pruthvi Brokers and Shareholders (349 ITR 336). Therefore, the contention of the Ld. Ld. DR that Ld. CIT(A) has rendered contradictory findings, is incorrect. Further, it is submitted that once the Ld. AO himself has adjudicated a claim on the merits of deduction, the question of entertaining a fresh claim by the Ld. CIT(A) does not arise. Therefore, the submission of the Ld. DR is contrary to the material on record and ought to be rejected. The Ld. AR stated that the contention of the Ld. DR that SLP against the decisions of the Hon’ble Karnataka High Court and Hon’ble Madras High Court is pending before the Hon’ble Supreme Court. Therefore, the issue is not settled, and the Ld. CIT(A) ought not to have allowed the claim of the assessee on such grounds is contrary to all canons of judicial discipline. The assessee submits that merely because a judgment has not been accepted by the revenue, the binding value of Printed from counselvise.com 22 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. the precedent is not diluted in any manner. In this relation, reliance is placed on the decision of the Hon’ble Supreme Court in the case of UOI vs. Kamlakshi Finance Corporation Ltd. (Supp. 1 SCC 443) (1992). Therefore, the Ld. CIT(A) rightly followed the binding decisions of the Superior Courts. The Ld. AR stated that coordinate bench of ITAT, in the assessee’s own case for AY 2009-10, in I.T.A. No. 2224/Mum/2016 dated 23rd May, 2025 has followed the decision in the case assessee’s own case for Assessment Year 2008-09, wherein the Bench allowed ESOP expenditure as a revenue expenditure by following, inter alia, the decision of the Hon’ble Special Bench in the case of Biocon Ltd. vs ACIT 144 ITD 21. The assessee submits that the ESOP expenditure incurred by the assessee has to be allowed as revenue expenditure, as it is nothing but employee remuneration. 29. We have heard the rival submissions and perused the material available on record. Following the decision of the coordinate bench of the ITAT, Mumbai, and respectfully applying the ratio laid down in the judgment discussed hereinabove, we decide the issue against the revenue. Thus, Ground No. 7 of the revenue’s appeal stands dismissed. In relation to Ground No.8 – Dividend received from M/s. Alexandria Carbon Black Company amounting to Rs.7,05,20,187/-: 30. The assessee received the dividend income of Rs.7,05,20,187/- from Alexandria Carbon Black Company, a Company registered under the laws of Egypt. The Assessee-Company contended that dividend income received from the Egypt Company is not liable to tax in India in terms of Article 11(2) of the India-United Arab Republic (Egypt) Tax Treaty (“India – UAR DTAA”). It was contended that the Printed from counselvise.com 23 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. India-UAR DTAA provides that dividend paid by a resident of UAR to a person a resident of India, “may be taxed” in UAR. Therefore, once the right to tax has been given to the UAR, India cannot seek to tax dividend income. 31. It is submitted that the coordinate bench of ITAT-Mumbai, in the assessee’s own case for AY 2009-10, ITA. No. 2224/Mum/2016 dated 23rd May, 2025 followed the order in the assessee’s own case for AY 2007-08 and decided this issue in favour of the revenue by holding that post the amendment made by Finance Act, 2003 under section 90(3)of the Act and the issuance of Notification No. 91 of 2008, the term “may be taxed” would mean that source country i.e. India has right to tax income earned in such country and relief shall be granted in accordance with method of elimination or avoidance of double taxation. The ITAT held that a similar issue has been decided against the assessee in AY 2004-05 and 2005-06, and the appeal on this issue is pending for adjudication before the Hon’ble High Court. 31. We have heard the rival submissions and carefully perused the material available on record. Respectfully following the decision of the coordinate bench of the ITAT, Mumbai, and maintaining consistency with the view already taken by the co-ordinate benches, we hold that the issue is to be decided against the assessee. Accordingly, the ground is decided in favour of the revenue. Thus, Ground No. 8 of the revenue’s appeal stands allowed. In relation to Ground No.9 - Disallowance of expenses incurred on transfer of Vikram Ispat Unit under section 48(1) of the Act amounting to Rs.6,21,79,879/-. Expenditure incurred of on transfer of Vikram Ispat Unit as business expenditure: (Revenue) Printed from counselvise.com 24 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. 32. The assessee, during the year under consideration, incurred an expenditure of Rs.6,21,79,879/- in connection with transfer of Sponge Iron Unit identified as Vikram Ispat Unit (hereinafter referred to as the “Unit”). The expenses incurred by the Assessee were in the nature of revenue and professional charges, travelling expenses, advertisement expenses, security expenses for shareholders and creditors’ meetings, postage charges, bank charges for NOCs, sole financial adviser’s fees, form filing fees and provision for expenses. The assessee, before the Ld. AO, claimed this expenditure as revenue expenditure allowable as a deduction. 33. The Ld. DR argued that the assessee has reduced these expenses from the sale consideration in the computation of capital gain. These expenses are in relation to the transfer of the Unit, and the assessee itself has added back these expenses for computation of business income and claimed these expenses in the computation of capital gain. Therefore, the claim of the assessee to allow these expenses as revenue expenditure is rejected. 34. The Ld. AR argued and relied on the order of the Ld. CIT(A). He stated that the Ld. CIT(A) observed that the expenses were towards professional fees, legal advertisements, postage, bank charges etc. These expenses had been incurred in connection with the sale of a business unit. It is not in dispute that these expenses had been incurred in the normal course of business. Capital structure of the assessee did not undergo any change. The expenses were incurred to carry out the business in a more profitable manner and to gain synergies. Accordingly, The Ld. CIT(A) has directed the Ld. AO to allow the assessee’s revenue expenditure of Rs.6,21,79,879/- to re-compute the gain on sale of the Unit. Printed from counselvise.com 25 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. The Ld. AR stated that a similar issue had arisen before coordinate bench of the ITAT-Mumbai in the assessee’s own case for AY 2009-10, ITA. No. 2224/Mum/2016 dated 23rd May 2025. with respect to similar expenses incurred by the assessee in earlier year. This Hon’ble Tribunal held that the expenditure incurred, in any case, has to be allowed either as revenue expenditure or as capital expenditure while computing capital gain of the Unit. Therefore, it is only of timing difference in the claim of expenditure, and it is revenue neutral. In view of the same, this Hon’ble Tribunal upheld the order of the Ld. CIT(A) and dismissed the appeal of the revenue on this ground. 35. We have heard the rival submissions and perused the material available on record. Following the decision of the coordinate bench of the ITAT, Mumbai, we decide the issue against the revenue. Thus, Ground No. 9 of the revenue’s appeal stands dismissed. In relation to Ground No.10 –Allocation of Head Office expenses to units claimed under section 80-IA of the Act: (revenue) 36. The Head Office (HO) controls units and manages the affairs of all units. Therefore, proportionate expenses of HO should be deducted from the eligible profit of respective units. Accordingly, proportionate HO expenses are worked out in the ratio of turnover of total expenses of HO amounting to Rs.2,01,87,550/-. The issue is decided in the assessee’s own case for AY 1994-95, the ITAT has decided the issue in favour of the assessee by holding that there is no need for separate allocation of any expenses to the units claiming deduction under sections 80-HH, 80-I, 80-M and 80-O of the Act. Respectfully following the decisions of the Hon’ble Printed from counselvise.com 26 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. Tribunal, the Ld. AO is directed to not to allocate HO expenses to units eligible for deduction under section 80-IA of the Act. The Ld. AR stated that consistently, the aforesaid issue has been decided in favour of the assessee right up till the AY 2009- 10 AY 2009-10, ITA. No. 2224/Mum/2016 dated 23rd May 2025. The ITAT-Mumbai bench, in the assessee’s own case for Assessment Year 2005-06, wherein it was held that in the assessee’s own case for AYs 1994-95 to 1998-99, the issue has been decided in favour of the assessee and the department is not in appeal against the order of the Tribunal. 37. We have heard the rival submissions and perused the material available on record. Following the decision of the coordinate bench of the ITAT, Mumbai, we decide the issue against the revenue. Thus, Ground No. 10 of the revenue’s appeal stands dismissed. In relation to Ground No. 11: Deduction under section 80-IA of the Act on Railway systems at Raipur and Hotgi: (Revenue) 38. The assessee, during the year under consideration, claimed deduction under section 80-IA of the Act in respect of Railway siding at Raipur and Hotgi. The Ld. AO followed the finding given in the assessment order for AY 2003-04 and 2004-05 and held that deduction in respect of Railway systems is not eligible for deduction under section 80-IA of the Act. 39. The coordinate bench of ITAT-Mumbai, in the assessee’s own case for AY 2009-10, ITA. No. 2224/Mum/2016 dated 23rd May 2025 decided the issue in favour of the assessee by following the decision in the assessee’s own case for AY 2008-09, wherein the orders in the assessee’s case for AYs 2003-04 to 2005-06 Printed from counselvise.com 27 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. were followed and held that deduction under section 80-IA of the Act is available with respect to Rail system. The Ld. DR was unable to refute the submission of the Ld. AR by submitting any contrary judgment. Following the decision of the coordinate bench of the ITAT, Mumbai, we decide the issue against the revenue. Thus, Ground No. 11 of the revenue’s appeal stands dismissed. The Assessee was eligible for subsidy under the Technology Upgradation Fund (TUF) Scheme. 40. Under this scheme, interest on loans taken for acquisition of capital assets for textile upgradation was reimbursed. The assessee originally treated the subsidy as revenue receipt in its return of income. Later, based on the Kolkata ITAT decision in Gloster Jute Ltd. v. CIT [33 ITR (T) 322], the assessee raised an additional ground before CIT(A) (Application dated 06.02.2015), claiming the subsidy was capital in nature. The assessee submitted that the objective of the TUF Scheme was to promote long-term viability and competitiveness of the textile sector by enabling capital access at concessional rates, thereby making the subsidy a capital receipt not chargeable to tax. 41. The Ld. CIT(A) accepted the Remand Report dated 02.03.2015 from the Ld. AO, where he stated that since the subsidy reimbursed interest cost (a revenue expenditure), it was a revenue receipt. The CIT(A), however, admitted the additional ground, held that the purpose of subsidy was capital in nature, and relied on Gloster Jute Ltd. (supra) to direct the AO to treat the TUF subsidy as capital receipt. Printed from counselvise.com 28 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. 42. The Ld. DR in argument stated that the Ld. CIT(A) wrongly permitted an additional ground. Assessee’s omission in return was deliberate, since it had consistently offered subsidy as income in earlier years. Reliance on Gloster Jute Ltd. (ITAT-Kolkata) was not binding on CIT(A). 43. The Ld. AR argued that coordinate bench of ITAT-Mumbai in assessee’s own case for AY 2005-06 to 2008-09 and AY 2009-10 ITA. No. 2224/Mum/2016 dated 23rd May 2025 held that TUF subsidy is capital receipt. The additional ground was rightly admitted since the claim was based on subsequent judicial pronouncement. Reliance placed on Pruthvi Brokers & Shareholders (Bom HC) (supra). The Department itself, in earlier years, failed in challenging admission of additional ground (HC order dated 18.12.2018 in ITA 778/2015; no SLP filed on admission issue). No specific argument on merits was raised by DR; thus, revenue cannot now challenge beyond grounds of appeal. Admission of additional ground by Ld. CIT(A) after remand report was a valid exercise of discretion; not perverse. Decision in Gloster Jute Ltd. (supra) being of a higher judicial forum, was binding on the Ld. CIT(A). Issue of admissibility of additional ground already accepted by jurisdictional HC in earlier years; hence revenue estopped. The Ld. AR stated that the Ld. DR has not challenged the merits of capital nature of subsidy, only technical admissibility. 44. We have heard the rival submissions and perused the record. The assessee received subsidy under the Technology Upgradation Fund (TUF) Scheme in the form of reimbursement of interest on loans taken for acquiring capital assets for technology upgradation. Though originally offered as revenue receipt, the assessee raised an additional ground before the Ld. CIT(A) relying on the decision of ITAT, Kolkata in Gloster Jute Ltd. (supra), wherein it was held that such subsidy is capital Printed from counselvise.com 29 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. in nature. The Ld. CIT(A), after obtaining remand report from the Ld. AO, admitted the additional ground and directed the Ld. AO to treat the receipt as capital in nature. We note that in assessee’s own case for earlier years (AYs 2005-06 to 2008- 09, AY 2009-10), this ITAT-Mumbai bench has consistently held that interest subsidy received under TUF Scheme is capital receipt. The principle of consistency requires us to follow the same view. Reliance placed by the revenue on non- admissibility of additional ground is misplaced, since the jurisdictional High Court in assessee’s own case (ITA 778/2015, order dated 18.12.2018) has declined to admit such question. Further, the Ld. DR has not disputed the merits of the subsidy being capital in nature, but only raised a procedural objection. Such objection, in our considered view, does not survive. Accordingly, following the consistent view taken in assessee’s own case and relying on the decision of Gloster Jute Ltd, we hold that the interest subsidy received under TUF Scheme is a capital receipt not chargeable to tax. Ground No. 12 raised by the revenue is dismissed. In relation to Ground No.13: Networth to be computed as on the date of Framework Agreement or Date of Transfer. 45. For the purpose of completeness, this ground is dealt with in the assessee’s appeal underneath while discussing ground no. 6. I.T.A.NO. 2897/MUM/2016 (ASSESSEE’S APPEAL): In relation to Ground No.1 - Direction to allow deduction under section 43B of the Act in relation to clauses (b) to (e) of the Act on a payment basis of the amounts disallowed in earlier years: Printed from counselvise.com 30 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. 46. The assessee submits that this ground is an alternate ground in nature. In the ground no-1 of revenue’s appeal related deduction U/s 43B is favour of the assessee. Hence, this ground of the assessee is infructuous. Ground No. 1 raised by the assessee is dismissed as infructuous. In relation to Ground No.2 – Disallowance of interest paid to the Income Tax Department amounting to Rs.95,02,963/-: 47. During the year, the assessee has received interest of Rs. 29,31,73,252/- and has paid interest of Rs. 95,02,963/- to the Income Tax Department. In the return of income, the interest paid to the Income Tax Department of Rs. 95,02,963/- was disallowed and offered to tax. Through the notes to computation, the assessee claimed that a net effect has to be given to transaction between the same party and only a net interest amounting to Rs. 28,36,70,289/- (Rs.29,31,73,252/- less Rs.95,02,963/-) should be offered to tax. But the Ld. AO held that interest paid to the Department was not allowable as a deduction under section 40(a)(ii) of the Act. The Ld. CIT(A) observed that the liability to pay income tax is a personal liability and, therefore, payment of interest on income tax liability is also a personal liability and not allowable as a deduction. In the earlier assessment year, i.e. AY 2008-09, the Ld. CIT(A) has upheld the action of the Ld. AO and rejected the claim of the assessee. Following the same, the plea of the assessee deserves to be rejected and no relief is granted to the assessee with regard to interest paid to the Department. 48. The Ld. AR argued that the assessee submits that an identical issue has been decided in favour of the assessee by this coordinate bench of ITAT-Mumbai in AY 1976-77 (ITA No.8221/BOM/1989) and in AY 2007-08 to AY 2009-10. The ITAT in Printed from counselvise.com 31 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. the assessee’s own case for AY 2009-10 followed the decision of the Tribunal in the assessee’s own case for AY 2007-08, which in turn had followed the decision of the Hon’ble Bombay High Court in the case of DIT v. Bank of America (ITA No.177/2012 dated July 3, 2014) and held that interest paid by the assessee to the department, has to be set off against the interest deposited by the department as the interest paid to and received it from the same party. Therefore, both transactions should be taken together. Following the aforesaid order, this Hon’ble Tribunal, for AY 2009-10, allowed the appeal of the assessee on this ground. 49. The Ld. DR argued and respectfully placed on the decision of the Hon’ble Supreme Court in the case of Bharat Commerce & Industries Ltd. vs. CIT (98 Taxman 151) wherein it is held that interest payable to the department was not an allowable expense. 50. We heard the rival submission and relied on the documents available on record. The Ld. AR submitted that the Hon’ble Jurisdictional High Court in Bank of America (supra) has permitted set off interest paid to the department with the interest received from the department. In view of the decision of the Hon’ble jurisdictional High Court, the claim of the assessee can, by no means, be said to be a frivolous claim. The Ld. AR stated that the assessee is claiming set off of the interest paid to the department with the interest received from the department, which is nothing but a transaction with the same party and, therefore, a net effect has to be given of the transactions. The Hon’ble Jurisdictional High Court has permitted this in the aforesaid decision. Further, reliance placed by the Ld. DR on the decision of the Hon’ble Supreme Court in the case of Bharat Commerce & Printed from counselvise.com 32 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. Industries Ltd. (supra) does not assist the revenue in any manner. As stated above, the assessee is claiming that only net interest received during the year can be taxed, as there can be only one account with one party and only net interest paid/received should be disallowed/offered to tax. The assessee has not claimed that interest paid on income tax will be allowable expenditure, and, therefore, the decision of the apex Court will not be applicable. The issue is squarely covered by the assessee’s own case for AY 2009-10 ITA. No. 2224/Mum/2016 dated 23rd May 2025. Accordingly, following the consistent view taken in assessee’s own case and relying on the decision of Bank of America (supra). The ground of the assessee is succeeded. Ground No. 2 raised by the assessee is allowed. In relation to Ground No.3 – Depreciation on assets added to the block of assets and subsequently let out: 51. The assessee let out its office premises in Sakhar Bhavan and Dalamal Towers at Nariman Point, Mumbai, and Ahura Centre, Andheri, Mumbai. The rent received from such letting out of property was offered under the head “income from house property”. In the return of income, the assessee did not claim depreciation under section 32 of the Act on these let out properties. However, through the notes to the computation of income, the assessee claimed depreciation on these let out properties by stating that once the asset is added to the block of asset, it loses its identity and depreciation on such a particular asset cannot be worked out separately. The Ld. AO noted in order that the assessee-company has claimed a deduction equal to 30% of the annual rental value while computing income from house property. Deduction allowable, as per the provision of section 24 of the Act, Printed from counselvise.com 33 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. the assessee cannot be allowed depreciation in addition to this deduction. No depreciation can be allowed on a let-out property. The Ld. CIT(A), in the assessee’s own case for AY 2008-09 and the earlier assessment year, has upheld the action of the Ld. AO and decided the issue of double deduction on the same asset against the assessee. While deduction has been allowed under section 24 of the Act, depreciation under section 32 of the Act cannot be allowed. Accordingly, the action of the Assessing Officer is upheld. 52. The Ld. AR submitted that this coordinate bench of ITAT-Mumbai, in the assessee’s own case for AY 2005-06 till immediately preceding assessment year, i.e. AY 2009-10, has decided this issue in favour of the Assessee. The Ld. AR further submitted that this Tribunal, for AY 2009-10, following the order in the assessee’s own case for AY 2007-08, wherein it was held that once the property forms part of the block of asset, carving out depreciation for the said property and disallowing the same, goes against the spirit of allowing depreciation on the entire block of depreciable asset. Merely because the revenue has accepted the claim of deduction under section 24 of the Act does not mean that the property, which forms part of the block of asset, will cease to be so. Therefore, the assessee is eligible to claim depreciation under section 32 of the Act. 53. The Ld. AR has submitted that the issue under consideration has consistently been decided in its favour by the coordinate benches of the ITAT, Mumbai. In particular, reliance has been placed on the decision of the Tribunal in the assessee’s own case for the immediately preceding AY 2009-10, in I.T.A. No. 2224/Mum/2016 dated 23rd May, 2025, wherein the Bench followed the ruling rendered in the assessee’s own case for assessment year 2007-08. The Ld. DR unable rebut the Printed from counselvise.com 34 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. issue by submitting any contrary judgment. The fact is identical with the alleged issue in impugned assessment year. Respectfully following the principle of judicial consistency and discipline, we hold that the issue is squarely covered in favour of the assessee. Accordingly, the ground raised by the assessee is allowed. Thus, Ground No. 3 of the assessee’s appeal stands allowed. In relation to Ground No.4 – Disallowance of administrative expenses incurred on retirement benefit funds of the employees of the Assessee: 54. The assessee, during the year, incurred an expenditure of Rs.6,49,506/- as administrative expenses of the employees’ retirement benefit funds and claimed it as a business expenditure. The Ld. AO, without providing any reasoning, disallowed the expenditure. It submitted that the order of the Ld. CIT(A) for AY 2008-09, on which reliance is placed by the Ld. CIT(A) for deciding the issue against the assessee in the year under consideration has been reversed by this coordinate bench of ITAT- Mumbai in the assessee’s own case for AY 2008-09 by relying upon the decision of Supreme Court in case of Continental Construction Ltd. [1992] 60 Taxman 429 (SC). The said decision has been followed by this coordinate bench of ITAT-Mumbai in the assessee’s own case for AY 2009-10. The issue under consideration has consistently been decided in its favour by the coordinate benches of the ITAT, Mumbai. In particular, reliance has been placed on the decision of the Tribunal in the assessee’s own case for the immediately preceding AY 2009-10, in I.T.A. No. 2224/Mum/2016 dated 23rd May, 2025, wherein the Bench followed the ruling rendered in the assessee’s own case for AY 2008-09. The fact is identical with the alleged issue in impugned assessment year. Respectfully following the principle of Printed from counselvise.com 35 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. judicial consistency and discipline, we hold that the issue is squarely covered in favour of the assessee. Accordingly, the ground raised by the assessee is allowed. Thus, Ground No. 4 of the assessee’s appeal stands allowed. In relation to Ground No. 6 – Gain on transfer of Sponge Iron Unit is not chargeable to tax under section 45 of the Act. 55. The assessee entered into a Framework Agreement dated June 10,2008 (“Framework Agreement”) with Welspun Power and Steel Ltd. (“Welspun”) for the transfer of its Sponge Iron Unit known as Vikram Ispat Unit (hereinabove as the “Unit”) as a going concern. In Recital C of the Framework Agreement, Page 505 of FPB – I, it was agreed that the Unit shall be transferred through a Scheme of Arrangement under section 391 of the Companies Act, 1956 on a going concern basis to a Company to be incorporated as a Special Purpose Vehicle (“SPV”). The assessee was to initially hold a stake in the SPV and Welspun was to acquire a majority stake in the SPV through subscription of shares of the SPV, Recital 7 of the Framework Agreement annexed in Page 514 of FPB – I. In Recital 3 of the Framework Agreement, Page 510 of FPB – I, it was further agreed that through a Scheme of Arrangement, the assessee shall transfer the Unit in its entirety as a going concern to M/s. Vikram Sponge Iron Ltd. (“VSIL”) for a consideration of Rs.1030 Crores to be paid by VSIL to the assessee. The consideration was to be funded by Welspun through the subscription of shares of VSIL. It was specifically agreed between the parties in Recital 3.4 of the Framework Agreement, Page 511 of FPB – I that the Scheme of Arrangement shall, upon becoming effective, be binding on the parties. The parties also agreed that upon effectiveness of the Scheme of Arrangement and with effect from the effective date, the Unit shall Printed from counselvise.com 36 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. pursuant to section 394(2) of the Companies Act, 1956 and without any further act or deed be transferred to and vested in or be deemed to have been transferred to and vested in VSIL as a going concern so as to become as and from the effective date the undertaking of VISL. Accordingly, the assessee incorporated and promoted VSIL on June 27, 2008 and thereafter, the Scheme of Arrangement under section 391 of the Act was filed by the assessee before the Hon’ble Madhya Pradesh High Court Page 607 –642 of FPB- I. The Hon’ble Madhya Pradesh High Court, vide order dated April 29, 2009, approved the Scheme of Arrangement by holding that the Scheme of Arrangement is in accordance with the guidelines laid down by the Hon’ble Supreme Court in various decisions, Page 601 –606 of FPB – I. Pursuant to the approval of the Scheme, the Scheme became effective from May 22, 2009, Page 587 of FPB-1. In the Scheme of Arrangement, in Recital D, Page 608 of FPB – I, it was stipulated that VSIL shall pay the consideration to the assessee by infusion of necessary funds by Welspun through a combination of equity and debt pursuant to such funding and upon the effectiveness of the Scheme, Welspun will own substantial majority stake in VSIL. The assessee, through notes to the computation forming part of the return of income, contended that section 50B of the Act applies only in the case of slump sale, as defined under section 2(42C) of the Act. From the reading of section 2(42C) of the Act, it is clear that it applies only to a transfer as a result of a sale. A transfer of undertaking otherwise than as a result of sale would not qualify as slump sale under the Act. Transfer of the Unit of the assessee was a result of Scheme of Arrangement under sections 391 to 394 of the Companies Act, 1956, being approved by the Hon’ble Madhya Pradesh High Court. Therefore, it cannot be said to be a transfer as a result of sale of the Unit by the assessee. Consequently, the Printed from counselvise.com 37 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. provisions of section 2(42C) and section 50B of the Act are not applicable and accordingly, it is not a taxable transaction under section 45 of the Act. 56. The Ld. AO, in the assessment order, rejected the contention of the assessee that the transfer of unit under a Court approved scheme is not a slump sale, without providing any reason. The Ld. CIT(A) observed that it is undisputable that the transfer of Unit has taken place for consideration of Rs.1030 Crores. Just because the whole restructuring took place through court approved scheme, it would not be proper to say that it is not a transfer by slump sale. The Act has been amended by Finance Act, 1999, to include the provisions for taxation of slump sale transactions. The decision relied upon by the assessee i.e. Avaya Global Connect Ltd. Vs. ACIT [2008] 26 SOT 397, is for the period before the said amendment. Therefore, the claim of the assessee is not as per law and hence, the same is rejected. 57. The Ld. AR argued that prior to insertion of section 50B of the Act, vide Finance Act, 1999, with effect from April 1, 2000, the law that prevailed was that a transaction of sale of an undertaking on a going concern basis would not be chargeable under section 45 of the Act as the computation mechanism under section 48 of the Act fails on account of the fact that cost of acquisition of the capital asset being transferred i.e. the undertaking cannot be determined. This position underwent a change pursuant to the insertion of section 50B of the Act. Section 50B of the Act, as it stood for the relevant assessment year under, is reproduced hereunder: (1) Any profits or gains arising from the slump sale effected in the previous year shall be chargeable to income-tax as capital gains Printed from counselvise.com 38 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. arising from the transfer of long-term capital assets and shall be deemed to be the income of the previous year in which the transfer took place. Provided that any profits or gains arising from the transfer under the slump sale of any capital asset being one or more undertakings owned and held by an assessee for not more than thirty-six months immediately preceding the date of its transfer shall be deemed to be the capital gains arising from the transfer of short-term capital assets. From a perusal of the aforesaid extract, it is evident that sub-section (1) of section 50B of the Act provides that any profit or gain arising from the ‘slump sale’ effected in the previous year, shall be chargeable to the income tax as capital gain arising from also a long term capital asset and shall be deemed to be the income of the previous year in which the transfer took place. Further, the term ‘slump sale’ has been defined under section 2(42C) of the Act, as it stood at the relevant point of time, to mean “transfer of one or more undertakings as a result of the sale for a lump sum consideration without value being assigned to the individual asset and liability in such sale.” The assessee submits that the definition of slump sale has further underwent a change from Finance Act, 2021 with effect from April 1, 2021, and defined as “means transfer of one or more undertakings, by any means, for a lump sum consideration without value being assigned to the individual assets and liabilities in such transfer”. Further, Explanation 3 to section 2(42C) of the Act was inserted by the Finance Act, 2021, which states that “For the purposes of this clause, “transfer” shall have the meaning assigned to it in clause (47)”. The word “sale” was substituted by the word “transfer” by Finance Act 2022 with retrospective effect from April 1, 2021. Printed from counselvise.com 39 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. From the plain reading of the definition of slump sale, it is clear that prior to 1st of April 2021, the definition of slump sale was restricted to transfer of one or more undertakings as a result of sale, which has undergone a drastic change to mean a transfer of one or more undertakings by any means. It is the submission of the assessee that this change assumes a great significance in the facts of the assessee’s case, which shall be pointed out below. 58. The Ld. AR submitted that once an undertaking has been transferred on a going concern basis through a court-approved scheme, it cannot be characterised as a ‘sale’ of the undertaking. The Ld. AR submitted that it would be a transfer, but not a transfer as a result of a sale. The assessee further submitted that in order to characterise a transaction of sale, the essential requisites of sale are to be satisfied. The essential requisites for determining it to be a sale are (i) a contract through which there shall be a transfer of property or agreement to transfer by one party to another, and (ii) it shall be for consideration of money payment or promise thereof by a buyer. Unless these elements are present, there can be no sale. The crucial feature that a contract between parties is absent once a transfer takes place through a Court-approved Scheme, as the transfer is taking place on account the imprimatur of the Court and not on account of agreement between parties. The assessee in support of the proposition that transfer of Unit through Scheme of Arrangement approved by Court cannot be equated with sales, as the essential feature of contract between the parties is absent, places reliance upon the celebrated decision of the Hon’ble Jurisdictional High Court in the case of Sadanand S. Varde v. State of Maharashtra (247 ITR 609).The Hon’ble Bombay High Court has held in para 95 and 96 that a scheme of amalgamation has a statutory operation once it is sanctioned by a competent court and is distinct and different from a mere Printed from counselvise.com 40 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. agreement signed by the necessary parties, even though scheme is approved by all concerned parties by consensus. Merely because it is so agreed upon, the Court is not obliged to put its imprimatur on it. The Court has the discretion and power to reject the scheme even if all creditors and shareholders have agreed to it. But once the scheme is scrutinised by the Court and sanctioned by an order made by it under section 391 of the Companies Act, it ceases to retain a character of contract and operates by force of the statute. The Hon’ble Bombay High Court followed the decision of the Hon’ble Supreme Court in the case of J.K. Bombay Pvt. Ltd. v. New Kaiser-I Hind Spinning & Weaving Company Ltd. (2 Comp. LJ 272). It was further held that the scheme of sanction by the Court is statutorily binding even on the creditors and shareholders who might have dissented or who might have opposed it from being sanctioned. It was held that there is an overwhelming authority of precedent suggesting that when amalgamation takes place, the transfer of assets takes place by force of the company Court’s order and/or by operation of law, it ceases to be a contractual or consensus transfer. Therefore, the assessee submits that the pre-condition for a transfer to be characterised sale is not satisfied in this case. The Ld. AR also places reliance upon the decision of the Hon’ble Mumbai Tribunal in the case of Avaya Global Connect Ltd. v. ACIT (26 SOT 397), wherein the Hon’ble Tribunal followed the decision of the Hon’ble Bombay High Court in the case of Sadanand S. Varde (supra) and held that the question whether transfer of property, consequent to an amalgamation, could be construed as a sale or not has been considered by the Hon’ble Bombay High Court in the aforesaid case and, therefore, transfer, consequent to a scheme of amalgamation, cannot be said to be sale of undertaking by the assessee in that case. It was further held that since the transfer could not be said to be as a result of a sale, the provisions of section 2(42C) Printed from counselvise.com 41 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. of the Act do not apply and, therefore, the provisions of section 50B of the Act also were not to apply. The Ld. AR submits that the Ld. CIT(A) erred in not appreciating that the aforesaid decision was not prior to the amendment vide Finance Act, 1999, by which section 50B of the Act was amended. The decision has been rendered for the AY 2002-03. In view of the above, it is submitted that transfer of the unit cannot be characterised as a sale falling within section 2(42C) of the Act and, therefore, the provisions of section 50B of the Act would not have any applicability as it cannot be characterised as a sale. 59. The Ld. AR further argued that the aforesaid contention is also fortified by the fact that the Legislature itself recognised the aforesaid distinction and amended the provision of section 2(42C) of the Act from Finance Act, 2021 to define slump sale to mean “transfer” of one or more undertakings “by any means” and not just as a “result of sale”. Further Explanation 3 to section 2(42C) of the Act was introduced to define the term transfer to have the same meaning as assigned under clause 47 of section 2 of the Act. Thereby taking within its purview all transfers and not just transfers as a result of sale. The incongruity in the section was also ironed out by substituting the word “sale” at the end of 2(42C) of the Act with “transfer” with retrospective effect from April 1, 2021 by Finance Act, 2022. The aforesaid interpretation is equally evident from the Memorandum to the Finance Bill, 2021, wherein the intention behind the amendment has been explained. The rationale of introducing the amendment has been stated, inter alia, as follows “Section 50B of the Act contains special provision for computation of capital gains in case of slump sale. Sub-section (42C) of section 2 of the Act defines “slump sale” to be on the transfer of one or more undertakings as a result of sale for lump sum consideration without value being assigned to individual assets and Printed from counselvise.com 42 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. liabilities in such cases. This has been interpreted by some courts that other means of transfer listed in sub-section (47) of section 2 of the Act, in relation to definition of the word “transfer” in relation to capital asset like exchange, relinquishment etc, are excluded.” In view of the above, it is abundantly clear that the definition of slump sale as it stood for the year under consideration encapsulated only a transfer as a result of sale. Since a Court-approved Scheme cannot be treated as a sale, the definition of section 2(42C) of the Act would not be attracted. In view thereof, it is argued that the consideration received cannot be brought to tax under section 50B of the Act. It is a capital receipt and, therefore, cannot be brought tax under the Act. 60. The Ld. DR contended that the transaction of transfer of the unit was a slump sale, as agreed between the parties in the Framework Agreement. It was further contended by the Ld. DR that the sanction to be obtained from the Hon’ble High Court was only a procedural requirement and none of the parties were bound by any modification / amendment that may be suggested by the High Court as per clause 5.1 of the Framework Agreement. Therefore, none of the decisions relied upon by the Assessee are applicable to the facts of the assessee’s case. 61. The Ld. AR rebutted that though initially there was an agreement between the parties, however the transfer of the undertaking is not on account of the said agreement. The transfer is in accordance with the scheme which has been approved by the Hon’ble Madhya Pradesh High Court and therefore, the transfer of undertaking in not on account of the agreement and, therefore, the agreement cannot be referred, to decide the nature of transfer of the undertaking. Once the scheme was scrutinised and approved by the Hon’ble High Court, it was binding “in Printed from counselvise.com 43 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. rem” and not just between the parties inter se. In this regard, reliance is placed on the decision of the Hon’ble Bombay High Court in Sadananda S. Verde (supra) and the decisions of the Hon’ble Supreme Court in the case of New Kaiser-I-Hind (supra) and Dalmia Power Ltd. vs. ACIT (42t0 ITR 339). It is further submitted that the argument of the Ld. DR that the sanction from the Court is merely a procedural requirement is not correct as the Court is not bound to approve the scheme or even if it approves the scheme, the approval can be with modification to the scheme. Therefore, the argument of the Ld. DR is not sustainable. Hence, the contention that the transfer was a slump sale, on account of the Framework Agreement, cannot be accepted. 62. We have carefully considered the rival submissions, perused the Framework Agreement, the Scheme of Arrangement approved by the Hon’ble Madhya Pradesh High Court, and the judicial precedents cited before us. It is undisputed that the assessee transferred its Sponge Iron Unit as a going concern to M/s. Vikram Sponge Iron Ltd. pursuant to a Scheme of Arrangement under sections 391 to 394 of the Companies Act, 1956, sanctioned by the Hon’ble High Court. The core issue for determination is whether such transfer falls within the ambit of “slump sale” as defined in section 2(42C) of the Act, and consequently whether section 50B applies. For the relevant assessment year, the definition of slump sale was confined to a transfer as a result of sale for lump sum consideration. It is well-settled by the Hon’ble Bombay High Court in Sadanand S. Varde (supra) and by the Hon’ble Supreme Court in J.K. Bombay Pvt. Ltd. (supra) that once a scheme is sanctioned by the Court, the transfer is effectuated by force of statute and ceases to retain the character of a consensual or contractual transfer. Printed from counselvise.com 44 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. We further note that the Hon’ble ITAT, Mumbai in Avaya Global Connect Ltd. (supra) has applied the same principle and held that transfer of an undertaking under a Court-approved scheme of arrangement cannot be equated with a sale, and consequently section 50B does not apply. The subsequent legislative amendments by Finance Act, 2021 and Finance Act, 2022, whereby the word “sale” was substituted by “transfer by any means,” only fortify the assessee’s contention that, prior to 1 April 2021, the statutory scheme covered only transfers by way of sale. In the present case, the transfer was pursuant to the Scheme of Arrangement, which operates in rem and not merely between the contracting parties. Thus, the essential attributes of a “sale” are absent. Respectfully following the binding ratio laid down by the Hon’ble Bombay High Court, the Hon’ble Supreme Court, and the coordinate bench decision in Avaya Global Connect Ltd. (supra), we hold that the transfer of the undertaking by the assessee cannot be characterised as a slump sale within the meaning of section 2(42C) of the Act as it stood at the relevant time. Consequently, the provisions of section 50B are not attracted. Accordingly, the action of the Ld. CIT(A) in treating the transaction as taxable under section 50B of the Act cannot be upheld. The assessee’s contention is accepted. The consideration received under the Scheme of Arrangement is to be treated as a capital receipt not chargeable to tax under section 50B of the Act. The ground raised by the assessee succeeds. The addition made under section 50B is deleted. Thus, Ground No. 6 of the assessee’s appeal stands allowed. Printed from counselvise.com 45 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. In relation to Ground No.5 of the Assessee’s appeal and Ground No.13 of the Department’s appeal: 63. The issue related re-compute the gain arising on transfer of Sponge Iron Unit and to allow deduction of liabilities towards representations and warranties. But the said issue is already decided in ground-6 of assessee’s appeal. So, both the ground -5 of assessee’s appeal & ground-13 of revenue’s appeal are dismissed as infructuous. Thus, Ground -5 of assessee’s appeal & Ground-13 of revenue’s appeal are dismissed. In relation to Ground No.7 – Deduction under section 80-IA of the Act in respect of water treatment facility at Kharach: 64. The assessee, during the year under consideration, set up a Water Treatment Plant (“WTM”) at its facility at Kharach, Gujarat. Through the notes of computation of income forming part of return of income, the assessee claimed a deduction with respect to the profits of the WTM and a deduction under section 80-IA of the Act by submitting that it fulfils all the conditions prescribed under section 80-IA of the Act. The assessee also obtained Form No.10CCB certified by an Independent Chartered Accountant, in support of the deduction which was issued prior to filing of the return of income. The Ld. AO rejected the claim of deduction under section 80-IA of the Act amounting to Rs.17,26,15,757/- under section 80-IA of the Act with respect to water treatment system at Kharach by simply stating that claim was by way of a note to the return of income and has not claimed the deduction in the computation of income while filing the return of income. Therefore, the claim of Printed from counselvise.com 46 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. deduction is rejected. The Ld. CIT(A) upheld the order of the AO by holding that unless the deduction under section 80-IA of the Act is claimed by the assessee in the return of income, the said deduction is not allowable. Sub-section (5) of section 80-IA of the Act clearly provides that no deduction shall be allowed where the assessee fails to make a claim in the return of income under section 80-IA of the Act. 65. The Ld. AR argued that the Ld. CIT(A) as well as the Ld. AO erred in not appreciating that the notes to the computation of income forms part of the return of income, as held by the Hon’ble Bombay High Court in the assessee’s own case in ITA No.2325 of 2013 dated February 02, 2016. In view of the same, the finding of the revenue authority that not having made a claim in the return of income disentitles the assessee from claiming a deduction is incorrect and cannot be accepted. The Ld. AO did not doubt the eligibility of the assessee for claiming a deduction under section 80-IA of the Act with respect to WTM. Once the Ld. AO has not doubted the eligibility of the assessee, deduction has to be allowed to the assessee. Further, the Ld. AR stated that the Ld. AO as well as the Transfer Pricing Officer (“TPO”) in subsequent assessment years, after making detailed inquiries in relation to the said deduction, have allowed the claim of the assessee under section 80-IA of the Act. Therefore, eligibility of the infrastructure unit to claim a deduction is not in doubt. In support of the same, the Ld. AR draws our attention to the submission filed before TPO during the course of proceedings for AY 2015-16, page no. 927 to 930 of FPB-II. In the submission dated December 4, 2018, the assessee has submitted that it is satisfying all the conditions prescribed under section 80-IA Printed from counselvise.com 47 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. (4) (i) of the Act. Pursuant to the submission made by the assessee, no adjustment has been proposed by the TPO as well as the AO in the assessment order. A similar view has been taken for AYs 2016-17 and 2017-18. 66. The Ld. DR contented that the decision in the assessee’s own case referred supra does not apply to the facts of the present case. The assessee in the instant case did not claim deduction under section 80-IA of the Act in the return of income, whereas in the facts before the Hon’ble Bombay High Court it was a case with relation to the applicability of Fringe Benefit Tax which was claimed not payable by the assessee through notes to the return of income. It is also contained by the Ld. DR that Provisions dealing with the deductions have to be strictly construed in light of the decision of the Hon’ble Supreme Court in the case of Commissioner of Customs vs. Dilip Kumar (9 SCC 1) 2018. It is also contended by the Ld. DR that merely because claim has been allowed by the assessing officer in assessment year 2015-16, deduction has to be permitted in assessment year 2010-11 cannot be accepted, as principles of res judicata do not apply to income tax law. 67. The Ld. AR argued that the distinction sought to be made by the Ld. DR has no basis. The principle that was laid down by the Hon’ble Bombay High Court in the Assessee’s own case is that the once the claim has been made in the notes to the return of income, it cannot be treated as a new claim. It was not restricted only to Fringe Benefit Tax. Therefore, the assessee submits that the ratio of the decision is applicable with all force to the present case as well. Further, the contention of the Ld. DR that principles of res judicata do not apply to the tax laws. The assessee submits that it is equally a settled position that even though res judicata does not apply to tax jurisprudence, but principles of consistency apply. The appellant in this Printed from counselvise.com 48 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. regard places reliance upon the decision of the Hon'ble Supreme Court in the case of Radhasoami Satsang vs. CIT (193 ITR 321), wherein the Hon'ble Supreme Court held that where a fundamental aspect permeating through different assessment years has been found as a fact one way or another and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. In the absence of any material justifying the revenue to take a different view, the question should not have been reopened and a different and contradictory stand should not have been taken. Similar view has been taken by the Hon'ble Bombay High Court in the cases of Cummins India Ltd. vs. ACIT (153 taxmann.com 223) and PCIT V/s Quest Investment Advisors Pvt. Ltd. (409 ITR 545). Further, the question of strictly interpreting deduction provisions of the Act does not apply in the present case. Once the deduction has been permitted by the Ld. AO himself in the subsequent assessment year, the allowability of the deduction has been established. Therefore, the submission of strict interpretation or liberal interpretation need not proceeded into. 68. We have heard the rival submissions and perused the material placed on record. The assessee set up a Water Treatment Plant (“WTM”) at its facility in Kharach, Gujarat, and claimed deduction under section 80-IA of the Act. The deduction was supported by Form 10CCB duly certified by an independent Chartered Accountant prior to filing of the return of income. The Ld. AO rejected the claim on the ground that the deduction was only made by way of a note to the computation and not reflected in the computation column of the return of income. The Ld. CIT(A) confirmed this view by holding that unless deduction is specifically claimed in the return, the same cannot be allowed in view of section 80-IA(5) of the Printed from counselvise.com 49 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. Act. We find merit in the submission of the assessee that the notes to the computation form an integral part of the return of income, as already held by the Hon’ble Bombay High Court in assessee’s own case in ITA No.2325 of 2013 dated 02.02.2016. Once the claim is duly disclosed in the notes and supported by statutory audit report in Form 10CCB, it cannot be treated as a fresh or belated claim. It is further an undisputed fact that in subsequent assessment years, the Ld. AO and the TPO have accepted the deduction under section 80-IA for the same undertaking after detailed examination. Thus, the eligibility of the unit for deduction is not under doubt. The reliance of the revenue on the decision of the Hon’ble Supreme Court in Dilip Kumar (9 SCC 1) is misplaced. The present issue is not one of strict versus liberal construction of a deduction provision; rather, the issue is whether a claim duly made in the return through computation notes and supported by audit report is a valid claim in law. Once the revenue has itself accepted the claim in subsequent years, the principle of consistency, as laid down by the Hon’ble Supreme Court in Radhasoami Satsang (supra) and followed by the Hon’ble Bombay High Court in Cummins India Ltd. (supra) and Quest Investment Advisors Pvt. Ltd. squarely applies. Respectfully following the binding decision of the Hon’ble Bombay High Court in assessee’s own case (supra), and in view of the consistent acceptance of the claim by the revenue in subsequent years, we hold that the deduction under section 80-IA of the Act in respect of the Water Treatment Plant at Kharach cannot be denied merely because it was reflected in the notes to the computation and not separately in the return. Accordingly, we direct the AO to allow the deduction under section 80-IA of the Act as claimed by the assessee. Thus, Ground No. 7 of the assessee’s appeal stands allowed. Printed from counselvise.com 50 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. In relation to Ground No.8 – Deduction under section 80-IA of the Act on other income earned by the assessee amounting to Rs.70,475/- in relation to rent for housing accommodation allotted to the employees: 69. It was held that the assessee receiving the housing rent income is not derived from the industrial undertaking. Accordingly, the same is excluded for the purpose of computing the deduction under section 80-IA of the Act. The Ld. CIT(A) followed the decision of the Ld. CIT(A) for Assessment years 2006-07 to 2008-09 and confirmed the finding of the AO that rent receipt from the employee was rightly excluded for the purposes of computing eligible income for deduction under section 80-IA of the Act. It is submitted that the decision of the Ld. CIT(A) for AYs 2006-07 to 2008-09 has been reversed by this coordinate bench of ITAT-Mumbai. This ITAT, in the assessee’s own case for Assessment Year 2007-08 to AY 2009-10, directed the AO to allow deduction under section 80-IA of the Act. 70. The reliance has been placed on the decision of the Tribunal in the assessee’s own case for the immediately preceding AY 2009-10, in I.T.A. No. 2224/Mum/2016 dated 23rd May, 2025, wherein the Bench followed the ruling rendered in the assessee’s own cases for AYs 2006-07 to 2008-09. The fact is identical with the alleged issue in impugned assessment year. Respectfully following the principle of judicial consistency and discipline, we hold that the issue is squarely covered in favour of the assessee. Accordingly, the ground raised by the assessee is allowed. Thus, Ground No. 8 of the assessee’s appeal stands allowed. Printed from counselvise.com 51 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. Additional Ground No.1 raised vide Application dated January 30, 2019 filed on February 1, 2019: 71. The assessee, vide Application dated January 30, 2019, filed with this Hon’ble Tribunal on February 1, 2019, raised an additional ground claiming deduction of education cess amounting to Rs.19,39,74,757/- as a deduction. It is submitted that this coordinate bench of ITAT-Mumbai, for AY 2005-06 till AY 2008-09, had admitted the additional ground and decided the issue against the assessee. 72. The assessee, vide application dated 30.01.2019 filed before this Tribunal on 01.02.2019, sought admission of an additional ground claiming deduction of education cess amounting to Rs.19,39,74,757/–. We note that this coordinate Bench of ITAT-Mumbai, in assessee’s own case for A.Ys. 2005-06 to 2008-09, had already admitted a similar additional ground and, after adjudication, decided the issue against the assessee. In the absence of any distinguishing facts or change in law having been brought to our notice, and respectfully following the consistent view taken by this Tribunal in earlier assessment years in assessee’s own case, we hold that the claim of deduction of education cess is not allowable. Accordingly, the additional ground raised by the assessee is dismissed. Printed from counselvise.com 52 ITA No.2897 & 4069/Mum/2016 Grasim Industries Ltd. 73. In the result, appeal of the revenue and the assessee are partly allowed, and the additional ground of the assessee is dismissed. Order pronounced in the open court on 09th day of September 2025. Sd/- sd/- (NARENDRA KUMAR BILLAIYA) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, िदनांक/Dated: 09/09/2025 Pavanan Copy of the Order forwarded to: 1. अपीलाथ /The Appellant , 2. ितवादी/ The Respondent. 3. आयकर आयु\u0014 CIT 4. िवभागीय ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, JODHPUR 5. गाड\u0019 फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, MUMBAI Printed from counselvise.com "