DCIT CENTRAL CIRCLE 3(2), MUMBAI, AIR INDIA V. AARTI INDUSTRIES LIMITED, MUMBAI

ITA 4869/MUM/2023

AI Insights

The case revolves around an appeal by the Deputy Commissioner of Income Tax against Aarti Industries Limited concerning the assessment year 2015-16. The primary issue was the disallowance of deductions under section 80IA of the Income Tax Act, which the Assessing Officer had reduced based on his determination of the arm's length price for electricity sold by the CPP to the manufacturing unit. The CIT(A) had restored the full deduction in favor of the assessee, leading to the Revenue's appeal. The Tribunal also addressed other issues such as the disallowance under section 14A related to exempt income, the treatment of subsidies under section 35(2AB), and the claim of additional depreciation under section 32(1). The Tribunal's decision favored the assessee, aligning with previous rulings in similar cases.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 793274 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 29-12-2023
• Other Referred Cases: CIT vs. ITC Limited [2015] 64 taxmann.com 214 (Calcutta), Asstt. CIT vs. Vireet Investment (P.) Ltd. [2017] 82 taxmann.com 415/165 ITD 27 (Delhi - Tri) (SB), CIT vs. Ponni Sugars & Chemicals Ltd. (2008) 306 ITR 392 (SC), Eastman Exports Global Clothing Pvt. Ltd. in ITA.No.47/MDS/2016 dated 17.05.2016, Sutlej Textiles & Industries Ltd. (ITA. No. 5142/Del/2013), M/s. Gloster Jute Mills Ltd. Vs. Addl. CIT in ITA.No. 687/Kol/2010, ACIT vs. M/s. Shree Pushkar Chemicals, Vinati Organics Limited (ITA No. 1667 to 1669/Mum/2021, dt. 28-04-2022), Aarti Drugs Ltd., (ITA No. 2503/Mum/2021, dt. 20-01-2023)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY MEHTA
• Assessee Lawyers: RAJESH KUMAR YADAV
• Keywords: Revised return; Transfer pricing; International transaction; Depreciation; Additional depreciation; Capital receipt; Capital expenditure; Earning of tax free income; Competent authority; Wholly owned subsidiary; Rule 8D; Related party transaction
• Section: 133(6); 14A; 115JB; 32(1)(iia)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 4869/Mum/2023 (Assessment Year: 2015-16) Dy. CIT, Central Circle-3(2) R. No. 1913, 19th Floor, Air India Building, Nariman Point, Mumbai-400 021 Vs. Aarti Industries Limited 71, Udyog Kshetra, 2nd Floor, Mulund Goregaon Link Road, Mulund (W), Mumbai-400 080 PAN/GIR No. AABCA 2787 L (Appellant) : (Respondent) Appellant by : Shri Vijay Mehta Respondent by : Shri Rajesh Kumar Yadav Date of Hearing : 12.08.2025 Date of Pronouncement : 25.09.2025 O R D E R Per Saktijit Dey, Vice President: This is an appeal by the Revenue, against the order dated 30.10.2023 of learned Commissioner of Income Tax (Appeals), Mumbai (‘ld.CIT(A) for short), pertaining to the assessment year (A.Y.) 2015-16. 2. Ground no. 1 in the appeal reads as under: 1. On the facts and circumstances of the case, the ld. CIT(A) erred in deleting the disallowances made by the A.O. to restrict the deduction u/s. 80IA of the Act despite the fact that the issue has not attained finality and pending for adjudication before the Hon'ble Supreme Court? – Rs.396,81,798/- 3. Briefly the facts are, the assessee is a resident corporate entity engaged in manufacturing and sale of chemicals, fertilizers and intermediaries. For such manufacturing activity, the assessee has set up a plant at plot no. 801/23, GIDC, Phase-III, Printed from counselvise.com 2 ITA No. 4869/Mum/2023 (A.Y. 2015-16) Dy. CIT vs. Aarti Industries Limited Vapi Dist-Valsad, Gujarat. For supplying uninterrupted power to the manufacturing unit, the assessee has set up a Captive Power Plant (‘CPP’ for short) in the same premises. 4. During the year under consideration, the CPP has generated power (electricity) and steam and has claimed deduction of Rs.67,91,90,511/- u/s. 80IA of the Act, comprising of Rs.22,91,82,801/- towards sale of electricity and Rs.45,00,07,710/- towards sale of steam. For supply of electricity, the CPP has charged Rs.7.52 per unit. Whereas, for steam it had charged Rs.1.509 per kg. 5. When the Assessing Officer (‘A.O.’ for short) called upon the assessee to justify the arm’s length nature of such transaction, the assessee submitted that in the very same period the manufacturing unit had also purchased power from DGVCL, a wholly owned subsidiary of Gujarat Urja Vikas Nigam Ltd. (GUVNL). It was submitted, the price at which the manufacturing unit had purchased power from DGVCL has been adopted as per unit cost of electricity sold by CPP to the manufacturing plant. The A.O., however, was not convinced with the submissions of the assessee. He observed, had the manufacturing unit for whatever may be the reason, not purchased the power from CPP, the CPP would have been compelled sell power to DGVCL. In that situation, the power generating companies can only be remunerated as per the tariff decided by the Competent Authority, which is normally much lesser than the rate which the assessee adopted to fix the price of electricity sold by CPP to the manufacturing unit. In the aforesaid context, he called for information from power distribution companies by issuing notices u/s. 133(6) of the Act. As per information received from GUVNL, the A.O. found that during the financial year 2014-15, the power distribution companies during the same period has purchased power from power generating companies in Gujarat at a flat rate of Rs.4.35 per unit. Based on Printed from counselvise.com 3 ITA No. 4869/Mum/2023 (A.Y. 2015-16) Dy. CIT vs. Aarti Industries Limited such information and relying upon decision of the Hon’ble Kolkata High Court in the case of CIT vs. ITC Limited [2015] 64 taxmann.com 214 (Calcutta) the A.O. concluded that the cost at which the CPP had sold electricity to the manufacturing unit is much higher than the average cost at which the power generating companies sale power to power distribution companies. Accordingly, applying the rate of Rs.4.35 per unit, the A.O. determined the price at which the assessee has sold electricity to the manufacturing unit at Rs.10,89,45,539/-, resulting in reduction in assessee’s claim of deduction u/s. 80IA of the Act. However, so far as sale of steam is concerned, the A.O. did not interfere with assessee’s claim of deduction u/s. 80IA of the Act. 6. Be that as it may, the assessee contested the part disallowance of deduction claimed u/s. 80IA of the Act in an appeal preferred before ld. first appellate authority. Noticing that identical issue has been decided in favour of the assessee in preceding assessment years, ld. first appellate authority followed those decisions and allowed assessee’s claim of deduction u/s. 80IA of the Act fully. 7. Being aggrieved, the Revenue is in appeal before us. 8. We have considered rival submissions and perused the materials available on record. Undisputedly, in the year under consideration, the CPP had sold power/electricity to the manufacturing unit and has claimed deduction u/s. 80IA of the Act in respect of profit arising from such transaction. There cannot be any manner of doubt that the transaction relating to sale of electricity between CPP and the manufacturing unit is a Specified Domestic Transaction (‘SDT’ for short) coming within the ambit of section 92BA of the Act. Therefore, in terms with Explanation (ii) under section 80IA(8) of the Printed from counselvise.com 4 ITA No. 4869/Mum/2023 (A.Y. 2015-16) Dy. CIT vs. Aarti Industries Limited Act read with clause (iii) to Explanation u/s. 80IA(6) of the Act, the deduction allowable u/s. 80IA of the Act should be equal to an amount which corresponds to the Arm’s Length Price (‘ALP’ for short) of the transaction determined in terms of section 92F(ii) of the Act and other transfer pricing provisions. In fact, in paragraphs 4.1 to 4.3 of the assessment order, the A.O. himself has observed that reference was made to the Transfer Pricing Officer (‘TPO’ for short) to determine the ALP of related party transactions. Notably, in terms with the reference made by the A.O., the TPO undertook analysis of the international transaction as well as SDTs between the related parties. Vide order dated 30.10.2018 passed u/s. 92CA(3) of the Act, the TPO finally concluded that the ALP of the international transactions as well as SDT undertaken by the assessee with its Associated Enterprises (AE)/related parties being at arm’s length, no further adjustment is required. For ease of reference, we deem it appropriate to reproduce the order passed by TPO: ORDER UNDER SECTION 92CA(3) OF THE I.T. ACT, 1961 1. A reference u/s. 92CA(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) in case of M/s. Aarti Industries Ltd., (hereinafter referred to as \"the assessee) for A.Y. 2015-16 for computation of arm's length price in relation to the international transactions and specified domestic transactions was received from DCIT-15(1)(1), Mumbai/ Assessing Officer (hereinafter referred to as \"Assessing Officer\" or \"AO\") on 13.09.2017. The AO has made this reference for determination of Arm's Length Price (hereinafter referred to as ALP) with reference to all the transactions reported in Fortn 3CEB filed by the assessee. 2. A notice u/s 92CA(2) of the LT. Act, 196 i' was issued to the assessee on 16.01.2018 by the DCIT(TP)-1(1)(1), Mumbai (hereinafter referred to as the \"Transfer Pricing Officer\" or \"TPO\"). Notice u/s 92D(3) of the 1. T. Act was also issued to the assessee on 12.02.2018 and duly served upon the assessee. Thereafter, another notice u/s 92CA(2) of the 1.T. Act, 1961 was issued by the TPO on 10.07.2018. In all these notices including order sheet entries, the assessee was required to submit information/documents to support the arm's length price with reference to international transactions and specified domestic transactions entered into by the wasessee with its various associated enterprises during the previous year 2014-15 relevant to AY 2015-16. 3. In response to the notices issued, the authorized representative, Ms. Komal Mehta and Ms. Naini Savia from Dhruva Advisors LLP, attended from time to time and filed details and the case was discussed. The transfer pricing documentation and supporting details furnished by the assessce/authorized representative were examined during the course of the transfer pricing proceedings for determination of ALP of International transactions and specified domestic transactions. Printed from counselvise.com 5 ITA No. 4869/Mum/2023 (A.Y. 2015-16) Dy. CIT vs. Aarti Industries Limited 4. Business Profile of the company M/s. Aarti Industries Limited (\"the assessee is engaged in the business of manufacturing and trading of dyes, intermediates, organic and in organic chemicals, agrochemicals, pharmaceuticals and home and personal care chemicals. 5. Details of international transactions and specified domestic transactions entered into by the taxpayer: During the year under consideration, Assessee has entered into the following international transactions and specified domestic transactions with its AEs/ related parties: Nature of services Amount (Rs.) International Transaction Sale of organic and inorganic chemicals and intermediates 78,13,15,195 Total 78,13,15,195 Specified Domestic Transaction Purchase of Raw materials 4,55,45,317 Purchase of Finished goods 3,57,66,726 Purchase of Packing material 80,716 Rent for business premises 87,26,436 Managerial Remuneration 2,99,34,778 Sitting Fees 10,40,000 Commission payments 5,00,34,000 Payment of Professional fees 6,48,182 Payment of Salary 21,44,261 Sale of power from eligible business units to non- eligible business units of the company 181,65,20,754 Total 199,04,41,170 6. Details and information requested were furnished by the taxpayer from time to time, and issues relating to the arm's length price of the international transactions/ specified domestic transactions were discussed. 7. In view of the taxpayer's submissions and facts of the case, the Arm's Length Price of transactions as reported by the taxpayer is accepted and no adjustment is being made to the international transactions and specified domestic transactions undertaken by the taxpayer with its Associated Enterprises/related parties. 8. It is hereby clarified that the findings and discussions made in this order are applicable only for this assessment year being referred, i.e. AY 2015-16 and not for subsequent assessment years. Sd/- (SWAPNIL PARIHAR) Asstt. Commissioner of Income-Tax, (Transfer Pricing)-1(1)(1), Mumbai. 9. Thus, as could be seen from the observations of the TPO, all the transactions with AE/related parties, both international transaction as well as SDTs were found to be at arm’s length. Hence, no adjustment was suggested. That being the factual position emerging on record, the A.O. cannot adopt a selective approach by accepting the order of the TPO with reference to the international transactions while ignoring it with reference to SDTs. In our Printed from counselvise.com 6 ITA No. 4869/Mum/2023 (A.Y. 2015-16) Dy. CIT vs. Aarti Industries Limited considered opinion, once the TPO has found SDTs to be at arm’s length, the A.O. cannot interfere with the decision of the TPO and independently decide the ALP of the transaction. This is against the scheme of the Act, hence, unsustainable. Even, otherwise also, as could be seen from the materials placed on record, in assessee’s own case in A.Y. 2014-15, the co-ordinate bench has decided the issue in favour of the assessee. In view of the aforesaid, we do not find any justifiable reason to interfere with the decision of ld. first appellate authority. Hence, ground no. 1 is dismissed. 10. In ground no. 2, the Revenue has challenged the relief granted by ld. first appellate authority in the matter of disallowance made u/s. 14A of the Act read with Rule 8D(2). 11. Briefly the facts are, in course of assessment proceeding, the A.O. noticed that in the previous year relevant to the assessment year under dispute, the assessee had earned exempt income by way of dividend amounting to Rs.1,29,86,975/-. Whereas, the assessee suo moto has computed disallowance at Rs.3,05,000/-. On examining the balance sheet of the assessee, the A.O. observed that though at the beginning of the year, the assessee had Nil investment, however, at the end of the year, it had investment of Rs.63,23,64,626/- in mutual funds, shares, etc. and had earned exempt income. He further observed that compared to the investment made, suo motu disallowance is grossly disproportionate. Therefore, he called upon the assessee to explain why disallowance should not be made by applying the methodology provided under Rule 8D(2). Though the assessee objected to the proposed disallowance, however, rejecting the objections of the assessee, the A.O. proceeded to compute disallowance applying the methodology provided under Rule 8D(2)(iii) and worked out at Rs.23,87,151/-. After reducing the suo motu disallowance made by the assessee, the A.O. made net disallowance of Rs.20,82,151/. Printed from counselvise.com 7 ITA No. 4869/Mum/2023 (A.Y. 2015-16) Dy. CIT vs. Aarti Industries Limited 12. The assessee contested the aforesaid disallowance before the ld. first appellate authority. Following the decision of ITAT Special Bench in the case of Asstt. CIT v. Vireet Investment (P.) Ltd. [2017] 82 taxmann.com 415/165 ITD 27 (Delhi - Tri) (SB) , the ld. first appellate authority directed the A.O. to compute the disallowance u/s. 14A of the Act taking the average value of those investments which have yielded exempt income during the year. He further directed that if upon such computation, the resulting disallowance comes to a figure less than the suo motu disallowance made by the assessee, then the disallowance should be restricted to the amount already disallowed by the assessee. 13. We have heard the parties and perused the materials available on record. As discussed above, in case of Vireet Investment (P.) Ltd. (supra), the Special Bench of ITAT has held that while applying Rule 8D(2)(iii), only those investments which yielded exempt income during the previous year relevant to the assessment year under dispute can be considered in the average value of the investment for computing disallowance. Since the directions of ld. first appellate authority are in conformity with the ratio laid down in case of Vireet Investment (P.) Ltd. (supra), we do not find any reason to interfere with it. Hence, ground no. 2 is dismissed. 14. Ground no. 3 relates to the disallowance u/s. 14A of the Act while computing the disallowance u/s. 115J of the Act. We have heard the parties and perused the materials on record. The short issue arising for consideration is whether while computing book profit u/s. 115J of the Act, disallowance u/s. 14A can be made. As rightly observed by ld. first appellate authority, in case of Vireet Investment (P.) Ltd. (supra), the Special Bench of ITAT has held that the provisions of section 14A of the Act would not apply while computing book profit u/s. 115J of the Act. Notably, applying the same ratio, the co- Printed from counselvise.com 8 ITA No. 4869/Mum/2023 (A.Y. 2015-16) Dy. CIT vs. Aarti Industries Limited ordinate bench in assessee’s own case in A.Ys. 2011-12, 2012-13 and 2014-15 has decided the issue in favour of the assessee. In view of the aforesaid, we do not find any reason to interfere with the decision of ld. first appellate authority. Hence, ground is dismissed. 15. In ground no. 4, the Revenue has challenged the deletion of disallowance made in respect of deduction claimed u/s. 35(2AB) of the Act. Briefly the facts are, in course of assessment proceeding, the A.O. noticed that in the year under consideration, the assessee had claimed weighted deduction u/s. 35(2AB) of the Act for an amount of Rs.26,69,58,914/- comprising both revenue and capital expenditure. He observed, though the assessee had fulfilled some of the conditions for claiming deduction, however, all the conditions have not been fulfilled. According to him, though the assessee is required to enter into an agreement with the prescribed authority and further, is required to furnish Form 3CL, containing approval by Department of Scientific and Industrial Research (‘DSIR’ for short), however, they were not furnished. Accordingly, he disallowed the weighted deduction claimed u/s. 35(2AB) of the Act at double the amount of expenditure actually incurred. However, he allowed the expenditure incurred in toto. 16. The assessee contested the aforesaid disallowance before ld. first appellate authority. 17. After considering the submissions of the assessee and in the context of facts and materials on record, ld. first appellate authority having found that the issue has been consistently decided in favour of the assessee till A.Y. 2014-15, allowed assessee’s claim of deduction in full. Printed from counselvise.com 9 ITA No. 4869/Mum/2023 (A.Y. 2015-16) Dy. CIT vs. Aarti Industries Limited 18. We have heard the parties and perused the materials on record. It is observed, in the latest order passed by the co-ordinate bench on identical issue in assessee’s own case in A.Y. 2014-15 (in ITA No. 3583, 3695/Mum/2018 vide order dated 30.03.2022), referring to the view taken by the ITAT in A.Ys. 2011-12, 2012-13 and 2013-14, the co-ordinate bench has allowed assessee’s claim. Thus, respectfully following the consistent view of ITAT in assessee’s own case, we uphold the decision of ld. first appellate authority by dismissing this ground. 19. In ground no. 5, the Revenue has challenged the deletion of disallowance in respect of additional depreciation claimed u/s. 32(1) of the Act. 20. Briefly the facts are, in course of assessment proceeding, the A.O. noticed that the assessee had purchased some plant and machinery during financial year 2013-14 after 01.10.2013 and had claimed additional depreciation at the rate of 10% of the actual cost. He observed that on the very same plant and machinery, the assessee had claimed 10% of additional depreciation in the impugned assessment year. Being of the view that the assessee cannot claim additional deprecation spread over two assessment years, the A.O. disallowed it. 21. The assessee contested the aforesaid decision of the A.O. before ld. first appellate authority. While deciding the issue, ld. first appellate authority found that in assessee’s own case, in preceding assessment years, the issue has been decided in favour of the assessee. Following them, ld. first appellate authority allowed assessee’s claim. Printed from counselvise.com 10 ITA No. 4869/Mum/2023 (A.Y. 2015-16) Dy. CIT vs. Aarti Industries Limited 22. We have considered rival submissions and perused the materials on record. Notably, in the latest order passed by the co-ordinate bench in assessee’s case in A.Y. 2014-15 (supra), it has been held as under: 29. With regard to Ground No. 7 which is in respect of Additional depreciation u/s. 32(1)(iia) of the Act, Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co-ordinate Bench of this tribunal in assessee's own case for the A.Y. 2011-12 in ITA.No. 5077/MUM/2017 dated 31.07.2020 (Copy of the order is placed on record) and for the A.Y. 2012- 13 and 2013-14, and submitted that the Tribunal has decided the issue in favour of the assessee and ld. Counsel for the assessee requested the same may be adopted for the appeal under consideration. 23. Facts being identical, respectfully following the decision of the co-ordinate bench, we uphold the decision of ld. first appellate authority by dismissing the ground. 24. In ground no. 6, the Revenue has challenged allowance of assessee’s claim of depreciation in respect of foreign exchange loss of earlier year. Briefly, the facts are, in course of assessment proceeding, the A.O. observed that in A.Y. 2009-10, the assessee had claimed unrealized forex loss of Rs.11,86,14,204/-. The said loss was treated as capital in nature and added to the value of the plant and machinery on which the assessee claimed depreciation. The A.O. was of the view that since the forex loss was unrealized, it cannot be added to the value of the block of plant and machinery in terms of section 43A of the Act. Accordingly, following the decision taken by the A.O. to disallow the claim of the assessee in A.Ys. 2009-10 and 2010-11, he made the disallowance. 25. The assessee contested the aforesaid disallowance before ld. first appellate authority. Having found that assessee’s claim has been allowed in the preceding assessment years, ld. first appellate authority allowed assessee’s claim. 26. We have considered rival submissions and perused the materials on record. On perusing the materials placed before us, we find that this is a recurring dispute between the Printed from counselvise.com 11 ITA No. 4869/Mum/2023 (A.Y. 2015-16) Dy. CIT vs. Aarti Industries Limited parties since A.Y. 2009-10. In fact, the A.O. has accepted the aforesaid factual position. In the latest order passed in assessee’s case in A.Y. 2014-15, the co-ordinate bench, while dealing with the issue, has held as under: 25. With regard to Ground No. 6 which is in respect of depreciation of foreign exchange loss disallowed in earlier year, Ld. Counsel for the assessee submitted that no factual inaccuracy or confusion is there in the order of the authorities below. The assessee is granted depreciation allowance on the opening written down value (WDV) arising out of the foreign exchange difference of loans actually repaid. The depreciation allowance has been granted by the Assessing Officer himself in earlier Assessment Years. Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co-ordinate Bench of this tribunal in assessee's own case for the A.Y. 2011-12 in ITA.No. 4943/MUM/2017 dated 31.07.2020 (Copy of the order is placed on record) and for the A.Y. 2012-13 and 2013-14, and submitted that the Tribunal has decided the issue in favour of the assessee and Ld. Counsel for the assessee requested the same may be adopted for the appeal under consideration. 27. In view of the aforesaid, we do not find any reason to interfere with the decision of ld. first appellate authority, hence, ground no. 6 is dismissed. 28. Ground nos. 7 to 10 are on the common issue of the nature and character of Status Holder Incentive Scripts (SHIS) and Fertilizer Subsidy, whether capital or revenue. Briefly the facts are, in course of assessment proceeding, the assessee through letter dated 04.12.2018 claimed before the A.O. that though SHIS subsidy and fertilizer subsidy have been credited to the profit and loss account as revenue receipt, however, they are actually in the nature of capital receipts, hence, not taxable. Relying upon the decision of Hon'ble Supreme Court in the case of Goetze (India) Limited vs. CIT [2006] 157 Taxman 1 (SC), the A.O. declined to entertain the claim as it was not made through a revised return of income. 29. Against the aforesaid decision, the assessee approached ld. first appellate authority. While deciding the issue, ld. first appellate authority not only held that the fresh claim made by the assessee can be entertained by the appellate authorities, but on merits also he Printed from counselvise.com 12 ITA No. 4869/Mum/2023 (A.Y. 2015-16) Dy. CIT vs. Aarti Industries Limited held that the nature and character of the subsidy being capital, is not taxable either under the normal provisions nor while computing book profit u/s. 115JB of the Act. 30. Before us, ld. Departmental Representative (ld. DR for short) submitted that firstly, the fresh claim made by the assessee without filing any revised return of income could not have been accepted by the A.O., hence, he was justified in disallowing assessee’s claim. Without prejudiced, he submitted that the nature and character of subsidy being revenue, it is taxable. 31. Per contra, ld. Counsel appearing for the assessee forcefully submitted that the issue being covered in favour of the assessee in its own case as well as in various other cases, the decision of ld. first appellate authority needs to be upheld. 32. We have considered rival submissions and perused the materials on record. Insofar as the power of ld. first appellate authority to admit assessee’s claim, which was not accepted by the A.O. at the first stage, we must observe that there is no restriction on the appellate authorities to entertain a fresh claim if facts relating to such claim are available on record. In the facts of the present appeal, undoubtedly, in course of assessment proceedings itself the assessee has made the claim that SHIS and fertilizer subsidies are taxable as they are capital in nature. All facts relevant to the aforesaid claim were available before the A.O. That being the case, in our considered opinion, ld. first appellate authority was wholly within his power to entertain the claim. Insofar as the merits of the issue is concerned, in our view, it squarely stands settled in favour of the assessee by virtue of the decisions of the co-ordinate bench in assessee’s own case in A.Ys. 2011-12 to 2014-15 (in Printed from counselvise.com 13 ITA No. 4869/Mum/2023 (A.Y. 2015-16) Dy. CIT vs. Aarti Industries Limited ITA No. 4533 to 4537/Mum/2024 vide order dated 04.04.2025), wherein while dealing with identical issue, the co-ordinate bench has held as under: 8. We shall now take up the appeal filed for AY. 2012-13 to 2014-15. In these three years, the Revenue is challenging the decision of the Ld.CIT(A) in excluding the incentives received under Status Holder Incentive Scrips (SHIS) and fertilizersubsidy received under NBS Scheme, treating both of them as capital receipts. 9. In all the three years, the Revenue is placing reliance on the amendment made to the definition of income by Finance Act, 2015 w.e.f. 01-04-2016. While adjudicating the appeal of the assessee for AY. 2011-12, in an earlier paragraph, we have held that the above said amendment cannot be applied retrospectively for the assessment years prior to AYs. 2016-17. Accordingly, we reject this ground of the Revenue in all the three years. 10. With regard to the fertilizer subsidy, we have upheld the decision of the Ld.CIT(A) in treating it as capital receipt in AY. 2011-12,since the Ld CIT(A) has held so by following the decision rendered by the Co-ordinate Bench in the case of ACIT vs. M/s. Shree Pushkar Chemicals (supra). Following the decision rendered by us in AY. 2011- 12, we uphold the decision rendered by the Ld.CIT(A) on this issue in all these three years. 11. The next issue contested by the Revenue in all the three years is related to the subsidy received under SHIS Scheme. We notice that this issue is covered by the decision rendered by the Co-ordinate Bench in the case of Vinati Organics Limited (ITA No. 1667 to 1669/Mum/2021, dt. 28-04-2022), wherein it was held as under:- “7....... So far as the export incentive claim is concerned, the assessee was entitled the incentive under status holder incentive claim (SHIS), Incremental Export Incentivisation Scheme (IEIS) and Market Linked Focus Products Scheme (MLFPS). As regards SHIS, the incentive was given with the objective to promote investment in technology upgradation and was granted @ 1% of FOB value of Export. The investment in technology is clearly a capital expenditure. So far as the incremental incentive scheme is concerned, the incentive was linked with incremental export if a particular year, export sale was more than certain percentage of export in the preceding year, the assessee becomes entitled for this incentive. The said incentive was connected to expenses of investment in new plant and machinery, hence, the incentive is capital in nature. With regard to, Market Linked Focus Product Scheme (MLEPS) is concerned, the incentive was granted in order to export of products of high export intensity employment potential and is incentivized at 2% of FOB value of exports. This incentive was linked to employment generation by the company connected to the export of goods and mercantile. It is linked with capital in nature. The CIT(A)has placed reliance upon the decision of the Hon'ble Supreme Court in the case of CIT VS. Ponni Sugars& Chemicals Ltd. (2008) 306 ITR 392 (SC), Eastman Exports Global Clothing Pvt. Ltd. in ITA.No.47/MDS/2016 dated 17.05.2016 and Sutlej Textiles & Industries Ltd. (ITA. No. 5142/Del/2013) and M/s. Gloster Jute Mills Ltd. Vs. Addl. CIT in ITA.No. 687/Kol/2010. These issues have duly been examined and discussed by CIT(A) in his order. The copy of scheme has also been filed by Id. Representative of the assessee for examination. It is necessary to advert the contents on record: - 3.14... 3.15... 3.16 Status Holders Incentive Scrip (SHIS) 3.16.1 With an objective to promote investment in upgradation of technology of some specified sectors as dated in Para 3.16.4 below, Status Holders shall be entitled to incentive scrip @ 1% of FOB value of exports made during 2009-10, 2010-11 and during 2011-12, of these specified sectors, in the form of duty credit. Printed from counselvise.com 14 ITA No. 4869/Mum/2023 (A.Y. 2015-16) Dy. CIT vs. Aarti Industries Limited The Status Holders of the additional sectors listed in the Para 3.10.8 of HBPvi 2009-14 (RE-2010) shall be eligible for this Status Holders Incentive Scrip on exports made during 2010-11 and 2011-12 This shall be over and above any duty credit scrip claimed /availed under this chapter. 3.16.2 Status Holders availing Technology Upgradation Fund Scheme (TUFS) benefits (under Ministry of Textiles) during a particular year shall not be eligible for Status Holders Incentive Scrip for exports of that year. 3.16.3 The Status Holders Incentive Scrip shall be with Actual User Condition and shall be used for exports of capital goods (as defined in FTP) relating to the sectors specified in Para 3.16.4 below. 3.16.4 The Status Holders of the following Sectors shall be eligible for thisStatus Holders Incentive Scrip – (1) Leather Sector (excluding finished leather); (2) Textiles and Jute Sector; (3) Handicrafts; (4) Engineering Sector (excluding Iron & Steel, Non-ferrous Metals in primary or intermediate forms, Automobiles & two wheelers, nuclear reactors & parts and Ships, Boats and Floating Structures); (5) Plastics, and (6) Basic Chemicals (excluding Pharma Products). The Status Holders of the additional sectors listed in the Para 3.10.8 of HBPv1 2009-14 (RE 2010)shall be eligible for this Status Holders Incentive Scrip an exports made during 2010-11 and 2011-12.\" 8. The scheme is self-explanatory. There is nothing on record to which it can be assumed that the same is not in existence. No reason has been explained to which it can be assumed that the CIT(A) has granted the relief wrongly and illegally. The facts are not distinguishable at this stage. In view of the facts and circumstances and the law considered by the CIT(A), we are of the view that the finding of the CIT(A) is quite correct which is not liable to be interfered with at this appellate stage. Accordingly, we affirm the finding of the CIT(A) on this issue and decide this issue in favour of the assessee against the revenue.” 11.1. The Ld.AR also submitted that the Co-ordinate Bench has held in the assessee’s sister concern’s case, named, Aarti Drugs Ltd., (ITA No. 2503/Mum/2021, dt. 20-01-2023) that the incentive received under SHIS Scheme is capital in nature. 11.2. Following the above said decisions, we uphold the order passed by the Ld.CIT(A) on this issue. 33. Factual position relating to the issue being identical in the impugned assessment year, respectfully following the decision of the co-ordinate bench, we uphold the order of ld. first appellate authority on the issue. Hence, grounds are dismissed. Printed from counselvise.com 15 ITA No. 4869/Mum/2023 (A.Y. 2015-16) Dy. CIT vs. Aarti Industries Limited 34. In the result, the appeal is dismissed. Order pronounced in the open court on 25.09.2025 Sd/- Sd/- (Girish Agrawal) (Saktijit Dey) Accountant Member Vice President Mumbai; Dated : 25.09.2025 Roshani, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "