Appeal Details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 1792 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 10 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-12-2017
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
Not Allotted
Assessment Year
2012-2013
Appeal Filed On
24-02-2016
Judgement Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA- @ ITA NO. 162/JP/2016 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2012-13 SHREE CEMENT LIMITED BANGUR NAGAR, POST BOX NO. 33 BEAWAR, RAJASTHAN CUKE VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, CENTRAL REVENUE BUILDING, AJMER, RAJASTHAN LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACCS8796G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA. NO. 181/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2012-13 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-02 AJMER CUKE VS. SHREE CEMENT LIMITED BANGUR NAGAR, POST BOX NO. 33 BEAWAR, RAJASTHAN LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACCS8796G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA. NO. 178/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2013-14. SHREE CEMENT LIMITED BANGUR NAGAR, POST BOX NO. 33 BEAWAR, RAJASTHAN CUKE VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-02 AJMER LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACCS8796G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 2 VK;DJ VIHY LA-@ ITA. NO. 182/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2013-14. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-02 AJMER CUKE VS. SHREE CEMENT LIMITED BANGUR NAGAR, POST BOX NO. 33 BEAWAR, RAJASTHAN LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACCS8796G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDEN T FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI VIJAY SHAH (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI VARINDRA MEHTA (CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 26/10/2017 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 28/12/2017 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE DIRECTED AGAINST THE ORDERS PASSED BY LD. CIT(A), A JMER DATED 09.12.2015 FOR A.Y. 2012-13 & 2013-14 RESPECTIVELY. GIVEN THE SIMILARITY OF FACTS AND COMMON GROUNDS OF APPEAL IN VOLVED IN ALL THESE CASES, ALL THESE APPEALS WERE HEARD TOGETHER AND AR E BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER. 2. FOR ASSESSMENT YEAR 2012-13, RESPECTIVE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE AND THE REVENUE ARE AS UNDER: ITA NO. 162/JP/2016 (GROUND OF ASSESSEES APPEAL): I) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, LD. CIT(APPEALS) WAS NOT JUSTIFIED AND ERRED IN LAW IN CONFIRMING THE ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 3 DISALLOWANCE U/S 80-IA BY RS. 47,70,86,078/- BY MAK ING ADJUSTMENT IN THE TRANSFER PRICE OF POWER CAPTIVELY CONSUMED. II) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(APPEALS) WAS NOT JUSTIFIED AND ERRED IN LAW IN CONFIRMING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF EDUCATION CESS AMOUNTING TO RS. 1,42,79,859/-. III) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) WAS NOT JUSTIFIED AND ERRED IN CONFIRM ING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF PROFIT ON SALE OF INVE STMENT AMOUNTING TO RS. 1,76,22,643/- & PROFIT ON SALE OF FIXED ASSE TS AMOUNTING TO RS. 1,18,52,588/- WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. ITA NO. 181/JP/2016 (GROUND OF REVENUES APPEAL): IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A), AJMER HAS ERRED IN : I) DELETING THE DISALLOWANCES MADE BY THE AO ON ACCOUN T OF SALES TAX SUBSIDY BY TREATING THE AMOUNT OF RS. 31,86,07, 921/- AS CAPITAL RECEIPTS INSTEAD OF REVENUE RECEIPT; II) DELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF SALES TAX SUBSIDY BY TREATING THE AMOUNT OF RS. 31,86,07,921/ - AS CAPITAL RECEIPT AND THE SAME IS NOT INCLUDIBLE IN THE BOOK PROFIT U /S 115JB OF THE IT ACT, WITHOUT APPRECIATING THE FACTS OF THE CASE. 3. REGARDING GROUND NO. 1 OF ASSESSEES APPEAL, BRI EFLY THE FACTS OF THE CASE ARE THAT THE DEDUCTION U/S 80-IA WAS CLAIMED BY THE ASSESSEE ON ITS POWER UNDERTAKINGS I.E, 42MW UNIT AT BEAWAR, 72MW UNIT AT RAS & 25 MW GPP AT RAS AMOUNTING TO RS. 1,79,79,51,830/ -. FOR COMPUTING THE PROFITABILITY OF UNITS CAPTIVELY CONSUMED, MARK ET VALUE OR ARMS LENGTH RATE WAS CONSIDERED AT ANNUAL AVERAGE LANDED COST (AALC) OF ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 4 ELECTRICITY PURCHASED FROM THE GRID FOR ITS JAIPUR UNIT I.E. RS. 6.51 PER UNIT. 3.1 THE AO HAS REDUCED THE CLAIM OF THE ASSESSEE BY RS. 47,70,86,078/- BY ADOPTING TRANSFER PRICE AT RS . 5.36 PER UNIT BASED ON ANNUAL AVERAGE LANDED COST OF ELECTRICITY PURCHA SED FROM THE GRID BY ALL UNITS OF THE ASSESSEE LOCATED IN RAJASTHAN (I.E KHUSHKHERA, SURATGARH AND JAIPUR) ON THE CONTENTION THAT TRANSFER PRICE A S ADOPTED BY THE ASSESSEE DOES NOT REFLECT FAIR MARKET VALUE AS IT I S BASED ON POWER PURCHASED FROM ONE UNIT ONLY. 3.2 THE LD. CIT(A) AFFIRMED THE DISALLOWANCE MADE B Y THE AO ON THE CONTENTION THAT JAIPUR UNIT FOR WHICH AALC HAS BEEN ADOPTED BY THE ASSESSEE DOES NOT REPRESENT RELEVANT GEOGRAPHICAL A REA WHERE THE ELIGIBLE UNDERTAKING OF THE ASSESSEE IS SITUATED. S INCE THE ELIGIBLE UNDERTAKING IS SITUATED IN THE STATE OF RAJASTHAN, AALC COMPUTED ON THE BASIS OF POWER PURCHASED BY ALL THE THREE CEMENT UN ITS (I.E KHUSKHERA, SURATGARH AND JAIPUR) WHICH IS LOCATED IN THE STATE OF RAJASTHAN SHALL CONSTITUTE THE FAIR MARKET VALUE IN TERMS OF EXPLAN ATION TO SECTION 80IA(8) OF THE ACT. NOW, THE ASSESSEE COMPANY IS IN APPEAL BEFORE US AGAINST THE SAID FINDINGS OF THE LD CIT(A). 4. DURING THE COURSE OF HEARING, THE LD AR SUBMITTE D THAT ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE DECIS ION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR AY 2007-08 TO AY 2009-1 0 VIDE ORDER DATED 27.01.2014 WHEREIN IT HAS BEEN HELD THAT: VALUE AT WHICH STATE GRID HAS SOLD POWER TO THE CEM ENT UNIT OF THE ASSESSEE CONSTITUTES MARKET VALUE IN TERMS OF E XPLANATION TO SEC. 80IA(8) ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 5 WHERE A BASKET OF MARKET VALUES ARE AVAILABLE FOR RELEVANT PERIOD AND RELEVANT GEOGRAPHICAL AREA WHERE THE ELI GIBLE UNIT IS SITUATED, THE ASSESSEE HAS DISCRETION TO ADOPT ANY ONE OF THEM AS MARKET VALUE IF THE VALUE ADOPTED BY ASSESSEE IS MARKET VALUE, I T IS NOT PERMISSIBLE FOR REVENUE TO RECOMPUTE THE PROFIT & G AINS OF THE ELIGIBLE UNIT BY SUBSTITUTING IT WITH ANY OTHER MAR KET VALUE. IT WAS SUBMITTED THAT THE ABOVE VIEW HAS ALSO BEEN AGAIN UPHELD BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2010-11 VIDE ORDER DATED 27.04.2016. 5. IT WAS SUBMITTED THAT THE FACT OF THE PRESENT CA SE IS SIMILAR TO AY 2010-11. IN THE SAID YEAR, TRANSFER PRICE RATE WAS ADOPTED BY CONSIDERING RATE OF SALE OF POWER THROUGH ONE OF TH E MODE. HOWEVER, AO ADOPTED THE RATE BY CONSIDERING AVERAGE OF SALE TO ALL THE MODE. SIMILARLY IN THE PRESENT CASE, RATE HAS BEEN ADOPTE D BY CONSIDERING AALC OF ONE OF THE UNIT WHEREAS AO ADOPTED THE RATE BY CONSIDERING AVERAGE OF AALC OF ALL THE UNITS. HENCE DISALLOWANC E MADE IN PRESENT CASE NEEDS TO BE QUASHED SINCE DEPARTMENTAL APPEAL HAS BEEN DISMISSED IN AY 2010-11 BY STATING THAT AS LONG AS THE ASSESSEE HAS ADOPTED A MARKET VALUE AS THE TRANSFER PRICE, IT IS SUFFICIENT COMPLIANCE OF LAW. SUBSTITUTION OF ANOTHER MARKET RATE BY THE AO IS NOT PERMISSIBLE. 6. IT WAS SUBMITTED THAT ONLY CONTENTION OF CIT(A) IS THAT THE TRIBUNAL ORDER OF EARLIER YEAR IS NOT APPLICABLE SI NCE IN THE PRESENT CASE, MARKET VALUE ADOPTED OF JAIPUR UNIT DOES NOT REPRES ENT RELEVANT ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 6 GEOGRAPHICAL AREA. THE SAID FACT DOES NOT HOLD GOOD SINCE THE ELIGIBLE POWER UNITS OF ASSESSEE IS SITUATED AT BEAWER & RAS WHICH IS IN RAJASTHAN AND AALC OF JAIPUR UNIT ADOPTED ALSO FALL S UNDER THE SAME GEOGRAPHICAL AREA OF RAJASTHAN AS ASSESSEES ELIGIB LE UNITS. IT WAS SUBMITTED THAT THE SAID CONTENTION OF CIT(A) IS CONTRADICTORY TO THE FACT THAT THE CIT(A) ITSELF IN PARA 5.4 III HAS CONSIDERED AALC OF JAIPUR, SURATGARH & KHUSHKHERA (BY STATING RAJASTHA N AS THE GEOGRAPHICAL AREA) AFTER CONSIDERING THE FACT THAT ELIGIBLE POWER UNITS IS NOT LOCATED IN ANY OF THE SAID AREAS. 7. IT WAS SUBMITTED THAT SEC. 80IA(8) ONLY REFERS T O ADOPTION OF MARKET VALUE AS THE OPEN MARKET RATE OR ARMS LENGT H PRICE. IT DOES NOT REQUIRE TO COMPUTE MARKET PRICE BY AVERAGING OF ALL THE RATES AVAILABLE. HENCE, RATE ADOPTED BY CIT(A) BY COMPUTING AVERAGE OF ALL THE UNITS CANNOT BE JUSTIFIED. 8. THE LD. AR HAS FURTHER SUBMITTED THAT THE ABOVE VIEW OF THE TRIBUNAL HAS BEEN AFFIRMED AND MATTER HAS SINCE BEE N DECIDED BY THE HONBLE RAJASTHAN HIGH COURT IN ASSESSEES OWN CASE (IN D.B. ITA NO. 85/JP/2014 DATED 22/08/2017) WHEREIN THE HONBLE HIGH COURT HAS HELD AS UNDER:- 24. THE ISSUE NO. 2 IS WITH REGARD TO THE CLAIM OF THE ASSESSEE FOR THE VALUE OF THE GOODS OR SERVICES FOR THE PURP OSES OF SECTION 80IA(8). 25. IN VIEW OF THE SUBMISSIONS MADE BY MR. S. GANES H, PRICE WHICH HAS BEEN GIVEN TO THE SISTER CONCERN IS TO BE DETERMINED ON THE BASIS OF PRINCIPLE LAID DOWN BY THE SUPREME COU RT IN CASE ALL ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 7 THE FOUR CONDITIONS ARE FULFILLED AS STATED IN HIS SUBMISSIONS AND MORE SO THE TRIBUNAL HAS GIVEN THE FINDING WHICH RE ADS AS UNDER:- 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE EVIDENCE ON RECORD. WE HAVE ALSO GONE THROUGH T HE FACTS OF THE CASE, ASSESSMENT ORDER, ORDER OF CIT(A PPEALS), THE PRINCIPLES AND THE JUDICIAL DECISIONS RELIED UP ON AND DOCUMENTS PRODUCED BY BOTH THE PARTIES. AT THE OUTS ET, WE FIND THAT THE REVISED RETURN FILED BY THE ASSESSEE HAS BEEN ACCEPTED BY THE AO BY CLEAR FINDING IN THE ASSESSME NT ORDER. ONCE REVISED RETURN IS VALIDLY FILED & ACCEP TED, THE ORIGINAL RETURN IS NON-EST AS IT IS COMPLETELY SUBS TITUTED BY THE REVISED RETURN. NOW LET US DEAL WITH MARKET VA LUE. ON PERUSAL OF THE ASSESSMENT ORDER & ALL OTHER RECORDS , WE FIND THAT FACTS WITH REGARD TO ADAPTATION OF MARKE T VALUE CLEAR. THE ASSESSEE HAS ADOPTED A VALUE WHICH IS MARKET VALUE AND THE DEPARTMENT HAS SUBSTITUTED THE SAME B Y ANOTHER VALUE. THE DEPARTMENT IS CONTENDING THAT TH E MARKET VALUE AS ADOPTED BY AO IS THE MOST APPROPR IATE SINCE IT REPRESENTS PRICE CHARGED BY THE STATE GRID TO VARIOUS CUSTOMERS INCLUDING THE ASSESSEE. HENCE, TH E SAME SHOULD BE CONSIDERED. THE AR OF THE ASSESSEE SUBMIT S THAT THE VALUE ADOPTED BY ASSESSEE REPRESENTS MARKET VA LUE SINCE IT IS BASED ON REAL TRANSACTIONS BETWEEN UNRE LATED PARTIES AND THE DETAILS FOR THE SAME ARE AVAILABLE IN PUBLIC DOMAIN. THE ISSUE BEFORE US IS WHETHER IN SUCH SITU ATIONS WHERE THERE ARE TWO OR MORE MARKET VALUES AVAILABLE AND IF THE ASSESSEE HAS ADOPTED A VALUE WHICH IS MARKET VALUE, WHETHER IT IS PERMISSIBLE FOR THE REVENUE TO STILL REPLACE THE SAME BY ANOTHER MARKET VALUE. 11. AT THIS STAGE, IT IS NECESSARY TO REFER TO THE RELEVANT PROVISIONS OF THE ACT I.E. SEC 80IA(8), WHICH STATE S THAT- WHERE ANY GOODS OR SERVICES HELD FOR THE PURPOSES OF THE ELIGIBLE BUSINESS ARE TRANSFERRED TO ANY OTHER BUSI NESS ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 8 CARRIED ON BY THE ASSESSEE, OR WHERE ANY GOODS OR S ERVICES HELD FOR THE PURPOSES OF ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE ARE TRANSFERRED TO THE ELIGIBLE BUSINE SS AND, IN EITHER CASE, THE CONSIDERATION, IF ANY, FOR SUCH TR ANSFER AS RECORDED IN THE ACCOUNTS OF THE ELIGIBLE BUSINESS D OES NOT CORRESPOND TO THE MARKET VALUE OF SUCH GOODS OR SER VICES AS ON THE DATE OF TRANSFER, THEN FOR THE PURPOSES O F THE DEDUCTION UNDER THIS SECTION, THE PROFITS AND GAINS OF SUCH ELIGIBLE BUSINESS SHALL BE COMPUTED AS IF THE TRANS FER, IN EITHER CASE, HAD BEEN MADE AT THE MARKET VALUE OF S UCH GOODS OR SERVICES AS ON THAT DATE EXPLANATION FO R THE PURPOSES OF THIS SUB-SECTION, MARKET VALUE, IN RE LATION TO ANY GOODS OR SERVICES, MEANS THE PRICE THAT SUCH GO ODS OR SERVICES WOULD ORDINARILY FETCH IN THE OPEN MARKET. 12. ON PERUSAL OF THE ABOVE, IT COULD BE CLEARLY SE EN THAT THE STATUTE PROVIDES THAT THE ASSESSEE MUST ADOPT MARKET VALUE AS THE TRANSFER PRICE. IN THE OPEN MARKET, W HERE A BASKET OF MARKET VALUES [SAY LIKE, INDEPENDENT TH IRD PARTY TRANSACTIONS, GRID PRICE (AVERAGE ANNUAL LANDED COS T AT WHICH GRID HAS SOLD POWER TO THE ASSESSEE), POWER EXCHANGE PRICE FOR THE RELEVANT PERIOD ETC.] ARE AV AILABLE, THE LAW DOES NOT PUT ANY RESTRICTION ON THE ASSESSE E AS TO WHICH MARKET VALUE IT HAS TO ADOPT, IT IS PURELY ASSESSEES DISCRETION. SO LONG AS THE ASSESSEE HAS ADOPTED A MARKET VALUE AS THE TRANSFER PRICE, THAT IS SUFFICIENT CO MPLIANCE OF LAW. AO CAN ADOPT A DIFFERENT VALUE ONLY WHERE THE VALUE ADOPTED BY ASSESSEE DOES NOT CORRESPOND TO THE MAR KET VALUE. EVEN IF ASSESSEES CEMENT UNIT HAS PURCHASE D POWER, ALSO FROM THE GRID OR THAT ASSESSEES POWER UNIT HAS ALSO PARTLY SOLD ITS POWER TO GRID OR THIRD PARTIES THAT BY ITSELF, DOES NOT COMPEL THE ASSESSEE OR PERMIT THE REVENUE, TO ADOPT ONLY THE GRID PRICE OR THE PRICE AT WHIC H THE ELIGIBLE UNIT HAS PARTLY SOLD ITS POWER TO GRID OR THIRD PARTIES, AS THE MARKET VALUE FOR CAPTIVE CONSUMPT ION OF POWER TO COMPUTE THE PROFITS OF THE ELIGIBLE UNIT. ANY SUCH ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 9 ATTEMPT IS CLEARLY BEYOND THE EXPLICIT PROVISIONS O F SECTION 80IA(8) OF THE ACT. UNDERLYING PRINCIPLES FORMING T HE BASIS OF OUR FINDINGS GIVEN HERE IN BEFORE IN THIS ORDER ARE ALSO SUPPORTED BY THE DECISION OF SPECIAL BENCH OF HONB LE BANGALORE TRIBUNAL IN AZTEC SOFTWARE & TECHNOLOGY SERVICES LTD. VS. ACIT [2007] 107 ITD 141 [BANG] [S B] AS WELL AS MUMBAI TRIBUNAL DECISION IN THE CASE OF ACI T VS. MAERSK GLOBAL SERVICE CENTRE (1) PVT. LTD [2011] 13 3 ITD 543 [MUM] WHEREIN WHILE INTERPRETING THE TRANSFER P RICING PROVISIONS, THE COURTS HAVE HELD THAT IT IS THE ASS ESSEE WHO IS THE BEST JUDGE TO KNOW THE TRANSACTIONS UNDERTAK EN & THUS FINDING OUT THE COMPARABLE CASES FROM THE VAST DATABASE AVAILABLE IN THE PUBLIC DOMAIN. ONCE THE A SSESSEE HAS ADOPTED THE SAME, THE AO HAS TO EXAMINE WHETHER THE SAME IS MARKET PRICE OR NOT. AO HAS THE POWER TO AD OPT THE MARKET PRICE ONLY WHEN THE PRICE ADOPTED BY THE ASS ESEE DOES NOT CORRESPOND TO MARKET VALUE. IN THE PRESENT CASE, WE FIND THAT THE ASSESSEE HAS ADOPTED A RATE AT WHI CH ACTUAL TRANSACTIONS HAVE BEEN UNDERTAKEN BY UNRELAT ED ENTITIES. THE VOLUMES OF TRANSACTION AS RELIED UPON ARE ALSO SUBSTANTIAL AND HENCE IT CANNOT BE SAID THAT THE AS SESSEE HAS HAND PICKED SOME TRANSACTIONS, WHICH ARE BENEFI CIAL TO IT. THE DR SUBMITTED THAT SINCE THE ASSESSEE HAS IT SELF DRAWN POWER FROM THE GRID, THE GRID RATE REPRESENTS THE BEST MARKET VALUE & HENCE THE SAME SHOULD ONLY BE ADOPTED. WE ARE NOT AGREEABLE TO THE ABOVE CONTENTI ON OF THE DEPARTMENT. NO DOUBT THE GRID RATE IS MARKET VA LUE BUT THERE IS NO CONCEPT OF BEST MARKET VALUE IN LAW. IF BY USING THE SAID ADJECTIVE, REVENUE SEEKS TO INFER TH AT GRID RATE IS THE ONLY MARKET VALUE IN THE PRESENT CONTEX T, SUCH INFERENCE IS ALSO CLEARLY NOT TENABLE. FURTHER, IN CASE THERE ARE OPTIONS, THE OPTION FAVORABLE TO THE ASSESSEE I S TO BE ADOPTED. THIS IS A WELL SETTLED PRINCIPLE OF LAW LA ID DOWN BY THE COURTS TIME AND AGAIN INCLUDING SUPREME COURT I N THE ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 10 CASE OF CIT VS. VEGETABLE PRODUCTS LTD. [1973] 88 I TR 192 [SC] AND OTHER HIGH COURTS AS POINTED OUT BY THE AR . 13. IN THE LIGHT OF THE AFORESAID, WE HOLD THAT- (A) THE VALUE ADOPTED BY THE ASSESSEE BE IT VALUE A S PER INDEPENDENT THIRD PARTY TRADING TRANSACTIONS OR AS PER POWER EXCHANGE (IEX ETC.) OR ANY OTHER INDEPENDENT TRANSACTION (FOR THE RELEVANT PERIOD AND WHICH HAS TAKEN PLACE IN THE RELEVANT AREA WHERE THE ELIGIBLE UNIT IS LOCATED) CONSTITUTE MARKET VALUE IN TERMS OF EXPLANATION T O SECTION 80IA(8); (B) THE VALUE AT WHICH STATE GRID HAS SOLD POWER TO THE CEMENT UNIT OF THE ASSESSEE (AVERAGE ANNUAL LANDED COST) ALSO CONSTITUTE MARKET VALUE IN TERMS OF EXPLANAT ION TO SECTION 80IA (8) BUT THE VALUE AT WHICH STATE GRID OR THIRD PARTY HAS PURCHASED POWER FROM THE POWER UNIT OF TH E ASSESSEE, WHICH REPRESENTS ITS POWER WHICH IS SOLD WHEN NO REQUIRED BY THE CEMENT UNIT, DOES NOT CONSTITUTE MARKET VALUE IN TERMS OF EXPLANATION TO SECTION 8 0IA(8). IT IS THE PRINCIPLE AND NOT THE QUANTUM WHICH IS D ECIDING FACTOR; (C) WHERE A BASKET OF MARKET VALUES ARE AVAILABL E FOR THE RELEVANT PERIOD AND RELEVANT GEOGRAPHICAL AREA WHERE THE ELIGIBLE UNIT IS SITUATED, THEN ASSESSEE HAS DI SCRETION TO ADOPT ANY ONE OF THEM AS MARKET VALUE; AND (D) IF THE VALUE ADOPTED BY THE ASSESSEE IS MARKET VALUE AS EXPLAINED ABOVE, IT IS NOT PERMISSIBLE FO R REVENUE TO RECOMPUTED THE PROFITS & GAINS OF THE ELIGIBLE U NIT BY SUBSTITUTING THE SAID VALUE (AS ADOPTED BY THE ASSE SSEE) BY ANY OTHER MARKET VALUE. 14. ACCORDINGLY, WE DELETE THE DISALLOWANCE AS MADE BY THE AO IN ORDER U/S 143(3) ON ACCOUNT OF DEDUCTION U/S ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 11 80IA OF THE ACT AND HENCE THE GROUNDS 1 & 2 ARE ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. 27. THE SAID ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE FINDINGS OF THE A O, THE LD CIT(A), THE ORDERS PASSED BY THE COORDINATE BENCHES IN THE EARL IER YEARS AND THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT WHEREI N THE VIEW TAKEN BY THE COORDINATE BENCHES HAVE BEEN AFFIRMED. 10. IN THE INSTANT CASE, WE FIND THAT BOTH THE AUT HORITIES BELOW AS WELL AS THE ASSESSEE HAS NOT TAKEN INTO CONSIDERATI ON THE PROVISIONS OF SECTION 80A(6) WHICH HAS BEEN BROUGHT ON THE STATUE BOOKS BY THE FINANCE ACT, 2009 AND WHICH OVERRIDES THE PROVISION S OF SECTION 80IA(8) OF THE ACT. UNLIKE SECTION 80IA(8) WHICH DEFINES M ARKET VALUE COMMONLY FOR BOTH SALE AND PURCHASE BY THE ELIGIBLE UNDERTAKING, SECTION 80A(6) PROVIDES FOR SEPARATE MARKET VALUE W ITH REFERENCE TO SALE AND PURCHASE BY THE ELIGIBLE UNDERTAKING. ANO THER FUNDAMENTAL CHANGE WHICH HAS BEEN BROUGHT-IN IS THAT THE MARKET VALUE IS MADE SUBJECT TO STATUTORY OR REGULATORY RESTRICTIONS, IF ANY. IN THE CONTEXT OF PRESENT CASE WHERE ELECTRICITY HAS BEEN GENERATED A ND CAPTIVELY CONSUMED, DETERMINATION OF THE MARKET VALUE FOR CLA IMING TAX EXEMPTION HAS BEEN ALIGNED WITH THE REGULATORY MECH ANISM IN TERMS OF ELECTRICITY ACT 2003 AND RELATED TARIFF REGULATIONS WHERE THE RATE AT WHICH THE ELECTRICITY IS SUPPLIED BY THE GENERATING COMPANY TO THE DISTRIBUTION COMPANY IS NOT THE SAME AT WHICH THE E LECTRICITY IS SUPPLIED BY THE DISTRIBUTION COMPANY TO THE CONSUMERS. THE ASSESSEE COMPANY ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 12 HAS DETERMINED THE MARKET VALUE AT ANNUAL AVERAGE L ANDED COST OF ELECTRICITY PURCHASED FROM THE GRID FOR ITS JAIPUR UNIT I.E. RS. 6.51 PER UNIT WHEREAS THE AO HAS DETERMINED THE MARKET VALUE AT RS. 5.36 PER UNIT BASED ON ANNUAL AVERAGE LANDED COST OF ELECTRI CITY PURCHASED FROM THE GRID BY ALL UNITS OF THE ASSESSEE LOCATED IN RA JASTHAN. IN OUR VIEW, THE BASIS ON DETERMINATION OF MARKET VALUE BOTH BY THE ASSESSEE AND THE REVENUE IS NOT IN CONSONANCE WITH PROVISIONS OF SECTION 80A(6) OF THE ACT. WHAT HAS TO BE DETERMINED IS THE RATE AT WHICH THE ELECTRICITY WOULD HAVE BEEN SUPPLIED BY THE CAPTIVE UNIT TO THE GRID AND NOT THE RATE AT WHICH ASSESSEE HAS PURCHASED OR WOULD HAVE PURCHASE THE ELECTRICITY FROM THE GRID. AND THE RATE AT WHICH TH E ELECTRICITY WOULD HAVE BEEN SUPPLIED BY THE CAPTIVE UNIT TO THE GRID SHOULD BE THE RATE AS DETERMINED BY RELEVANT REGULATORY AND TARIFF AUTHOR ITY AS CONSTITUTED UNDER THE RELEVANT ELECTRICITY ACT. 11. THE ABOVESAID ISSUE HAS BEEN DEALT AT LENGTH BY US (SPEAKING THROUGH ONE OF US) IN CASE OF M/S CHAMBAL FERTILIZERS & CHEMICALS LIMITED VS CIT (ITA NO. 459/JP/12 & OTHERS DATED 28.10.2016) AND RELEVANT DISCUSSION IS REPRODUCED AS UNDER: 52.2 NOW, COMING TO DETERMINATION OF THE MARKET VA LUE OF THE ELECTRICITY GENERATED AND SUPPLIED BY THE CAPTIVE P OWER PLANT, THE ASSESSEE TOOK THIS VALUE EQUAL TO RS. 4.52 PER UNIT ON THE BASIS THAT ASSESSEE WAS PURCHASING POWER FROM JAIPUR VIDHYUT V ITRAN NIGAM LTD. AT THIS PRICE (EXCLUDING TAXES). EVEN AS PER THE AN NUAL REPORT OF CERC, AVERAGE SALE PRICE OF ELECTRICITY WAS RS. 4.52 PER KWH. HOWEVER, AS PER LD CIT(A), THE AVERAGE PURCHASE PRICE OF ELECTRICIT Y AT RS. 4.48 PER ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 13 KWHAS PER THE ANNUAL REPORT OF CERC CAN BE TAKEN AS SALE PRICE IN OPEN MARKET. IN ORDER TO APPRECIATE THE MATTER IN RIGHT PERSPECT IVE, IT WOULD BE RELEVANT TO REFER TO THE PROVISIONS OF SECTION 80IA (8) AND THE EXPLANATION THERETO WHICH READS AS UNDER: (8) WHERE ANY GOODS OR SERVICES HELD FOR THE PURPOS ES OF THE ELIGIBLE BUSINESS ARE TRANSFERRED TO ANY OTHER BUSINESS CARR IED ON BY THE ASSESSEE, OR WHERE ANY GOODS OR SERVICES HELD FOR T HE PURPOSES OF ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE ARE TRANS FERRED TO THE ELIGIBLE BUSINESS AND, IN EITHER CASE, THE CONSIDERATION, IF ANY, FOR SUCH TRANSFER AS RECORDED IN THE ACCOUNTS OF THE ELIGIBLE BUSINES S DOES NOT CORRESPOND TO THE MARKET VALUE OF SUCH GOODS OR SERVICES AS ON THE DATE OF THE TRANSFER, THEN, FOR THE PURPOSES OF THE DEDUCTION U NDER THIS SECTION, THE PROFITS AND GAINS OF SUCH ELIGIBLE BUSINESS SHALL B E COMPUTED AS IF THE TRANSFER, IN EITHER CASE, HAD BEEN MADE AT THE MARK ET VALUE OF SUCH GOODS OR SERVICES AS ON THAT DATE : PROVIDED THAT WHERE, IN THE OPINION OF THE ASSESSIN G OFFICER, THE COMPUTATION OF THE PROFITS AND GAINS OF THE ELIGIBL E BUSINESS IN THE MANNER HEREINBEFORE SPECIFIED PRESENTS EXCEPTIONAL DIFFICULTIES, THE ASSESSING OFFICER MAY COMPUTE SUCH PROFITS AND GAIN S ON SUCH REASONABLE BASIS AS HE MAY DEEM FIT. EXPLANATION.FOR THE PURPOSES OF THIS SUB-SECTION, 'MARKET VALUE', IN RELATION TO ANY GOODS OR SERVICES, MEANS THE PRICE THAT SUCH GOODS OR SERVICES WOULD ORDINARILY FETCH IN THE OPEN MARKET ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 14 WE ALSO REFER TO THE AMENDMENT BROUGHT IN BY THE FI NANCE ACT, 2009 IN SECTION 80A OF THE ACT WHERE SUB-SECTION 6 HAS BEEN SPECIFICALLY BROUGHT ON THE STATUE BOOK BY THE LEGISLATION WHICH READS AS UNDER: AMENDMENT OF SECTION 80A. 29. IN SECTION 80A OF THE INCOME-TAX ACT, (A) AFTER SUB-SECTION (3), THE FOLLOWING SUB-SECTI ONS SHALL BE INSERTED, AND SHALL BE DEEMED TO HAVE BEEN INSERTED WITH EFFECT FROM THE 1ST DAY OF APRIL, 2003, NAMELY: (4) NOTWITHSTANDING ANYTHING TO THE CONTRARY CON TAINED IN SECTION 10A OR SECTION 10AA OR SECTION 10B OR SECTI ON 10BA OR IN ANY PROVISIONS OF THIS CHAPTER UNDER THE HEADING C-DED UCTIONS IN RESPECT OF CERTAIN INCOMES, WHERE, IN THE CASE OF AN ASSES SEE, ANY AMOUNT OF PROFITS AND GAINS OF AN UNDERTAKING OR UNIT OR ENTE RPRISE OR ELIGIBLE BUSINESS IS CLAIMED AND ALLOWED AS A DEDUCTION UNDE R ANY OF THOSE PROVISIONS FOR ANY ASSESSMENT YEAR, DEDUCTION IN RE SPECT OF, AND TO THE EXTENT OF, SUCH PROFITS AND GAINS SHALL NOT BE ALLO WED UNDER ANY OTHER PROVISIONS OF THIS ACT FOR SUCH ASSESSMENT YEAR AND SHALL IN NO CASE EXCEED THE PROFITS AND GAINS OF SUCH UNDERTAKING OR UNIT OR ENTERPRISE OR ELIGIBLE BUSINESS, AS THE CASE MAY BE. (5) WHERE THE ASSESSEE FAILS TO MAKE A CLAIM IN H IS RETURN OF INCOME FOR ANY DEDUCTION UNDER SECTION 10A OR SE CTION 10AA OR SECTION 10B OR SECTION 10BA OR UNDER ANY PROVISION OF THIS CHAPTER UNDER THE HEADING C.DEDUCTIONS IN RESPECT OF CERT AIN INCOMES, NO DEDUCTION SHALL BE ALLOWED TO HIM THEREUNDER.; (B) AFTER SUB-SECTION (5) AS SO INSERTED, THE FOLL OWING SUB- SECTION SHALL BE INSERTED, NAMELY: ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 15 (6) NOTWITHSTANDING ANYTHING TO THE CONTRARY CON TAINED IN SECTION 10A OR SECTION 10AA OR SECTION 10B OR SECTI ON 10BA OR IN ANY PROVISIONS OF THIS CHAPTER UNDER THE HEADING C-DED UCTIONS IN RESPECT OF CERTAIN INCOMES, WHERE ANY GOODS OR SERVICES HE LD FOR THE PURPOSES OF THE UNDERTAKING OR UNIT OR ENTERPRISE OR ELIGIBL E BUSINESS ARE TRANSFERRED TO ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE OR WHERE ANY GOODS OR SERVICES HELD FOR THE PURPOSES OF ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE ARE TRANSFERRED TO THE U NDERTAKING OR UNIT OR ENTERPRISE OR ELIGIBLE BUSINESS AND, THE CONSIDERAT ION, IF ANY, FOR SUCH TRANSFER AS RECORDED IN THE ACCOUNTS OF THE UNDERTA KING OR UNIT OR ENTERPRISE OR ELIGIBLE BUSINESS DOES NOT CORRESPOND TO THE MARKET VALUE OF SUCH GOODS OR SERVICES AS ON THE DATE OF THE TRA NSFER, THEN, FOR THE PURPOSES OF ANY DEDUCTION UNDER THIS CHAPTER, THE P ROFITS AND GAINS OF SUCH UNDERTAKING OR UNIT OR ENTERPRISE OR ELIGIBLE BUSINESS SHALL BE COMPUTED AS IF THE TRANSFER, IN EITHER CASE, HAD BE EN MADE AT THE MARKET VALUE OF SUCH GOODS OR SERVICES AS ON THAT D ATE. EXPLANATION.FOR THE PURPOSES OF THIS SUB-SECTION , THE EXPRESSION MARKET VALUE (I) IN RELATION TO ANY GOODS OR SERVICES SOLD OR S UPPLIED, MEANS THE PRICE THAT SUCH GOODS OR SERVICES WOULD FETCH I F THESE WERE SOLD BY THE UNDERTAKING OR UNIT OR ENTERPRISE OR ELIGIBLE B USINESS IN THE OPEN MARKET, SUBJECT TO STATUTORY OR REGULATORY RESTRICT IONS, IF ANY; (II) IN RELATION TO ANY GOODS OR SERVICES ACQUIRED , MEANS THE PRICE THAT SUCH GOODS OR SERVICES WOULD COST IF THE SE WERE ACQUIRED BY THE UNDERTAKING OR UNIT OR ENTERPRISE OR ELIGIBLE B USINESS FROM THE OPEN MARKET, SUBJECT TO STATUTORY OR REGULATORY RESTRICT IONS, IF ANY. ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 16 WE NOW REFER TO THE NOTES TO THE CLAUSES TO THE FIN ANCE BILL 2009 AND THE RELEVANT NOTES IN RELATING TO SECTION 80A(6) RE ADS AS UNDER: THE PROPOSED SUB-SECTION (6) PROVIDES THAT NOTWITH STANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 10A OR SECTION 10AA OR SECTION 10B OR SECTION 10BA OR IN ANY PROVISIONS OF CHAPTER VIA UNDER THE HEADING C-DEDUCTIONS IN RESPECT OF CERTAIN INCOMES, WHERE ANY GOODS OR SERVICES HELD FOR THE PURPOSES OF THE UNDERTAKING O R UNIT OR ENTERPRISE OR ELIGIBLE BUSINESS ARE TRANSFERRED TO ANY OTHER B USINESS CARRIED ON BY THE ASSESSEE OR WHERE ANY GOODS OR SERVICES HELD FO R THE PURPOSES OF ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE ARE T RANSFERRED TO THE UNDERTAKING OR UNIT OR ENTERPRISE OR ELIGIBLE BUSIN ESS AND, THE CONSIDERATION, IF ANY, FOR SUCH TRANSFER AS RECORDE D IN THE ACCOUNTS OF THE UNDERTAKING OR UNIT OR ENTERPRISE OR ELIGIBLE B USINESS DOES NOT CORRESPOND TO THE MARKET VALUE OF SUCH GOODS OR SER VICES AS ON THE DATE OF THE TRANSFER, THEN, FOR THE PURPOSES OF ANY DEDUCTION UNDER THIS CHAPTER, THE PROFITS AND GAINS OF SUCH UNDERTAKING OR UNIT OR ENTERPRISE OR ELIGIBLE BUSINESS SHALL BE COMPUTED AS IF THE TR ANSFER, IN EITHER CASE, HAD BEEN MADE AT THE MARKET VALUE OF SUCH GOODS OR SERVICES AS ON THAT DATE. THE EXPLANATION AS PROPOSED IN THE SAID SUB-SECTION PROVIDES THAT (I) IN RELATION TO ANY GOODS OR SERVICES SOLD OR SUPPLIED, MARKET VALUE MEANS THE PRICE THAT SUCH GOODS OR SERVICES W OULD FETCH IF THESE WERE SOLD BY THE UNDERTAKING OR UNIT OR ENTERPRISE OR ELIGIBLE BUSINESS IN THE OPEN MARKET, SUBJECT TO STATUTORY OR REGULATORY RESTRICTIONS, IF ANY; (II) IN RELATION TO ANY GOODS OR SERVICES ACQUIRED, MARKET VALUE MEANS THE PRICE THAT SUCH GOODS OR SERVICES WOULD COST IF THESE WERE ACQUIRED BY THE UNDERTAKING OR UNIT OR ENTERPRISE OR ELIGIBL E BUSINESS FROM THE ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 17 OPEN MARKET, SUBJECT TO STATUTORY OR REGULATORY RES TRICTIONS, IF ANY. THE SAID EXPLANATION IS CLARIFICATORY IN NATURE. THIS A MENDMENT WILL TAKE EFFECT RETROSPECTIVELY FROM 1ST APRIL, 2009. WE NOW REFER TO THE MEMORANDUM EXPLAINING THE FINAN CE BILL 2009 AND IN PARTICULAR, INTRODUCTION OF SECTION 80A(6) OF TH E ACT WHICH READS AS UNDER: AMENDMENT IN CHAPTER VIA TO PREVENT ABUSE OF TAX I NCENTIVES: THE PROFIT LINKED DEDUCTIONS IN CHAPTER VIA ARE PRO NE TO CONSIDERABLE MISUSE. FURTHER, SINCE THE SCOPE OF THE DEDUCTIONS UNDER VARIOUS PROVISIONS OF CHAPTER VIA OVERLAP, THE TAXPAYERS, A T TIMES, CLAIM MULTIPLE DEDUCTIONS FOR THE SAME PROFITS. WITH A VIEW TO PREVENTING SUCH MISUSE, IT IS PROPOS ED TO AMEND THE PROVISIONS OF SECTION 80A OF THE INCOME-TAX ACT TO PROVIDE THE FOLLOWING, NAMELY : (I) DEDUCTION IN RESPECT OF PROFITS AND GAINS SHAL L NOT BE ALLOWED UNDER ANY PROVISIONS OF SECTION 10A OR SECT ION 10AA OR SECTION 10B OR SECTION 10BA OR UNDER ANY PROVISIONS OF CHAP TER VIA UNDER THE HEADING C.-DEDUCTIONS IN RESPECT OF CERTAIN INCOME S IN ANY ASSESSMENT YEAR, IF A DEDUCTION IN RESPECT OF SAME AMOUNT UNDER ANY OF THE AFORESAID HAS BEEN ALLOWED IN THE SAME ASSES SMENT YEAR; (II) THE AGGREGATE OF THE DEDUCTIONS UNDER THE VAR IOUS PROVISIONS REFERRED TO IN (I) ABOVE, SHALL NOT EXCE ED THE PROFITS AND GAINS OF THE UNDERTAKING OR UNIT OR ENTERPRISE OR ELIGIBL E BUSINESS, AS THE CASE MAY BE; ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 18 (III) NO DEDUCTIONS UNDER THE VARIOUS PROVISIONS R EFERRED TO IN (I) ABOVE, SHALL BE ALLOWED IF THE DEDUCTION HAS NOT BE EN CLAIMED IN THE RETURN OF INCOME; THESE AMENDMENTS WILL TAKE EFFECT RETROSPECTIVELY F ROM THE 1ST APRIL, 2003, AND WILL ACCORDINGLY APPLY IN RELATION TO ASS ESSMENT YEAR 2003-04 AND SUBSEQUENT YEARS. FURTHER IT IS ALSO PROPOSED TO AMEND SECTION 80A TO PROVIDE THAT THE TRANSFER PRICE OF GOODS AND SERVICES BETWEEN THE UN DERTAKING OR UNIT OR ENTERPRISE OR ELIGIBLE BUSINESS AND ANY OTHER UNDER TAKING OR UNIT OR ENTERPRISE OR BUSINESS OF THE ASSESSEE SHALL BE DET ERMINED AT THE MARKET VALUE OF SUCH GOODS OR SERVICES AS ON THE DA TE OF TRANSFER. FURTHER, THE EXPRESSION MARKET VALUE HAS BEEN DEF INED TO MEAN, (A) IN RELATION TO ANY GOODS OR SERVICES SOLD OR S UPPLIED, MEANS THE PRICE THAT SUCH GOODS OR SERVICES WOULD FETCH I F THESE WERE SOLD BY THE UNDERTAKING OR UNIT OR ENTERPRISE OR ELIGIBLE B USINESS IN THE OPEN MARKET, SUBJECT TO STATUTORY OR REGULATORY RESTRICT IONS, IF ANY; (B) IN RELATION TO ANY GOODS OR SERVICES ACQUIRED, MEANS THE PRICE THAT SUCH GOODS OR SERVICES WOULD COST IF THE SE WERE ACQUIRED BY THE UNDERTAKING OR UNIT OR ENTERPRISE OR ELIGIBLE B USINESS FROM THE OPEN MARKET, SUBJECT TO STATUTORY OR REGULATORY RESTRICT IONS, IF ANY. THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 200 9 AND WILL ACCORDINGLY APPLY TO ALL CASES WHERE THE PROCEEDING S ARE PENDING BEFORE ANY AUTHORITY ON OR AFTER SUCH DATE. ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 19 FURTHER, WITH A VIEW TO PREVENTING THE MISUSE OF TH E TAX HOLIDAY UNDER SECTION 80-IA OF THE INCOME-TAX ACT, IT IS PROPOSED TO AMEND THE EXPLANATION TO THE SAID SECTION TO CLARIFY THAT NOT HING CONTAINED IN THE SAID SECTION SHALL APPLY IN RELATION TO A BUSINESS REFERRED TO IN SUB- SECTION (4) OF THE SAID SECTION WHICH IS IN THE NAT URE OF A WORKS CONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STA TE GOVERNMENT) AND EXECUTED BY AN UNDERTAKING OR ENTERPRISE REFERR ED TO IN SUB-SECTION (1) THEREOF. THIS AMENDMENT WILL TAKE EFFECT RETROSPECTIVELY FRO M 1ST APRIL, 2000 AND WILL, ACCORDINGLY, APPLY IN RELATION TO ASSESSMENT YEAR 2000-01 AND SUBSEQUENT YEARS. THE PROVISIONS OF SECTION 80A(6) PROVIDES THAT NOTW ITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 10A OR SECTION 10AA OR SECTION 10B OR SECTION 10BA OR IN ANY PROVISIONS OF THIS CHAPTE R UNDER THE HEADING C-DEDUCTIONS IN RESPECT OF CERTAIN INCOMES, THE P ROVISIONS OF SECTION 80A(6) WILL APPLY. IN THE INSTANT CASE, IT WILL THU S OVERRIDE THE PROVISIONS OF SECTION 80IA(8) READ WITH THE EXPLANATION. SECO NDLY, IT IS PROVIDED THAT THE SAID AMENDMENT HAS BEEN BROUGHT ON THE STA TUE BOOKS WITH EFFECT FROM 1ST APRIL, 2009 AND WILL ACCORDINGLY AP PLY TO ALL CASES WHERE THE PROCEEDINGS ARE PENDING BEFORE ANY AUTHORITY ON OR AFTER SUCH DATE. UNLIKE OTHER AMENDMENTS SUCH AS AMENDMENT BY WAY OF INSERTION OF SECTION 80A(4) AND SECTION 80A(5) WHICH HAS BEEN MA DE EFFECTIVE FROM THE 1ST APRIL, 2003, AND WILL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2003-04 AND SUBSEQUENT YEARS, THE AMENDMENT BY WAY OF INSERTION OF SUB-SECTION 6 TO SECTION 80A HAS BEEN MADE EFFECTIVE FROM ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 20 1ST APRIL, 2009 AND IT WILL APPLY TO ALL CASES WHER E THE PROCEEDINGS ARE PENDING BEFORE ANY AUTHORITY ON OR AFTER SUCH DATE. IN THE INSTANT CASE, THE RETURN OF INCOME WAS ORIGINALLY FILED ON 30.09. 2008, NOTICE U/S 143(2) WAS ISSUED ON 3.9.2009, ASSESSMENT ORDER WAS THEREAFTER PASSED ON 31.12.2010 AND SUBSEQUENTLY, THE ORDER OF THE LD CIT(A) WAS PASSED ON 30.03.2012. ACCORDINGLY, THE PROCEEDINGS FOR THE IMPUNGED ASSESSMENT YEAR WERE PENDING BEFORE THE ASSESSING O FFICER AND THE PROVISIONS OF SECTION 80 A(6) WILL APPLY IN THE INS TANT CASE. IT IS HOWEVER NOTED THAT THE AUTHORITIES BELOW HAVE NOT EXAMINED THE MATTER AFTER TAKING INTO CONSIDERATION THE PROVISIO NS OF SECTION 80A(6) OF THE ACT. AS WE HAVE STATED ABOVE, THE PROVISIONS O F SECTION 80A(6) WILL OVERRIDE THE PROVISIONS OF SECTION 80IA(8) READ WIT H THE EXPLANATION THERETO. IF WE EXAMINE AND COMPARE THE PROVISIONS OF SECTION 80IA(8) AND 80A(6), IT IS NOTED ARE AS FOLLOWS: 1) UNLIKE SECTION 80 IA(8), SECTION 80A(6) STARTS W ITH NON OBSTANTE CLAUSE AND PROVIDES THAT NOTWITHSTANDING ANYTHING C ONTRARY CONTAINED IN CHAPTER VI-A, APPLICATION OF ARMS LENGTH PRICE IS MANDATORY FOR COMPUTING PROFITS ELIGIBLE FOR DEDUCTION, OF THE EL IGIBLE UNIT. 2) MARKET VALUE, IN SECTION 80-IA(8) IS DEFINED CO MMONLY BOTH FOR TRANSFER AND ACQUISITION BY THE ELIGIBLE UNIT. SECTION 80A(6) PROVIDES FOR SEPARATE MARKET VALUE WITH REFERENCE TO TRANSFE R OR ACQUISITION BY THE ELIGIBLE UNIT. 3) DETERMINATION OF MARKET VALUE IS MADE SUBJECT TO STATUTORY OR REGULATORY RESTRICTIONS, IF ANY. ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 21 IN THIS CONTEXT, IT WOULD BE RELEVANT TO REFER TO D ECISION OF THE HONBLE HIGH COURT OF CALCUTTA IN CASE OF COMMISSIONER OF INCOME-TAX, KOLKATA - III VS. ITC LTD [2016] 7 ITR OL 166 (CAL) WHERE THE HONBLE HIGH COURT HAS HELD AS UNDER: 17. WE HAVE CONSIDERED THE SUBMISSION ADVANCED BY MR. KHAITAN BUT WE ARE UNABLE TO AGREE WITH HIM. THE BENEFIT UN DER SECTION 80-IA WAS INTENDED TO ENCOURAGE THE BUSINESS OF GEN ERATING POWER. AN ENTREPRENEUR WHO WANTS TO AVAIL THE BENEF IT OF SECTION 80IA CANNOT HOPE TO GET ANY BENEFIT MORE THAN WHAT HAS BEEN CONTEMPLATED BY THE ACT. IT WAS A FORTUITOUS CIRCUM STANCE THAT THE ENTREPRENEUR IN THIS CASE HAS A HOME CONSUMPTIO N OF ELECTRICITY WHICH ANY OTHER ENTREPRENEUR ENGAGED IN THE GENERATION OF ELECTRICITY WOULD NOT HAVE. BUT THAT CANNOT BE A REASON WHY TWO ENTREPRENEURS ENGAGED IN THE SAME BU SINESS WILL GET BENEFIT AT RATES COMPUTED DIFFERENTLY. IN ORDER TO AVOID ANY SUCH DISCRIMINATION, THE LEGISLATURE HAS TAKEN CARE TO PROVIDE THAT THE PRICE WHICH CAN BE CHARGED HAS TO BE THE SAME, WHICH ELECTRICITY WOULD FETCH IN THE OPEN MARKET. IT IS T RUE THAT AT THE RELEVANT POINT OF TIME THE EXPLANATION ADDED TO SUB -SECTION 8 OF SECTION 80-IA QUOTED ABOVE WAS NOT THERE IN THE STA TUTE. BUT THIS FACT BY ITSELF DOES NOT ADVANCE THE CASE OF THE ASS ESSEE BECAUSE WHAT WAS ALREADY THERE DURING THE RELEVANT ASSESSME NT YEAR READS AS FOLLOWS: 'EXPLANATION.-FOR THE PURPOSES OF THIS SUB-SECTION, 'MARKET VALUE', IN RELATION TO ANY GOODS OR SERVICES, MEANS THE PRICE THAT SUCH GOODS OR SERVICES WOULD ORDINARILY FETCH IN TH E OPEN MARKET.' ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 22 CLAUSE 2 TO THE EXPLANATION HAS BEEN ADDED TO CLARI FY WHAT WAS OBVIOUS ALREADY. THE ASSESSING OFFICER WAS CORRECT IN THE VIEW HE TOOK THAT THE ASSESSEE CAN COMPUTE THE PRICE OF THE ELECTRICITY SOLD TO THE PAPER UNIT AT THE MARKET RATE AND FOR T HAT PURPOSE HE ALSO GAVE AN OPPORTUNITY TO ADDUCE EVIDENCE TO THE ASSESSEE. THE ASSESSEE DID NOT, HOWEVER, AVAIL THE SAME AND CONTE NTED ITSELF BY DISCLOSING THE PRICE AT WHICH POWER WAS PURCHASED B Y THE PAPER UNIT OF THE ASSESSEE FROM THE ANDHRA PRADESH STATE ELECTRICITY BOARD. THE RATE AT WHICH ELECTRICITY WAS PURCHASED FROM ANDHRA PRADESH STATE ELECTRICITY BOARD BY THE PAPER UNIT O F THE ASSESSEE CAN BY NO MEANS BE THE MARKET RATE AT WHICH THE POW ER PLANT OF THE ASSESSEE COULD HAVE SOLD ITS PRODUCTION IN THE OPEN MARKET. IN THE OPEN MARKET THE BUYER WOULD OBVIOUSLY BE A D ISTRIBUTION COMPANY OR A COMPANY ENGAGED BOTH IN GENERATION AND DISTRIBUTION. THEREFORE, THE RATE AT WHICH ELECTRIC ITY IS SOLD TO ANY SUCH COMPANY CAN ONLY BE THE MARKET RATE CONTEMPLAT ED BY THE SECTION. THE JUDGMENT IN THE CASE OF THIRU AROORAN SUGARS LTD. (SUPRA) HAS NO MANNER OF APPLICATION FOR THE SIMPLE REASON THAT THE COURT IN THAT CASE WAS CONCERNED WITH THE QUEST ION AS TO THE MARKET VALUE OF SUGARCANE GROWN BY THE ASSESSEE AT HOME. THE SUPREME COURT WAS OF THE OPINION THAT THE SUGARCANE GROWN AT HOME WOULD BE DEEMED TO HAVE BEEN SOLD TO THE SUGAR MILL AT THE SAME RATE AT WHICH SUGAR CANE WAS PURCHASED BY THE SUGAR MILL. THAT OBVIOUSLY IS CORRECT BECAUSE IF THE SUGA RCANE GROWN AT HOME HAD NOT BEEN SOLD TO THE SUGAR MILL OF THE ASS ESSEE ITSELF, THE SUGARCANE WOULD HAVE BEEN SOLD IN THE OPEN MARK ET. THE ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 23 RATE OF SALE IN THE OPEN MARKET WOULD BE THE SAME A T WHICH SUGARCANE WAS PURCHASED BY THE SUGAR MILL OF THE AS SESSEE. BUT IN THE CASE BEFORE US THE ELECTRICITY GENERATED BY THE ASSESSEE COULD NOT BE SOLD TO ANYONE OTHER THAN A DISTRIBUTI ON COMPANY OR A COMPANY WHICH IS ENGAGED BOTH IN GENERATION AND D ISTRIBUTION. THE RATE AT WHICH ELECTRICITY COULD HAVE BEEN SOLD TO ANY SUCH COMPANY IS NOT THE SAME AT WHICH SUCH COMPANIES SAL E ELECTRICITY TO THE CONSUMERS. THE RATE AT WHICH ELECTRICITY CAN BE SUPPLIED TO A CONSUMER BY THE DISTRIBUTION LICENSEE AND THE RAT E AT WHICH THE GENERATING COMPANIES CAN SELL ELECTRICITY TO THE DI STRIBUTION LICENSEE ARE GOVERNED RESPECTIVELY BY SECTIONS 61 A ND 62 OF THE ELECTRICITY ACT 2003. THERE IS TARIFF REGULATORY CO MMISSION WHICH FIXES BOTH THE RATES FOR SALE AND PURCHASE OF ELECT RICITY BY THE DISTRIBUTION LICENSEE. THERE ARE PROVISIONS IN SECT ION 62 SO THAT THE GENERATING COMPANIES CAN RECOVER EXPECTED REVEN UE ON THE BASIS OF THE TARIFF FIXED BY THE COMMISSION. THERE ARE SIMILARLY PROVISIONS IN SECTION 61 SO THAT THE DISTRIBUTION L ICENSEE CAN DERIVE REASONABLE RETURN. THERE IS THUS AN IN-BUILT MECHANISM TO ENSURE PERMISSIBLE PROFIT BOTH TO THE GENERATING CO MPANIES AND THE DISTRIBUTION LICENSEES. THE ASSESSEE'S GENERATI NG UNIT CANNOT AS SUCH CLAIM ANY BENEFIT UNDER SECTION 80-IA OF TH E I. T. ACT COMPUTED ON THE BASIS OF RATES CHARGEABLE BY THE DI STRIBUTION LICENSEE FROM THE CONSUMER. THE BENEFIT CAN ONLY BE CLAIMED ON THE BASIS OF THE RATES FIXED BY THE TARIFF REGULATI ON COMMISSION FOR SALE OF ELECTRICITY BY THE GENERATING COMPANIES. ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 24 THE ABOVE DECISION OF THE HONBLE HIGH COURT THOUGH HAS BEEN RENDERED IN THE CONTEXT OF SECTION 80IA(8) READ WIT H THE EXPLANATION, TO OUR MIND, IT RESONATES THE INTENT BEHIND INTRODUCTI ON OF SECTION 80A(6) OF THE ACT AND ELECTRICITY ACT, 2003, AND SHOULD TH EREFORE BE CONSIDERED AS A GUIDING PRECEDENT WHILE DETERMINING THE ARMS LENGTH PRICING IN THE CONTEXT OF ELECTRICITY GENERATED BY THE CAPTIVE POW ER PLANT WHICH ARE SUBJECT TO TARIFF REGULATIONS. THE DECISIONS CITED BY THE LD AR HAVE BEEN RENDERED PRIOR TO INTRODUCTION OF SECTION 80A(6) AND PRIOR TO ELECTRI CITY ACT, 2003, AND IN ANY CASE, THE DECISION OF THE HONBLE CALCUTTA HIGH COURT (SUPRA) LAYS DOWN THE CURRENT PROPOSITION OF LAW WHICH IS BINDIN G ON US IN ABSENCE OF ANY CONTRARY DECISION. 12. IN THE INSTANT CASE, AS WE HAVE NOTED ABOVE, T HE AUTHORITIES BELOW HAVE NOT EXAMINED THE MATTER AFTER TAKING INT O CONSIDERATION THE PROVISIONS OF SECTION 80A(6) OF THE ACT WHEREIN THE MARKET VALUE OF THE ELECTRICITY SOLD AND PURCHASED ARE TO BE DETERMINED SEPARATELY AND HAS BEEN MADE SUBJECT TO STATUTORY AND REGULATORY RESTR ICTIONS. FURTHER, THE EARLIER DECISIONS OF THE COORDINATE BENCHES ARE DIS TINGUISHABLE AS THE PROVISIONS OF SECTION 80A(6) WERE NOT CONSIDERED IN THOSE DECISIONS. THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT WH EREIN THE DECISION OF THE COORDINATE BENCHES HAS BEEN AFFIRMED THEREFO RE DOESNT SUPPORT THE CASE OF THE ASSESSEE. IN THE INTEREST OF JUSTI CE AND FAIR PLAY, FOLLOWING OUR DECISION IN CASE OF CHAMBAL FERTILIZE RS (SUPRA) AND GIVEN THE PROVISIONS OF SECTION 80A(6) WHICH OVERRIDES SE CTION 80IA(8) AND ARE CLEARLY APPLICABLE IN THE INSTANT CASE AND HAVE NOT BEEN CONSIDERED ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 25 BY THE AUTHORITIES BELOW, WE DEEM IT APPROPRIATE TO SET ASIDE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMIN E THE SAME AFRESH TAKING INTO CONSIDERATION THE ABOVE DISCUSSIONS. 13. REGARDING GROUND NO. 2 OF ASSESSEES APPEAL, B RIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS CLAIMED DEDUCTION ON ACCOUNT OF EDUCATION CESS (EC) & SECONDARY AND HIGHER EDUCATIO N CESS (SHEC) ON INCOME TAX & DIVIDEND DISTRIBUTION TAX AMOUNTING TO RS. 1,42,79,859/-, AS ELIGIBLE REVENUE EXPENSE U/S 37 OF THE ACT WHILE COMPUTING TOTAL INCOME FOR THE YEAR UNDER CONSIDERATION. THE AO DIS ALLOWED THE ABOVE CLAIM ON CONTENTION THAT EC & SHEC ARE IN EFFECT AD DITIONAL SURCHARGE AND IF SURCHARGE IS NOT ALLOWABLE AS REVENUE EXPEND ITURE, THEN EDUCATION CESS SHOULD BE TREATED SIMILARLY WHILE CO MPUTING TOTAL INCOME. 14. THE LD. CIT(A) AFFIRMED THE CONTENTION OF THE A O THAT EDUCATION CESS IS IN THE NATURE OF ADDITIONAL SURCHARGE AND T HEREFORE NOT ALLOWABLE AS DEDUCTION WHILE COMPUTING BUSINESS INCOME. AS EC & SHEC CLAIMED BY THE ASSESSEE IS NOT ON ITS SERVICES, SALES, PURC HASE OR PRODUCTION, RATHER IT IS ON THE PROFIT OR GAINS CARRIED OUT BY THE ASSESSEE, IT IS COVERED UNDER SECTION 40(A)(II) OF THE ACT. NOW, TH E ASSESSEE COMPANY IS IN APPEAL BEFORE US AGAINST THE SAID ACTION OF T HE LD CIT(A). 15. DURING THE COURSE OF HEARING, THE LD AR SUBMITT ED THAT EDUCATION CESS WAS INTRODUCED VIDE FINANCE ACT, 2004 AS A LEV Y FOR THE SPECIFIC PURPOSE OF FULFILLING THE COMMITMENT OF THE GOVT. T O PROVIDE AND FINANCE UNIVERSALIZED QUALITY BASIC EDUCATION. ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 26 IT WAS SUBMITTED THAT AS STATED IN THE SPEECH OF HO NBLE FINANCE MINISTER WHILE PLACING THE BUDGET FOR THE YEAR 2004 -05 BEFORE THE PARLIAMENT, ENTIRE AMOUNT COLLECTED AS CESS SHALL B E EARMARKED FOR EDUCATION WHICH SHALL INCLUDE PROVIDING NUTRITIOUS COOKED MIDDAY MEAL. 16. IT WAS SUBMITTED THAT THE HONBLE APEX COURT IN DEWAN CHAND BUILDERS & CONTRACTORS VS-UOI (CIVIL APPEAL NO. 18 30 TO 1832 OF 2008) HAS HELD THAT CESS EARMARKED FOR SPECIFIC PURPOSE A ND NOT FORMING PART OF THE CONSOLIDATED FUND SHOULD BE CONSIDERED AS F EE AND NOT TAX. FOLLOWING THE SAID PRINCIPLES, HONBLE DELHI HIGH C OURT IN DALMIA CEMENT (BHARAT) LIMITED VS.-CIT (2013) 357 ITR 419 (DEL) HELD THAT CESS PAYABLE UNDER TAMIL NADU PANCHAYAT ACT, 1958 W HICH DOES NOT FORM PART OF CONSOLIDATED FUND IS NOT IN THE NATURE OF TAX OR DUTY. 17. THE WORD CESS WAS PRESENT IN SEC. 10(4) OF TH E ERSTWHILE INCOME TAX ACT, 1922 WHICH SPECIFICALLY PROVIDED FO R DISALLOWANCE OF CESS LEVIED ON THE PROFIT OR GAINS OF ANY BUSINESS OR PROFESSION. SUBSEQUENTLY, THE SAID WORD WAS OMITTED FROM SECTIO N 40(A)(II) OF THE INCOME TAX ACT, 1961. THIS BEING A SPECIFIC OMISSION ON THE PART OF THE L EGISLATURE, IT SHOULD BE CONSTRUED AS THE INTENTION OF THE LEGISLATURE TO AL LOW CESS IN COMPUTING PROFITS AND GAINS FROM BUSINESS AND PROFESSION. 18. IN THE MATTER OF INTERPRETATION OF THE TAXING S TATUTES, THE LAW COURTS WOULD NOT BE JUSTIFIED IN INTRODUCING SOME O THER EXPRESSIONS ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 27 WHICH THE LEGISLATURE THOUGHT FIT TO OMIT. A FISCAL STATUTE SHALL HAVE TO BE INTERPRETED ON THE BASIS OF THE LANGUAGE USED TH EREIN AND NOT DE HORS THE SAME. THIS VIEW IS SUPPORTED BY PRINCIPLES OF INTERPRETATION EXPRESSED IN FOLLOWING DECISIONS- - ORISSA STATE WAREHOUSING CORPORATION-VS. CIT (199 9) 237 ITR 589 (SC) - VODAFONE INTERNATIONAL HOLDINGS BV-VS.-UOI (2012) 341 ITR 1 (SC) 19. THE SAID OMISSION WAS CLARIFIED BY CBDT CIRCULA R NO. 91/58/66 ITJ (19) DATED 18-05-1967, WHEREIN IT HAS BEEN STAT ED THAT THE EFFECT OF THE OMISSION OF THE WORD CESS FROM SEC. 40(A)(II) IS THAT ONLY TAXES PAID ARE TO BE DISALLOWED FROM AY 1962-63 ONWARDS A ND NOT THE CESS. SINCE CIRCULAR IS BINDING ON THE DEPARTMENT AS ALSO HELD BY HONBLE APEX COURT IN THE CASE OF COMMISSIONER OF CUSTOMS-V S.-INDIAN OIL CORPN. LTD. (2004) 267 ITR 272 (SC), CESS SHOULD NO T BE DISALLOWED WHILE COMPUTING TOTAL INCOME FOR THE YEAR UNDER CON SIDERATION. 20. RELIANCE IN THIS REGARD IS PLACED ON THE DECISI ON OF DUNCANS INDUSTRIES LTD.-VS-JCIT (2003) 87 ITD 457 (KOL), WH EREIN RELYING ON CBDT CIRCULAR NO. 91/58/66-ITJ (19) IT HAS BEEN HEL D THAT CESS DOES NOT FALL WITHIN THE PROHIBITORY ITEMS OF DEDUCTION UNDE R SEC. 40(A)(II). 21. FURTHER, THE ISSUE WHETHER TAX SHALL INCLUDE CE SS, HAS BEEN DECIDED BY HONBLE LUCKNOW TRIBUNAL IN DCIT-VS.-YUV RAJ SINGH (ITA NO. 408/LKW/2011 DATED 23.12.2013) WHEREIN IT HAS BEEN HELD THAT FOR COMPUTING TAX EFFECT, CESS SHOULD NOT BE CONSIDERED AS PART OF TAX AS IT DOES NOT FALL WITHIN THE CHARACTERISTICS OF TAX. SI MILAR VIEW HAS BEEN HELD ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 28 IN HINDUSTAN LEVER LTD. VS.- CIT (2011) 335 ITR 1 08 (CAL) CESS PAID UNDER ASSAM AGRICULTURAL IT ACT HAS BEEN CONSIDERED TOO BE ALLOWABLE BUSINESS EXPENDITURE. 22. IT WAS SUBMITTED THAT A CONTRARY VIEW HAS BEEN TAKEN BY HONBLE PANAJI TRIBUNAL IN SESA GOA LTD.-VS.-JCIT (ITA NO. 72/PNJ/2012 DTD. 08- 03-2013) & HONBLE MUMBAI TRIBUNAL IN KALIMATI INVE STMENT CO. LTD.-VS- ITO (ITA NO. 4508/MUM/2010 DTD. 09-05-2012) WHEREIN EDUCATION CESS HAS BEEN CONSIDERED AS ADDITIONAL SURCHARGE FALLING WITHIN THE AMBIT OF SEC. 40(A)(II) OF THE ACT. HOWEVER, SAID DECISIONS HAS BEEN RENDERED WITHOUT C ONSIDERING CLARIFICATION PROVIDED BY CIRCULAR NO. 91/58/66-ITJ (19) DATED 18-05- 1967. FURTHER, CESS CANNOT BE TERMED AS ADDITIONAL SURCHARGE DUE TO THE FOLLOWING:- (A) EDUCATION CESS HAS BEEN CREATED FOR SPECIFIC PURPOS E OF PROVIDING EDUCATION. HOWEVER, FOR SURCHARGE THERE I S NO MENTION OF THE PURPOSE FOR WHICH IT IS TO BE USED. (B) EDUCATION CESS DOES NOT FIND PLACE IN FIRST SCHEDUL E AS IT IS NOT A TAX. WHILE INCOME TAX & SURCHARGE ON INCO ME TAX FOR THE PURPOSES OF UNION FALLS UNDER TAX IN FIRST SCHEDULE. (C) MARGINAL RELIEF IS PROVIDED TO INDIVIDUALS & HUFS W .R.T. INCOME TAX PAYABLE INCLUDING SURCHARGE. HOWEVER, NO MARGINAL RELIEF IS AVAILABLE ON EDUCATION CESS. [RE FER MEMORANDUM EXPLAINING PROVISIONS OF FINANCE BILL (N O. 2) OF 2004]. ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 29 (D) NO SURCHARGE IS LEVIED ON CO-OPERATIVE SOCIETIES AN D LOCAL AUTHORITIES. HOWEVER, EDUCATION CESS CONTINUED TO B E LEVIED ON SUCH ASSESSES. 23. IT WAS FURTHER SUBMITTED THAT IN SEC. 115JB, E XPLANATION 1(A) READ WITH EXPLANATION 2 SPECIFICALLY REQUIRES EDUCATION CESS AND SECONDARY AND HIGHER EDUCATION CESS TO BE INCLUDED WITHIN THE DEFINITION OF INCOME-TAX. IN ABSENCE OF ANY SUCH INCLUSION OF THE TERM CESS UNDER SEC. 40(A)(II), SAME CANNOT BE PRESUMED TO BE COVER ED WITHIN THE DEFINITION OF TAX. 25. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSED THE MATERIAL AVAILABLE ON RECORD. IN THE CASE OF M/S CHAMBAL FERTILIZERS & CHEMICALS LIMITED VS. ACIT, KOTA (SUPRA) , WE (SPEAKING THROUGH ONE OF US) HAD AN OCCASION TO EXAMINE THE SAID ISSU E AT GREAT LENGTH AND THEREIN, AFTER CONSIDERING SIMILAR CONTENTIONS AS RAISED BY THE LD AR AS IN THE INSTANT CASE, WE HAVE HELD THAT THE NATUR E OF EDUCATION CESS, AND SECONDARY AND HIGHER EDUCATION CESS IS CLEARLY ADDITIONAL SURCHARGE FOR THE PURPOSES OF THE UNION AND BEING A SURCHARGE , IT PARTAKE THE NATURE AND CHARACTER OF TAX AND THUS DISALLOWABLE U NDER THE PROVISIONS OF SECTION 40(A)(II) OF THE ACT. THE RELEVANT DISC USSION AND FINDINGS ARE REPRODUCED HEREWITH: 62. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH TH E PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN O RDER TO APPRECIATE THE ALTERNATE CONTENTIONS RAISED BY BOTH THE PARTIES, WE REFER TO THE PROVISIONS OF SECTION 40(A)(II) OF THE ACT WHICH IS ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 30 THE SUBJECT MATTER OF EXAMINATION BEFORE US WHICH R EADS AS UNDER: SECTION 40(A)(II) AMOUNTS NOT DEDUCTIBLE. 40. AMOUNTS NOT DEDUCTIBLE. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION S 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION, (A) IN THE CASE OF ANY ASSESSEE (II) ANY SUM PAID ON ACCOUNT OF ANY RATE OR TAX LEV IED ON THE PROFITS OR GAINS OF ANY BUSINESS OR PROFESSION OR A SSESSED AT A PROPORTION OF, OR OTHERWISE ON THE BASIS OF, ANY SU CH PROFITS OR GAINS. EXPLANATION 1.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT FOR THE PURPOSES OF THIS SUB-CLAUSE, ANY SUM P AID ON ACCOUNT OF ANY RATE OR TAX LEVIED INCLUDES AND SHALL BE DEE MED ALWAYS TO HAVE INCLUDED ANY SUM ELIGIBLE FOR RELIEF OF TAX UN DER SECTION 90 OR, AS THE CASE MAY BE, DEDUCTION FROM THE INDIAN I NCOME-TAX PAYABLE UNDER SECTION 91. EXPLANATION 2.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT FOR THE PURPOSES OF THIS SUB-CLAUSE, ANY SUM P AID ON ACCOUNT OF ANY RATE OR TAX LEVIED INCLUDES ANY SUM ELIGIBLE FOR RELIEF OF TAX UNDER SECTION 90A; FROM THE PERUSAL OF THE AFORESAID PROVISIONS OF SEC TION 40(A)(II), IT IS CLEAR THAT : ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 31 1) WHERE ANY SUM IS PAID ON ACCOUNT OF ANY RATE OR TAX LEVIED ON THE PROFITS OR GAINS OF ANY BUSINESS OR PROFESSI ON; OR 2) WHERE ANY SUM IS ASSESSED AS PROPORTION OF, OR OTHE RWISE ON THE BASIS OF ANY SUCH PROFITS AND GAINS, IT WILL NOT BE ALLOWABLE AS A DEDUCTION IN THE COMP UTATION OF INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE QUESTION THAT ARISES FOR CONSIDERATION IS WHAT IS THE EXACT NATURE OF EDUCATION CESS. FOR THE PURPOSES, IT WOU LD BE RELEVANT TO REFER TO THE FINANCE BILL (NO. 2) 2004 THROUGH WHICH THE EDUCATION CESS WAS FIRST INTRODUCED IN THE LEGISLAT ION . CHAPTER II RATES OF INCOME-TAX INCOME-TAX (1) SUBJECT TO THE PROVISIONS OF SUB-SECTIONS (2) A ND (3), FOR THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 2004, INCOME-TAX SHALL BE CHARGED AT THE RATES SPECIFIED IN PART I OF THE FIRST SCHEDULE AND SUCH TAX AS REDUCED BY THE REBAT E OF INCOME- TAX CALCULATED UNDER CHAPTER VIII-A OF THE INCOME-T AX ACT, 1961 (43 OF 1961) (HEREINAFTER REFERRED TO AS THE INCOME -TAX ACT) SHALL BE INCREASED BY A SURCHARGE FOR PURPOSES OF THE UNI ON CALCULATED IN EACH CASE IN THE MANNER PROVIDED THEREIN. (2) IN THE CASES TO WHICH PARAGRAPH A OF PART I OF THE FIRST SCHEDULE APPLIES, WHERE THE ASSESSEE HAS, IN THE PR EVIOUS YEAR, ANY NET AGRICULTURAL INCOME EXCEEDING FIVE THOUSAND RUPEES, IN ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 32 ADDITION TO TOTAL INCOME, AND THE TOTAL INCOME EXCE EDS FIFTY THOUSAND RUPEES, THEN, (A) THE NET AGRICULTURAL INCOME SHALL BE TAKEN INTO ACCOUNT, IN THE MANNER PROVIDED IN CLAUSE (B) [THAT IS TO SAY, AS IF THE NET AGRICULTURAL INCOME WERE COMPRISED IN THE TOTAL INC OME AFTER THE FIRST FIFTY THOUSAND RUPEES OF THE TOTAL INCOME BUT WITHOUT BEING LIABLE TO TAX], ONLY FOR THE PURPOSE OF CHARGING IN COME-TAX IN RESPECT OF THE TOTAL INCOME; AND (B) THE INCOME-TAX CHARGEABLE SHALL BE CALCULATED AS FOLLOWS: (I) THE TOTAL INCOME AND THE NET AGRICULTURAL INCO ME SHALL BE AGGREGATED AND THE AMOUNT OF INCOME-TAX SHALL BE DE TERMINED IN RESPECT OF THE AGGREGATE INCOME AT THE RATES SPECIF IED IN THE SAID PARAGRAPH A, AS IF SUCH AGGREGATE INCOME WERE THE T OTAL INCOME; (II) THE NET AGRICULTURAL INCOME SHALL BE INCREASED BY A SUM OF FIFTY THOUSAND RUPEES, AND THE AMOUNT OF INCOME-TAX SHALL BE DETERMINED IN RESPECT OF THE NET AGRICULTURAL INCOM E AS SO INCREASED AT THE RATES SPECIFIED IN THE SAID PARAGR APH A, AS IF THE NET AGRICULTURAL INCOME AS SO INCREASED WERE THE TO TAL INCOME; (III) THE AMOUNT OF INCOME-TAX DETERMINED IN ACCORD ANCE WITH SUB-CLAUSE (I) SHALL BE REDUCED BY THE AMOUNT OF IN COME-TAX DETERMINED IN ACCORDANCE WITH SUB-CLAUSE (II) AND T HE SUM SO ARRIVED AT SHALL BE THE INCOME-TAX IN RESPECT OF TH E TOTAL INCOME: PROVIDED THAT THE AMOUNT OF INCOME-TAX SO ARRIVED A T, AS REDUCED BY THE AMOUNT OF REBATE OF INCOME-TAX CALCULATED UN DER CHAPTER VIII-A, SHALL BE INCREASED BY A SURCHARGE FOR PURPO SES OF THE UNION CALCULATED IN EACH CASE IN THE MANNER PROVIDE D IN THAT ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 33 PARAGRAPH AND THE SUM SO ARRIVED AT SHALL BE THE IN COME-TAX IN RESPECT OF THE TOTAL INCOME. IN CASES TO WHICH THE PROVISIONS OF CHAPTER XII OR CHAPTER XII-A OR SECTION 115JB OR SUB-SECTION (1A) OF SECTION 161 OR SECTION 164 OR SECTION 164A OR SECTION 167B OF THE INCOME-TAX A CT APPLY, THE TAX CHARGEABLE SHALL BE DETERMINED AS PROVIDED IN T HAT CHAPTER OR THAT SECTION, AND WITH REFERENCE TO THE RATES IMPOS ED BY SUB- SECTION (1) OR THE RATES AS SPECIFIED IN THAT CHAPT ER OR SECTION, AS THE CASE MAY BE: PROVIDED THAT THE AMOUNT OF INCOME-TAX COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 112 SHALL BE INCREAS ED BY A SURCHARGE FOR PURPOSES OF THE UNION AS PROVIDED IN PARAGRAPH A, B, C, D OR E, AS THE CASE MAY BE, OF PART I OF THE FIRST SCHEDULE: PROVIDED FURTHER THAT IN RESPECT OF ANY INCOME CHAR GEABLE TO TAX UNDER SECTIONS 115A, 115AB, 115AC, 115ACA, 115AD, 1 15B, 115BB, 115BBA, 115E AND 115JB OF THE INCOME-TAX ACT , THE AMOUNT OF INCOME-TAX COMPUTED UNDER THIS SUB-SECTIO N SHALL BE INCREASED BY A SURCHARGE FOR PURPOSES OF THE UNION, CALCULATED, (A) IN THE CASE OF EVERY INDIVIDUAL, HINDU UNDIVIDE D FAMILY, ASSOCIATION OF PERSONS AND BODY OF INDIVIDUALS, WHE THER INCORPORATED OR NOT, AT THE RATE OF TEN PER CENT OF SUCH INCOME- TAX WHERE THE TOTAL INCOME EXCEEDS EIGHT HUNDRED AN D FIFTY THOUSAND RUPEES; (B) IN THE CASE OF EVER Y CO-OPERATIVE SOCIETY, FIR M, LOCAL AUTHORITY AND COMPANY, AT THE RATE OF TWO AND ONE-H ALF PER CENT OF SUCH INCOME-TAX; ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 34 (C) IN THE CASE OF EVERY ARTIFICIAL JURIDICAL PERSO N REFERRED TO IN SUB-CLAUSE (VII) OF CLAUSE (31) OF SECTION 2 OF THE INCOME-TAX ACT, AT THE RATE OF TEN PER CENT OF SUCH INCOME-TAX. IN CASES IN WHICH TAX HAS TO BE CHARGED AND PAID UN DER SECTION 115-O OR SUB-SECTION (2) OF SECTION 115R OF THE INC OME-TAX ACT, THE TAX SHALL BE CHARGED AND PAID AT THE RATE AS SP ECIFIED IN THOSE SECTIONS AND SHALL BE INCREASED BY A SURCHARGE FOR PURPOSES OF THE UNION, CALCULATED AT THE RATE OF TWO AND ONE-HA LF PER CENT OF SUCH TAX. IN CASES IN WHICH TAX HAS TO BE DEDUCTED UNDER SECT IONS 193, 194, 194A, 194B, 194BB, 194D AND 195 OF THE INCOME- TAX ACT, AT THE RATES IN FORCE, THE DEDUCTIONS SHALL BE MADE AT THE RATES SPECIFIED IN PART II OF THE FIRST SCHEDULE AND SHAL L BE INCREASED, BY A SURCHARGE FOR PURPOSES OF THE UNION, CALCULATE D IN EACH CASE, IN THE MANNER PROVIDED THEREIN. (6) IN CASES IN WHICH TAX HAS TO BE DEDUCTED UNDER SECTIONS 194C, 194E, 194EE, 194F, 194G, 194H, 194-I, 194J, 1 94LA, 196B, 196C AND 196D OF THE INCOME-TAX ACT, THE DEDUCTIONS SHALL BE MADE AT THE RATES SPECIFIED IN THOSE SECTIONS AND S HALL BE INCREASED BY A SURCHARGE FOR PURPOSES OF THE UNION, CALCULATED, (A) IN THE CASE OF EVERY INDIVIDUAL, HINDU UNDIVIDE D FAMILY, ASSOCIATION OF PERSONS AND BODY OF INDIVIDUALS, WHE THER INCORPORATED OR NOT, AT THE RATE OF TEN PER CENT OF SUCH TAX WHERE THE INCOME OR THE AGGREGATE OF SUCH INCOMES PAID OR LIKELY TO BE ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 35 PAID AND SUBJECT TO THE DEDUCTION EXCEEDS EIGHT HUN DRED AND FIFTY THOUSAND RUPEES; (B) IN THE CASE OF EVERY CO-OPERATIVE SOCIETY, FIRM , LOCAL AUTHORITY AND COMPANY, AT THE RATE OF TWO AND ONE-H ALF PER CENT OF SUCH TAX; (C) IN THE CASE OF EVERY ARTIFICIAL JURIDICAL PERSO N REFERRED TO IN SUB-CLAUSE (VII) OF CLAUSE (31) OF SECTION 2 OF THE INCOME-TAX ACT, AT THE RATE OF TEN PER CENT OF SUCH TAX. (7) IN CASES IN WHICH TAX HAS TO BE COLLECTED UNDER THE PROVISO TO SECTION 194B OF THE INCOME-TAX ACT, THE COLLECTION SHALL BE MADE AT THE RATES SPECIFIED IN PART II OF THE FIRST SCHE DULE, AND SHALL BE INCREASED, BY A SURCHARGE FOR PURPOSES OF THE UNION , CALCULATED IN THE MANNER PROVIDED THEREIN. (8) IN CASES IN WHICH TAX HAS TO BE COLLECTED UNDER SECTION 206C OF THE INCOME-TAX ACT, THE COLLECTION SHALL BE MADE AT THE RATES SPECIFIED IN THAT SECTION AND SHALL BE INCREASED BY A SURCHARGE FOR PURPOSES OF THE UNION, CALCULATED, (A) IN THE CASE OF EVERY INDIVIDUAL, HINDU UNDIVIDE D FAMILY, ASSOCIATION OF PERSONS AND BODY OF INDIVIDUALS, WHE THER INCORPORATED OR NOT, AT THE RATE OF TEN PER CENT OF SUCH TAX WHERE THE AMOUNT OR THE AGGREGATE OF SUCH AMOUNTS COLLECT ED, AND SUBJECT TO THE COLLECTION, EXCEEDS EIGHT HUNDRED AN D FIFTY THOUSAND RUPEES; (B) IN THE CASE OF EVER Y CO-OPERATIVE SOCIETY, FIR M, LOCAL AUTHORITY AND COMPANY, AT THE RATE OF TWO AND ONE-H ALF PER CENT OF SUCH TAX; ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 36 (C) IN THE CASE OF EVERY ARTIFICIAL JURIDICAL PERSO N REFERRED TO IN SUB-CLAUSE (VII) OF CLAUSE (31) OF SECTION 2 OF THE INCOME-TAX ACT, AT THE RATE OF TEN PER CENT OF SUCH TAX. (9) SUBJECT TO THE PROVISIONS OF SUB-SECTION (10), IN CASES IN WHICH INCOME-TAX HAS TO BE CHARGED UNDER SUB-SECTIO N (4) OF SECTION 172 OR SUB-SECTION (2) OF SECTION 174 OR SE CTION 174A OR SECTION 175 OR SUB-SECTION (2) OF SECTION 176 OF TH E INCOME-TAX ACT OR DEDUCTED FROM, OR PAID ON, INCOME CHARGEABLE UNDER THE HEAD SALARIES UNDER SECTION 192 OF THE SAID ACT O R IN WHICH THE ADVANCE TAX PAYABLE UNDER CHAPTER XVII-C OF THE S AID ACT HAS TO BE COMPUTED AT THE RATE OR RATES IN FORCE, SUCH INCOME-TAX OR, AS THE CASE MAY BE, ADVANCE TAX SHALL BE SO CHARG ED, DEDUCTED OR COMPUTED AT THE RATE OR RATES SPECIFIED IN PART III OF THE FIRST SCHEDULE AND SUCH TAX AS REDUCED BY THE REBATE OF I NCOME-TAX CALCULATED UNDER CHAPTER VIII-A OF THE SAID ACT SHA LL BE INCREASED BY A SURCHARGE FOR PURPOSES OF THE UNION, CALCULATE D IN EACH CASE IN THE MANNER PROVIDED THEREIN: PROVIDED THAT IN CASES TO WHICH THE PROVISIONS OF C HAPTER XII OR CHAPTER XII-A OR SECTION 115JB OR SUB-SECTION (1A) OF SECTION 161 OR SECTION 164 OR SECTION 164A OR SECTION 167B OF T HE INCOME-TAX ACT APPLY, ADVANCE TAX SHALL BE COMPUTED WITH REF ERENCE TO THE RATES IMPOSED BY THIS SUB-SECTION OR THE RATES AS S PECIFIED IN THAT CHAPTER OR SECTION, AS THE CASE MAY BE: PROVIDED FURTHER THAT THE AMOUNT OF ADVANCE TAX C OMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 111A OR S ECTION 112 OF THE INCOME-TAX ACT SHALL BE INCREASED BY A SURCHARG E FOR ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 37 PURPOSES OF THE UNION AS PROVIDED IN PARAGRAPH A, B , C, D OR E, AS THE CASE MAY BE, OF PART III OF THE FIRST SCHEDU LE: PROVIDED ALSO THAT IN RESPECT OF ANY INCOME CHARGEA BLE TO TAX UNDER SECTIONS 115A, 115AB, 115AC, 115ACA, 115AD, 1 15B, 115BB, 115BBA, 115E AND 115JB OF THE INCOME-TAX ACT , ADVANCE TAX COMPUTED UNDER THE FIRST PROVISO SHALL BE INCR EASED BY A SURCHARGE FOR PURPOSES OF THE UNION, CALCULATED, (A) IN THE CASE OF EVERY INDIVIDUAL, HINDU UNDIVIDE D FAMILY, ASSOCIATION OF PERSONS AND BODY OF INDIVIDUALS, WHE THER INCORPORATED OR NOT, AT THE RATE OF TEN PER CENT OF ADVANCE TAX WHERE THE TOTAL INCOME EXCEEDS EIGHT HUNDRED AND FI FTY THOUSAND RUPEES; (B) IN THE CASE OF EVERY CO-OPERATIVE SOCIETY, FIRM , LOCAL AUTHORITY AND COMPANY, AT THE RATE OF TWO AND ONE-H ALF PER CENT OF SUCH ADVANCE TAX; (C) IN THE CASE OF EVERY ARTIFICIAL JURIDICAL PERSO N REFERRED TO IN SUB-CLAUSE (VII) OF CLAUSE (31) OF SECTION 2 OF THE INCOME-TAX ACT, AT THE RATE OF TEN PER CENT OF SUCH ADVANCE TAX. (10) IN CASES TO WHICH, PARAGRAPH A OF PART III OF THE FIRST SCHEDULE APPLIES, WHERE THE ASSESSEE HAS, IN THE PR EVIOUS YEAR OR, IF BY VIRTUE OF ANY PROVISION OF THE INCOME-TAX ACT, INCOME-TAX IS TO BE CHARGED IN RESPECT OF THE INCOME OF A PERI OD OTHER THAN THE PREVIOUS YEAR, IN SUCH OTHER PERIOD, ANY NET AG RICULTURAL INCOME EXCEEDING FIVE THOUSAND RUPEES, IN ADDITION TO TOTAL INCOME AND THE TOTAL INCOME EXCEEDS FIFTY THOUSAND RUPEES, THEN, IN CHARGING INCOME-TAX UNDER SUB-SECTION (2) OF SEC TION 174 OR ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 38 SECTION 174A OR SECTION 175 OR SUB-SECTION (2) OF S ECTION 176 OF THE SAID ACT OR IN COMPUTING THE ADVANCE TAX PAYA BLE UNDER CHAPTER XVII-C OF THE SAID ACT, AT THE RATE OR RATE S IN FORCE, (A) THE NET AGRICULTURAL INCOME SHALL BE TAKEN INTO ACCOUNT, IN THE MANNER PROVIDED IN CLAUSE (B) [THAT IS TO SAY, AS IF THE NET AGRICULTURAL INCOME WERE COMPRISED IN THE TOTAL INC OME AFTER THE FIRST FIFTY THOUSAND RUPEES OF THE TOTAL INCOME BUT WITHOUT BEING LIABLE TO TAX], ONLY FOR THE PURPOSE OF CHARGING OR COMPUTING SUCH INCOME-TAX OR, AS THE CASE MAY BE, ADVANCE TAX IN RESPECT OF THE TOTAL INCOME; AND (B) SUCH INCOME-TAX OR, AS THE CASE MAY BE, ADVANC E TAX SHALL BE SO CHARGED OR COMPUTED AS FOLLOWS: (I) THE TOTAL INCOME AND THE NET AGRICULTURAL INCOM E SHALL BE AGGREGATED AND THE AMOUNT OF INCOME-TAX OR ADVANCE TAX SHALL BE DETERMINED IN RESPECT OF THE AGGREGATE INCOME AT THE RATES SPECIFIED IN THE SAID PARAGRAPH A, AS IF SUCH AGGRE GATE INCOME WERE THE TOTAL INCOME; (II) THE NET AGRICULTURAL INCOME SHALL BE INCREASED BY A SUM OF FIFTY THOUSAND RUPEES, AND THE AMOUNT OF INCOME-TAX OR ADVANCE TAX SHALL BE DETERMINED IN RESPECT OF THE NET AGRI CULTURAL INCOME AS SO INCREASED AT THE RATES SPECIFIED IN THE SAID PARAGRAPH A, AS IF THE NET AGRICULTURAL INCOME WERE THE TOTAL INCOM E; (III) THE AMOUNT OF INCOME-TAX OR ADVANCE TAX DET ERMINED IN ACCORDANCE WITH SUB-CLAUSE (I) SHALL BE REDUCED BY THE AMOUNT OF INCOME-TAX OR, AS THE CASE MAY BE, ADVANCE TAX DE TERMINED IN ACCORDANCE WITH SUB-CLAUSE (II) AND THE SUM SO ARRI VED AT SHALL BE ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 39 THE INCOME-TAX OR, AS THE CASE MAY BE, ADVANCE TAX IN RESPECT OF THE TOTAL INCOME: PROVIDED THAT THE AMOUNT OF INCOME-TAX OR ADVANCE TAX SO ARRIVED AT, AS REDUCED BY THE REBATE OF INCOME-TAX CALCULATED UNDER CHAPTER VIII-A OF THE SAID ACT, SHALL BE INCR EASED BY A SURCHARGE FOR PURPOSES OF THE UNION CALCULATED IN E ACH CASE, IN THE MANNER PROVIDED THEREIN. (11) THE AMOUNT OF INCOME-TAX AS SPECIFIED IN SUB-S ECTIONS (4) TO (10) AND AS INCREASED BY A SURCHARGE FOR PURPOSES O F THE UNION CALCULATED IN THE MANNER PROVIDED THEREIN, SHALL BE FURTHER INCREASED BY AN ADDITIONAL SURCHARGE FOR PURPOSES O F THE UNION, TO BE CALLED THE EDUCATION CESS ON INCOME-TAX, SO AS TO FULFILL THE COMMITMENT OF THE GOVERNMENT TO PROVIDE AND FIN ANCE UNIVERSALISED QUALITY BASIC EDUCATION, CALCULATED A T THE RATE OF TWO PER CENT OF SUCH INCOME-TAX AND SURCHARGE. WE NOW REFER TO THE NOTES TO CLAUSES OF THE FINANCE BILL 2004 WHICH PROVIDES AS UNDER : IT IS ALSO PROPOSED THAT THE AMOUNT OF INCOME-TAX AS SPECIFIED IN SUB-CLAUSES (4) TO (10) OF CLAUSE 2 OF THE FINANCE (NO. 2) BILL, 2004 AND AS INCREASED BY A SURCHARGE FOR PURPOSES O F THE UNION CALCULATED IN THE MANNER PROVIDED THEREIN, SHALL BE FURTHER INCREASED BY AN ADDITIONAL SURCHARGE FOR PURPOSES O F THE UNION, TO BE CALLED THE EDUCATION CESS ON INCOME-TAX SO AS TO FULFIL THE COMMITMENT OF GOVERNMENT TO PROVIDE AND FINANCE UNI VERSALISED QUALITY BASIC EDUCATION, CALCULATED AT THE RATE OF TWO PER CENT, OF SUCH INCOME-TAX AND SURCHARGE. THE EDUCATION CESS O N INCOME- ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 40 TAX SHALL BE PAYABLE DURING THE PREVIOUS YEAR BEGIN NING ON 1ST APRIL, 2004. WE NOW REFER TO THE MEMORANDUM EXPLAINING THE FINANCE BILL 2004: 2. SUBJECT TO CERTAIN EXCEPTIONS, WHICH HAVE BEEN INDICATED WHILE DEALING WITH THE RELEVANT PROVISIONS, THE BIL L FOLLOWS THE PRINCIPLE THAT CHANGES IN THE PROVISIONS OF THE TAX LAWS, SHOULD ORDINARILY BE MADE OPERATIVE PROSPECTIVELY IN RELAT ION TO THE CURRENT INCOMES AND NOT IN RELATION TO THE INCOMES OF PAST YEARS. THE SUBSTANCE OF THE MAIN PROVISIONS IN THE BILL RE LATING TO DIRECT TAXES IS EXPLAINED IN THE FOLLOWING PARAGRAPHS: INCOME-TAX I. RATES OF INCOME-TAX IN RESPECT OF INCOMES LIABLE TO TAX FOR THE ASSESSMENT YEAR 2004-2005 IN RESPECT OF INCOMES OF ALL CATEGORIES OF TAXPAYER S (CORPORATE AS WELL AS NON-CORPORATE) LIABLE TO TAX FOR THE ASSESS MENT YEAR 2004- 2005, THE RATES OF INCOME-TAX HAVE BEEN SPECIFIED I N PART I OF THE FIRST SCHEDULE TO THE BILL AND ARE THE SAME AS THOS E LAID DOWN IN PART III OF THE FIRST SCHEDULE TO THE FINANCE ACT, 2003, FOR THE PURPOSES OF COMPUTATION OF ADVANCE TAX, DEDUCTION OF TAX AT SOURCE FROM SALARIES AND CHARGING OF TAX PAYABLE IN CERTAIN CASES DURING THE FINANCIAL YEAR 2003-2004. IT HAS A LSO BEEN SPECIFIED THAT IN THE CASE OF INDIVIDUALS, HINDU UN DIVIDED FAMILIES, ASSOCIATION OF PERSONS AND BODY OF INDIVIDUALS HAVI NG TOTAL INCOME EXCEEDING RS. 8,50,000, THE TAX SO COMPUTED AFTER REBATE UNDER CHAPTER VLLL-A SHALL BE ENHANCED BY A SURCHAR GE OF TEN PER ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 41 CENT, FOR PURPOSES OF THE UNION. IN THE CASE OF EVE RY ARTIFICIAL JURIDICAL PERSON, THE TAX SO COMPUTED SHALL BE INCR EASED BY A SURCHARGE OF TEN PER CENT, FOR PURPOSES OF THE UNIO N. FURTHER, IN CASE OF A FIRM, A LOCAL AUTHORITY, A CO-OPERATIVE S OCIETY AND A COMPANY, THE TAX SO COMPUTED SHALL BE ENHANCED BY A SURCHARGE OF TWO AND ONE-HALF PER CENT FOR PURPOSES OF THE UN ION. II. RATES FOR DEDUCTION OF INCOME-TAX AT SOURCE DUR ING THE FINANCIAL YEAR 2004-05 FROM INCOME OTHER THAN SALA RIES THE RATES FOR DEDUCTION OF INCOME-TAX AT SOURCE DUR ING THE FINANCIAL YEAR 2004-05 FROM INCOMES OTHER THAN SAL ARIES HAVE BEEN SPECIFIED IN PART II OF THE FIRST SCHEDULE TO THE BILL AND APPLY TO INCOME BY WAY OF INTEREST ON SECURITIES, INTERES T OTHER THAN INTEREST ON SECURITIES, INSURANCE COMMISSION, WIN NINGS FROM LOTTERIES OR CROSSWORD PUZZLES, WINNINGS FROM HORSE RACES AND INCOME OF NON-RESIDENTS (INCLUDING NON-RESIDENT IND IANS). THE RATES ARE THE SAME AS THOSE SPECIFIED IN PART II OF THE FIRST SCHEDULE TO THE FINANCE ACT, 2003. THE TAX DEDUCTED AT SOURCE IN EACH CASE SHALL BE INCREASED BY A SURCHARGE FOR PUR POSES OF THE UNION TO BE CALCULATED AS FOLLOWS: (I) IN THE CASE OF EVERY INDIVIDUAL, HINDU UNDIVIDE D FAMILY, ASSOCIATION OF PERSONS AND BODY OF INDIVIDUALS AT T HE RATE OF TEN PER CENT, OF SUCH TAX WHERE THE INCOME OR THE AGGRE GATE OF SUCH INCOMES PAID OR LIKELY TO BE PAID EXCEEDS RS. 8,50, 000; (II) IN THE CASE OF EVERY CO-OPERATIVE SOCIETY, FIR M, LOCAL AUTHORITY AND COMPANY, AT THE RATE OF TWO AND ONE-H ALF PER CENT, OF SUCH TAX; AND ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 42 (III) IN THE CASE OF EVERY ARTIFICIAL JURIDICAL PER SON, AT THE RATE OF TEN PER CENT, OF SUCH TAX. AN ADDITIONAL SURCHARGE, TO BE CALLED THE EDUCATION CESS TO FINANCE THE GOVERNMENTS COMMITMENT TO UNIVERSALISE QUALITY BASIC EDUCATION, IS PROPOSED TO BE LEVIED AT THE RA TE OF TWO PER CENT ON THE AMOUNT OF TAX DEDUCTED OR ADVANCE TAX P AID, INCLUSIVE OF SURCHARGE. III. RATES FOR DEDUCTION OF INCOME-TAX AT SOURCE FR OM SALARIES, COMPUTATION OF ADVANCE TAX AND CHARGING OF INCOME -TAX IN SPECIAL CASES DURING THE FINANCIAL YEAR 2004-2005 THE RATES FOR DEDUCTION OF INCOME-TAX AT SOURCE FRO M SALARIES DURING THE FINANCIAL YEAR 2004-2005 AND ALSO FOR CO MPUTATION OF ADVANCE TAX PAYABLE DURING THAT YEAR IN THE CASE OF ALL CATEGORIES OF TAXPAYERS HAVE BEEN SPECIFIED IN PART III OF THE FIRST SCHEDULE TO THE BILL. THESE RATES ARE ALSO APPLICAB LE FOR CHARGING INCOME-TAX DURING THE FINANCIAL YEAR 2004-2005 ON C URRENT INCOMES IN CASES WHERE ACCELERATED ASSESSMENTS HAVE TO BE MADE, E.G., PROVISIONAL ASSESSMENT OF SHIPPING PROF ITS ARISING IN INDIA TO NON-RESIDENTS, ASSESSMENT OF PERSONS LEAVI NG INDIA FOR GOOD DURING THAT FINANCIAL YEAR, ASSESSMENT OF PERS ONS WHO ARE LIKELY TO TRANSFER PROPERTY TO AVOID TAX, OR ASSESS MENT OF BODIES FORMED FOR SHORT DURATION, ETC. AN ADDITIONAL SURCHARGE, TO BE CALLED THE EDUCATION CESS TO FINANCE THE GOVERNMENTS COMMITMENT TO UNIVERSALISE QUALITY BASIC EDUCATION, IS PROPOSED TO BE LEVIED AT THE RA TE OF TWO PER CENT ON THE AMOUNT OF TAX DEDUCTED INCLUSIVE OF SUR CHARGE. ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 43 WE NOW REFER TO CHAPTER VI OF THE FINANCE BILL 2004 WHICH TALKS ABOUT EDUCATION CESS: 81. (1) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB -SECTION (11) OF SECTION 2, THERE SHALL BE LEVIED AND COLLECTED, IN ACCORDANCE WITH THE PROVISIONS OF THIS CHAPTER AS SURCHARGE FOR PUR POSES OF THE UNION, A CESS TO BE CALLED THE EDUCATION CESS, TO F ULFIL THE COMMITMENT OF THE GOVERNMENT TO PROVIDE AND FINANCE UNIVERSALISED QUALITY BASIC EDUCATION. (2) THE CENTRAL GOVERNMENT MAY, AFTER DUE APPROPRIA TION MADE BY PARLIAMENT BY LAW IN THIS BEHALF, UTILISE, SUCH SUMS OF MONEY OF THE EDUCATION CESS LEVIED UNDER SUB-SECTION (11) OF SECTION 2 AND THIS CHAPTER FOR THE PURPOSES SPECIFIED IN SUB- SECTION (1), AS IT MAY CONSIDER NECESSARY. EDUCATION CESS ON EXCISABLE GOODS. 83. (1) THE EDUCATION CESS LEVIED UNDER SECTION 81, IN THE CASE OF GOODS SPECIFIED IN THE FIRST SCHEDULE TO THE CENTRA L EXCISE TARIFF ACT, 1985 (5 OF 1986), BEING GOODS MANUFACTURED OR PRODUCED, SHALL BE A DUTY OF EXCISE (IN THIS SECTION REFERRED TO AS THE EDUCATION CESS ON EXCISABLE GOODS), AT THE RATE OF TWO PER CENT, CALCULATED ON THE AGGREGATE OF ALL DUTIES OF EXCISE (INCLUDING SPECIAL DUTY OF EXCISE OR ANY OTHER DUTY OF EXCISE BUT EXCLUDING EDUCATION CESS ON EXCISABLE GOODS) WHICH ARE LEVIED AND COLLECTED BY THE CENTRAL GOVERNMENT IN THE MINISTRY OF FINANCE (DEPARTMENT OF REVENUE), UNDER THE PROVISIONS OF TH E CENTRAL EXCISE ACT, 1944 (1 OF 1944) OR UNDER ANY OTHER LAW FOR THE TIME BEING IN FORCE. ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 44 (2) THE EDUCATION CESS ON EXCISABLE GOODS SHALL BE IN ADDITION TO ANY OTHER DUTIES OF EXCISE CHARGEABLE ON SUCH GOODS , UNDER THE CENTRAL EXCISE ACT, 1944 (1 OF 1944) OR ANY OTHER L AW FOR THE TIME BEING IN FORCE. (3) THE PROVISIONS OF THE CENTRAL EXCISE ACT, 1944 (1 OF 1944) AND THE RULES MADE THEREUNDER, INCLUDING THOSE RELATING TO REFUNDS AND EXEMPTIONS FROM DUTIES AND IMPOSITION OF PENALT Y SHALL, AS FAR AS MAY BE, APPLY IN RELATION TO THE LEVY AND COLLEC TION OF THE EDUCATION CESS ON EXCISABLE GOODS AS THEY APPLY IN RELATION TO THE LEVY AND COLLECTION OF THE DUTIES OF EXCISE ON SUCH GOODS UNDER THE CENTRAL EXCISE ACT, 1944 OR THE RULES, AS THE C ASE MAY BE. EDUCATION CESS ON IMPORTED GOODS 84. (1) THE EDUCATION CESS LEVIED UNDER SECTION 81, IN THE CASE OF GOODS SPECIFIED IN THE FIRST SCHEDULE TO THE CUSTOM S TARIFF ACT, 1975 (51 OF 1975), BEING GOODS IMPORTED INTO INDIA, SHALL BE A DUTY OF CUSTOMS (IN THIS SECTION REFERRED TO AS THE EDUCATION CESS ON IMPORTED GOODS), AT THE RATE OF TWO PER CENT CAL CULATED ON THE AGGREGATE OF DUTIES OF CUSTOMS WHICH ARE LEVIED AND COLLECTED BY THE CENTRAL GOVERNMENT IN THE MINISTRY OF FINANCE ( DEPARTMENT OF REVENUE), UNDER SECTION 12 OF THE CUSTOMS ACT, 1962 (52 OF 1962) AND ANY SUM CHARGEABLE ON SUCH GOODS UNDER AN Y OTHER LAW FOR THE TIME BEING IN FORCE, AS AN ADDITION TO, AND IN THE SAME MANNER AS, A DUTY OF CUSTOMS, BUT NOT INCLUDING (A) THE SAFEGUARD DUTY REFERRED TO IN SECTIONS 8B A ND 8C OF THE CUSTOMS TARIFF ACT, 1975 (51 OF 1975); (B) THE COUNTERVAILING DUTY REFERRED TO IN SECTION 9 OF THE CUSTOMS TARIFF ACT, 1975 (51 OF 1975); ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 45 (C) THE ANTI-DUMPING DUTY REFERRED TO IN SECTION 9A OF THE CUSTOMS TARIFF ACT, 1975 (51 OF 1975); AND (D) THE EDUCATION CESS ON IMPORTED GOODS. (2) THE EDUCATION CESS ON IMPORTED GOODS SHALL BE I N ADDITION TO ANY OTHER DUTIES OF CUSTOMS CHARGEABLE ON SUCH GOOD S, UNDER THE CUSTOMS ACT, 1962 (52 OF 1962) OR ANY OTHER LAW FOR THE TIME BEING IN FORCE. (3) THE PROVISIONS OF THE CUSTOMS ACT, 1962 (52 OF 1962) AND THE RULES AND REGULATIONS MADE THEREUNDER, INCLUDING TH OSE RELATING TO REFUNDS AND EXEMPTIONS FROM DUTIES AND IMPOSITIO N OF PENALTY SHALL, AS FAR AS MAY BE, APPLY IN RELATION TO THE L EVY AND COLLECTION OF THE EDUCATION CESS ON IMPORTED GOODS AS THEY APP LY IN RELATION TO THE LEVY AND COLLECTION OF THE DUTIES OF CUSTOMS ON SUCH GOODS UNDER THE CUSTOMS ACT, 1962 OR THE RULES OR THE REG ULATIONS, AS THE CASE MAY BE. EDUCATION CESS ON TAXABLE SERVICES. 85. (1) THE EDUCATION CESS LEVIED UNDER SECTION 81, IN THE CASE OF ALL SERVICES WHICH ARE TAXABLE SERVICES, SHALL BE A TAX (IN THIS SECTION REFERRED TO AS THE EDUCATION CESS ON TAXABL E SERVICES) AT THE RATE OF TWO PER CENT, CALCULATED ON THE TAX WHI CH IS LEVIED AND COLLECTED UNDER SECTION 66 OF THE FINANCE ACT, 1994 (32 OF 1994). (2) THE EDUCATION CESS ON TAXABLE SERVICES SHALL BE IN ADDITION TO THE TAX CHARGEABLE ON SUCH TAXABLE SERVICES, UNDER CHAPTER V OF THE FINANCE ACT, 1994 (32 OF 1994). (3) THE PROVISIONS OF CHAPTER V OF THE FINANCE ACT, 1994 (32 OF 1994) AND THE RULES MADE THEREUNDER, INCLUDING THOS E RELATING TO REFUNDS AND EXEMPTIONS FROM TAX AND IMPOSITION OF P ENALTY SHALL, ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 46 AS FAR AS MAY BE, APPLY IN RELATION TO THE LEVY AND COLLECTION OF THE EDUCATION CESS ON TAXABLE SERVICES, AS THEY APP LY IN RELATION TO THE LEVY AND COLLECTION OF TAX ON SUCH TAXABLE S ERVICES UNDER CHAPTER V OF THE FINANCE ACT, 1994 OR THE RULES, AS THE CASE MAY BE. WE NOW REFER TO THE FINANCE MINISTERS SPEECH WHILE INTRODUCING THE FINANCE BILL 2004 IN THE PARLIAMENT : 22. IN MY SCHEME OF THINGS, NO ISSUE ENJOYS A HIGH ER PRIORITY THAN PROVIDING BASIC EDUCATION TO ALL CHILDREN. THE NCMP MANDATES GOVERNMENT TO LEVY AN EDUCATION CESS. I PR OPOSE TO LEVY A CESS OF 2 PER CENT. THE NEW CESS WILL YIELD ABOUT RS. 4000 - 5000 CRORE IN A FULL YEAR. THE WHOLE OF THE AMOUNT COLLECTED AS CESS WILL BE EARMARKED FOR EDUCATION, WHICH WILL NA TURALLY INCLUDE PROVIDING A NUTRITIOUS COOKED MIDDAY MEAL. IF PRIMA RY EDUCATION AND THE NUTRITIOUS COOKED MEAL SCHEME CAN WORK HAND IN HAND, I BELIEVE THERE WILL BE A NEW DAWN FOR THE POOR CHILD REN OF INDIA. ON PERUSAL OF THE FINANCE BILL AND THE RELATES NOTE S TO THE CLAUSES AND THE MEMORANDUM EXPLAINING THE FINANCE B ILL, IT IS CLEAR THAT INCOME-TAX SHALL BE CHARGED AT THE RATES SPECIFIED IN PART I OF THE FIRST SCHEDULE AND SUCH TAX SHALL BE INCREASED BY A SURCHARGE FOR THE PURPOSES OF THE UNION. FURTHER, AS PER SECTION 2(11), THE AMOUNT O F INCOME-TAX SHALL BE FURTHER INCREASED BY AN ADDITIO NAL SURCHARGE FOR THE PURPOSES OF THE UNION TO BE CALLE D THE EDUCATION CESS ON INCOME-TAX. WE HAVE ALSO GONE ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 47 THROUGH THE FINANCE ACT 2004 AND FOUND THAT THE PROVISIONS THEREIN REGARDING EDUCATION CESS ARE PAR I- MATERIA TO THE PROVISIONS CONTAINED IN THE FINANCE BILL 2004. EVEN THE SUBSEQUENT FINANCE ACTS CONTAINS IDENTICAL PROVISIONS EXCEPT THE FACT THAT ANOTHER ADDITIONAL SURCHARGE FOR THE PURPOSES OF UNION, TO BE CALLED THE SECONDARY AND HIGHER EDUCATION CESS ON INCOME TAX HAS BEEN INTRODUCED WHICH HAS THE SAME CHARACTER AS THAT OF EDUCATION CESS. THE NATURE OF EDUCATION CESS IS THEREFORE CLEARLY ADDITIONAL SURC HARGE FOR THE PURPOSES OF THE UNION AND BEING A SURCHARGE , IT PARTAKE THE NATURE AND CHARACTER OF TAX. SIMILARLY, UNDER CHAPTER VI OF THE FINANCE BILL 200 4 WHICH CONTAINS DETAIL PROVISIONS ON LEVY OF EDUCATION CES S, CLAUSE 81 (1) PROVIDES THAT WITHOUT PREJUDICE TO THE PROVISIONS O F SUB-SECTION (11) OF SECTION 2, THERE SHALL BE LEVIED AND COLLEC TED, IN ACCORDANCE WITH THE PROVISIONS OF THIS CHAPTER AS S URCHARGE FOR PURPOSES OF THE UNION, A CESS TO BE CALLED THE EDUC ATION CESS. FURTHER, CLAUSE 83 (1) PROVIDES THAT THE EDUCATION CESS LEVIED UNDER SECTION 81, IN THE CASE OF GOODS SPECIFIED IN THE FIRST SCHEDULE TO THE CENTRAL EXCISE TARIFF ACT, 1985 , B EING GOODS MANUFACTURED OR PRODUCED, SHALL BE A DUTY OF EXCISE (IN THIS SECTION REFERRED TO AS THE EDUCATION CESS ON EXCISA BLE GOODS), AT THE RATE OF TWO PER CENT. SIMILAR IS THE POSITION IN RESPECT OF EDUCATION CESS LEVIED ON IMPORT OF GOODS WHERE IT I S HELD AS DUTY ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 48 OF CUSTOMS AND EDUCATION CESS ON TAXABLE SERVICE WH ERE IT IS HELD AS SERVICE TAX. IT IS THEREFORE CLEAR THAT ACROSS ALL TAX LEGISLATI ON DIRECT TAXES AS WELL AS INDIRECT TAXES ON GOODS AND SERVIC ES, EDUCATION CESS HAS BEEN DEFINED AS TAX. THE SPEECH OF THE FINANCE MINISTER THEREFORE HAS TO BE READ AND UNDERSTOOD IN THE CONTEXT OF THE FINANCE BILL WHICH WE HAVE DISCUSSED ABOVE. THOUGH THE LEVY HAS BEEN TER MED AS A EDUCATION CESS, WHAT IS RELEVANT TO DETERMINE IS ITS EXACT NATURE RATHER THAN ITS NOMENCLATURE. THE NA TURE OF EDUCATION CESS IS CLEARLY TAX AND NOTHING ELSE. NOW LOOKING AT THE ISSUE FROM THE ANGLE OF RECOVERY OF EDUCATION CESS, THERE IS NO SEPARATE MACHINERY IN T HE INCOME TAX ACT FOR RECOVERY OF UNPAID EDUCATION CES S AND IMPOSITION OF INTEREST AND PENALTY IN CASE OF DEFAU LT IN PAYMENT OF UNPAID CESS. THIS ALSO CLEARLY INDICATES THAT CESS IS A PART OF TAX AND ALL RECOVERY MECHANISMS & CONSEQUENCES PERTAINING TO RECOVERY OF TAX APPLY TO RECOVERY OF CESS ALSO WITHOUT EXPLICIT MENTION OF T HE WORD 'EDUCATION CESS'. INFACT, CLAUSE 83 (3) OF THE FIN ANCE BILL 2004 MAKES THIS POSITION CRYSTAL CLEAR WHEN IT STAT ES THAT THE PROVISIONS OF THE CENTRAL EXCISE ACT, 1944 AND THE RULES MADE THEREUNDER, INCLUDING THOSE RELATING TO REFUNDS AND EXEMPTIONS FROM DUTIES AND IMPOSITION O F PENALTY SHALL, AS FAR AS MAY BE, APPLY IN RELATION TO THE ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 49 LEVY AND COLLECTION OF THE EDUCATION CESS ON EXCISA BLE GOODS AS THEY APPLY IN RELATION TO THE LEVY AND COL LECTION OF THE DUTIES OF EXCISE ON SUCH GOODS UNDER THE CEN TRAL EXCISE ACT, 1944 OR THE RULES, AS THE CASE MAY BE. THOUGH THE SAME HAS BEEN STATED IN THE CONTEXT OF CENTRAL EXCISE ACT, IN OUR VIEW, THE SAME EQUALLY A PPLIES IN THE CONTEXT OF THE INCOME TAX ACT GIVEN THAT THE NATURE AND CHARACTER OF LEVY OF EDUCATION CESS IS IDENTICA L ACROSS ALL TAX LEGISLATIONS. WE NOW REFER TO THE JUDGEMENT OF THE HONBLE SUPREM E COURT IN THE CASE OF JAIPURIA SAMLA AMALGAMATED COLLIERIES LTD VS CIT [1971] 82 ITR 580 (SC). IN THIS CASE, THE ASSESSEE WHO CARRIED ON THE BUSINESS OF RAISING COAL FROM COAL M INES AND SELLING IT, PAID ROAD AND PUBLIC WORKS CESS UNDER THE BENGA L CESS ACT, 1880 AND EDUCATION CESS UNDER THE BENGAL (RURAL) PR IMARY TAX ACT, 1930,IN RELATION TO THE COAL MINES, WHICH IT H AD TAKEN ON LEASE. THE CESS WAS LEVIABLE UNDER THE RESPECTIVE S TATUTES ON THE ANNUAL NET PROFITS TO BE CALCULATED ON THE AVERAGE ANNUAL NET PROFITS FOR THE LAST THREE YEARS, FOR WHICH THE ACC OUNTS HAD BEEN MADE UP. THE QUESTION WAS WHETHER THESE CESSES PAID BY THE ASSESSEE UNDER THE AFORESAID BENGAL ACTS FELL WITHI N THE MISCHIEF OF SECTION 10(4) OF THE INCOME-TAX ACT, 1922 AND IT WAS HELD AS UNDER: NOW IT IS QUITE CLEAR THAT THE AFORESAID CESSES WO ULD BE ALLOWABLE DEDUCTIONS EITHER UNDER CLAUSE (IX) OR CLAUSE (XV) OF SUB-SECTION (2) OF SECTION 10 UNLESS THEY FELL WITHIN SECTION 1 0(4). WE HAVE ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 50 ALREADY REFERRED TO THE PROVISIONS OF BOTH ACTS UND ER WHICH THE CESSES ARE LEVIED WHICH SHOW THAT THEIR ASSESSMENT IS NOT MADE AT A PROPORTION OF THE PROFITS OF THE ASSESSEE'S BU SINESS. WHAT HAS TO BE DETERMINED IS WHETHER THE ASSESSMENT OF THE C ESSES IS MADE ON THE BASIS OF ANY SUCH PROFITS. THE WORDS 'P ROFITS AND GAINS OF ANY BUSINESS, PROFESSION OR VOCATION' WHIC H ARE EMPLOYED IN SECTION 10(4) CAN, IN THE CONTEXT, HAVE REFERENCE ONLY TO PROFITS OR GAINS AS DETERMINED UNDER SECTIO N 10 AND CANNOT COVER THE NET PROFITS OR GAINS ARRIVED AT OR DETERMINED IN A MANNER OTHER THAN THAT PROVIDED BY SECTION 10. THE WHOLE PURPOSE OF ENACTING SUB-SECTION (4) OF SECTION 10 A PPEARS TO BE TO EXCLUDE FROM THE PERMISSIBLE DEDUCTIONS UNDER CL AUSES (IX) AND (XV) OF SUB-SECTION (2) SUCH CESS, RATE OR TAX WHIC H IS LEVIED ON THE PROFITS OR GAINS OF ANY BUSINESS, PROFESSION OR VOCATION OR IS ASSESSED AT A PROPORTION OF OR ON THE BASIS OF SUCH PROFITS OR GAINS. IN OTHER WORDS, SUB-SECTION (4) WAS MEANT TO EXCLUDE A TAX OR A CESS OR RATE THE ASSESSMENT OF WHICH WOULD FOL LOW THE DETERMINATION OR ASSESSMENT OF PROFITS OR GAINS OF ANY BUSINESS, PROFESSION OR VOCATION IN ACCORDANCE WITH THE PROVI SIONS OF SECTION 10 OF THE ACT. THE ROAD CESS AND PUBLIC WORKS CESS ARE TO BE ASSE SSED ON THE ANNUAL NET PROFITS UNDER SECTIONS 72 TO 76 OF THE C ESS ACT, 1880. THE NET ANNUAL PROFITS HAVE TO BE CALCULATED ON THE AVERAGE OF THE NET PROFITS FOR THE LAST THREE YEARS OF THE MIN E OR THE QUARRY AND IF THE ANNUAL NET PROFITS OF THE PROPERTY CANNO T BE ASCERTAINED IN THE AFORESAID MANNER THEN IT IS LEFT TO THE COLLECTOR TO DETERMINE THE VALUE OF THE PROPERTY FIRST IN SUC H MANNER AS HE ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 51 CONSIDERS EXPEDIENT AND DETERMINE 6 PER CENT. ON TH AT VALUE WHICH WOULD BE DEEMED TO BE THE ANNUAL NET PROFITS. THE CESS ACT OF 1930 FOLLOWS THE SAME PATTERN SO FAR AS THE ASCERTAINMENT OF ANNUAL NET PROFITS IS CONCERNED. THESE PROFITS A RRIVED AT ACCORDING TO THE PROVISIONS OF THE TWO CESS ACTS CA N BY NO STRETCH OF REASONING BE EQUATED TO THE PROFITS WHICH ARE DE TERMINED UNDER SECTION 10 OF THE ACT. IT IS NOT POSSIBLE TO SEE, THEREFORE, HOW SECTION 10(4) COULD BE APPLICABLE AT ALL IN THE PRESENT CASE. THUS, ON THE LANGUAGE OF THE PROVISIONS BOTH OF THE ACT AND THE TWO CESS ACTS THE APPLICABILITY OF SECTION 10(4) CA NNOT BE ATTRACTED. BUT EVEN ACCORDING TO THE DECIDED CASES SUCH CESSES CANNOT FALL WITHIN SECTION 10(4). IT IS THUS CLEAR THAT SECTION 10(4) OF THE 1922 ACT EXCLUDES ONLY CESS, RATE OR TAX WHICH IS LEVIED ON THE PROFITS OR GAINS OF ANY BUSINESS, PROFESSION OR VOCATION, OR IS ASSESSED AT A PROPORTION OF OR ON THE BASIS OF SUCH PROFITS OR GAINS, IN ACCORD ANCE WITH THE PROVISIONS OF SECTION 10 OF THE ACT. THE ROAD AND PUBLIC WORKS CESS LEVIED UNDER THE BENGAL CESS ACT, 1880 AND E DUCATION CESS LEVIED UNDER THE BENGAL (RURAL) PRIMARY TAX A CT, 1930 WAS THUS HELD AS NOT A CESS LEVIED AS PART OF THE TAX U NDER THE INCOME-TAX ACT AND ACCORDINGLY, IT WAS ALLOWED AS A PERMISSIBLE DEDUCTION. IF WE WERE TO READ THE PROVISIONS OF SECTION 10(4) BEING PARI-MATERIA WITH THE PROVISIONS OF SEC TION 40(A)(II) AND APPLY THE RATIO OF THE AFORESAID SUPR EME COURT JUDGEMENT IN THE CONTEXT OF EDUCATION CESS, I T WILL SUPPORTS THE VIEW THAT THE EDUCATION CESS PRESENTLY ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 52 LEVIED UNDER THE INCOME-TAX ACT, 1961 COULD NOT BE ALLOWED AS A DEDUCTION UNDER SECTION 40(A)(II) OF T HE ACT. THE REASON FOR THE SAME IS THAT AS WE HAVE ALREADY HELD ABOVE THAT THE BASIC CHARACTER OF EDUCATION CESS IS NOTHING BUT LEVY OF TAX. SUCH LEVY OF EDUCATION CE SS IS ON THE PROFITS/GAINS OF THE BUSINESS OF THE ASSESSEE. WHERE THERE ARE NO PROFITS/GAINS IN A PARTICULAR YEAR, TH ERE WOULD NOT BE ANY LEVY OF EDUCATION CESS. THE LEVY OF EDUCATION CESS IS THUS CLEARLY ON THE PROFITS OR GA INS OF THE BUSINESS. FURTHER, EVEN THOUGH MEASUREMENT AND CALCULATION OF SUCH LEVY OF EDUCATION CESS IS AS A PERCENTAGE OF INCOME TAX, THE BASIS OF MEASUREMENT OF SUCH LEVY WILL NOT DETERMINE OR ALTER THE BASIC CHA RACTER OF SUCH LEVY WHICH CONTINUES TO REMAIN AS TAX. IT SATISFIES BOTH THE FIRST AND THE SECOND LIMB OF SECTION 40(A) (II). THE FIRST LIMB TALKS ABOUT THE PAYMENT OF TAX LEVIE D ON THE PROFITS OR GAINS BY THE ASSESSEE AND THE SECOND LIMB TALKS ABOUT THE DETERMINATION AND ASSESSMENT THEREO F BY THE ASSESSING OFFICER ON THE BASIS OF SUCH PROFITS OR GAINS. IT IS, THUS, CLEAR THAT THE AFORESAID JUDGEMENT OF THE HONBLE SUPREME COURT SUPPORT THE CASE OF THE REVEN UE THAT EDUCATION CESS WHOSE DETERMINATION AND ASSESSM ENT IS BASED ON THE PROFITS OR GAINS OF BUSINESS, COMPU TED IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX AC T, COULD NOT BE ALLOWED AS A DEDUCTION UNDER SECTION 40(A)(II) OF THE ACT. ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 53 THE ABOVE VIEW ALSO FIND SUPPORTS FROM THE DECISION OF THE COORDINATE BENCH IN CASE OF SESA GOA LTD VS JCIT [2013] 60 SOT 121 (PANAJI) WHEREIN IT WAS HELD AS UNDER: 35. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY C ONSIDERED THE SAME. IN OUR OPINION, EDUCATION CESS AND SECONDARY HIGHER EDUCATION CESS LEVIED BY THE ASSESSEE HAS BEEN COLL ECTED AS PART OF THE INCOME-TAX AND THE PROVISIONS OF SECTION 40( A)(IC) & (II) ARE CLEARLY APPLICABLE AND THE ASSESSEE IS NOT ENTITLED FOR THE DEDUCTION. THE SAID PAYMENT IS NOT A FEE BUT IS A T AX. IN CASE OF FEES, PAYMENT IS MADE AGAINST GETTING CERTAIN BENEF IT OR SERVICES WHILE TAX IS IMPOSED BY THE GOVERNMENT AND IS LEVIE D FOR WHICH THE PERSON WHO PAY THE TAX IS NOT PROMISED IN RETUR N TO GET ANY BENEFIT OR SERVICE. THE ASSESSEE IS NOT GETTING ANY BENEFIT OR SERVICES IN RETURN BY MAKING THE PAYMENT TOWARDS TH E EDUCATION CESS AND SECONDARY HIGHER EDUCATION CESS. THEREFORE , IT CANNOT BE SAID THAT IT IS AN EXPENDITURE INCURRED WHOLLY A ND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS AND IS NOT PART OF TAX. WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE ORDER OF TH E CIT(A) WHILE CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING O FFICER IN THIS REGARD. THUS, DISALLOWANCE OF RS.19,72,00,814/-IS H EREBY CONFIRMED. THUS, THIS GROUND STAND DISMISSED. AS REGARDS THE CIRCULAR NO.91 / 58 / 66 ITJ (19), DT.18.5.1967, THE EFFECT OF OMISSION OF THE WORD CESS FROM SECTION 40(A)(II) IS THAT ONLY TAXES PAID ARE TO BE DISALLOWED IN THE ASSESSMENTS FOR THE YEARS 1962-63, ONWARDS. IN THIS REGARD, IN ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 54 THE FIRST PLACE, IT HAS TO BE SEEN THAT CESS, AS CONTEMPLATED IN THE AFORESAID CIRCULAR, RELATES TO THE CESS WHICH I S LEVIABLE UNDER SOME OTHER STATUTES AND WHICH IS A CHARGE ON THE PR OFITS OF THE ASSESSEE, AS IN THE AFORESAID CASE OF JAIPURIA SAML A AMALGAMATED COLLIERIES LTD VS CIT [1971] 82 ITR 580 (SC). SECO NDLY, THE PRESENT EDUCATION CESS HAS BEEN LEVIED MUCH AFTER T HE DATE OF THE AFORESAID CIRCULAR AND MORE IMPORTANTLY, THE ED UCATION CESS, AS CONTEMPLATED UNDER THE FINANCE ACT, IS NOTHING B UT A PART OF INCOME-TAX, CHARGEABLE UNDER THE PROVISIONS OF THE ACT. THEREFORE, THE AFORESAID CIRCULAR IS NOT RELEVANT I N THE PRESENT CONTEXT. THE CASE OF DUNCANS INDUSTRIES LTD RENDERED IN THE CONTEXT OF CESS LEVIED UNDER THE WEST BENGAL RURAL EMPLOYMENT PRODUCTION ACT, 1976 AND THE WEST BENGAL PRIMARY EDUCATION ACT , 1973 AND NOT IN THE CONTEXT OF CESS LEVIED ON THE PROFITS OR GAINS OF THE BUSINESS OF THE ASSESSEE IN ACCORDANCE WITH THE PRO VISIONS OF THE INCOME TAX ACT, DOESNT SUPPORT THE CASE OF THE ASS ESSEE FOR THE REASONS AS DISCUSSED ABOVE. 63. NOW COMING TO THE CONTENTION OF THE LD AR THAT THE LANGUAGE OF SECTION 115JB ESPECIALLY EXPLANATION 2 WHICH SPECIFICALLY INCLUDES EDUCATION CESS WITHIN THE AMB IT OF INCOME TAX AND IN ABSENCE OF SUCH INCLUSION IN SECTION 40(A)( II), THE EDUCATION CESS IS NOT A TAX FOR THE PURPOSES OF SEC TION 40(A)(II). AS WE HAVE ALREADY HELD ABOVE THAT THE BASIC CHARAC TER OF EDUCATION CESS IS TAX. GIVEN THAT, WE DONOT SEE A NECESSITY FOR A ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 55 SPECIFIC INCLUSION OF EDUCATION CESS IN SECTION 40( A)(II). AS FAR AS SECTION 115JB IS CONCERNED, THE SPECIFIC INCLUSION OF EDUCATION CESS IS BY WAY OF AN EXPLANATION AND AN EXPLANATION IS ALWAYS UNDERSTOOD TO MEAN WHAT IS INTENDED ORIGINALLY AT T HE TIME OF ENACTMENT. IN OUR VIEW, THE SAID EXPLICIT DEFINITI ON OF INCOME TAX TO INCLUDE EDUCATION CESS IS CLARIFICATORY IN NATUR E AND THE SAME CANNOT BE TAKEN AS A BASIS OF ARGUMENT TO CONTEND T HAT IN ABSENCE OF SUCH CLARIFICATION IN CONTEXT OF SECTION 40(A)(II), EDUCATION CESS IS NOT PART OF TAX. 63.1. NOW COMING TO THE CONTENTION OF THE AR THAT W HERE THE LEGISLATURE WANTED CERTAIN TAXES OTHER THAN INCOME- TAX TO BE EXCLUDED FOR THE PURPOSES OF COMPUTATION OF TAXABLE INCOME, IT HAS SPECIALLY PROVIDED FOR THE SAME. THE INSTANCES ARE AMOUNTS PAID AS WEALTH-TAX, SECURITIES TRANSACTION TAX AND FRINGE BENEFIT TAX IN SECTION 40 OF THE IT ACT. HAD THERE BEEN ANY INTENTION OF DISALLOWING EDUCATION CESS, SUCH PROVISION WOULD HA VE BEEN SPECIFICALLY BEEN ENACTED WHICH HAS NOT BEEN DONE. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE AFORESAID CONT ENTION OF THE LD AR BUT WE ARE AFRAID WE ARE UNABLE TO ACCEDE TO THE SAME. AS WE HAVE ALREADY HELD ABOVE, THE BASIS CHARACTER OF EDUCATION CESS AS INTENDED BY THE LEGISLATURE IS TAX WHICH IS LEVIED ON THE PROFITS OR GAINS OF THE BUSINESS AND GIVEN THAT SUC H TAX HAS ALREADY BEEN PROVIDED IN SECTION 40(A)(II) AS NOT A N ALLOWABLE DEDUCTION, THERE WAS NOTHING MORE THAT WAS REQUIRED OR EXPECTED FROM THE LEGISLATURE. THE LEVY OF WEALTH TAX, SECU RITIES TRANSACTION TAX AND FRINGE BENEFIT TAX ARE NOT ON T HE PROFITS OR ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 56 GAINS OF BUSINESS OR PROFESSION, HENCE, THERE WAS A NECESSITY FELT BY THE LEGISLATURE AND WHICH WAS SPECIFICALLY PROVI DED FOR. 64. IN LIGHT OF ABOVE DISCUSSIONS AND THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT LD CIT(A) HAS RIGHTLY DISALLOWED THE CLAIM OF EDUCATION CESS AS A N ALLOWABLE DEDUCTION UNDER SECTION 40(A)(II) OF THE ACT. IN T HE RESULT, GROUND TAKEN BY THE ASSESSEE IS DISMISSED. 26. OUR ABOVE VIEW HAS BEEN FORTIFIED BY A RECENT D ECISION OF THE HONBLE SUPREME COURT IN CASE OF SRD NUTRIENTS PRIVATE LIMITED VS COMMISSIONER OF CENTRAL EXCISE, GUWAHATI (CIVIL APPEAL NO. 2781-2790 OF 2010 DATED 10.11.2017) WHEREIN THE ISSUE FOR CONSIDERATION WAS WHERE THE APPELLANT WAS ENTITLED FOR REFUND OF EDUCATION CESS AND HIGHER EDUCATION CESS WHICH WAS PAID ALONG WITH EXCISE DUTY ONCE THE EXCISE DUTY ITSELF WAS EXEMPTE D FROM LEVY. THE HONBLE SUPREME COURT HAS HELD THAT EDUCATION CESS AND HIGHER EDUCATION CESS WOULD PARTAKE THE CHARACTER OF EXCIS E DUTY AND ENTITLED TO THE REFUND WHERE EXCISE DUTY ITSELF WAS EXEMPTED FROM LEVY. WHILE LAYING DOWN THE SAID LEGAL PROPOSITION, THE HONBLE SUPREME COURT HAS ALSO AFFIRMED THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN CASE BANSWARA SYNTEX LIMITED AND HAS HELD AS UNDER: 20) ONE ASPECT THAT CLEARLY EMERGES FROM THE READ ING OF THESE TWO CIRCULARS IS THAT THE GOVERNMENT ITSELF HAS TAK EN THE POSITION THAT WHERE WHOLE OF EXCISE DUTY OR SERVICE TAX IS E XEMPTED, EVEN THE EDUCATION CESS AS WELL AS SECONDARY AND HIGHER EDUC ATION CESS ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 57 WOULD NOT BE PAYABLE. THESE CIRCULARS ARE BINDING O N THE DEPARTMENT. 21) EVEN OTHERWISE, WE ARE OF THE OPINION THAT IT IS MORE RATIONAL TO ACCEPT THE AFORESAID POSITION AS CLARIF IED BY THE MINISTRY OF FINANCE IN THE AFORESAID CIRCULARS. EDUCATION CESS IS ON EXCISE DUTY. IT MEANS THAT THOSE ASSESSEES WHO ARE REQUIRED TO P AY EXCISE DUTY HAVE TO SHELL OUT EDUCATION CESS AS WELL. THIS EDUC ATION CESS IS INTRODUCED BY SECTIONS 91 TO 93 OF THE FINANCE (NO. 2) ACT, 2004. AS PER SECTION 91 THEREOF, EDUCATION CESS IS THE SURCH ARGE WHICH THE ASSESSEE IS TO PAY. SECTION 93 MAKES IT CLEAR THAT THIS EDUCATION CESS IS PAYABLE ON EXCISABLE GOODS I.E. IN RESPEC T OF GOODS SPECIFIED IN THE FIRST SCHEDULE TO THE CENTRAL EXCISE TARIFF ACT, 1985. FURTHER, THIS EDUCATION CESS IS TO BE LEVIED @ 2% AND CALCUL ATED ON THE AGGREGATE OF ALL DUTIES OF EXCISE WHICH ARE LEVIED AND COLLECTED BY THE CENTRAL GOVERNMENT UNDER THE PROVISIONS OF CENT RAL EXCISE ACT, 1944 OR UNDER ANY OTHER LAW FOR THE TIME BEING IN F ORCE. SUB-SECTION (3) OF SECTION 93 PROVIDES THAT THE PROVISIONS OF T HE CENTRAL EXCISE ACT, 1944 AND THE RULES MADE THEREUNDER, INCLUDING THOSE RELATED TO REFUNDS AND DUTIES ETC. SHALL AS FAR AS MAY BE APPL IED IN RELATION TO LEVY AND COLLECTION OF EDUCATION CESS ON EXCISABLE GOODS. A CONJOINT READING OF THESE PROVISIONS WOULD AMPLY DEMONSTRATE THAT EDUCATION CESS AS A SURCHARGE, IS LEVIED @ 2% ON THE DUTIES O F EXCISE WHICH ARE PAYABLE UNDER THE ACT. IT CAN, THEREFORE, BE CL EARLY INFERRED THAT WHEN THERE IS NO EXCISE DUTY PAYABLE, AS IT IS EXEM PTED, THERE WOULD NOT BE ANY EDUCATION CESS AS WELL, INASMUCH AS EDUC ATION CESS @ 2% IS TO BE CALCULATED ON THE AGGREGATE OF DUTIES O F EXCISE. THERE CANNOT BE ANY SURCHARGE WHEN BASIC DUTY ITSELF IS N IL. ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 58 22) IT IS RIGHTLY POINTED OUT BY THE LEARNED COUNSE L FOR THE APPELLANTS THAT THE CESTAT IN THE EARLIER TWO JUDGM ENTS GIVEN IN BHARAT BOX FACTORY LTD. AND CYRUS SURFACTANTS PVT. LTD., HELD THAT EDUCATION CESS AND HIGHER EDUCATION CESS WOULD ALSO REFUNDABLE ALONG WITH EXCISE DUTY AND IN VIEW THEREOF, ANOTHER CO-ORDINATE BENCH OF CESTAT COULD NOT TAKE A CONTRARY VIEW IN J INDAL DRUGS LTD. JUDICIAL DISCIPLINE WARRANTED REFERENCE OF THE MATT ER TO THE LARGER BENCH WHICH IT DID NOT DO. IN THE IMPUGNED JUDGMENT , WHILE PREFERRING TO FOLLOW THE VIEW TAKEN IN JINDAL DRUG LTD. THE TRIBUNAL HAS NOT GIVEN ANY REASONS FOR ADOPTING THIS COURSE OF ACTION. THE RAJASTHAN HIGH COURT IN THE CASE OF BANSWARA SYNTEX LTD. WHILE HOLDING THAT SURCHARGE TAKEN IN THE FORM OF E DUCATION CESS SHALL ALSO BE REFUNDABLE HAS GIVEN THE FOLLOWING RE ASONS IN SUPPORT OF THE SAID VIEW: 15. THE VERY FACT THAT THE SURCHARGE IS COLLECTED AS PART OF LEVY UNDER THREE DIFFERENT ENACTMENTS GOES TO SHOW THAT SCHEME OF LEVY OF EDUCATION CESS WAS BY WAY OF COLLECTING SPECIAL FUNDS FOR THE PURPOSE OF GOVERNMENT PROJECT TOWARDS PROVIDING AND FINANCING UNIVERSALISED QUALITY OF BASIC EDUCATION BY ENHANCI NG THE BURDEN OF CENTRAL EXCISE DUTY, CUSTOMS DUTY, AN D SERVICE TAX BY WAY OF CHARGING SURCHARGE TO BE COLLECTED FOR THE PURPOSE OF UNION. BUT, IT WAS MADE CLEAR THAT IN RESPECT OF ALL THE THREE TAXES, THE SURCHARGE COLLECTED ALONG WITH THE TAX WILL BEAR THE SAME CHARACTER OF RESPECTIVE TAXES TO WHICH SURCHARGE WAS APPENDED AND WAS TO BE ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 59 GOVERNED BY THE RESPECTIVE ENACTMENTS UNDER WHICH EDUCATION CESS IN THE FORM OF SURCHARGE IS LEVIED & COLLECTED. 16. APPARENTLY, WHEN AT THE TIME OF COLLECTION, SURCHARGE HAS TAKEN THE CHARACTER OF PARENT LEVY, WHATEVER MAY BE THE OBJECT BEHIND IT, IT BECOMES SUBJECT TO THE PROVISION RELATING TO THE EXCISE DUTY APPLICABLE TO IT IN THE MANNER OF COLLECTING THE SAME, OBLIGATION OF THE TAX PAYER IN RESPECT OF ITS DISCHARGE AS WELL AS EXEMPTION CONCESSION BY WAY OF REBATE ATTACHED WITH SUCH LEVIES. THIS ASPECT HAS BEEN MADE CLEAR BY COMBINED READING OF SUB-SECTIONS (1),(2) & (3) OF SECION 93. XXX XXX XXX 18. THE EXPLANATION APPENDED TO NOTIFICATION DATED 26.06.2001 INCLUDED WITHIN THE AMBIT OF EXCIS E DUTY ANY SPECIAL EXCISE DUTY COLLECTED UNDER ANY FINANCE ACT WHEN UNDER FINANCE ACT, 2004 IT WAS ORDAINED THAT EDUCATION CESS TO BE COLLECTED AS SURCHARGE ON EXCISE DUTY PAYABLE ON EXCISABLE GOODS AND SHALL BE A DUTY OF EXCISE, IT BECAME A SPECIAL DUTY OF EXCISE BY WAY OF EDUCATION CESS CHARGEABLE AND COLLECTED UNDER FINANCE ACT, 2004 AND FELL WITH IN ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 60 THE AMBIT OF CLAUSE (3) OF EXPLANATION APPENDED TO NOTIFICATION DATED 26/6/2001. CONSEQUENTLY, REBATE BECAME AVAILABLE ON COLLECTION OF SURCHARGE ON EXCISE DUTY UNDER FINANCE ACT, 2004 IN TERMS OF EXISTING NOTIFICATION DATED 26/6/2001 IMMEDIATELY. LATER NOTIFICATION INCLUDING THE EDUCATION CESS IN ENUMERATIVE DEFINITION IN THE CIRCUMSTANCES WAS ONL Y CLARIFICATORY AND BY WAY OF ABANDONED CAUTION, BUT NOT A NEW REBATE IN RELATION TO EXCISE DUTY OR ANY PART THEREOF AS STATUTORILY PRONOUNCED AS WELL AS SPECIFIED EXCISE DUTY LEVIED AND COLLECTED UNDER TH E FINANCE ACT. WE ARE IN AGREEMENT WITH THE AFORESAID REASONS A CCORDED BY THE RAJASTHAN HIGH COURT, SINCE IT IS IN CONSONANCE WITH THE LEGAL PRINCIPLE ENUNCIATED BY THIS COURT. FOR THIS PURPOSE, WE MAY REFER TO THE JUDGMENT IN THE CASE OF COLLECTOR OF CENTRAL EXCISE, PATNA V. TATA ENGINEERING AND LOCOMOTIVE CO. 10 IN THAT CASE, ISSUE PERTAINED TO VALUATION OF CESS WHICH WAS LEVI ED @ 1/8 PER CENT OF AD VALOREM VALUE OF THE CENTRAL EXCISE DUTY. THE COURT HELD THAT THE CALCULATION OF 1/8 PER CENT AD VALOREM OF THE MOTOR VEHICLE FOR THE PURPOSES OF THE LEVY AND COLLECTION OF THE AUTOMOBI LE CESS MUST BE MADE THAT WAS BEING CALCULATED SINCE AUTOMOBILE CES S WAS TO BE LEVIED ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 61 AND CALCULATED AS IF IT WAS EXCISE DUTY. AS A FORTIORARI, THE EDUCATION CESS AND HIGHER EDUCATION CESS LEVIED @ 2% OF THE E XCISE DUTY WOULD PARTAKE THE CHARACTER OF EXCISE DUTY ITSELF. 27. IN LIGHT OF ABOVE DISCUSSIONS, RESPECTFULLY FOL LOWING THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF SRD NUTRIENTS PRIVATE LIMITED (SUPRA) WHERE EDUCATION CESS AND HIGHER EDUCATION C ESS HAVE BEEN HELD TO PARTAKE THE CHARACTER OF EXCISE DUTY, THE LEGAL PROPOSITION SO LAID DOWN BY THE HONBLE SUPREME COURT WILL APPLY WITH E QUAL FORCE IN THE CONTEXT OF INCOME TAX, AND FOLLOWING OUR DECISION I N CASE OF CHAMBAL FERTILIZERS (SUPRA) WHEREIN WE HAVE HELD THAT ACROS S ALL TAX LEGISLATION DIRECT TAXES AS WELL AS INDIRECT TAXES ON GOODS AND SERVICES, THE NATURE AND CHARACTER OF EDUCATION CESS AND HIGHER EDUCATIO N CESS IS CLEARLY TAX AND NOTHING ELSE, WE ARE OF THE CONSIDERED VIEW THA T THE ASSESSEES CLAIM OF DEDUCTION ON ACCOUNT OF EDUCATION CESS (EC ) & SECONDARY AND HIGHER EDUCATION CESS (SHEC) ON INCOME TAX & DIVIDE ND DISTRIBUTION TAX AMOUNTING TO RS. 1,42,79,859/-, AS ELIGIBLE REVENUE EXPENSE U/S 37 OF THE ACT IS NOT PERMISSIBLE IN VIEW OF THE PROVISION S OF SECTION 40(A)(II) OF THE ACT. 28. REGARDING GROUND NO. 3 OF ASSESSEES APPEAL, B RIEFLY THE FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATI ON, THE ASSESSEE EXCLUDED PROFIT ON SALE OF INVESTMENTS AMOUNTING TO RS. 1,76,22,643/- AND PROFIT ON SALE OF FIXED ASSETS AMOUNTING TO RS. 1,18,52,588/-, WHILE COMPUTING BOOK PROFIT U/S 115JB. THE CLAIM WAS DISA LLOWED BY THE AO ON THE CONTENTION THAT SECTION 115JB IS AN OVERRIDI NG SECTION WHICH IS ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 62 INTRODUCED FOR A SPECIFIC PURPOSE. NO ADDITION OR D EDUCTION CAN BE MADE EXCEPT THOSE SPECIFIED IN EXPLANATION 1 AND 2 OF SE CTION 115JB. RELIANCE IN THIS REGARD WAS PLACED ON THE DECISION OF RAIN C OMMODITIES LIMITED- VS.-DCIT (ITA NO. 673/HYD/2010 DATED 24.12.2010). T HE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE AO BY PLACING RE LIANCE ON THE DECISION OF COORDINATE BENCH DATED 27.01.2014 IN TH E ASSESSEES OWN CASE FOR AY 2008-09. 29. DURING THE COURSE OF HEARING, THE LD AR FAIRLY CONCEDED THAT THE ISSUE HAS SINCE BEEN COVERED AGAINST THE ASSESSEE B Y THE DECISION OF COORDINATE BENCH (ITA NO. 504/JP/2012 DATED 27.01.2014) IN THE ASSESSEES OWN CASE FOR AY 2008-09. RESPECTFULLY F OLLOWING THE SAME, WE HEREBY CONFIRM THE ORDER OF THE LD CIT(A) AND DI SMISS THE GROUND OF APPEAL TAKEN BY THE ASSESSEE. 30. NOW, COMING TO THE APPEAL FILED BY THE REVENUE . IN GROUND NO. 1, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD CIT (A) IN DELETING THE DISALLOWANCES MADE BY THE AO ON ACCOUNT OF SALES TA X SUBSIDY BY TREATING THE AMOUNT OF RS. 31,86,07,921/- AS CAPITA L RECEIPTS INSTEAD OF REVENUE RECEIPT. IN GROUND NO. 2, THE REVENUE HAS CHALLENGED THE DELETION OF DISALLOWANCE MADE BY THE AO ON ACCOUNT OF SALES TAX SUBSIDY BY TREATING THE AMOUNT OF RS. 31,86,07,921/ - AS CAPITAL RECEIPT AND THE SAME IS NOT INCLUDIBLE IN THE BOOK PROFIT U /S 115JB OF THE IT ACT, WITHOUT APPRECIATING THE FACTS OF THE CASE. 31. THE LD. AR SUBMITTED THAT THE MATTER HAS BEEN D ECIDED IN FAVOUR OF THE ASSESSEE BY THE RECENT DECISION OF HONBLE R AJASTHAN HIGH COURT ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 63 IN ASSESSEES OWN CASE IN DB ITA NO. 204/2010 DATED 22/08/2017 AND DB ITA NO. 85/2014 DATED 22/08/2017. 32. IN DB ITA NO. 204/2010 DATED 22/08/2017, THE SU BSTANTIAL QUESTION OF LAW FRAMED FOR CONSIDERATION BY HONBLE RAJASTHAN HIGH COURT WAS AS UNDER:- WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE OF RS. 18,48,85,506/- IN THE FORM OF SALES TAX EXEMPTION WAS A CAPITAL RECEIPT AND NOT A REVENUE R ECEIPT IGNORING THE BASIC PURPOSE FOR WHICH THE SAME WAS G IVEN WHICH ITSELF PROVIDES THAT THE SUBSIDY WAS GIVEN TO THE A SSESSEE TO ENHANCE THE PRODUCTION, EMPLOYMENT AND THE SALE IN THE STATE OF RAJASTHAN WHICH ARE ALL POST OPERATIONAL ACTIVITIES . 33. WHILE CONSIDERING THE ABOVE SUBSTANTIAL QUESTIO N OF LAW, THE FINDINGS OF THE HONBLE RAJASTHAN HIGH COURT ARE AS FOLLOWS: 6. WE HAVE HEARD COUNSEL FOR THE PARTIES. 6.1 IN VIEW OF THE CONTENTIONS WHICH HAVE BEEN RAI SED BY THE COUNSEL FOR THE DEPARTMENT AND DISCUSSIONS MADE BY THE AO AS WELL AS CIT(A) IN OUR CONSIDERED OPINION, THE TAX L IABILITY, WE HAVE CONSIDERED ORIGINAL PURPOSE FOR WHICH THE SCHEME HA S BEEN FLOATED BY THE STATE GOVERNMENT BY GOING THROUGH TH E SCHEME. 6.2 IT IS VERY CLEAR THAT BECAUSE AT THE RELEVANT TIME THE STATE GOVERNMENT NEED EMPLOYMENT GENERATION THEREFORE IT HAS COME OUT WITH THE GENERATION OF EMPLOYMENT FOR WHICH CAP ITAL ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 64 INVESTMENT WAS NECESSARY AND THEREFORE TO BOOST CAP ITAL INVESTMENT SCHEME HAS BEEN FLOATED FOR EXEMPTION OF SALES TAX WHICH CAN BE CAPITALIZED AGAINST THE CAPITAL WHICH HAS BEEN INVESTED AGAINST THE LOSS OF INTEREST WHICH THEY HA VE MADE INVESTMENT APART FROM 1.50 CRORES AND OVER A PERIOD OF 11 YEARS THEY HAVE TO REALIZED THE INVESTMENT MADE. 6.3 WE HAVE GONE THROUGH THE SCHEME AND RELEVANT BU DGET SPEECH OF THE FINANCE MINISTER AND ALL THE OTHER DO CUMENTS AND MORE PARTICULARLY THE TRIBUNAL WHILE CONSIDERING TH E SCHEME HAS ANALYISED COMPLETELY IN PARA NO. 5.13 AND HAS COME TO THE CONCLUSION IN VIEW OF THE OBSERVATIONS MADE BY THE SUPREME COURT IN PONY SUGAR (SUPRA). 6.4 IN OUR CONSIDERED OPINION, THE TRIBUNAL HAS NOT COMMITTED AN ERROR AND VIEW TAKEN BY THE TRIBUNAL IS JUST AND PROPER. IT IS NOTHING BUT CAPITAL INVESTMENT BY INVESTING HUGE AM OUNT OF 1.57 CRORES. 6.5 IN OUR CONSIDERED OPINION, THE VIEW TAKEN BY TH E TRIBUNAL IS REQUIRED TO BE UPHELD AND THE SAME IS UPHELD. 7. IN THAT VIEW OF THE MATTER, THE ISSUE IS ANSWERE D IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 34. IN D.B. ITA NO. 85/2014 DATED 22.08.2017, THE F OLLOWING SUBSTANTIAL QUESTION WAS FRAMED WHILE ADMITTING THE APPEAL BY THE HONBLE RAJASTHAN HIGH COURT: ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 65 (I) WHETHER THE TRIBUNAL WAS LEGALLY JUSTIFIED IN HOLDING THAT THE SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE FOR RS. 40,53,06,138/- IN THE FORM OF SALES TAX EXEMPTION A ND ALSO NOT TO BE INCLUDED IN BOOK PROFIT U/S 115JB IGNORING THE P URPOSE OF SUBSIDY, WHICH WAS GIVEN TO ENHANCE THE PRODUCTION EMPLOYMENT AND SALES IN THE STATE OF RAJASTHAN WHICH ARE POST OPERATIONAL ACTIVITIES? 35. WHILE DISPOSING OFF THE ABOVE SUBSTANTIAL QUEST ION OF LAW, THE HONBLE HIGH COURT HELD THAT THE ISSUE NO. 1 IS SQ UARELY COVERED BY THE DECISION TAKEN TODAY IN D.B. ITA NO. 204/2010. 36. RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE RAJASTHAN HIGH COURT REFERRED SUPRA, WE AFFIRM THE ORDER OF THE LD CIT(A) AND DISMISS BOTH THE GROUNDS OF APPEAL OF THE REVENUE. 37. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND REVENUES APPEAL IS DISMISSED. 38. NOW, WE REFER TO AY 2013-14 WHEREIN THE RESPECT IVE GROUNDS OF APPEAL ARE AS FOLLOWS: ITA NO. 178//JP/2016 (GROUND OF ASSESSEES APPEAL): I) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(APPEALS) WAS NOT JUSTIFIED AND ERRED IN LAW IN CONFIRMING THE DISALLOWANCE U/S 80-IA BY RS. 137,34,88,344/- BY MA KING ADJUSTMENT IN THE TRANSFER PRICE OF POWER CAPTIVELY CONSUMED. II) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(APPEALS) WAS NOT JUSTIFIED AND ERRED IN LAW IN CONFIRMING THE ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 66 DISALLOWANCE MADE BY THE AO ON ACCOUNT OF EDUCATION CESS AMOUNTING TO RS. 7,03,53,342/-. III) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) WAS NOT JUSTIFIED AND ERRED IN LAW IN CONFIRMING THE DISALLOWANCE MADE BY THE A.O ON ACCOUNT OF GIFT EXP ENSES TO THE TUNE OF RS. 4,13,437/-. IV) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED AND ERRED IN CONFIRM ING THE DISALLOWANCE MADE BY THE A.O ON ACCOUNT OF PROFIT ON SALE OF INV ESTMENT AMOUNTING TO RS. 60,37,35,196/- & PROFIT ON SALE OF FIXED ASS ETS AMOUNTING TO RS. 2,23,82,657/- WHILE COMPUTING BOOKS PROFIT U/S 115J B OF THE ACT. ITA. NO. 182/JP/2016 (GROUND OF REVENUES APPEAL):- I) DELETING THE DISALLOWANCE MADE BY THE AO ON ACC OUNT OF SALES TAX SUBSIDY BY TREATING THE AMOUNT OF RS. 1,31,82,58,25 1/- AS CAPITAL RECEIPTS INSTEAD OF REVENUE RECEIPT; II) DELETING THE DISALLOWANCES MADE BY THE AO ON AC COUNT OF SALES TAX SUBSIDY BY TREATING THE AMOUNT OF RS. 1,31,82,5 8,251/- AS CAPITAL RECEIPT AND THE SAME IS NOT INCLUDIBLE IN THE BOOK PROFIT U/S 115JB OF THE IT ACT, WITHOUT APPRECIATING THE FACTS OF THE CASE. III) DELETING THE DISALLOWANCES MADE BY THE AO ON A CCOUNT OF ELECTRICITY DUTY EXEMPTION BY TREATING THE AMOUNT O F RS. 6,57,98,024/- AS CAPITAL RECEIPT INSTEAD OF REVENUE RECEIPT. IV) DELETING THE DISALLOWANCES MADE BY THE AO ON AC COUNT OF ELECTRICITY DUTY EXEMPTION BY TREATING THE AMOUNT O F RS. 6,57,98,024/- AS CAPITAL RECEIPT AND THE SAME IS NOT INCLUDIBLE I N THE BOOK PROFIT U/S 115JB OF THE IT ACT, WITHOUT APPRECIATING THE FACTS OF THE CASE. 39. BOTH THE PARTIES SUBMITTED THAT THE FACTS AND CIRCUMSTANCES ARE SIMILAR TO FACTS AND CIRCUMSTANCES IN AY 2012-13 AN D RESPECTIVE ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 67 CONTENTIONS RAISED THEREIN SHALL BE CONSIDERED FOR THE IMPUNGED ASSESSMENT YEAR AS WELL. 40. IN ITA NO. 178//JP/2016 IN RESPECT OF GROUND OF APPEAL NO. (I), (II) & (IV), ADMITTEDLY THE FACTS AND CIRCUMSTANCES OF THE CASE ARE SIMILAR TO AY 2012-13. OUR FINDINGS AND DIRECTIONS CONTAINE D IN ITA NO. 162/JP/16 SHALL APPLY MUTATIS MUTANDIS TO THIS APPEAL AS WELL. IN RESPECT OF GROUND NO. (III) RELATING TO DISALLOWANC E MADE BY THE A.O ON ACCOUNT OF GIFT EXPENSES TO THE TUNE OF RS. 4,13,43 7/-, WE HAVE GONE THROUGH THE ORDER OF THE LOWER AUTHORITIES AND DONO T SEE ANY INFIRMITY IN THE SAME. HENCE, THIS GROUND OF APPEAL IS DISMISSE D. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 41. IN ITA NO. 182//JP/2016 IN RESPECT OF GROUND OF APPEAL NO. (I)& (II) ADMITTEDLY THE FACTS AND CIRCUMSTANCES OF THE CASE ARE SIMILAR TO AY 2012-13. OUR FINDINGS AND DIRECTIONS CONTAINED IN I TA NO. 181/JP/16 SHALL APPLY MUTATIS MUTANDIS TO THIS APPEAL AS WELL. 42. IN RESPECT OF GROUND NO. 3 & 4 OF REVENUES APP EAL WHEREIN THE REVENUE HAS CHALLENGED THE ACTION OF THE LD CIT(A) IN DELETING THE DISALLOWANCE OF ELECTRICITY DUTY EXEMPTION OF RS 6, 57,98,024 HOLDING THE SAME AS CAPITAL RECEIPT AND FURTHER NOT INCLUDING T HE SAME WHILE DETERMINING THE BOOKS PROFITS U/S 115JB OF THE ACT. 43. BRIEFLY, THE FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS RECEIVED RS 6,57,98,024 BY WAY OF ELECTRICITY DUTY EXEMPTION UNDER RAJASTHAN I NVESTMENT PROMOTION SCHEME 2003. THE ASSESSEE COMPANY HAS TRE ATED THE SAME AS CAPITAL RECEIPT APPLYING THE SAME ANALOGY AS IN CASE OF SALES TAX ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 68 SUBSIDY AND HAS NOT OFFERED THE SAME TO TAX. IN SU PPORT, RELIANCE WAS PLACED ON THE DECISION OF THE COORDINATE BENCHES OF THE TRIBUNAL FOR EARLIER YEARS RENDERED IN THE CONTEXT OF SALES TAX SUBSIDY. THE AO ALSO APPLYING THE SAME ANALOGY AS IN CASE OF SALES TAX S UBSIDY GIVEN THAT THESE RECEIPTS ARE ALSO BORNE OUT OF THE SAME SCHEM E OF THE RAJASTHAN GOVERNMENT AND THE FACT THAT THE DECISION OF THE CO ORDINATE BENCHES ARE UNDER CHALLENGE BEFORE THE HONBLE HIGH COURT, BROUGHT THESE RECEIPTS TO TAX AND ALSO ADDED THE SAME TO COMPUTE THE BOOK PROFITS U/S 115JB OF THE ACT. 44. ON APPEAL, THE LD CIT(A) HELD THAT BOTH SALES T AX SUBSIDY AND ELECTRICITY DUTY EXEMPTION HAS BEEN RECEIVED UNDER THE RAJASTHAN INVESMENT PROMOTION POLICY OF 2003, FOLLOWING THE O RDERS OF THE COORDINATE BENCH FOR AY 2006-07 TO 2009-10, HE DELE TED THE ADDITION SO MADE BY THE AO. NOW, THE REVENUE IS IN APPEAL A GAINST THE SAID FINDINGS OF THE LD CIT(A). 45. DURING THE COURSE OF HEARING, THE LD AR SUBMIT TED THAT THE MATTER RELATING TO SALES TAX SUBSIDY HAS ALREADY BEEN DECI DED BY THE HONBLE RAJASTHAN HIGH COURT IN ASSESSEES FAVOUR AND GIVEN THAT ELECTRICITY DUTY EXEMPTION ALSO FLOWS FROM THE SAME SCHEME OF THE RA JASTHAN GOVERNMENT, THE NATURE OF ELECTRICITY EXEMPTION IS ALSO DIRECTED RELATED TO EXPANSION OF THE UNDERTAKING BY WAY OF INVESTMEN T OF FIXED CAPITAL AND GENERATION OF EMPLOYMENT OPPORTUNITY, THE SAME IS CAPITAL IN NATURE AND RIGHTLY NOT OFFERED TO TAX BY THE ASSESS EE COMPANY. IT WAS SUBMITTED THAT THE RATIO OF THE DECISION OF THE HON BLE RAJASTHAN HIGH COURT THOUGH RENDERED IN THE CONTEXT OF SALES TAX S UBSIDY EQUALLY APPLIES IN THE CONTEXT OF ELECTRICITY DUTY EXEMPTIO N. ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 69 46. IT WAS FURTHER SUBMITTED THAT IDENTICAL ISSUED HAS RECENTLY BEEN DECIDED BY THIS BENCH IN CASE OF ACIT VS HINDUSTAN ZINC LTD (ITA NO. 638/JU/2008 & 606/JU/2008 DATED 24.04.2017) IN THE CONTEXT OF ELECTRICITY DUTY EXEMPTION AS PER RAJASTHAN INVESTM ENT PROMOTION POLICY OF 2003 AND THE NATURE OF THE RECEIPT WAS HE LD TO BE CAPITAL IN NATURE. THE RELEVANT FINDINGS ARE AS UNDER: 11.2. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE LD. CIT (A) DELETED THE ADDITION, BY RE LYING UPON THE JUDGMENT OF THE SPECIAL BENCH OF THIS TRIBUNAL REND ERED IN THE CASE OF DCIT VS. RELIANCE INDUSTRIES LTD. LD. CIT (A) DECI DED THE ISSUE IN PARA 47 TO 50 AS UNDER:- DECISION I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISS IONS OF THE LD. A/R AND HAVE GONE THROUGH THE ORIGINAL NOTIFICA TION DATED 28/07/2003 ISSUED BY THE GOVT. OF RAJASTHAN, FINANC E (TAX DIVISION) DEPARTMENT. THE IMPORTANT/RELEVANT FEATU RES FOR THE PURPOSE OF DECIDING THE ISSUE ARE AS UNDER:- I) THE NOTIFICATION STARTS WITH THE HEADING RAJASTHA N INVESTMENT PROMOTION POLICY2003. WITH A VIEW TO P ROVIDE INVESTORS AN ATTRACTIVE OPPORTUNITY TO INVEST IN TH E STATE OF RAJASTHAN, THE FOLLOWING SCHEME IS INTRODUCED IN TH E STATE. CLAUSE-2: OPERATIVE PERIOD : THE SCHEME SHALL COME INTO OPERATION WITH EFFECT F ROM 1 ST JULY, 2003 AND SHALL REMAIN IN FORCE UPTO 31 ST MARCH, 2008. CLAUSE-3: APPLICABILITY OF THE SCHEME ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 70 THE SCHEME SHALL BE APPLICABLE TO ALL NEW INVESTMEN TS AND INVESTMENTS MADE BY EXISTING UNITS AND ENTERPRISES FOR MODERNIZATION/DIVERSIFICATION, SUBJECT TO THE CONDI TION THAT SUCH UNITS SHALL COMMENCE COMMERCIAL PRODUCTION/OPERAT IONS OWING TO SUCH INVESTMENT DURING THE OPERATIVE PERIOD OF T HE SCHEME. CLAUSE-5: ELIGIBILITY: THE BENEFIT (SUBSIDIES AS PER CLAUSE 7 AND EXEMPTIO N AS PER CLAUSE 9 UNDER THIS SCHEME SHALL BE AVAILABLE TO AL L UNITS, OTHER THAN THOSE COVERED IN THE LIST OF INELIGIBLE UNITS SUBJECT TO THE FULFILLMENT OF THE FOLLOWING CONDITIONS:- (I) TO CLAIM WAGE/EMPLOYMENT SUBSIDY THE UNIT SHALL PROVIDE:- (A) DIRECT EMPLOYMENT TO AT LEAST THEN PERSONS IN CASE OF A NEW UNIT AND (B) TWENTY FIVE PERCENT ADDITIONAL DIRECT EMPLOYMENT SUBJECT TO A MINIMUM OF TEN PERSONS IN CASE OF DIVERSIFICATION, MODERNIZATION OR EXPANSION. (C) THE UNIT SHALL BE ELIGIBLE FOR INTEREST SUBSIDY AND/OR WAGE/EMPLOYMENT SUBSIDY ONLY IF IT COMMENCES FIRST COMMERCIAL PRODUCTION/OPERATION DURING THE OPERATIVE PERIOD OF THE SCHEME. CLAUSE-7: SUBSIDIES: IN CASE OF NEW INVESTMENT MADE, THE SUM TOTAL OF IN TEREST SUBSIDY AND WAGE/EMPLOYMENT SUBSIDY WOULD BE SUBJEC T TO A MAXIMUM LIMIT OF FIFTY PERCENT OF THE TAX PAYABLE A ND DEPOSITED UNDER THE RAJASTHAN SALES TAX ACT, 1994, THE CENTRA L SALES TAX ACT, 1956 AND VALUE ADDED TAX ACT AS AND WHEN INTRO DUCED IN THE STATE; PROVIDED THAT THE MAXIMUM LIMIT OF 50% PRESCRIBED U NDER CLAUSE 7(1)(A) AND CLAUSE 7(I)(B) MAY BE RAISED BY THE BIO I TO SIXTY PERCENT IN SUCH CASES WHERE THE INVESTMENTS EXCEED RS. 100 ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 71 CRORE BUT ARE LESS THAN OR EQUAL TO RS. 200 CRORES, AND THIS MAXIMUM LIMIT MAY BE RAISED FURTHER TO SEVENTY FIVE PERCENT IN CASES WHERE THE INVESTMENTS EXCEED RS. 200 CRORE. EXEMPTIONS: IN ADDITION TO THE SUBSIDIES AVAILABLE IN CLAUSE 7, THE ELIGIBLE BENEFICIARY SHALL BE ENTITLED TO CLAIM THE FOLLOWIN G EXEMPTION, IF APPLICABLE:- 50% EXEMPTION OF ELECTRICITY DUTY FOR SEVEN YEARS. THE GOVT. OF RAJASTHAN VIDE ORDER DATED 28/3/2005 H AS MODIFIED THE SCHEME. AFTER THE EXISTING CLAUSE 8(VI) OF THE SCHEME THE FOLLOWING PROVISO SHALL BE INSERTED:- PROVIDED THAT THE NEW PROJECT HAVING A TOTAL NEW INVESTMENT AS PER COLUMN NO. 2 OF THE TABLE GIVEN B ELOW, SHALL BE EXEMPTED FROM ELECTRICITY DUTY, ON SELF GENERATED E NERGY IN RESPECT OF NEW INVESTMENT IN CPP FOR 7 YEARS, TO TH E EXTENT A MENTIONED IN COLUMN NO. 3 OF THE TABLE. S.NO. TOTAL NEW INVESTMENTS EXEMPTION OF ELECTRICITY DUTY ON SELF GENERATED ENERGY 1 FROM RS. 100 CRORE UPTO RS. 200 CRORE 60% 2 FROM RS. 200 CRORE UPTO RS. 400 CRORE 75% 3 RS. 400 CRORE OR MORE 100% . 48. IT IS A FACT THAT THE APPELLANT HAD INSTALL ED A CPP AT CHITTORGARH LZS, CHANDERIA DURING ASSESSMENT YEAR 2005-06. THE COMPANY GENERATED 83.0507 CRORE UNIT THEREFROM. IN VIEW OF THE ABOVE ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 72 NOTIFICATION, THE ELECTRICITY DUTY WAS WAIVED TO TH E APPELLANT EXTENT OF RS. 8,55,50,700/-. HAD THERE BEEN NO SUCH WAIVER, THE APPELLANT WOULD HAVE CLAIMED THE PAYMENT OF ELECTRICITY DUTY AS REV ENUE EXPENDITURE. FURTHER THE APPELLANT ITSELF HAS ROUTED THE SAME TH ROUGH P&L ACCOUNT AS REVENUE ITEM. AS PER THE DECISION CITED BY AO IN T HE CASE OF RAJARAM MAIZE PRODUCT BY THE HONBLE SUPREME COURT WAS DELI VERED ON 23/7/2001 THAT THE POWER SUBSIDY RECEIVED BY THE RE SPONDENT WAS OF REVENUE NATURE INASMUCH AS IT WENT TOWARDS REDUCTIO N OF THE ELECTRICITY BILLS. 49. THE A/R HAS CITED THE DECISION OF BOMBAY SPT. BENCH ITD 273 (2004) IN THE CASE OF DCIT VS. RELIANCE INDUSTRIES LTD. IN THIS CASE THE FOLLOWING POINT WAS TO BE DECIDED; WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAE AND IN LAW THE ASSESSEE CO MPANY IS JUSTIFIED IN ITS CLAIM THAT THE SALES TAX INCENTIVE ALLOWED TO I T DURING THE PREVIOUS YEAR IN TERMS OF RELEVANT GOVERNMENT ORDER CONSTITU TE CAPITAL RECEIPT AND IS NOT TO BE TAKEN INTO ACCOUNT IN COMPUTATION OF TOTAL INCOME. THE FACTUAL POSITION IN THIS CASE IS AS UNDER:- THE ASSESSEE SET UP A UNIT IN PATALGANGA WHICH IS A NOTIFIED AREA AND BECAME ELIGIBLE FOR INCENTIVE ANNOUNCED BY THE GOVT. OF MAHARASHTRA, WHICH BEGINS COMMERCIAL PRODUCTION IN NOVEMBER, 1982. THE INCENTIVE WAS IN THE FORM OF EXEMPTION FROM LIA BLE FOR PAYMENT OF SALES TAX FOR A PERIOD OF 5 YEARS COMMENCING FROM 8 -6-83 AND ENDING ON 7-6-1988. THE ASSESSEES CLAIM WAS THAT THE QUA NTUM OF THE SALE TAX LIABLE WOULD BE CLAIMED AS DEDUCTION ON THE BAS IS OF THAT IT IS A CAPITAL RECEIPT OR ON THE BASIS OF THAT IT SHOULD B E TREATED AS LIABILITY UNDER THE SALES TAX LIABILITY. BUT SINCE, IT WAS E XEMPTED FROM PAYMENT OF SALES TAX, THE SAME SHOULD BE TREATED A PAID WIT HIN THE MEANING OF SECTION 43B SO AS TO ADJUSTED AGAINST THE AMOUNT OF SUBSIDY, WHICH THE ASSESSEE WOULD HAVE RECEIVED FROM THE STATEMENT GOV ERNMENT. IN THAT YEAR THE ASSESEE WAS EXEMPTED FROM THE PAYMENT OF P URCHASE TAX OF RS. 10,82,175/- AND SALES TAX OF RS. 4,29,89,686/- MAKING THE TOTAL TO RS. 4,40,71,858/-. THE SPL. BENCH FINALLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE SPL. BENCH DID CONSIDER THE RATI O LAID DOWN IN THE JUDGMENT OF SUPREME COURT IN SAHINEY STEEL AND PRES S WORKS LTDS CASE, WHICH IS AS UNDER:- IF ANY SUBSIDY IS GIVEN, THE CHARACTER OF THE SUB SIDY IN THE HANDS OF THE RECIPIENTS-WHETHER REVENUE OR CAPITAL-WILL H AVE TO BE DETERMINED BY HAVING REGARD TO THE PURPOSE FOR WHICH THE SUBSI DY IS GIVEN. IF IT IS GIVEN BY WAY OF ASSISTANCE TO THE ASSESSEE IN CARRY ING ON OF ITS TRADE OR ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 73 BUSINESS, IT HAS TO BE TREATED AS TRADING RECEIPT. THE SOURCE OF THE FUND IS QUITE IMMATERIAL. 50. IN THE APPELLANTS CASE ALSO THE TITLE OF THE SCHEME RAJASTHAN INVESTMENT PROMOTION SCHEME, 2003(RAJ. INVEST 2003) ITSELF MAKES THE PURPOSE OF THE SCHEME VERY MUCH CLEAR. IF FURT HER LAID DOWN THAT THE SCHEME SHALL BE APPLICABLE TO ALL NEW INVESTMEN TS AND INVESTMENTS MADE BY EXISTING UNITS AND ENTERPRISES FOR MODERNIZATION/EXPANSION/DIVERSIFICATION SUBJECT TO THE CONDITION THAT SUCH UNITS SHALL COMMENCE COMMERCIAL PRODUCTION/OPE RATION OWING TO SUCH INVESTMENT DURING THE OPERATIVE PERIOD OF THE SCHEME. THE SCHEME IS OPERATIVE W.E.F. 1-7-2003 AND WAS REMAINE D IN FORCE UPTO 31- 03-2008. INITIALLY THE EXEMPTION IN CLAUSE 8 OF TH E SCHEME WAS 50% OF THE ELECTRICITY DUTY FOR SEVEN YEARS IN ADDITION TO THE SUBSIDY AVAILABLE UNDER CLAUSE 7 OF THIS SCHEME BUT THE APPELLANT HAS NOT CLAIMED ANY DEDUCTION MENTIONED IN CLAUSE 7. BY AMENDMENT ORDE R DATED 28-03- 2005 OF GOVT. OF RAJASTHAN, THE FINANCE DEPARTMENT (TAX DIVISION), THE SCHEME HAS BEEN AMENDED TO THE EXTENT THAT THE EMPT ION WOULD BE AVAILABLE TO 100% IF THE TOTAL NEW INVESTMENT IS RS . 400 CRORE OR MORE IN CPP. THE APPELLANT HAS ESTABLISHED THE CPP IN 2 005-06 FOR THE FIRST TIME IN CHANDERIA SMELTER UNIT. THE CAPITAL INVESTMENT IS ALSO MORE THAN RS. 400 CR ORE. THE CPP IS ESTABLISHED WITHIN THE PERIOD FROM 1-7-2003 TO 31-3 -2008. THE COMMERCIAL PRODUCTION HAS ALSO COMMENCED IN THE SAM E FINANCIAL YEAR. THUS ALL THE TERMS AND CONDITIONS OF THE SCHEME DO CLEARLY DEFINE THAT THE WAIVER OF ELECTRICITY DUTY BY THE GOVT. OF RAJA STHAN WAS WITH A PURPOSE TO HELD THE ASSESSEE TO ESTABLISH A NEW POW ER PLANT AND NOT TO HELD IN DAY TO DAY OPERATIONS OF THE POWER PLANT. THEREFORE, THE DECISION OF THE HONBLE SPL. BENCH, BOMBAY IN THE C ASE OF RELIANCE INDUSTRIES IS FULLY APPLICABLE TO THE APPELLANTS C ASE. THEREFORE, THE DISALLOWANCE MADE BY THE AO IS DELETED. THE APPEAL IS ALLOWED ON THIS GROUND. FROM ABOVE, IT CAN BE INFERRED THAT LD. CIT (A) CON SIDERED ALL THE JUDGMENTS AS RELIED BY THE PARTIES AND BY FOLLOWING THE DECISION OF THE SPECIAL BENCH DELETED THE ADDITION. IN THE PRESENT CASE, THERE IS NO ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 74 DISPUTE WITH REGARD TO THE FACT THAT THE WAIVER OF ELECTRICITY DUTY IS LINKED WITH THE QUANTUM OF INVESTMENT MADE BY THE A SSESSEE. THE PRE CONDITION FOR AVAILING SUCH INCENTIVE IS ESSENTIALL Y INVESTMENT MADE BY THE ASSESSEE. IN THE SAHNEY STEEL AND PRESS WORKS L TD.(SUPRA), THE HONBLE SUPREME COURT EXAMINED THE ISSUE AND LAID D OWN PRINCIPLES ON THE BASIS OF WHICH A SUBSIDY GIVEN TO THE ASSESSEE IS REQUIRED TO BE CATEGORIZED. IF IT IS AN OPERATIONAL SUBSIDY SAME WOULD FALL WITHIN THE AMBIT OF REVENUE AND IF IT IS A SUBSIDY FOR A PURPO SE OF SETTING UP AND EXPANSION OF INDUSTRY THAT WOULD BE WITHIN THE AMBI T OF CAPITAL. ADMITTEDLY, IN THE PRESENT CASE, IT IS NOT THE CASE OF SUBSIDY GIVEN BY THE STATE GOVERNMENT BUT IT IS A SORT OF INCENTIVE IN THE FORM OF WAIVER OF ELECTRICITY DUTY BUT THIS WAIVER IS DEPENDENT UP ON THE INVESTMENT MADE BY THE ASSESSEE AND PRODUCTION OF POWER. THE LD. CIT(A) HAS FOLLOWED THE DECISION OF SPL. BENCH OF THIS TRIBUNA L RENDERED IN THE CASE OF DCIT VS. RELIANCE INDUSTRIES LTD. (SUPRA) IN THA T CASE THERE WAS INCENTIVE IN THE FORM OF EXEMPTION FROM LIABILITY O F PAYMENT OF SALES TAX FOR A PERIOD OF 5 YEARS. IN THE PRESENT CASE, IT I S THE WAIVER OF THE ELECTRICITY DUTY. THE REVENUES CASE IS THAT HAD T HIS WAIVER WAS NOT GIVEN BY THE STATE GOVERNMENT, THE PAYMENT OF ELECT RICITY DUTY WOULD BE ELIGIBLE DEDUCTION AS REVENUES EXPENDITURE. ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 75 ON THE CONTRARY, THE ASSESSEES CASE IS THAT THE IS SUE IS SQUARELY COVERED BY THE DECISION OF THE SPL. BENCH OF THIS T RIBUNAL AND ALSO THERE ARE OTHER JUDGMENTS. THE HONBLE SUPREME COURT REND ERED IN THE CASE OF PONNI SUGAR (SUPRA) HELD AS UNDER:- 14. IN OUR VIEW, THE CONTROVERSY IN HAND CAN BE RE SOLVED IF WE APPLY THE TEST LAID DOWN IN THE JUDGMENT OF THIS CO URT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD. (SUPRA) . IN THAT CASE, ON BEHALF OF THE ASSESSEE, IT WAS CONTEN DED THAT THE SUBSIDY GIVEN WAS UP TO 10% OF THE CAPITAL INVE STMENT CALCULATED ON THE BASIS OF THE QUANTUM OF INVESTMEN T IN CAPITAL AND, THEREFORE, RECEIPT OF SUCH SUBSIDY WAS ON CAPITAL ACCOUNT AND NOT ON REVENUE ACCOUNT. IT WAS ALSO URGED IN THAT CASE THAT SUBSIDY GRANTED ON THE BASI S OF REFUND OF SALES TAX ON RAW MATERIAL, MACHINERY AND FINISHED GOODS WERE ALSO OF CAPITAL NATURE AS THE OBJECT OF GRANTING REFUND OF SALE TAX WAS THAT THE ASSESSEE COULD SET UP NEW BUSINESS OR EXPAND HIS EXISTING BUSINESS. THE CONT ENTION OF THE ASSESSEE IN THAT CASE WAS DISMISSED BY THE T RIBUNAL AND, THEREFORE, THE ASSESSEE HAD COME TO THIS COURT BY WAY OF A SPECIAL LEAVE PETITION. IT WAS HELD BY THIS C OURT ON THE FACTS OF THAT CASE AND ON THE BASIS OF THE ANALYSES OF THE SCHEME THEREIN THAT THE SUBSIDY GIVEN WAS ON REVENU E ACCOUNT BECAUSE IT WAS GIVEN BY WAY OF ASSISTANCE I N CARRYING ON OF TRADE OR BUSINESS. ON THE FACTS OF THAT CASE, IT WAS HELD THAT THE SUBSIDY GIVEN WAS TO MEET RECU RRING ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 76 EXPENSES. IT WAS NOT FOR ACQUIRING THE CAPITAL ASS ET. IT WAS NOT TO MEET PART OF THE COST. IT WAS NOT GRANT ED FOR PRODUCTION OF OR BRINGING INTO EXISTENCE ANY NEW AS SET. THE SUBSIDIES IN THAT CASE WERE GRANTED YEAR AFTER YEAR ONLY AFTER SETTING UP OF THE NEW INDUSTRY AND ONLY AFTER COMMENCEMENT OF PRODUCTION, AND THEREFORE, SUCH A SUBSIDY WOULD ONLY BE TREATED AS ASSISTANCE GIVEN F OR THE PURPOSE OF CARRYING ON THE BUSINESS OF THE ASSESSEE . CONSEQUENTLY, THE CONTENTIONS RAISED ON BEHALF OF T HE ASSESSEE ON THE FACTS OF THAT CASE STOOD REJECTED A ND IT WAS HELD THAT THE SUBSIDY RECEIVED BY SAHNEY STEEL COUL D NOT BE REGARDED AS ANYTHING BUT A REVENUE RECEIPT. ACCORD INGLY, THE MATTER WAS DECIDED AGAINST THE ASSESSEE. THE IMPORTANCE OF THE JUDGMENT OF THIS COURT IN SAHNEY STEEL & PRESS WORKS LTD.S CASE(SUPRA) LIES IN THE FACT T HAT IT HAS DISCUSSED ANY ANALYZED THE ENTIRE CASE LAW AND IT H AS LAID DOWN THE BASIC TEST TO BE APPLIED IN JUDGING THE CH ARACTER OF A SUBSIDY. THE TEST THAT THE CHARACTER OF THE R ECEIPT IN THE HANDS OF THE ASSESSEE HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIV EN. IN OTHER WORDS, IN SUCH CASES, ON HAS TO APPLY THE PUR POSE TEST. THE POINT OF TIME AT WHICH THE SUBSIDY IS PA ID IS NOT RELEVANT. THE SOURCE IS IMMATERIAL. THE FORM OF S UBSIDY IS IMMATERIAL. THE MAIN ELIGIBILITY CONDITION IN THE SCHEME WITH WHICH WE ARE CONCERNED IN THIS CASE IS THAT TH E INCENTIVE MUST BE UTILIZED FOR REPAYMENT OF LOANS T AKEN BY THE ASSESSEE TO SET UP NEW UNITS OR FOR SUBSTANTIAL ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 77 EXPANSION OF EXISTING UNITS. ON THIS ASPECT THERE IS NOT DISPUTE. IF THE OBJECT OF THE SUBSIDY SCHEME WAS T O ENABLE THE ASSESSEE TO RUN THE BUSINESS MORE PROFITABLY TH EN THE RECEIPT IS ON REVENUE ACCOUNT. ON THE OTHER HAND, IF THE OBJECT OF THE ASSISTANCE UNDER THE SUBSIDY SCHEME W AS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT OR TO EXPA ND THE EXISTING UNIT THEN THE RECEIPT OF THE SUBSIDY WAS O N CAPITAL ACCOUNT. THEREFORE, IT IS THE OBJECT FOR WHICH THE SUBSIDY ASSISTANCE IS GIVEN WHICH DETERMINES THE NATURE OF THE INCENTIVE SUBSIDY. THE FORM OF THE MECHANISM THOUG H WHICH THE SUBSIDY IS GIVEN IS IRRELEVANT. 15. IN THE DECISION OF HOUSE OF LORDS IN THE CASE O F SEAHAM HARBOUR DOCK CO. V. CROOK [1931] 16 TC 333 THE HARB OUR DOCK CO. HAD APPLIED FOR GRANTS FROM THE UNEMPLOYME NT GRANTS COMMITTEE FROM FUNDS APPROPRIATED BY PARLIAM ENT. THE SAID GRANTS WERE PAID AS THE WORK PROGRESSED TH E PAYMENT WERE MADE SEVERAL TIMES FOR SOME YEARS. TH E DOCK CO. HAD UNDERTAKEN THE WORK OF EXTENSION OF IT S DOCKS. THE EXTENDED DOCK WAS FOR RELIEVING THE UNEMPLOYMENT. THE MAIN PURPOSE WAS RELIEF FROM UNEMPLOYMENT. THEREFORE, THE HOUSE OF LORDS HELD T HAT THE FINANCIAL ASSISTANCE GIVEN TO THE COMPANY FOR D OCK EXTENSION CANNOT BE REGARDED AS A TRADE RECEIPT. I T WAS FOUND BY THE HOUSE OF LORDS THAT THE ASSISTANCE HAD NOTHING TO DO WITH THE TRADING OF THE COMPANY BECAU SE THE WORK UNDERTAKEN WAS DOCK EXTENSION. ACCORDING TO T HE HOUSE OF LORDS, THE ASSISTANCE IN THE FORM OF A GRA NT WAS ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 78 MADE BY THE GOVERNMENT WITH THE OBJECT THAT BY ITS USE MEN MIGHT BE KEPT IN EMPLOYMENT AND, THEREFORE, ITS RECEIPTS WAS CAPITAL IN NATURE. THE IMPORTANCE OF THE JUDGMENT LIES IN THE FACT THAT THE COMPANY HAD APPL IED FOR FINANCIAL ASSISTANCE TO THE UNEMPLOYMENT GRANTS COMMITTEE. THE COMMITTEE GAVE FINANCIAL ASSISTANCE FROM TIME TO TIME AS THE WORK PROGRESSED AND THE PAYMENT S WERE EQUIVALENT TO HALF THE INTEREST FOR TWO YEARS ON APPROVED EXPENDITURE MET OUT OF LOANS. EVEN THOUGH THE PAYMENT WAS EQUIVALENT TO HALF THE INTEREST AMOUNT PAYABLE ON THE LOAN (INTEREST SUBSIDY) STILL THE HO USE OF LORDS HELD THAT MONEY RECEIVED BY THE COMPANY WAS N OT IN THE COURSE OF TRADE BUT WAS OF CAPITAL NATURE. THE JUDGMENT OF HOUSE OF LORDS SHOWS THAT THE SOURCE OF PAYMENT OR THE FORM IN WHICH THE SUBSIDY IS PAID OR THE MECHANISM THROUGH WHICH IT IS PAID IS IMMATERIAL AN D THAT WHAT IS RELEVANT IS THE PURPOSE FOR PAYMENT OF ASSI STANCE. ORDINARILY SUCH PAYMENTS WOULD HAVE BEEN ON REVENUE ACCOUNT BUT SINCE THE PURPOSE OF THE PAYMENT WAS TO CURTAIN/OBLITERATE UNEMPLOYMENT AND SINCE THE PURPO SE WAS DOCK EXTENSION, THE HOUSE OF LORDS HELD THAT TH E PAYMENT MADE WAS OF CAPITAL NATURE. 16. ONE MORE ASPECT NEEDS TO BE MENTIONED. IN SAHN EY & PRESS WORKS LTD.S CASE (SUPRA) THIS COURT FOUND TH AT THE ASSESSEE WAS FREE TO USE THE MONEY IN ITS BUSINESS ENTIRELY AS IT LIKED. IT WAS NOT OBLIGED TO SPEND THE MONEY FOR A PARTICULAR PURPOSE. IN THE CASE OF SEAHAM HARBOUR DOCK ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 79 CO. (SUPRA) ASSESEE WAS OBLIGED TO SPEND THE MONEY FOR EXTENSION OF ITS DOCKS. THIS ASPECT IS VERY IMPORT ANT. IN THE PRESENT CASE ALSO, RECEIPT OF SUBSIDY WAS CAPIT AL IN NATURE AS THE ASSESSEE WAS OBLIGED TO UTILIZE THE S UBSIDY ONLY FOR REPAYMENT OF TERM LOANS UNDERTAKEN BY THE ASSESSEE FOR SETTING UP NEW UNITS/EXPANSION OF EXIS TING BUSINESS. 17. APPLYING THE ABOVE TESTS TO THE FACTS OF THE PR ESENT CASE AND KEEPING IN MIND THE OBJECT BEHIND THE PAYMENT O F INCENTIVE SUBSIDY WE ARE SATISFIED THAT SUCH PAYMEN T RECEIVED BY THE ASSESSEE UNDER THE SCHEME WAS NOT I N THE COURSE OF A TRADE BUT WAS OF A TRADE BUT WAS OF CAP ITAL NATURE. ACCORDINGLY, THE FIRST QUESTION IS ANSWERE D IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 11.3 IF WE APPLY THE PURPOSE TEST ON THE FACTS OF THE PRESE NT CASE, ESSENTIALLY SUCH WAIVER OF ELECTRICITY DUTY IS RELA TED TO SETTING UP AND EXPANSION OF INDUSTRY HENCE CAPITAL IN NATURE AS PE R NOTIFICATION ISSUED BY THE STATE GOVERNMENT. UNDER THESE UNDISPUTED FAC TS, WE DO NOT SEE ANY REASON TO DISTURB THE FINDING OF THE LD. CIT (A ), SAME IS HEREBY AFFIRMED. THIS GROUND OF THE REVENUES APPEAL IS D ISMISSED. ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 80 47. RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE RAJASTHAN HIGH COURT IN ASSESSEES OWN CASE WHEREIN THE OBJECT AND PURPOSE TEST HAS BEEN HELD TO BE DETERMINATIVE OF THE CHARACTER OF R ECEIPT IN THE HANDS OF THE ASSESSEE COMPANY AND OUR OWN DECISION IN CAS E OF HINDUSTAN ZINC (SUPRA) WHEREIN WE HAVE EXAMINED THE RAJASTHAN INVESTMENT PROMOTION POLICY 2003 IN CONTEXT OF ELECTRICITY DUT Y EXEMPTION, WE AFFIRM THE ACTION OF THE LD CIT(A) AND HOLD THE REC EIPT ON ACCOUNT OF ELECTRICITY DUTY EXEMPTION AS CAPITAL RECEIPT. HEN CE, THE SAME CANNOT BE BROUGHT TO TAX IN THE HANDS OF ASSESSEE COMPANY UNDER THE NORMAL COMPUTATIONAL PROVISIONS AS WELL AS WHILE DETERMINI NG THE BOOKS PROFITS UNDER SECTION 115JB OF THE ACT. IN THE RESULT, GRO UND 3 AND 4 OF REVENUES APPEAL ARE DISMISSED. 48. IN THE RESULT, THE REVENUES APPEAL IS DISMISS ED. THE RESPECTIVE APPEALS ARE THUS DISPOSED OFF WITH A BOVE DIRECTIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 28/12/2017. SD/- SD/- ( KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 28/12/2017 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI CEMENT LTD., AJMER 2. IZR;FKHZ@ THE RESPONDENT- ACIT, AJMER 3. VK;DJ VK;QDR@ CIT ITA NO. 162, 181, 178 & 182/JP/2016 SHRI CEMENT LIMITED, VS. ACIT, AJMER 81 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO.162, 181, 178 & 182/JP/2016} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR
Other Referred Cases
-
Laws Referred To
-
1:1 Consultation on Salary Structuring
₹1
1:1 Consultation on Startup Fundraising
₹5000
1:1 Consultation on Legal Requirements
₹1
Assignment of Registered Trademark
Mehul₹500
Object Clause - Merchant Banking Business
Mehul₹100
Minimum Alternate Tax (MAT): Comprehensive Overview and Key Changes under Finance Bill, 2026
Team Counselvise - February 06, 2026
Finance Bill, 2026: Key Direct Tax Amendments on Assessments and Appeals
Team Counselvise - February 06, 2026
Residency Rules: Income Tax Act, 1961 vs Income Tax Bill, 2025 — A Subtle Yet Significant Shift!
Team Counselvise - February 18, 2026