The DCIT, Circle-4(1)(2), Ahmedabad V. M/s. Torrent Power Limited, Ahmedabad

ITA 1652/AHD/2019

AI Insights

The case involves multiple appeals by Torrent Power Limited and the revenue against the orders of the Commissioner of Income Tax (Appeals), Ahmedabad, concerning the assessment orders for the assessment years 2014-15 and 2015-16. The primary issues revolved around the eligibility of certain deductions under sections 32AC and 80IA of the Income Tax Act, 1961, related to investments in new assets and various items of income respectively. The tribunal examined the claims and the corresponding deductions allowed or disallowed by the Assessing Officer and the CIT(A). The tribunal's decision was influenced by previous rulings on similar issues and the interpretation of relevant sections of the Income Tax Act.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135843 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2023
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 24-07-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 04-11-2019
• Other Referred Cases: Euro Pratik Ispat Pvt Ltd vs. ACIT, International Cars and Motors Limited Vs. ITO, PCIT vs. IDMCLimited, Torrent Power Limited vs. CIT, M/s Ultratech Cement Limited Vs. DCIT, Radha Madhav Industries Vs. ITO, CIT vs. Jayshree Tea Industries Ltd, CIT vs. Nirma Industries Ltd, CIT vs. India Gelatine & Chemicals Pvt Ltd, CIT vs. Sintex Industries Ltd, CIT vs. Raymonds Ltd, CIT vs. National Rayon Corporation Ltd, CIT vs. HDFC Bank Ltd, CIT vs. L.H. Sugar Factory Ltd, CIT vs. Reliance Utilities and Power Ltd, CIT vs. UTI Bank Ltd, CIT vs. Apollo Tyres Ltd, CIT vs. Deverson Industries Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BEFOREUSSUBMITTEDTHATSAID; FORTHEASSESSEESUBMITTEDTHAT; FORTHEASSESSEEHASNOTBROUGHT; FORTHEASSESSEEATTHETIMEOFHEARING; SHRIAARSIPRASAD
• Assessee Lawyers: .ASCANBENOTED; THEHONBLEGUJARATHIGHCOURTANDTHEHONBLEBENCHOF; URGINGTHATINTHECONTEXTOFSUBSECTION A; ITHASBEEN; FOLLOWINGTHEORDEROFHISPREDECESSORINTHEOWNCASE; WAYOFPENALTYFORLATEDELIVERYFROMTHESUPPLIERSISNOTDIRECTLY; WAYOFSCRAPSALEISNOTDIRECTLY; WAYOFSALEOFSCRAPISNOTARISINGFROMTHEACTIVITYOFPOWER; ITANOS.AHDWITHOTHERS
• Keywords: Sale consideration of property below Jantri Value; Depreciation; Liquidation

Judgement Text

आयकरअपीलीयअधिकरण , अहमदाबादनयायपीी INTHEINCOMETAXAPPELLATETRIBUNAL, ‘’D’’BENCH,AHMEDABAD BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And SHRIT.RSENTHILKUMAR,JUDICIALMEMBER Sl. No(s) ITANo(s)Asset. Year(s) Appeal(s)by Appellantvs.Respondent AppellantRespondent 1.ITANo.1598/Ahd/20192014-15TorrentPower Limited, “Samanvay”,600, Tapovan, Ambawadi, Ahmedabad-380015. PAN:AACCT0294J D.C.I.T., Circle-4(1)(2), Ahmedabad. 2.ITANo.1652/Ahd/20192014-15D.C.I.T., Circle-4(1)(2), Ahmedabad. TorrentPower Limited, “Samanvay”,600, Tapovan, Ambawadi, Ahmedabad-380015. PAN:AACCT0294J 3.ITANo.128/Ahd/20202015-16TorrentPower Limited, “Samanvay”,600, Tapovan, Ambawadi, Ahmedabad-380015. PAN:AACCT0294J A.C.I.T., Circle-4(1)(2), Ahmedabad. 4.ITANo.231/Ahd/20202015-16 D.C.I.T., Circle-4(1)(2), Ahmedabad. TorrentPower Limited, “Samanvay”,600, Tapovan, Ambawadi, Ahmedabad-380015. PAN:AACCT0294J ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 2 Assesseeby:ShriS.N.Soparkar,Sr.Advocate withShriParinShah.A.R Revenueby:ShriAarsiPrasad,CIT.D.R सुनवाईकीतारीख /DateofHearing:25/07/2023 घोषणाकीतारीख /DateofPronouncement:21/09/2023 आदेश /ORDER PERWASEEMAHMEDACCOUNTANTMEMBER: ThecaptionedfourappealshavebeenfiledattheinstanceofAssesseeand RevenueagainsttherespectiveordersoftheLearnedCommissionerofIncome Tax(Appeals),Ahmedabadarisinginthematterofassessmentorderpassed unders.143(3)oftheIncomeTaxAct,1961(here-in-afterreferredtoas"the Act")relevanttotheAssessmentYearsasmentionedinthecausetitle. 2.First,wetakeupITANo.1598/Ahd/2019,anappealbytheassessee forAY2014-15.Theassesseehasraisedfollowinggroundsofappeal: 1.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredinconfirming thedisallowanceofRs.239,31,74,752madebytheAssessingOfficerinrespectofthe appellant'sclaimfordeductionu/s.32ACoftheI.T.Act,inrespectofSUGEN40unit. 2.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredinconfirming thedisallowanceofRs.26,57,257(inadvertentlystatedinCIT(A)'sorderasRs.26,57,527) madebytheAssessingOfficerbeingthedeductionclaimedbytheappellant-company u/s.80-IAoftheI.T.ActinrespectofinterestearnedFixedDepositswhereinidlebusiness fundsoftheappellant-companyweretemporarilyparked. 3.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredinconfirming thedisallowanceofRs.1,48,38,569(inadvertentlystatedinCIT(A)'sorderRs.1,48,08,569) madebytheAssessingOfficerinrespectofothermiscellaneousincomeonwhich deductionu/s.80-IAoftheI.T.Actwasclaimedbytheappellant-company. 4.Onthefactandcircumstanceofthecase,theappellantrequesttheHon'bleITATtoadmit andallowitsadditionalclaimforreductionofitbookprofitu/s.115JBbyRs. 23,80,78,403/-,beingDebentureRedemptionReservecreatedduringtheyear. (Applicant)(Respondent) ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 3 5.Theappellantcravesleavetoadd,alter,amendand/orwithdrawanygroundorgroundsof appealeitherbeforeorduringthecourseofhearingoftheappeal. 3.ThefirstissueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingthedisallowanceof₹239,37,74,752/-beingclaimofdeductionunder section32ACwithrespecttoitspowergenerationunitbeingSuratgeneration units(SUGEN). 4.Thefactsinbriefarethattheassesseeisapubliccompanyandengagedin thebusinessofgenerationanddistributionofpower.Therearedifferentunitsof theassesseeforgenerationanddistributionofpowerlocatedindifferentcities. Theassesseeintheoriginalreturnofincomefortheyearunderconsideration claimeddeductionundersection32ACoftheActforitspowergenerationunit locatedatAhmedabadandSuratfor₹26,94,84,910and₹4,49,774/-respectively. However,theassesseereviseditsreturnofincomedated25 th March2016and claimedfurtherdeductionundersection32ACoftheActfor₹239,31,24,752/-on accountofsetupofnewpowergenerationunitatSurat(SUGEN-40)inrespectof whichaninvestmentof₹1599,81,62,602/-innewassetswasmade. 5.However,theAOduringtheassessmentproceedingsfoundthatinthe impugneduniti.e.SUGEN-40,theassetsofRs.1779.54croresoutoftotalassets installedamountingtoRs.1826.80croresintheyearunderconsideration(i.e.F.Y. 2013-14)werefromCapitalWork-in-progress(CWIP)ason31-03-2013.However, theassesseefinallyclaimeddeductionundersection32ACoftheActon investmentofnewassetsinimpugnedplantfor₹1599,81,62,602/-only. AccordingtotheAOtheprovisionofsection32ACprescribesthattoavailthe benefitofinvestmentallowancesundersaidsection,theassetsshouldbeacquired andinstalledafter31 st March2013butbefore1 st April2015whereasassets amountingtoRs.1779.54wereshownasCWIPason31 st March2013which impliesthattheassetswerenotacquiredafter31 st March2013butonlyinstalled aftertheprescribeddate.Thus,theconditionsprescribedi.e.acquiredand installedafter31 st March2013werenotfulfilled.Accordingly,theAOissuedshow ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 4 causenoticetotheassesseeproposingtodisallowtheclaimofadditional deductionof₹239,31,24,752/-only. 5.1Theassesseeinresponsetotheshowcausenoticesubmittedthatthe CWIPason31 st March2013shouldonlybeconsideredaspartofmachineryand nottobeconsideredastheentireplant/unitunlessanduntilacquisitionofentire plantandmachineryiscompletedandinstallationofthesametakesplace.The completeacquisitionandinstallationoftheentireplantandmachineryforthe impugnedunitwerecompletedduringtheyearunderconsiderationonly.Thus, theconditionsprescribedundersection32ACoftheActweredulyfulfilled. 5.2Theassesseefurthersubmittedthatintheprocessofsettingupofnew powergenerationunit,theactivityoftheacquisitionandinstallationofplantsand machinerytakeslongperiod.Therefore,thebenefitofinvestmentallowances undersection32ACshouldbeallowedintheyearinwhichinstallationofplantand machineryiscompletedandputtouse.Theassesseeinthisregardreferredthe orderofMumbaiTribunalincaseofEuroPratikIspatPvtLtd.vs.ACITbearing ITANo.1682/Mum/2011andcontendedthatinthesaidcasethedisputewaswith regardtoclaimofadditionaldeprecationundersection32(1)(iia)oftheAct whereinidenticalphrasebeing“acquiredandinstalled”after31 st March2005has beenused.TheTribunal,whiledecidingtheissue,heldthatassetsacquiredonan earlieroccasion,butinstalledafter31 st March2005,willbeeligibleforadditional depreciation. 5.3Theassesseealsosubmittedthattheprovisionofsection32ACoftheActis abeneficialprovisionbroughtwiththeobjecttoacceleratingtheindustrial investment,thereforethesameshouldbeinterpretedliberally.Theassesseein thisregardreferredthebudgetspeechofHon’bleFinanceMinisterand subsequentamendmentbroughtbyFinancebill2016whereinaprovisow.e.f.1 st April2016wasinsertedprovidingdeductiononaccountofinvestmentallowance fromtheyearinwhichthenewassetswereinstalled.Thememorandum ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 5 explainingtheamendmentstatesthattheimpugnedamendmentwasbroughtdue tothegenuinehardshipfacedbyassesseeincaseswhereassetswereacquired butnotinstalled. 5.4However,theAOdisagreedwiththesubmissionoftheassesseeby observingthattheLegislatorspecificallyusedthewords“acquiredandinstalled” withinthespecifiedperiodwhicharewithoutanyambiguity.So,thereisnoneed tointerpretthewordsofthestatutedifferently.Thus,theassetsshouldbe acquiredandinstalledwithinthesaidspecifiedperiod.Fortheallowanceunder section32ACoftheAct,individualplantsandmachineryshouldbeconsideredand nottheentiremachineryofplant/unit. 5.5ThefactsofthecasebeforetheMumbaiTribunalwereregardingAddl. deprecation,whicharedifferentfromthefactsofthecaseonhand.Thereisno timelimitforclaimingAddl.depreciationundersection32(1)(iia)oftheAct whereasthereistimelimitfortheacquisitionandinstallationofassetstoclaim thedeductionfortheinvestmentallowanceundersection32ACoftheAct.There isacasefromanotherTribunalofDelhiinvolvingtheissueofsection32(1)(iia)of theActwhichisinfavourofrevenue,namelyInternationalCarsandMotors LimitedVs.ITOreportedin30taxmann.com5.Likewise,theprovisotosection 32ACoftheActwasinsertedbytheFinanceAct2016w.e.f.1-4-2016whichisnot applicablefortheyearunderconsideration.Inviewoftheabove,theAO disallowedthebenefitofthedeductionclaimedundersection32ACoftheActand addedthesametothetotalincomeoftheassessee. 5.6TheaggrievedassesseepreferredanappealbeforethelearnedCIT(A)and reiteratedthecontentionsasmadeduringtheassessmentproceedings. 6.ThelearnedCIT(A)afterconsideringthefactsconfirmedthefindingofthe AObyobservingasunder: ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 6 Barereadingoftheprovisionsofsection32ACoftheAct,makesitcrystalclearthatnew asseteligiblefordeductionunderSection32ACisrequiredtobeacquiredandinstalled after31March,2013butbefore1stApril,2015.Thereisnoambiguitywhatsoeverinthe provisionstosupporttheclaimofAppellantthatanyassetswhichareacquiredbefore31st March,2013butwereinstalledandputtouseininterveningperiodofApril,2013to31 March,2015arealsoeligibleforsuchdeduction.Itisalsoobservedthatsuchdeduction wasnotclaimedbyAppellantinoriginalreturnofincomebutsamewasclaimedinRevised ReturnofIncomefiledon25.03.2016.EventheLd.TaxAuditorsincolumnNo.19(b)of TaxAuditReportinForm3CDhavecommentedasunder: "Duringthepreviousyear,thecompanyhascapitalisedtheSUGEN40Generationplantat atotalcostofRs1826,80,77,321inbooksofaccountConsideringtheapparentlackof claritycurrently,withregardtotheterm"acquiredandinstalledduringthepreviousyear forplantandmachineryasusedinSection32AC,claimunderSection32AChasnotbeen reckonedforthepurposeofthisreport" Thus,theLd.Auditorshavealsonotadvisedtheappellanttoclaimthedepreciationon suchassets.TheAppellanthasreliedupontheintentionofthelegislatureinintroducing suchprovisionswasmentionedintheBudgetSpeechofHon'bleFinanceMinister.Asper theappellantdeductionwasproposedtobeallowedforacceleratingthegrowthby encouraginginvestmentinallspectrumofeconomy.Forthesakeofclaritythebudget speechasreferredbyAppellantinwrittensubmissionbeforeAOisreproducedherein below: 7.OurgoalishighergrowthleadingtoinclusiveandsustainabledevelopmentThat isthemoolmantra. 8Growthisanecessaryconditionandwemustunhesitatinglyembracegrowthas thehighestgoal,itisgrowththatwillleadtoinclusivedevelopment,without growththerewillbeneitherdevelopmentnorinclusiveness IV.INVESTMENT,INFRASTRUCTUREANDINDUSTRY 55.ThegrowthrateofaneconomyiscorrelatedwiththeinvestmentrateThekey torestartthegrowthengineistoattractmoreinvestment,bothfromdomestic investorsandforeigninvestors.Investmentisanactoffaith.Wewillimprove communicationofourpoliciestoremoveanyapprehensionordistrustintheminds ofinvestors,includingfearsaboutundueregulatoryburdenorapplicationoftax laws.'DoingbusinessinIndiamustbeseenaseasy,friendlyandmutually beneficial. 56.Whileeverysectorcanabsorbnewinvestment,itistheinfrastructuresector thatneedslargevolumesofinvestment.The12thPlanprojectsaninvestmentof USD1trillionor55,00,000croreininfrastructure.ThePlanenvisagesthatthe privatesectorwillshare47percentoftheinvestment.Besides,weneednewand innovativeinstrumentstomobilisefundsforthisorderofinvestment.Government hastakenorwilltakethefollowingmeasurestoincreaseinvestmentin infrastructure: CabinetCommitteeInvestiment 58Revivalofinvestmentintheindustrialsector,especiallymanufacturing,isakey challenge.Manyprojectsarestalledbecausetheyareunabletoclearregulatory hurdles.TheCabinetCommitteeonInvestment(CCI)hasbeensetupmonitor investmentproposalsaswellasprojectsunderimplementation,includingstalled projects,andguidedecision-makinginordertoremovebottlenecksandquicken ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 7 thepaceofimplementation.TwomeetingsoftheCCIhavebeenheldalreadyand decisionsweretakeninrespectofanumberofoilandgas,powerandcoal projects.CCIwilltakeupsomemoreprojectsshortly NewInvestment 59.Toattractnewinvestmentandtoquickentheimplementationofprojects,I proposetointroduceaninvestmentallowancefornewhighvalueinvestments.A companyinvesting100croreormoreinplantandmachineryduringtheperiod 1.4.2013to31.3.2015willbeentitledtodeductaninvestmentallowanceof15 percentoftheinvestment.Thiswillbeinadditiontothecurrentratesof depreciation.Therewillbeenormousspill-overbenefitstosmallandmedium enterprises VIIITAXPROPOSALS 136.Nolargeeconomycanbecometrulydevelopedwithoutarobust manufacturingsector.Hence,asstatedinpartAofmyspeech,Iproposeto provideaninvestmentallowanceattherateof15percenttoamanufacturing companythatinvestsmorethan100croreinplantandmachineryduringthe period1.4.2013to31.3.2015. 137.Iproposetoextendthe'eligibledate'forprojectsinthepowersectortoavail ofbenefitundersection80-1AoftheIncome-taxAct,from31.3.2013to31.3.2014. ItisclearthattheBudgetSpeechreferredbyAppellantclearlyfocusonhighergrowth leadingtoinclusiveandsustainabledevelopment,makingnewinvestments,innovative instruments,etc.,butnowherestatesthatassetsacquiredbefore1stApril,2013arealso eligibleforsuchdeduction.Onthecontrarythereisclearcutperiodforacquisitionand installationprovidedi.e.between01.04.2013to31.03.2015forsuchclaim.Eveninthetax proposalsasreferredinpara136and137(supra)itisclearthatdeductionunderSection 80-1AisavailableifmanufacturingcompanyinvestsmorethanRs.100croreinplant& machineryduringtheperiod1stApril,2013to31March,2015,whichmeansthatoutflow offundsfromtheaccountsofprivatecompanyoranyorganisationshouldbeduringthe interveningperiod.EveninMemorandumexplainingtheprovisionsofFinanceBill,2016it isnotstatedthatinvestmentsmadebycompanypriorto31stMarch,2013isalsoeligible fordeductionifinstallationismadeduringtheinterveningperiod.Hence,itisabundantly clearthattheintentionofthelegislatureistoprovidefortheinvestmentallowanceonlyto theassetsacquiredandputtouseduringtheperiodspecifiedinsection35ACoftheAct. AsAppellanthasfailedtosatisfythetwinconditionsprovidedthatacquisitionofnewasset andinstallationshouldbeduringtheinterveningperiodprovidedintheAct,AOwasright indenyingofthedeductionclaimed 5.3TheAppellanthasreferredtoprovisotoSection32ACwhichhasbecomeeffective from1"April,2006whereinitisstatedasunder. "providedthatwheretheinstallationofthenewassetsareinayearotherthan yearofacquisition,deductionunderthissub-sectionshallbeallowedintheyearin whichnewassetsareinstalled." TheAppellanthasstatedthatrationalebehindinsertingtheaboveprovisoisexplainedin memorandumtoFinanceBill,2016,thatdualconditionofacquisitionandinstallation causesgenuinehardshipinacaseinwhichassetshavebeenacquiredandcouldnotbe installedinthesamepreviousyear,hence,asperprovisotoSection32AC,when ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 8 installationisinayearotherthanayearinwhichnewassetisinstalled,thebenefitof deductionshouldnotbedeniedtosuchAssessee.However,thisprovisowasinsertedby FinanceAct,2016,witheffectfrom1April,2016andnotretrospectively,hence,for allowingdeductionunderSection32ACinyearunderconsiderationprovisionsasstoodin theActintheyearunderconsiderationneedtobefollowed.Thememorandumexplaining theintroductionoftheprovisoreadasunder. "Rationalisationofscopeoftaxincentiveundersection32ACTheexistingprovision ofsub-section(1A)insection32ACoftheActprovidesforinvestmentallowanceat therateof15%oninvestmentmadeinnewassets(plantandmachinery) exceedingRs.25croreinapreviousyearbyacompanyengagedinmanufacturing orproductionofanyarticleorthingsubjecttotheconditionthattheacquisition andinstallationhastobedoneinthesamepreviousyear.Thistaxincentiveis availableupto31.03.2017.Thedualconditionofacquisitionandinstallation causesgenuinehardshipincasesinwhichassetshavingbeenacquiredcouldnot beinstalledinsamepreviousyearItisproposedtoamendthesub-section(1A)of section32ACsoastoprovidethattheacquisitionoftheplant&machineryofthe specifiedvaluehasmadepreviousyear.However,installationmaybemadeby 31.03.2017inordertoavailthebenefitofinvestmentallowanceof15%.Itis furtherproposedtoprovidethatwheretheinstallationofthenewassetisina yearotherthantheyearofacquisition,thedeductionunderthissub-sectionshall beallowedintheyearinwhichthenewassetisinstalledTheseamendmentswill takeeffectretrospectivelyfrom1stApril,2016andwill,accordingly,applyin relationtotheassessmentyear2016-17and2017-18." Thus,theprovisoisclearlyapplicablefrom01.04.2016and,hence,doesnothelpthe causeoftheappellant. 5.4Duringthecourseofappellatehearing.ARSoftheappellanthavereliedupondecision ofHon'bleGujaratHighcourtinthecaseofPCITVSIDMCLimited,78Taxman.com285, whereinHon'bleHighCourthaveallowedadditionaldepreciationu/s32(1)(iia)oftheAct onPlantandMachineryacquiredduringassessmentyearbutinstalledafterendofyear. Appellanthascontendedthatprovisionsofsection32(1)(iia)and32ACoftheActare similar,and,hence,followingthejudgement,claimofappellantneedtobeallowed.For sakeofclarity,relativeheadnoteofthejudgementisreproducedhereinbelow: Section32oftheIncome-taxAct,1961-DepreciationAllowance/Rateof (Additionaldepreciation)-Assessmentyear2006-07Assesseepurchasedplant andmachineryon12-2-2004However,certaindamagedpartsofmachinerywere replacedbysupplieratGermanyon13-12-2004and,therefore,saidmachinery couldbeinstalledon15-4-2005-Assesseeclaimedadditionaldepreciationonsaid plantandmachinerywhichwasdeniedbyAssessingOfficerongroundthatas plantandmachineryonwhichadditionaldepreciationwasclaimedwasnot installedduringyearunderconsideration,twinconditionsofacquisitionand installationhadnotbeensatisfiedPurposeandobjectofgrantingadditional depreciationundersection32(1)(a)istoencourageindustriesbypermitting assesseesettingupnewundertakinginstallationofnewplantandmachinery Whether,therefore,provisionsofsection32(1)(iia)arerequiredtobeinterpreted reasonablyandpurposivelyasstrictandliteralreadingofsection32(1)(iia)would leadtoanabsurdresultdenyingadditionaldepreciationtoassesseethough admittedlyassesseehadinstallednewplantandmachineryand,therefore, assesseewasentitledtoadditionaldepreciation-Heldyes(Para[infavourof assessee) ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 9 Provisotosection32ACoftheActisinsertedbyFinanceAct2016asdiscussed hereinaboveandsuchprovisoisexpresslynotretrospectiveinoperationwhichmeans legislaturehadnointentiontoprovideinvestmentallowanceforassetsacquiredbefore 01.04.2013andinstalledsubsequently,therearenosimilarprovisionsinsection32(1)(a) oftheAct,hence,provisionsofsection32(1)(iia)arenotakintosection32ACoftheAct. Consideringthesefactsandthelegalprovisions,judgementofHon'bleGujaratHighcourt relieduponbyappellantcannotbemadeapplicabletothefactsofthecaseathand. Fromtheabovediscussionitisclearthattheprovisionsofsection32ACapplytotheassets acquiredandinstalledduringtheperiodspecifiedinthatsection,theprovisoinserted expresslyw.e.f.01.4.2016toprovideforthebenefitoftheprovisionstotheassets acquiredinearlieryearbutputtousesubsequentlydoesnotcovertheperiodpriorto 1.4.2016whichisthecaseofappellant.Further,thejudgementsrelieduponbythe appellantarenotapplicabletothefactsofthecase.Hence,thedenialofdeductionu/s 32ACbyAOforRsRs.239,31,74,752isconfirmedandGroundNo.2oftheappealis dismissed. 7.BeingaggrievedbytheorderofthelearnedCIT-A,theassesseeisin appealbeforeus. 8.ThelearnedARbeforeusfiledapaperbookrunningfrompages1to133 alongwithachartexplainingeachgroundofappealinitsowncaseandrevenue’s case.ThelearnedARalsofiledthewrittensubmissionsdated1August2023on thedirectionoftheITATraisinghiscontentionontheissuerelatingtosection32 ACoftheAct.ItwaspointedoutbythelearnedARthattheobjectbehindthe introductionofsection32ACoftheActwastoattractnewinvestmentaswellas quickimplementationoftheproject.Thus,theprovisionsspecifiedundersection 32ACoftheActforacquisitionofplantandmachineryandtheinstallationcannot beconstruedinsuchawaytoprovideanabsurdresultwithoutgoingintothe intentionofthelegislature.Likewise,itwasalsocontendedbythelearnedARthe projectswhereitsinstallationtakesseveralyears,thebenefitprovidedunder section32ACoftheActcannotbegiventotheassesseeiftheprovisionsareread withnarrowmind.ThelearnedARalsosubmittedthattheITATMumbaiin identicalfactsandcircumstancesinthecaseofM/sUltratechCementLimitedVs. DCITreportedin139taxmann.com151hasdecidedtheappealinfavourofthe assessee. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 10 8.1ThelearnedARalsosubmittedthatthephraseacquisitionandinstallation hasalsobeenusedundertheprovisionsofsection32oftheActwherethe Hon’bleCourtshaveconstruedtheprovisionsliberally.ThelearnedARinsupport ofhiscontentionreliedonthejudgementofHon’bleGujaratHighCourtinthe caseofPCITVs.IDMCLimitedreportedin393ITR441. 9.Ontheotherhand,thelearnedDRbeforeuscontendedthatthewords specifiedundertheprovisionsofsection32ACoftheActarewithoutany ambiguity,thereforethereisnoquestionofapplyingtherulesofinterpretation. Thelegislaturewasveryclearinitsapproachthattheplantandmachineryshould beacquiredandinstalledwithinthespecifiedperiodtoclaimthebenefitofthe deductionspecifiedundersection32ACoftheAct.AsperthelearnedDR,the assesseehasacquiredplantsandmachinerybeforethedatespecifiedunderthe statutesection32ACoftheAct.Therefore,theassesseecannotbeallowedthe deductionundersection32ACoftheActinthegivenfactsandcircumstances. ThelearnedDRvehementlysupportedtheorderoftheauthoritiesbelow. 10.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Theprovisionofsection32ACoftheAct,was broughttothestatuebytheFinanceAct2013,fortheAssessmentYearbeginning from2014-15and2015-16.Itwasprovidedthereintoallowthedeductionatthe rateof15%ofthecostofinvestmentinnewplantsandmachinerytothe companiesengagedinthebusinessofmanufacturing/productionofanyarticleor things.Thisnewplantandmachineryshouldbeacquiredandinstalledafter31 daysofMarch2013,butbefore1 st dayofApril2015andtheaggregateamountof investmentshouldexceedRs.100crores. 10.1Subsequently,theamendmentwasbroughtbytheFinanceActNo.2of 2014,effectivefrom1 st April2015whereintherequirementofmakinginvestment innewplantandmachinerywasreducedfrom100crorestoexceedingRs.25 ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 11 crores.Likewise,thetimewasalsoextendeduponto31dayofMarch2017for makingtheinvestmentinnewplantandmachinery. 10.2Later,theLegislaturerealizedthatthedualconditionofacquisitionand installationofplantandmachinerywithinthesameFinancialYearissomewhat difficultandcausinggenuinehardshiptothecompanies.Insimplewords,itwas observedthatthereareprojectswhereintheprocessofformingplantsand machineryandtheirinstallationspreadintwoormoredifferentFinancialYears. Thus,theconditionofacquisition/installationoftheplant&machinerywithinthe sameFinancialYearwasimpracticable.Therefore,toovercomewiththishardship, anamendmentwasbroughtbytheFinanceAct2016,effectivefromA.Y.2016-17 whereinaprovisowasinsertedstatingthatiftheyearofacquisitionand installationisdifferent,thenthedeductionshallbeallowedintheyearinwhich thenewassetisinstalled.Thus,fromtheoverallreadingofprovisionofsection 32ACoftheAct,itappearsthatthebenefitofdeductionwasprovidedunderthe statueforlimitednumberofyearswithrespecttotheacquisitionandinstallation ofplantandmachinery.Onclosereadingoftheprovisionofsection32AC(1(a))of theAct,itwasrevealedthatthebenefitofdeductiononaccountofacquisitionand installationofnewassetcanbegrantedifitisacquiredduringanypreviousyear exceeding25croresofRupeesbutinstalledonorbefore31 st ofMarch2017.The controversyariseshowtointerprettheprovisioni.e.acquiringduringanyprevious yearbutinstalledbefore31dayofMarch2017soastobecomeeligiblefor deductionu/s32ACoftheAct.FromtheprovisionoftheAct,itisnotveryclear however,onperusalofthebudgetspeechgivingthereasonforprovidingsuch benefittotheassesseeundertheprovisionofsection32ACoftheAct,itis transpiredthattheprovisionswerebroughttoencouragethemanufacturing activitiesforthegrowthoftheeconomy.Iftheactivityofmanufacturingincreases, itwillhavemultipleeffectsonthecreationofnewjobs.However,inthebudget speechitwasmadeclearthatthebenefitundertheprovisionof32ACoftheAct, willbeeffectivefromF.Y2013-14tillFinancialYear2017.Thus,itistranspired thattheplantandmachineryacquiredandinstalledbetweentheperiodfrom1 st ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 12 dayofApril2013,till31 st March2017willonlybeliablefordeductionu/s32ACof theAct.However,onreadingtheprovisionofsubsection(1A)tosection32ofthe Act,wefindthatthereisnonecessityforacquiringthenewassetintheformof plantandmachinerywithinthespecifiedtime,butthelimitofinstallationhasbeen puti.e31/03/2017.Accordingly,wefindananomalybetweentheprovisionsof section32ACoftheAct,vis-à-visBudgetspeech/memorandumexplainingthe provisionsoftheAct. 10.3Bethat,asitmaybe,theprovisionofsection32ACoftheAct,are beneficialprovisionwhichwerebroughtunderthestatueforthepurposesof givingbenefittotheassesseewhohavebeenmadehugeinvestmentinthenew plantandmachinery,therefore,weareoftheviewthattheliberalinterpretation shouldbeappliedsoastoachievetheobjectoftheprovisionofsection32ACof theAct. 10.4Inthegivencasetheassesseehasshowncapitalintheprogressason 31/03/2013amountingtoRs.Rs.1779.54croreswhichwereinstalledintheyear underconsiderationandthereforetheassesseehasclaimedthedeductionu/s 32ACoftheAct,amountingtoRs.₹239,31,24,752/-only.Atthisjuncture,we alsonotethatsimilarwordswerealsousedu/s32(1)oftheAct,whereinthe additionaldepreciationwasprovidedontheassetacquired/installedafter 31/03/2005.TheMumbaiTribunalinthecaseofEuroPratikIspatPrivateLimited inITANo.1682/Mum/2011,hasheldthatincasetheinstallationspreadsovera periodtherelevantyearforgrantofdeductionwouldbetheyearinwhichthe installationiscompleted.TakingthesupportfromthefindingsoftheTribunal,we areoftheviewthatthesamelogiccanbeappliedinthecaseofhand. 10.5WealsofindthattheHon’bleGujaratHighinthecaseofPCITVs.IDMC Limitedreportedin393ITR441hasheldasunder: ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 13 7.ApplyinglawlaiddownbytheHon'bleSupremeCourtintheaforesaiddecisions tothefactsofthecaseonhand,ifthesubmissiononbehalfoftheRevenueis accepted,inthatcaseitwillleadtoanabsurdandunjustresultandthepurpose andobjectofgrantingtheadditionaldepreciationwillbefrustrated.Ifthe contentiononbehalfoftheRevenueisaccepted,inthatcase,theassesseeshall nevergettheadditionaldepreciationasprovidedunderSection32(1)(iia)oftheIT Act.Inthefactsandcircumstancesofthecase,thetwinconditionsoftheacquired andinstalledshallneverbesatisfiedinayearandtherefore,theassesseeshall nevergetanydepreciation.Thepurposeandobjectofgrantingadditional depreciationunderSection32(1)(iia)oftheITActisstatedhereinabovei.e.to encouragetheindustriesbypermittingtheassesseesettingupthenew undertaking/installationofnewplantandmachineryandtogiveaboosttothe manufacturingsectorbyallowingadditionaldepreciationdeduction.Thus,as rightlyheldbythelearnedITATtheprovisionofsection32(1)(iia)oftheITActis requiredtobeinterpretedreasonablyandpurposivelyasthestrictandliteral readingofsection32(1)(iia)oftheITActwillleadtoanabsurdresultdenyingthe additionaldepreciationtotheassesseethoughadmittedlytheassesseehasinstalled newplantandmachinery.Underthecircumstances,noerrorhasbeencommitted bythelearnedITATinallowingtheadditionaldepreciationattherateof20%on theplantandmachineryinstalledbytheassesseeafter31stDayofMarch2005i.e. theyearunderconsideration.Nosubstantialquestionoflawarise. 8.Inviewoftheaboveandforthereasonsstatedabove,presentTaxAppeal deservestobedismissedandis,accordingly, 10.6TheITATMumbaiTribunalinthecaseofM/sUltratechCementLimitedVs. DCITreportedin139taxmann.com151involvingtheidenticalissuehasdecided theappealoftheassesseeinfavouroftheassesseebyobservingasunder: 244.Ascanbenoted,theHon'bleGujaratHighCourtandtheHon'bleBenchof CoordinateBenchofthisTribunalhaveconsistentlytakenaviewthatthetwin conditionof"acquiredandinstalled"havetobereadinthemannertogiveita meaningful,reasonableandpurposiveinterpretation.Thetwinconditioncanbe saidtohavebeensatisfiedonthedaythesehugeplantandmachineriesare installedandbecomeusefulforproduction.Since,thelanguageofsection32ACis similartothelanguageusedinsection32(1)(iia),theratiolaiddownintheabove casessquarelyappliestothefactsoftheinstantcaseinthecontextofsection32AC. 245.TheARoftheassesseealsocontendedthatifastrictinterpretationisadopted fortheword"and"usedintheterm"acquiredandinstalled",tounderstanditinits normalgrammaticalsense,i.e.aconjunctive,thentheremaybealargenumberof instanceswheretheassessee,evenaftermakingrequiredinvestmentinplantand machinery,wouldnotbeabletoclaimdeductionundersection32ACoftheAct. Theassesseemayinvestindesigns,plans,drawings,bottles,books,etc.whichare consideredas"plant"forthepurposeofsection32oftheAct.Iftheinterpretation oftheRevenueisacceptedthatonlyplantacquiredandinstallediseligiblefor deductionundersection32ACoftheActthen,itwouldleadtoabsurdresultsasthe aforesaidassetswhichhavebeenconsideredbytheSupremeCourtandtheHigh ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 14 Courtsfallingwithinthemeaningof"plant"wouldnotbeeligiblefordeduction undersection32ACoftheActsincetheaforesaidassetsareincapableof installation.Designs,plans,drawings,bottles,books,etc.bytheirverynatureare notrequiredtobeinstalledandontheiracquisition,theyarereadytobeputtouse. Therefore,amanufacturerwhoisacquiringdesigns,drawings,planswhichare consideredasplantandmachineryforthetypeofbusinesstheyarein,willnotbe eligibletoclaimdeductionundersection32ACsinceaccordingtotheRevenuethe designs,drawing,plansarenotinstalledbytheassessee. 246.Itisfairlywellsettledlawthatwheretheword"and"asisunderstoodleadsto unintendedresults,thenitshouldbeinterpretedtomean"or".TheSupremeCourt inthecaseofCITv.RamKishanDass[2019]103taxmann.com414/263Taxman 657/413ITR337hasheld: "Secondly,thealternateconstructionoftheprovisoisthattheexpression"andfor anygoodandsufficientreason"shouldbereadtomean"orforanygoodand sufficientreason".Asamatterofstatutoryinterpretation,itiswellsettledthatthe expression"and"caninagivencontextbereadas"or"(seeinthiscontextIshwar SinghBindrav.StateofUPAIR1968SC1450).Thissubmissionwasopposedon behalfoftheassesseesbyurgingthatinthecontextofsub-section(2A),ithasbeen heldbythisCourtinSaharaIndia(Firm),Lucknow(supra)thattheword"and"is usedintheconjunctivesense.Undoubtedlytheexpression"and"insub-section(2A) hasbeenheldtotheconjunctive,whiledelineatingthecircumstancesonthebasis ofwhichanopinioncanbearrivedatbytheassessingofficer.Thiswouldnot necessarilyfurnishanindextohowtheexpression"and"intheprovisotosub- section(2C)shouldbeconstrued.Theinterpretationoftheexpressionmustbe basedonthecontextinwhichitisused.Intheprovisotosub-section(2C),the expression"and"isusedinconnectionwiththegrantofanextensionoftimeand notinthecontextoftheformationofanopinionfororderingaspecialaudit." 247.Weare,therefore,inclinedtoacceptthecontentionoftheARoftheassessee thatthewords"acquiredandinstalled"havetobereadas"acquiredorinstalled" togiveeffecttotheintentionofthelegislature. 248.WerefertothedecisioninthecaseofJupiterRadiosv.Dy.CIT[2017]88 taxmann.com93(Delhi)relieduponbytheDRduringthecourseofhearing.We havegonethroughthecasebutfindnorelevancetotheissuebeforeus.The Hon'bleDelhiHighCourtinthatcasewasconcernedwiththeissuerelatingto availabilityofdevelopmentrebate/allowanceundersection32A/34(3)thelanguage inwhicharenotparimateriawiththeprovisionsofsection32ACoftheAct. Secondly,theCourtwasnotatallconcernedwiththeinterpretationofthewords "acquiredandinstalled"andthequestionbeforetheHighCourtwaswhetherthe partnershipfirmcancontinuetoclaimdeductionundersection34A/34(3)ofthe Actiftheplantandmachineryisgiventoapartneronhisretirementfromthefirm duringthestatutoryholdingperiodof8years.Therefore,theaforesaiddecisionis notrelevanttodecidetheissuedinvolvedinthepresentappeal. 249.Inviewoftheabovewehavenohesitationtoholdthattheassesseeisentitled todeductionu/s32ACoftheActonthevalueofcostofcomponentsofplantor machinerylyingasCWIPason1April2013butinstalledduringthefinancialyear 2013-14.WethereforedirecttheAOtoallowdeductionasinvestmentallowance u/s32ACoftheITAct. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 15 10.7Admittedly,theplantandmachinerywereinstalledintheyearunder consideration.Therefore,takingtheliberalview,weholdthattheassesseeis eligiblefordeductionu/s32ACoftheAct.Accordingly,wesetasidethefindingsof theLd.CIT(A)anddirecttheAOtoallowthedeductiontotheassesseeunderthe provisionofsection32ACoftheAct.Hence,thegroundofappealoftheassessee isherebyallowed. 11.ThenextissueraisedbytheassesseevidegroundNo.2isthatthe learnedCIT(A)erredinsustainingthedisallowancesofdeductionclaimedunder section80-IAoftheActforRs.26,57,257/-onaccountofFDinterestincome. 12.Theassesseehasshowninterestincomeof₹26,57,257/-onfixeddeposit whichwasclaimedasdeductionundersection80-IAoftheAct.Asperthe assessee,thefixeddepositsweremadebytheundertakingseligiblefordeduction undersection80IAoftheActnamelySUGENunitwhereinidlefundwasinvested withbanktoearninteresttillthefunddeployedinbusiness.Theassessee alternativelycontendedthatifthebenefitofdeductionundersection80-IAis deniedtoitonsuchinterestincome,then,theexpenditureincurredbywayof interestonsuchdepositsshouldbenettedoff. 13.However,theAOfoundthattheamountofinterestincomefromthefixed depositisnotarisingfromtheactivityofgenerationordistributionofpower. Therefore,thesameisnoteligiblefordeductionundersection80-IAoftheAct. Likewise,thealternatecontentionfornettingoftheinterestincomeisalsonot maintainableforthereasonthattherewasnonexusbroughtonrecordbythe assesseesuggestingthattherewastheexpenditureincurredbyit(theassessee) againstsuchfixeddepositintheformofinterest.Thus,theAOwaspleasedto excludethegrossamountofinterestincomefromFDwhilecalculatingtheamount eligiblefordeductionundersection80-IAoftheAct. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 16 14.AggrievedassesseepreferredanappealtothelearnedCIT(A)who confirmedtheorderoftheAO. 15.BeingaggrievedbytheorderofthelearnedCIT(A),theassesseeinappeal beforeus. 16.ThelearnedARbeforeuscontendedthattheinterestwasrecoveredwith respecttotheeligibleundertaking.Therefore,thesameshouldbeeligiblefor deductionundersection80IAoftheAct. 17.Ontheotherhand,theld.DRvehementlysupportedtheorderofthe authoritiesbelow. 18.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethatidenticalissuewith respecttotheeligibilityofdeductionofincomebeinginterestonFDandincome taxrefundcameupbeforethisTribunalintheowncaseoftheassesseeforAY 2008-09inITANo.776&738/Ahd/2012wheretheissuehasbeendecided againsttheassessee.TherelevantfindingoftheBenchisextractedasunder: 52.Wehaveheardtherivalcontentionsofboththepartiesandperusedthematerials availableonrecord.Undeniably,thefixeddepositsweremadebytheeligibleundertakings andinterestwasearnedthereon.OnperusaloftheorderoftheAO,wealsonotethat therewassurplusfundavailablewiththeassesseewhichwasparkedinthefixeddeposits. TherelevantcontentionsoftheassesseebeforetheAOreadsasunder: “theassesseecompanysubmittedthatithasinvesteditsmoneyinfixeddeposits soastoearnincomethetimethefundsunderprovidebusinessactivities” 52.1Thus,fromtheaboveitistranspiredthattheassesseehasnotmadefixeddeposits underanyobligationinthecourseofcarryingonthebusinessofdistributionofpower. However,itisalsoafactonrecordtheimpugnedinterestincomewasofferedbythe assesseeasbusinessincomewhichwasalsoacceptedbytherevenueintheassessment proceedings.TheprovisionsofSection80-IAoftheActprovidesfordeductionofthe profitsderivedfromthebusinessbyanundertakingorenterprise,engagedinteralia,in generationorgenerationanddistributionofpower.Buttheinterestincomewasnotarising totheassesseefromtheactivityofdistributionofpower.Thus,onthesamereasoning givenintherelationtostreetlightmaintenanceactivityinparano.38ofthisorder,the impugnedincomeisnoteligiblefordeductionundersection80-IAoftheAct.Therefore theauthoritybelowrightlyexcludedthesamefromthecomputationofdeductionunder section80IAoftheAct.Hencetheassesseegroundofappealisdismissed. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 17 18.1Beforeus,nomaterialhasbeenplacedonrecordbythelearnedARto demonstratethatthedecisionofTribunalasdiscussedabovehasbeensetaside/ stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,learnedARhas notplacedanymaterialonrecordtopointoutanydistinguishingfeatureinthe factsofthecasefortheyearunderconsiderationandthatofearlieryearnorhas placedanycontrarybindingdecisioninitssupport.Thus,respectfullyfollowingthe orderofthistribunalintheowncaseofassessee,weherebyconfirmthefinding ofthelearnedCIT(A).Thus,thegroundofappealraisedbytheAssesseeis herebydismissed. 19.Thenextissueraisedbytheassesseevidegroundsno.3ofitsappealis thatthelearnedCIT(A)erredinconfirmingthedisallowanceofthededuction claimedundersection80-IAoftheActrepresentingmiscellaneousreceiptofRs. 1,48,38,569/-only. 20.TheAOduringtheassessmentproceedingsobservedthattherewere certainmiscellaneousreceiptsofRs.1,48,38,569/-shownundereligibleunitbeing BhiwandiDistributionUnit(Bhiwandiunit)andSuratGenerationUnit.The impugnedmiscellaneousreceiptsincludevariousincomesuchasInvoiceTDC income,differentialamountfromfuelvendor,varioustypesofrecoveryfrom employees,saleofoldnewspaper,connectionorreconnectionfee,incentive income,normativeincome,energyrelatedincomeetc.TheAOwasoftheview thatsuchreceiptshavenodirectnexuswitheligiblebusinessofgenerationor distributionofpower.Assuch,theimpugnedmiscellaneousreceiptsareonly incidentalincomewhicharenoteligiblefordeductionundersection80IAofthe Act.Thus,theAOdisallowedthedeductionclaimedbytheassessee. 21.Onappealbytheassessee,thelearnedCIT(A)confirmedthedisallowances madebytheAObyobservingasunder: (3)OtherMiscellaneousIncomeforRs.1,48,08,569/- ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 18 TheAppellantarguedthattheseincomeswereintheformofpenaltyforlate submissionofbills,penaltyforHR,safety&othernon-compliance,qualityissue,etc. further,theAppellanthasearnedvariousotherincomesandarguedthatsuchincomesare directlyrelatedtotheeligibleactivitiescarriedonbytheAppellant.Thedetailedbreakup ofsaidactivitiesisasunder: Sr.No.ParticularsAmount (Rs.) 1.IncentiveIncome-collection33,21,906 2.Differentialamountfromfuel vendors 11,87,329 3.Medicalcostrecoveryfrom contractors 1,95,380 4.Medicalcostrecoveryfrom employees 25,995 5.Misc.Recovery36,418 6.OtherRecoveryfrom employees 29,822 7.Recoveryforloss6,000 8.SaleofOldnewspaper2,040 9.Connection/Re-connectionFee26,76,150 10.IncentiveIncome(partof energyincomeof Rs.64,71,467) 33,67,129 11.Normativeincome(partof energyincomeof Rs.64,71,467) 1,90,768 12.EnergyRelatedIncome(part ofenergyincomeof Rs.64,71,467) 29,13,570 13.Transportrecoveryfrom employees 11,554 14.ReimbursementofIRand wheelingcharges 8,44,508 TOTAL1,48,08,569 IfindthatthefactofthecasearesimilartoA.Y.2013-14asfarasinvoiceTCDincome(Sr. No.1)33,21,906,othermiscellaneousincome(Sr.No.2to8)forRs.14,82,984and incentiveincome(Sr.10)forRs33,67,129,inwhichundersignedhasheldasunder "Oncarefulconsiderationofthefactsstatedabove,itisobservedthatasfaras incentiveincome,TCDincomeandotherincomeisconcemed(Rs.16,42,702+ 24,01,431+40,521),thefactsaresimilartoA.Y2012-13inwhichmypredecessor CIT(A)hasheldasunder However,sofarasothermiscellaneousreceiptsofRs.62,95,181areconcerned, Appellanthasgivengeneralexplanationregardingincentiveincomeordeduction fromcontractorsbillforlatesubmissionbutnotestablishedsuchclaimwith evidenceshenceitisheldthatsuchincomeisnoteligiblefordeductionunder Section80-1AoftheActAsfactsofyearunderconsiderationcontinuetobesame andinviewofthefactthatappellanthasnotbeenabletodemonstratethedirect ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 19 andproximatenexusoftheactivitywiththeeligibleactivity,deductionu/s80IA onsuchincometowardsincentiveincome,invoiceTCDincomeandother miscellaneousincomeasclaimedcannotbeallowed." AsfactsoftheyearunderconsiderationaresimilartothefactsofprecedingAssessment year,hence,forthereasonsasabovedeductionu/s80IAonsuchincometowards incentiveincome,invoiceTCDincomeandothermiscellaneousincomeasclaimedcannot beallowed. AsregardstheotherincomesbeingConnection/re-connectionfees(Sr.No9)forRs. 26.76.150,Normativeincome(Sr.No.11)forRs.1,90,768,Energyrelatedincome(Sr.No. 12)forRs.29,13,570,Transportrecoveryfromemployees(Sr.No.13)forRs.11.554and ReimbursementofIRandwheelingchargesforRs.8,44,508,theAppellanthasmerely givengeneralexplanationandhasnotexplainedthegenesisoftheseitemsofincome eitherbeforetheAOoninthepresentproceedings,hence,nodeductionontheseitemsof incomecanbeallowedaspertheprovisionsofsection80IAoftheAct. Hence,actionofAOindisallowingthedeductionamountingtoRs.1,48,08,569/-isupheld. Relatedgroundoftheappealisdismissed. 22.BeingaggrievedbytheorderofthelearnedCIT(A),theassesseeisin appealbeforeus. 23.ThelearnedARbeforeushasfiledachartcontaininghiscontentionsonthe differentissuesontheincomeclassifiedabove.Thesumandsubstanceofthe learnedAR’scontentionisthattheincomewaspertainingtotheunitengagedin theactivityofpowergenerationanddistributionandthereforeitcannotbesaid thatsuchincomewasnotderivedfromtheeligibleactivity.ThelearnedAR alternativelycontendedthatiftheincomeasdiscussedaboveisnottreatedas incomederivedfromtheeligibleactivitysoastoexcludethemfromthededuction computedundersection80-IAoftheAct,thenonlythenetincomeafter deductingthecorrespondingexpensesshouldonlybeconsidered. 24.Ontheotherhand,thelearnedDRbeforeusreiteratedthefindings containedintheordersoftherespectiveauthoritiesandvehementlysupported theorderoftheauthoritiesbelow. 25.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Fromtheprecedingdiscussion,wenotethatthe ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 20 assesseehasshownmiscellaneousreceiptsasincomeamountingtoRs. 1,48,08,569/-onlyandclaimeddeduction80-IAoftheAct.Thebreakupofthe samestandsasunder: Sr.No.ParticularsAmount (Rs.) 1.IncentiveIncome-collection33,21,906 2.Differentialamountfromfuel vendors 11,87,329 3.Medicalcostrecoveryfrom contractors 1,95,380h 4.Medicalcostrecoveryfrom employees 25,995 5.Misc.Recovery36,418 6.OtherRecoveryfrom employees 29,822 7.Recoveryforloss6,000 8.SaleofOldnewspaper2,040 9.Connection/Re-connectionFee26,76,150 10.IncentiveIncome(partof energyincomeof Rs.64,71,467) 33,67,129 11.Normativeincome(partof energyincomeof Rs.64,71,467) 1,90,768 12.EnergyRelatedIncome(part ofenergyincomeof Rs.64,71,467) 29,13,570 13.Transportrecoveryfrom employees 11,554 14.ReimbursementofIRand wheelingcharges 8,44,508 TOTAL1,48,08,569 25.1AsfarasitemofmiscellaneousincomeatserialNos.1and10i.e.Incentive Income-CollectionofRs.33,21,906/-andIncentiveincome(Partofenergyincome) ofRs.33,67,129/-areconcerned,wenotethattherewasidenticalissuebefore thistribunalinowncaseofassesseeforA.Y.2012-13inCONo.41/AHD/2019 whereintheco-ordinatebenchvideparagraphNos.90.1ofsaidorderdecidedthe impugnedissueagainsttheassessee.TherelevantfindingoftheBenchis extractedasunder: 90.1ThesumofT16,88,995/-representsincentivetotheassesseeonaccountof collectionmadeofthearrearsofMaharashtraStateElectricityDistributionCompanyLtd (MSEDCL).Admittedly,theincentivegivenbyMSEDCLisnotconnectedwiththe ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 21 generationanddistributionactivityoftheassessee.Thus,thesameisnoteligiblefor deductionundertheprovisionsofsection80IAoftheAct.However,whileexcludingthe impugnedmiscellaneousreceipt,theassesseeiseligiblefordeductionoftheexpenses incurred,ifany,againstsuchmiscellaneous(incentiveincome)receipt. 25.1.1Beforeus,nomaterialhasbeenplacedonrecordbythelearnedARto demonstratethatthedecisionofTribunalasdiscussedabovehasbeensetaside/ stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,learnedARhas notplacedanymaterialonrecordtopointoutanydistinguishingfeatureinthe factsofthecasefortheyearunderconsiderationandthatofearlieryearnorhas placedanycontrarybindingdecisioninitssupport.Thus,respectfullyfollowingthe orderofthistribunalintheowncaseofassessee,weherebyholdthatthe assesseewillnotbeeligiblefordeductionundersection80IAoftheActonthe incomebeingIncentiveIncome-CollectionofRs.33,21,906/-andIncentive income(Partofenergyincome)ofRs.33,67,129/-only.However,atthesame timeitisdirectedtotheAOtoreducesuchincomebytheamountof correspondingexpenditureifanyincurredbytheassessee.Thus,thegroundof appealtotheextentofIncentiveIncome-CollectionofRs.33,21,906/-and Incentiveincome(Partofenergyincome)ofRs.33,67,129/-ispartlyallowed. 25.2ComingtoitemslistedatserialNos.2to8and13ofthetableabove,in thisregard,wenotethatthefactsinvolvedinitemNos.2to8and13areidentical. Assuch,theassesseeintheeligibleunithasincurredcertainexpenditureandout suchexpenditurecertainamountrecoveredorrefundedtoassesseebeingexcess paidorrecoveryonaccountnon-fulfilmentofcontractualobligationbytheparty towhomsuchamountswerepaidorthenominalamountreceivedfrom employee/contractemployeeforthemedicalfacilities/reissueofID card/transportation.However,theassesseeinsteadofadjustingtheexpenditure onaccountofrefundorrecoveryhasshownsuchreceiptasseparateitemof incomeundertheheadmiscellaneousincome.TheAO,onreasoningthethatthe receiptswerenotderivedfromeligiblebusinessactivityofpowergeneration& distributionexcludedthesamefromtheamountofprofiteligiblefordeduction undersection80IAoftheAct. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 22 25.2.1However,wefindthatthesereceiptsaredirectlylinkedtotheexpenditure incurredintheeligibleunitwhichhasbeenacceptedbytherevenue.Ifthe assesseewouldhavereducedthecostofsuchexpenditurebytheamountof refund/recovery,therewouldnothavebeenanyquestionofshowingthe impugnedincomeseparatelyandconsequentlydenyingthedeductionclaimedby theassesseeundersection80-IAoftheAct.Itisjustamannerofpresentationof theincomeandexpense.Assuch,theassesseehasrepresentedthe refund/recoveryoutofsuchexpensesseparatelyasincomeinsteadofreducing thecost.Admittedly,thecorrespondingexpenseshavebeenallowedasdeduction againsttheincomefromgenerationanddistributionofpower.Thus,ithasalive linkwiththeactivityoftheassessee.Accordingly,weholdthattheassesseeis eligiblefordeductiononsuchreceiptofrefunditemslistedatserialNos.2to8 and13inthetableabove. 25.3ComingtoitemslistedatSerialNos.9and12i.e.,theconnectionand reconnectionfeeofRs.26,76,150/-andenergyrelatedincomeofRs.29,13,570/-, inthisregard,thelearnedARfortheassessee,beforeussubmittedthatsaid receiptsrepresentamountreceived/recoveredfromitscustomeronaccountof registrationofnewconnection,reconnection,changeofnameormeterand relatedtestingcharges.Attheoutset,wefindthattherewasidenticalissuei.e. shiftingchargesbeforethistribunalintheowncaseoftheassesseeforA.Y.2011- 12inITANo.3178/Ahd/2016whereinthecoordinatebenchofthistribunal decidedtheissueinthefavouroftheassesseeandthesamewasalsofollowedin owncaseoftheassesseeforA.Y.2012-13and2013-14.Therelevantfindingof theTribunalreadsasunder: 215.Beforeparting,Incomefromshiftingservicesofthemetersgiventothecustomers, havedirectproximitywiththebusinessoftheassessee.Therefore,wedonotfindany infirmityintheorderoflearnedCIT(A).Atthetimeofhearing,thelearnedARhasnot broughtanythingonrecordcontrarytothefindingofthelearnedCIT(A).Hencewe declinetointerfereintheorderofthelearnedCIT(A).Thusthegroundofappealofthe revenueisherebydismissed. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 23 25.3.1Beforeus,nomaterialhasbeenplacedonrecordbytheRevenueto demonstratethatthedecisionoftheTribunalasdiscussedabovehasbeenset aside/stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,the Revenuehasnotplacedanymaterialonrecordtopointoutanydistinguishing featureinthefactsofthecasefortheyearunderconsiderationandthatofthe earlieryearnorhasplacedanycontrarybindingdecisioninitssupport.Thus, respectfullyfollowingtheorderthistribunalintheowncaseofassessee,wehold thattheassesseeiseligiblefordeductionundersection80-IAoftheActwith respecttoconnection/reconnectionfeeandenergyrelatedincomelistedatserial Nos.9and12ofabovetable. 25.4ComingtotheitemofincomelistedinserialNo.11oftheabovetablei.e. NormativeIncomeofRs.1,90,768/-,itwassubmittedbythelearnedARofthe assesseethatsuchincomerepresentsthesupervisionchargesrecoveredfromthe customerswhocarryoutthelineworkthroughhisowncontractorbutunderthe supervisionofTPL.Thus,itwassubmittedbytheassesseethatthesameis eligiblefordeductionundersection80IAoftheAct.Fromthesubmissionofthe assessee,wenotethatthesupervisionchargedoesnotariseduringthebusiness ofgeneratingpoweranddistributionofpower.Therefore,weareoftheviewthat suchincomecannotbemadesubjecttotheprovisionsofsection80IAoftheAct forthepurposeofthededuction.However,theAO,beforedisallowingthe impugnedincomefromtheeligibleprofitwillconsiderthecorrespondingexpenses ifanyincurredbytheassessee.Thus,wedirecttheAOtomakethedisallowance oftheincomeclaimedshownbytheassesseenetofexpenses.Hence,theissue raisedbytheassesseeispartlyallowed. 25.5ComingtotheitemofincomelistedinserialNo.14oftheabovetablei.e. ReimbursementIRandwheelingchargesofRs.1,90,768/-,itwassubmittedby thelearnedARoftheassesseethatsuchincomerepresentstherecoveriesfor supervisionchargesfromthebeneficiariesoutofthelegalexpenses.Thus,itwas submittedbytheassesseethatthesameiseligiblefordeductionundersection ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 24 80IAoftheAct.Fromthesubmissionoftheassessee,wenotethattherecoveries forsupervisionchargesfromthebeneficiariesoutofthelegalexpensesdonot ariseduringthebusinessofgeneratingpoweranddistributionofpower.Therefore, weareoftheviewthatsuchincomecannotbemadesubjecttotheprovisionsof section80IAoftheActforthepurposeofthededuction.However,theAO, beforedisallowingtheimpugnedincomefromtheeligibleprofitwillconsiderthe correspondingexpensesifanyincurredbytheassessee.Thus,wedirecttheAOto makethedisallowanceoftheincomeclaimedshownbytheassesseenetof expenses.Hence,theissueraisedbytheassesseeispartlyallowed. 26.TheassesseevidenextgroundNo.4ofitsappealrequestedtoadmitand allowtheadditionalclaimforreductionofbookprofitonaccountofDebenture RedemptionReservebyRs.23,80,78,403/-only. 26.1TheassesseeduringtheyearcreatedDebentureRedemptionReserve(DRR) forRs.23,80,78,403/-only.Theassesseewhilecomputingbookprofitunder section115JBoftheActhastakenprofitbeforeappropriationofimpugnedDRR. Inotherwords,thebookprofitincludestheamountofdebentureredemption reserve.Theassesseeforthefirsttimebeforeusprayedtoexcludesuchamount ofDRRfromthebookprofitundersection115JBoftheActbycontendingthat DRRisnotreservefallingundertheprovisionofexplanation1(b)tosection 115JB(2)oftheAct.Thus,thequestionbeforeusiswhetherDRRcreatedbythe assesseeisareserveandneedstoaddedtoprofitaspertheprovisionof explanation1(b)tosection115JB(2)oftheAct.Thisquestionhasbeenanswered bythistribunalincaseofACITvs.GenusElectrotechLtd.reportedin71 taxmann.com101whereinthecoordinatebenchheldthattheDRRarecreatedfor knownliabilities,thereforethesamecannotbeequatedwithnormalreservemade inthebooksofaccounts.Accordingly,weholdthatthesameneednottobe includedinthebookprofit.Therelevantfindingofthecoordinatebenchofthis Tribunalinabovementionedcaseisextractedasunder: ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 25 16.Duringthecourseofthescrutinyassessmentproceedings,theadjustmentfordebt redemptionfund,atRs.2.50crores,wasdeclinedwithashortobservationthat'debt redemptionfundofRs.2.50croresisanappropriationforpurposeofcreatingareserve andisabelowthelineadjustment,itdoesnotfallinanycategoryoftheadjustments providedundersection115JB".LearnedCIT(A)confirmedthesameonthesamebasis andrejectedassesseesstandthatitiscoveredbyHon'bleBombayHighCourt'sjudgment inthecaseofCITv.RaymondsLtd.[2012]21taxmann.com60/209Taxman65.Itwas heldthatthepurposeofdebtredemptionreserveiscreationofareserveandisnota permissibleadjustment.Theassesseeisaggrievedandisinappealbeforeus. 17.Havingheardtherivalcontentionsandhavingperusedthematerialonrecord,wefind thattheissueisindeedcoveredbythedecisionofHon'bleBombayHighCourt,inthecase ofRaymondsLtd.(supra)whereinTheirLordshipshaveinteraliaobservedasfollows: '2.Requestion(a):Section115JAoftheIncomeTaxAct,1961providesinsubsection(2) thateveryassessee,beingacompanyshallforthepurposeofthesectionprepareitsprofit andlossaccountfortherelevantpreviousyearinaccordancewiththeprovisionsofParts IIandIIIofScheduleVItotheCompaniesAct,1956.TheexplanationtotheSection providesthatforthepurposeofthesection,"bookprofit"meansthenetprofitasshownin theprofitandlossaccountfortherelevantpreviousyearpreparedundersub-section(2) asincreasedinteraliaby"(b)theamountscarriedtoanyreservesbywhatevername called".PartIIIofScheduleVItotheCompaniesAct,1956providesinteraliainClause 7(1)(b)that,"theexpression"reserve"shallnotincludeanyamountwrittenofforretained bywayofprovidingfordepreciation,renewalsordiminutioninvalueofassetsorretained bywayofprovidingforanyknownliability". 3.ThenatureofaDebentureRedemptionReserve(DRR)hasbeenconsideredbythe judgmentoftheSupremeCourtinNationalRayonCorporationLtd.v.Commissionerof IncomeTax[(1997)227ITR764].TheSupremeCourtafteradvertingtotheprovisionsof Clause7ofPartIIItoScheduleVIoftheCompaniesAct,1956heldthat"thebasic principleisthatanamountsetaparttomeetaknownliabilitycannotberegardedas reserve".Whereacompanyissuesdebentures,theliabilitytorepayarisesthemomentthe moneyisborrowed.Byissuingdebenturesacompanytakesaloanagainstthesecurityof itsassets.Thoughtheloanmaynotberepayableintheyearofaccount,theobligationto repayisapresentobligation.Henceanymoneysetapartintheaccountsofthecompany toredeemthedebenturehastobetreatedasmoniessetaparttomeetaknownliability. Consequently,debentureshavetobeshowninthebalancesheetofacompanyasa liability.Beingmoniessetaparttomeetaknownliability,aDebentureRedemption ReservecannotberegardedasareserveforthepurposeofScheduleVItotheCompanies Act,1956.InNationalRayonCorporation,theSupremeCourtfolloweditsearlierdecision inVazirSultanTobaccoCo.Ltd.v.CIT[1981]132ITR559],inholdingthatsincethe conceptofreserveandofaprovisioniswellknownincommercialaccountancyandisused intheCompaniesAct,1956,whiledealingwiththepreparationofbalancesheetsand profitandlossaccountsthemeaningofthatconceptwouldhavetobegatheredfromthe meaningattachedintheCompaniesActitself.ThefollowingobservationsoftheSupreme Courtareofsignificance: "Thedebentureswerenothingbutsecuredloans.Merelybecausethedebentureswerenot redeemableduringtheaccountingperiod,theliabilitytoredeemthedebenturesdidnot ceasetoexist.Itwasredeemableorrepayableatafuturedate.Butitwasaknownliability. Intheformofbalance-sheetprescribedbytheActinScheduleVI,thesecuredloanshave tobeshownundertheheading"liabilities".Securedloansinclude(1)debentures,(2)loans andadvancesfrombanks,(3)loansandadvancesfromsubsidiaries,and(4)otherloans andadvances.Thesecuredloansmightnotbeimmediatelyrepayable,buttheliabilityto repaytheseloansisanexistingliabilityandhastobeshowninthecompany'sbalance- sheetfortherelevantyearofaccountasaliability.Amountssetaparttopaytheseloans cannotbe"reserve".Theinterpretationclauseofthebalance-sheetinScheduleVIofthe CompaniesActspecificallylaysdownthatreservesshallnotincludeanyamountwrittenoff orretainedbywayofprovidingforaknownliability." ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 26 4.ThemerefactthataDebentureRedemptionReserveislabeledasareservewillnot renderitasareserveinthetruesenseormeaningofthatconcept.Anamountwhichis retainedbywayofprovidingforaknownliabilityisnotareserve.Consequently,the TribunalwascorrectinholdingthattheamountwhichwassetapartasaDebenture RedemptionReserveisnotareservewithinthemeaningofExplanation(b)toSection 115JAoftheIncomeTaxAct,1961.' 18.We,therefore,upholdthepleaoftheassessee,anddirecttheAssessingOfficerto grantthereliefaccordingly. 26.2Beforeus,nomaterialhasbeenplacedonrecordbythelearnedDRto demonstratethatthedecisionofTribunalasdiscussedabovehasbeensetaside/ stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,thelearnedDR hasnotplacedanymaterialonrecordtopointoutanydistinguishingfeaturein thefactsoftheassesseeandthecaseasdiscussedabovenorhasplacedany contrarybindingdecisioninitssupport.Thus,respectfullyfollowingtheorderof thisTribunalinthecasementionedabove,weherebydirecttheAOtoallowthe reductionofbookprofitundersection115JBbytheamountofDRR.Thus,the groundofappealraisedbytheAssesseeisherebyallowed. 27.Additionalgroundsofappealraisedbytheassesseevideletterdated26- 11-2021arereproducedasunder: AppellantcravesleavetoraisetheseadditionalgroundsofappealbeforetheHon'bleITAT. Thesearelegalgroundsandtherefore,asperthedecisionofHon'bleSupremecourtinthe caseofNationalThermalPower(229ITR383),itcanberaisedbeforetheHon'bleITAT. Inviewoftheabove,theappellantherebyraisesfollowinggroundsasadditionalgrounds ofappeal,whichiswithoutprejudicetothegroundsraisedbytheappellantwhilefiling appealinForm36. "1.Withoutprejudicetoallthegroundsraised,in!awandinthefactsandcircumstances oftheappellant'scase,theappellantrequestsforadmissionofitsadditionalclaimandfor allowingdeductionofRs.97,03,000/-inrespectofEducationCessandtheSecondaryand HigherEducationCessonincometax,onthegroundthatsuchexpenditureisallowable businessexpenditureu/s37(1)oftheActaspersettledlegalprecedents.• 2.Withoutprejudicetoallthegroundsraised,inlawandinthefactsandcircumstances oftheappellant'scase,theappellantrequestsforadmissionofitsadditionalclaimandfor allowingdeductionofRs.40,17,903/-inrespectofEducationCessandtheSecondaryand HigherEducationCessonDividendDistributionTax,onthegroundthatsuchexpenditure isallowableexpenditureu/s.37(1)oftheActaspersettledlegalprecedents. Inviewoftheabove,theadditionalgroundsraisedmaykindlybeadmittedinviewof naturaljusticetotheappellant. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 27 28.Attheoutset,wenotethatthelearnedARfortheassesseeatthetimeof hearingsubmittedthathewasinstructedbytheassesseenottopresstheissue raisedinadditionalgroundsofappeal.Hence,thesamearedismissedasnot pressed. 29.Intheresultappeal,oftheassesseeisherebypartlyallowed. ComingtoITANo.1652/Ahd/2019,anappealbytheRevenueforAY 2014-15. 30.TheRevenuehasraisedfollowinggroundsofappeal: 1.WhethertheLd.CIT(A)wascorrectindeletingthedisallowanceu/s14Ar.w.r.8Dof theIncome-TaxAct,1961ofRs.6,47,98.315/-undernormalprovisionsofincome. 2.WhethertheLd.CIT(A)wascorrectindeletingthedisallowancemadeonaccountof interestexpenditureofRs.7.20.69.678/-madeonaccountofdiversionofborrowed fundsformakinginterestfreeadvancestosubsidiarycompanies. 3.(A)WhethertheLd.CIT(A)wascorrectindeletingthedisallowancemadeonaccount ofdeductionu/s.80GoftheIncome-TaxAct,1961andu/s.80GGBoftheIncome-Tax Act,1961. (B)TheCIT(A)oughttohaveconfirmedthedisallowancemadebytheAssessing Officerwhohaddisallowedtheamountaftertakingintoconsiderationtherelevant facts. 4.WhethertheLd.CIT(A)wascorrectindeletingthedisallowanceofdeductionu/s.801A oftheIncome-TaxAct,1961onthefollowingissues: (1)InterestIncome: InterestondelayedpaymenttocustomersonsaleamountingtoRs.4,01,15,415/-in respectofBhiwandiUnit. (II)MiscellaneousIncome: LatedeliverypaymentofRs.7,43,051/-(BhiwandiUnit-Rs.6,40,180/-+SugenUnit– 1,02,871/-)andsupplier'sdiscountonpromptpaymentofpurchasebillforRs.26,76,041/- (SugenUnit). DelayedpaymentchargesofRS.6,68,68,014/-(BhiwandiUnit) (iv)MiscelleneousReceiptsforRs.3,96,51,605/- (A)Scrapsales-Rs.3,70,62,808/- (B)(i)OtherMiscellaneousIncomeofRs.16,75,375/-includingenergyrelatedincome. (ii)LiquidateddamagesofRs.9,13,422/- ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 28 (C)ProvisionofearlieryearwrittenbackofRs.13,32,48,622/- 5)WhethertheLd.CIT(A)wascorrectindeletingtheadditiontobookprofitofRs. 15,23,10,540/- 31.ThefirstissueraisedbytheRevenuevidegroundNo.1ofitsappealis thatthelearnedCIT(A)erredindeletingthedisallowanceofRs.6,47,98,315/- undersection14Areadwithrule8DoftheIncomeTaxRules. 32.TheassesseeduringtheyearearnedadividendincomeofRs. 13,31,99,000/-onlywhichwasclaimedasexemptedundersection10(38)ofthe Act.Theassesseeinthereturnofincomemadesuo-motodisallowanceofRs. 8,75,12,225/-undersection14Areadwithrule8D(2)(iii)oftheIncomeTaxRule representingadministrativeexpenses.TheassesseebeforetheAOsubmittedthat therewasnoexpenditureincurredwhichdirectlyrelatedtotheexemptedincome hencenodisallowanceunderrule8D(2)(i)isrequiredtobemade.Similarly,the borrowingsareforspecificbusinesspurposes,thereforeinterestpaidonsuch borrowingcannotalsobesubjectedtodisallowanceunderrule8D(2)(ii)ofIncome TaxRules.Thus,onlydeemedadministrativeexpensesunderrule8D(2)(iii)can besubjecttodisallowancewhichhasalreadybeendonei.e.suo-moto disallowancesofRs.8,75,12,225/-only.Hence,nofurtherdisallowanceisrequired tobemade. 33.However,theAOdisagreedwiththecontentionoftheassesseeandre- workedouttheamountofdisallowanceasperrule8D(2)oftheIncomeTaxRule atRs.15,23,10,540/-beinginterestexpenditureatRs.6,47,98,315/-and administrativeexpensesofRs.8,75,12,225/-only.Thus,theAOmadeadditionof Rs.6,47,98,315/-tothetotalincomeoftheassessee. 34.Onappealbytheassessee,thelearnedCIT(A)deletedthedisallowancesof interestexpenseunderrule8D(2)(ii)ofIncomeTaxRulebyobservingasunder: Consideringtheabove,theAppellantrequestyourgoodhonortodeletethedisallowance madebytheLd.AssessingOfficeru/s14AoftheActinthecaseofAppellant."Considering theabovefactsthatrightfromtheyearofinvestmentstillthecurrentyearappellanthad ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 29 formorefreereservesthantheinvestmentsmadeineachoftheyearsandthefactthat theentireinterestexpenseexceptinterestofRs.3,93,061/-ontermloanpertaintoand laidoutforservicingtheloansobtainedforspecificpurposesandrespectfullyfollowingthe decisionsoftheBombayHighCourtinCITv.RelianceUtilitiesandPowerLtd.(313ITR 340),DecisionofGujaratHighcourtincaseofCommissionerofIncome-tax,Ahmedabad- IVv.TorrentPowerLtd.[44taxmann.com441]dated04.02.2014,DecisionofGujarat HighcourtincaseofCITV/SUTIBankLimited[32Taxman.Com370](2013)dated, DecisionofGujaratHighcourtincaseofPrincipalCommissionerofIncome-taxv/sSintex IndustriesLtd[2017][82taxmann.com171]andotherjudgmentsreferredsupra disallowanceofinterestbyAOunderSection14AreadwithRule8D(2)(ii)for Rs.6,47,98,315towardsinterestisnotjustifiableandhencedeleted.AOisdirectedto deletethesame.Thus,GroundNo.1oftheappealisallowed. 35.BeingaggrievedbytheorderofthelearnedCIT(A),theRevenueisin appealbeforeus. 36.ThelearnedDRbeforeusreiteratedthefindingscontainedinthe assessmentorderandreliedontheorderoftheAO. 37.Ontheotherhand,thelearnedARoftheassesseebeforeuscontended thattheassesseehasinterestfreefund(beingSharecapitalandReserve)ofRs. 6176.56croreagainstthetotalinvestmentyieldingexemptedincomeforRs. 2112.34croresonly.Therefore,nodisallowancesofinterestexpenditurecanbe made.Theld.ARsupportedtheorderoftheld.CIT-A. 38.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethatidenticalissuecameup forhearingbeforethistribunalintheowncaseoftheassesseeforAY2008-09in ITANo.776/Ahd/2012wheretheissuehasbeendecidedinfavouroftheassessee andagainsttheRevenuevideorderdated09-12-2021.Therelevantfindingofthe Benchisextractedasunder: 21.Wehaveheardtherivalcontentionsofboththepartiesandperusedthematerials availableonrecord.AttheoutsetwenotethattheAOhasmadetheadditiononaccount oftwocounts.Firstly,theinterestexpensesandsecondlyadministrativeexpensesunder section14Ar.w.r.8DofIncomeTaxRules.Thereisnoambiguitytothefactthattheown fundoftheassesseeexceedstheinvestmentmadeinthesecurities.Thenecessarydetails oftheownfundoftheassesseeandtheinvestmentinsecuritiesstandsasunder: Netownedfunds:Rs.2889.76crore Investmentinsecurities:Rs.61.88crore ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 30 21.1Inviewoftheabove,apresumptioncanbedrawnthattheownedfundofthe assesseehasbeenusedintheimpugnedinvestment.Therefore,weareoftheviewthat nodisallowanceofinterestexpensesonaccountofdiversionofthefundiswarranted.In thisregard,wefindsupportandguidancefromthejudgementofHon’bleBombayHigh CourtinthecaseofRelianceUtilitiesandPowerLtd.reportedin313ITR340whereinit washeldasunder:- “Theprinciplethereforewouldbethatiftherearefundsavailablebothinterest- freeandoverdraftand/orloanstaken,thenapresumptionwouldarisethat investmentswouldbeoutoftheinterest-freefundgeneratedoravailablewiththe company,iftheinterest-freefundsweresufficienttomeettheinvestments.Inthis casethispresumptionisestablishedconsideringthefindingoffactbothbythe CIT(A)andTribunal”. 21.2Similarly,wealsorelyonthejudgmentoftheHon’bleGujaratHighCourtinthecase ofCITvs.IndiaGelatine&ChemicalsPvt.Ltd.reportedin376ITR553.Therelevant extractoftheorderisreproducedbelow: Theassesseehadmadeinvestmentinsharesandmutualfunds.Itsuomotu offered/disallowedtheamountofRs.2lakhsonaccountofsection14A.The AssessingOfficer,however,madefurtherdisallowanceundersection14A.The TribunaldeletedtheentiredisallowancemadebytheAssessingOfficeronthe groundthattheassesseehadsufficientinterest-freefundsoutofwhich investmentwasmade.Heldthattherewasnoinfirmityintheimpugnedorderof theTribunal. 21.3Likewise,wealsodrawsupportfromthejudgmentofHon’bleGujaratHighCourtin thecaseofUTIBankLtd.reportedin32Taxmann.com370wheretheheadnotereadsas under: “Iftherearesufficientinterestfreefundstomeettaxfreeinvestments,theyare presumedtobemadefrominterestfreefundsandnotloanedfundsandno disallowancecanbemadeundersection14A”. 21.4Inviewoftheaboveproposition,weholdthatnodisallowanceofinterestexpense claimedbytheassesseecanbemadeonaccountofinvestmentsmadeinthesecuritiesas discussedabove.HencewedirecttheAOtodeletetheadditionmadetotheextentof interestexpenses. 38.1Beforeus,nomaterialhasbeenplacedonrecordbytheRevenueto demonstratethatthedecisionoftheTribunalasdiscussedabovehasbeenset aside/stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,Revenue hasalsoneitherplacedanymaterialonrecordtopointoutanydistinguishing featureinthefactsofthecasefortheyearunderconsiderationandthatofearlier yearnorhasplacedanycontrarybindingdecisioninitssupport.Thus,respectfully followingtheorderofthisTribunalintheowncaseofassessee,weupholdthe findingofthelearnedCIT(A).Thus,thegroundofappealraisedbytheRevenueis herebydismissed. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 31 39.ThenextissueraisedbytheRevenuevidegroundNo.2ofitsappealis thatthelearnedCIT(A)erredindeletingthedisallowanceofinterestforRs. 7,20,69,678/-madebytheAOonaccountofdiversionofinterest-bearingfund. 40.TheAOduringtheassessmentproceedingsfoundthattheassesseehas advancedinterestfreeloanstoitssubsidiaries.Accordingly,theAOcalculatedthe proportionateamountofinterestat₹7,20,69,678/-@10%attributabletosuch loananddisallowedthesamebyaddingtothetotalincomeoftheassessee. 41.AggrievedassesseepreferredanappealtothelearnedCIT(A)whodeleted theadditionmadebytheAOonreasoningthattheassesseewashavingsufficient interestfreefundtoextendtheinterestfreeloanandadvance. 42.BeingaggrievedbytheorderofthelearnedCIT(A),theRevenueisin appealbeforeus. 43.BoththelearnedDRandtheARbeforeusvehementlysupportedtheorder oftheauthoritiesbelowasfavourabletothem. 44.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethattheidenticalissuecame upbeforethistribunalintheowncaseoftheassesseeforAY2010-11inITANo. 2025/Ahd/2013whereintheissuehasbeendecidedinfavouroftheassesseeand againsttheRevenuevideorderdated09-12-2021.Therelevantfindingofthe Benchisextractedasunder: 187.Wehaveheardtherivalcontentionsofboththepartiesandperusedthematerials availableonrecord.Admittedly,theownfundoftheassesseeexceedstheamountofloans providedwithoutcharginginterestthereon.TheownfundoftheassesseestandsatRs. 3960.15croreonlywhereastheamountofloansandadvancestosubsidiarystandsatRs. 49.79croreonlywhichcanbeverifiedformthefinancialstatementavailableonrecord. Thus,apresumptioncanbedrawnthatsuchamountofloanadvanceshavebeenprovided bytheassesseeoutofitsownfund.Therefore,therecannotbeanydisallowanceof interestexpenses.HencethegroundofappealoftheRevenueisherebydismissed. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 32 44.1Beforeus,nomaterialhasbeenplacedonrecordbytheRevenueto demonstratethatthedecisionofTribunalasdiscussedabovehasbeensetaside/ stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,Revenuehas neitherplacedanymaterialonrecordtopointoutanydistinguishingfeatureinthe factsofthecasefortheyearunderconsiderationandthatoftheearlieryearnor hasplacedanycontrarybindingdecisioninitssupport.Thus,respectfully followingtheorderofthistribunalintheowncaseofassessee,weupholdthe findingofthelearnedCIT(A).Thus,thegroundofappealraisedbytheRevenueis herebydismissed. 45.ThenextissueraisedbytheRevenuevidegroundNo.3ofitsappealis thatthelearnedCIT(A)erredindeletingthedisallowanceofdeductionmadeby theAOundersection80Gand80GGBoftheAct. 46.Theassesseeduringtheyearhasmadecertaindonationsundersection 80G/80GGBoftheActwhicharedetailedasunder: 1.Donationundersection80GRs.1,77,11,950/- 2.Donationundersection80GGBRs.5,00,00,000/- 46.1Theassesseeoutoftheabovedonationworkedtheamounteligiblefor deductionunderrespectivesectionwithrespecttotheunitseligiblefordeduction undersection80IAoftheActwhicharedetailedasunder: ParticularsBhiwandiSUGEN Donationu/s80G23,12,350/-21,74,900/- Donationu/s80GGB1,00,00,000/-2,00,00,000/- 46.2However,theassesseeneitherclaimedanydeductionundersection80IA norundersection80Gor80GGBoftheActbecausetherewasnopositiveincome fortheyearunderconsideration. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 33 46.3TheAOheldthattheassesseeiseligibletoclaimseparatedeductionunder section80G/80GGBoftheActfortheunitcoveredundersection80IAoftheAct astheentireprofitfromthesaidunitisalreadyeligiblefordeductionunder section80IAoftheAct.TheAOalsoworkedouttheamountofdonationeligible fordeductionintheratioofturnoverofeachunit.However,noadditionwasmade bytheAOastheassesseehasnotclaimedanydeductionundersaidsection. 47.TheaggrievedassesseepreferredanappealbeforethelearnedCIT(A)and submittedthattheamountavailablefordeductionundersection80Gand80GGB oftheActwasworkedoutforeachunitasperactualpayment.Therefore,the samecannotbeallocatedintheturnoverratioasheldbytheAO. 47.1Theassesseefurthersubmittedthatdeductionundersection80IAand 80G/80GGBareseparateandthesamecannotbeinterlinked.TheorderoftheAO hasnoeffectontheincomefortheyearunderconsiderationasthereisnegative income.However,suchfindingswillaffecttheoutcomeifincomebecomes positiveinthesubsequentyear.Therefore,suchafindingoftheAOshouldbeset aside. 48.ThelearnedCIT(A),afterconsideringthefactsintotalityallowedthe appealoftheassesseebyfollowingtheorderofhispredecessorintheowncase oftheassesseeforA.Ys.2008-09to2013-14. 49.BeingaggrievedbytheorderofthelearnedCIT(A),theRevenueappeals beforeus. 50.ThelearnedDRbeforeusreiteratedthefindingscontainedinthe assessmentorderandvehementlysupportedtheorderoftheAO. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 34 51.Ontheotherhand,thelearnedARbeforeusreiteratedthefindings containedintheappellateorderandvehementlysupportedtheorderoftheld. CIT-A. 52.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethatidenticalissuecameup beforethistribunalintheowncaseoftheassesseefortheAY2008-09inITANo. 776&738/Ahd/2012wheretheissuehasbeendecidedinfavouroftheassessee andagainsttheRevenuevideorderdated09-12-2021.Therelevantfindingofthe benchisextractedasunder: 114.Wehaveheardtherivalcontentionsofboththepartiesandperusedthematerials availableonrecord.Thecontroversyinthepresentcaserelateswhethertheassesseecan claimthedeductionundersection80Gand80GGBoftheActforthedonationsmadeby theundertakingeligiblefordeductionundersection80-IAoftheAct.Thedeductionunder section80-IAoftheActisallowedtotheassesseewithrespecttothebusinessreferred thereiniscarriedonbytheassessee.Thatparticularbusinessisknownastheundertaking whichisconsideredasseparateandindependenttootheractivitiesoftheassessee.Thus thedeductionundersection80-IAoftheActisspecificfortheeligibleundertaking.Ifthe eligibleundertakingderivesanyincomefromtheactivityotherthanthosebusiness referredtherein,then,thesamecannotbeallowedasdeductionundersection80-IAof theAct.Onthesamereasoning,ifthereisanyexpense/paymentmadebytheeligible undertakingwhichisnotinconnectionwiththebusinessreferredundertheprovisionsof section80-IAoftheAct,thesameexpenses/paymenthastobeexcludedfordetermining theeligibleprofit.Thus,theamounteligiblefordeductionundersection80-IAoftheActis computedfromthebusinessreferredthereinonly. 114.1Nowcomingtothecaseonhandthedonationspaidbytheassesseeagainstthe eligibleundertakingwhichisqualifiedfordeductionundersection80G/80GGGBoftheAct, thesamecannotbeconsideredasanexpense/paymentagainstthespecific business/undertakingeligiblefordeductionundersection80-IAoftheAct.Itisforthe reasonthatthedonationundersection80G/80GGBoftheActdoesnotrelatetothe activityofeligibleundertaking.Inotherwords,thepaymentundersection80G/80GGBof theActiseligiblefordeductiononaccountofthepaymentmadetothespecificinstitution irrespectiveofthebusinesswhetheritiseligibleornon-eligiblecarriedonbytheassessee. 114.2Thereisnodisputetothefactthattheamountofdonationwasclaimedbythe assesseeintheprofitandlossaccountoftheeligibleundertakingwhichhasbeen disallowedwhilecomputingtheeligibleprofit.Certainly,theprofitoftheeligible undertakingwillincreasebytheamountofdisallowancemadebytheassesseeonaccount ofthedonationspaidtotheinstitutionswhichisentitledfordeductionundersection 80G/80GGBoftheAct.Ithastobedisallowed/addedbackwhilecomputingtheeligible profitofthebusinessreferredthereinundersection80-IAoftheAct.Itisforthereason thatthisdonationdoesnotrelatetothebusinessreferredundersection80-IAoftheAct whichiseligiblefordeduction.Butthesamecanbeclaimedasdeductionbyvirtueofthe provisionsofsection80G/80GGBoftheActseparatelysubjecttotheconditionsspecified therein.Hence,wedonotfindanyinfirmityintheorderoflearnedCIT(A).Thus,the groundofappealoftheRevenueisdismissed. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 35 52.1Beforeus,nomaterialhasbeenplacedonrecordbytheRevenueto demonstratethatthedecisionoftheTribunalasdiscussedabovehasbeenset aside/stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,Revenue hasneitherplacedanymaterialonrecordtopointoutanydistinguishingfeature inthefactsofthecasefortheyearunderconsiderationandthatoftheearlier yearnorhasplacedanycontrarybindingdecisioninitssupport.Thus,respectfully followingtheorderofthisTribunalintheowncaseofassessee,weupholdthe findingofthelearnedCIT(A).Thus,thegroundofappealraisedbytheRevenueis herebydismissed. 53.ThenextissueraisedbytheRevenuevidegroundNo.4ofitsappealis thatthelearnedCIT(A)erredindeletingthedisallowanceofdeductionunder section80IAoftheActwithrespecttocertainreceiptswhicharenotderivedfrom eligiblebusiness. 54.TheAOduringtheassessmentproceedingsfoundthattherewereseveral incomesshownbytheassesseeunderdifferentheadswhichwerenotdirectly arisingfromtheactivityofdistributionofpower.Thedetailsofthesamestandas under: 1.InterestDelayedpaymentBhiwandiunitRs.4,01,15,415/- 2.LatedeliverypaymentBhiwandi&SugenunitRs.7,43,051/- 3.DiscountonpromptpaymentRs.26,76,041/- 4.DelayedpaymentchargesRs.6,68,68,014/- 5.SaleofscrapRs.3,70,62,808/- 6.OtherMiscellaneousRs.16,75,375/- 7.Liquidateddamages/rebateRs.9,13,422/- 8.ProvisionofearlieryearwrittenoffRs.13,32,48,622/- 54.1Nevertheless,theassesseehasclaimedadeductionundersection80IAof theActbytreatingthemasprofitderivedfromthebusinessofgenerationand distributionofpower.However,theAOdisputedthedeductionwithrespectto ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 36 suchitemsofincome.However,inappellateproceeding,thelearnedCIT(A)held theaboveitemsofincomeaseligiblefordeductionundersection80IAoftheAct. Thus,theRevenueisinappealbeforeus.Forthesakeofconvenience,we proceedtoadjudicateeachitemofincomeshownbytheassesseeandclaimed deductionundersection80IAoftheActinthemannerasdetailedbelow: a)Interestondelayedpayment 55.Attheoutset,wenotethatidenticalissuecameupbeforethisTribunalin owncaseoftheassesseeforA.Y.2008-09inITANo.776&738/Ahd/2012where theissuehasbeendecidedinfavouroftheassesseeandagainsttheRevenue videorderdated09-12-2021.TherelevantfindingoftheBenchisextractedas under: 59.Wehaveheardtherivalcontentionsofboththepartiesandperusedthematerials availableonrecord.Onceabillisraisedtothecustomer,itisexpectedfromthecustomer tomakethepaymentwithinthetimeprovidedtherein.Incaseofanydelay,theinterest chargedbytheassesseefromthecustomersrepresentsthecompensationforthedelay payment.Inotherwords,itisanopportunitylosstotheassesseeforthedelayinthe payment,hadthemoneybeenrealizedbytheassesseeinthetime,thesamewouldhave beenexploitedinsomeremunerativeactivitybuttheassesseewasdeprived.Thusthe interestwaschargedwhichpartakesthecharacterofthesaleproceeds.Thustoour understandingsuchamountofinterestisverymucheligiblefordeductionundersection 80-IAoftheAct.InholdingsowedrawsupportandguidancefromtheJudgmentof Hon’ableGujaratHighCourtinthecaseofNirmaIndustriesLtdVs.DCITreportedin283 ITR402whereinitwasheldasunder: “However,thepartieshavingmadeelaboratesubmissions,themattermaybe examinedfromaslightlydifferentangle.Whentheassesseeentersintoacontract forsaleofitsproductsitcouldeitherstipulate(a)thatinterestatthespecifiedrate wouldbechargedontheunpaidsalepriceandaddedtotheoutstandingtillthe pointoftimeofrealisation,or(b)thatincaseofdelaythepaymentforsaleof productsworthRs.100tocarrythesalepriceofRs.102forfirstmonth’sdelay,Rs. 104forsecondmonth’sdelay,Rs.106forthirdmonth’sdelayandsoon.Ifthe contentionofRevenueisaccepted,merelybecausetheassesseehasdescribedthe additionalsaleproceedsasinterestincaseofcontractasperillustration(a)above, suchpaymentwouldnotbeprofitsderivedfromindustrialundertaking,butincase ofillustration(b)above,ifthepaymentisdescribedassalepriceitwouldbe profitsderivedfromtheindustrialundertaking.Thiscanneverbe,becauseinsum andsubstancetheseareonlytwomodesofrealisingsaleconsideration,theobject beingtorealisesaleproceedsattheearliestandwithoutdelay.Purchaserpays highersalepriceifitdelayspaymentofsaleproceeds.Inotherwords,thisisa conversesituationtoofferingofcashdiscount.Thus,inprinciple,inreality,the transactionremainsthesameandthereisnodistinctionastothesource.Itis incorrecttostatethatthesourceforinterestistheout-standingsaleproceeds.It isnottheassessee’sbusinesstolendfundsandearninterest.Thedistinction ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 37 drawnbyRevenueisartificialinnatureandisneitherinconsonancewithlawnor commercialpractice. 30.TheTribunalwas,therefore,notjustifiedinholdingthatwhilecomputing deductionundersection80-IoftheAct,interestreceivedfromtradedebtors towardslatepaymentofsalesconsiderationisrequiredtobeexcludedfromthe profitsoftheindustrialundertakingasthesamecannotbestatedtohavebeen derivedfromthebusinessoftheindustrialundertaking. 31.Intheresult,boththequestionsstandansweredashereinbefore.Theappeal isaccordinglyallowedandstandsdisposedof.” 59.1Fromtheprecedingdiscussionwenotethatthejudgmentwasrenderedin connectionwiththeprovisionsofsection80IoftheActbuttheprincipleslaiddowntherein canalsobeadoptedtotheprovisionsofsection80-IAoftheAct.Inviewoftheabove,we donotfindanyinfirmityintheorderoflearnedCIT(A).Hencetheissueraisedbythe Revenueisdismissed. 55.1Beforeus,nomaterialhasbeenplacedonrecordbytheRevenueto demonstratethatthedecisionoftheTribunalasdiscussedabovehasbeenset aside/stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,Revenue hasneitherplacedanymaterialonrecordtopointoutanydistinguishingfeature inthefactsofthecasefortheyearunderconsiderationandthatoftheearlier yearnorhasplacedanycontrarybindingdecisioninitssupport.Thus,respectfully followingtheorderofthistribunalintheowncaseofassessee,weupholdthe findingofthelearnedCIT(A).Thus,weholdthattheassesseeiseligiblefor deductionundersection80-IAoftheActwithrespecttointerestincomefrom customers. b)Latedeliverypayment 56.Theassesseeduringtheyearunderconsiderationrealizedanamount aggregatingtoRs.6,40,180/-andRs.1,02,871-intheeligibleunitofBhiwandi andSuratfromthesupplieraspenaltyforlatedeliveryofmaterials.Theassessee claimedsuchreceipthasdirectnexuswiththeeligiblebusinessofdistribution& generationofpower.Hence,thesameiseligiblefordeductionundersection80-IA oftheAct.However,theAOwasoftheviewthattheincomeshownbythe assesseebywayofpenaltyforlatedeliveryfromthesuppliersisnotdirectly arisingfromtheactivityofpowergeneration/distributionbutincidentaltothe ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 38 businessoftheassessee.Accordingly,thesamecannotbemadesubjectto deductionundersection80IAoftheAct. 56.1Onappeal,thelearnedCIT-Awaspleasedtoallowthedeductiontothe assesseeundertheprovisionsofsection80-IAoftheActwithrespecttolate deliverypaymentaccountedasincomebyfollowingtheorderofhispredecessorin owncaseoftheassesseeforA.Y.2013-14. 56.2BeingaggrievedbytheorderofthelearnedCIT(A),therevenueisin appealbeforeus. 56.3ThelearnedDRbeforeusreiteratedthefindingscontainedinthe assessmentorderandvehementlysupportedtheorderoftheAO. 56.4Ontheotherhand,thelearnedARbeforeusreiteratedthefindings containedintheappellateorderandvehementlysupportedtheorderoftheld. CIT-A. 56.5Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wefindthatthefactsinvolvedinthe issueathandareidenticaltothefactsinvolvedintheissueofreceiptof Liquidationdamagecharges.ThedisputeonLiquidationdamagehasbeen adjudicatedbyusvideParaNo.61ofthisorder.Sincethefactsinvolveinthe issueonhandaswellasonissueofLiquidationdamageareidentical,therefore weholdthatfindinggivenincaseofliquidationdamagewillapplyhereinalso. Thus,weholdthattheassesseeiseligiblefordeductionundersection80-IAof theActwithrespecttolatedeliverychargesfromthesuppliers. c)Supplierdiscount ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 39 57.DuringtheyearunderconsiderationtheassesseereceivedadiscountofRs. 26,76,041/-onaccountofpromptpaymenttocertainparties,detailedasunder: ParticularsAmount(Rs.) LongTermOpenAccesspaidtoPowerGridCorp.ofIndia26,11,902 ShortTermOpenAccesspaidtoGETCO60,403 WRIDCFees&ChargespaidtoPOSOCO3,736 Total26,76,041 57.1Theassesseesubmittedthatitreceivedarebate/discountonpayment madetoabovementionedpartieswhicharedirectlyconnectedwiththe distributionofpower.Therefore,suchreceiptsbeingdiscounts/rebatesareeligible fordeductionundersection80-IAoftheAct.However,theAOdisagreedwiththe contentionoftheassesseeandheldtherebate/discountearnedarenotthe incomederivedfromeligiblebusinessactivityofdistributionofpower.Assuchthe sameisonlyincidentaltothebusinessactivityoftheassessee.Hence,thesameis noteligiblefordeductionundersection80IAoftheAct. 57.2Onappeal,thelearnedCIT-Awaspleasedtoallowthedeductiontothe assesseeundertheprovisionsofsection80-IAoftheActwithrespectto impugneddiscount/rebateonthepromptpaymentbyfollowingtheorderofhis predecessorintheowncaseoftheassesseeforA.Y.2013-14. 57.3BeingaggrievedbytheorderofthelearnedCIT(A),theRevenueisin appealbeforeus. 57.4ThelearnedDRbeforeusreiteratedthefindingscontainedinthe assessmentorderandvehementlysupportedtheorderoftheAO.Ontheother hand,thelearnedARbeforeusreiteratedthefindingscontainedintheappellate orderandvehementlysupportedtheorderoftheld.CIT-A. 57.5Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Admittedlythediscount/rebatefetchedbythe ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 40 assesseeonaccountofquickpaymentmadetoPowerGridCorporationofIndia, GETCOandPOSOCOhasdirectlinkwiththeactivityoftheassesseebeing distributionofpower.Similarly,theamountofdiscount/rebatereceivedbythe assesseehasbeenpresentedinthefinancialstatementinadifferentformat.As such,theassesseeinsteadofshowingthediscount/rebateincomeasaseparate item’sincome,couldhaveadjustedsuchrebateagainstthepaymentmadeto suchparties/theexpensesincurredinthenameofsuchparties.Insuchanevent, therewouldnothavebeenanyquestionfordisclosinganyincomeunderthe captionedheadandconsequentlydisallowingthedeductionclaimedbythe assesseeundertheprovisionsofsection80IAoftheAct.Accordingly,wehold thattheassesseeiseligiblefordeductionundertheprovisionsofsection80IAof theActonsuchrebate/discountreceivedonaccountofpromptpayment. Delayedpaymentchargesfromcustomers 58.Attheoutset,wenotethatidenticalissuecamebeforethistribunalinthe owncaseoftheassesseeforAY2008-09inITANo.776&738/Ahd/2012where theissuehasbeendecidedinfavouroftheassesseeandagainsttheRevenue videorderdated09-12-2021.TherelevantfindingoftheBenchisextractedas under: 80.Wehaveheardtherivalcontentionsofboththepartiesandperusedthematerials availableonrecord.Thelatefeeschargedbytheassesseefromthecustomersonaccount ofdelayedpaymentwithinthetimehasdirectnexuseswiththeactivityofthebusinessof theassesseei.e.distributionofelectricity.Thustoourunderstandingsuchamountof delayedpaymentchargesisverymucheligiblefordeductionundersection80-IAofthe Act.InholdingsowedrawsupportandguidancefromthejudgmentofHon’bleGujarat HighCourtinthecaseofNirmaIndustriesLtd.Vs.DCITreportedin283ITR402wherein itwasheldasunder: “Whentheassesseeentersintoacontractforsaleofitsproductsitcouldeither stipulate(a)thatinterestatthespecifiedratewouldbechargedontheunpaid salepriceandaddedtotheoutstandingtillthepointoftimeofrealisation,or(b) thatincaseofdelaythepaymentforsaleofproductsworthRs.100tocarrythe salepriceofRs.102forfirstmonth’sdelay,Rs.104forsecondmonth’sdelay,Rs. 106forthirdmonth’sdelayandsoon.IfthecontentionofRevenueisaccepted, merelybecausetheassesseehasdescribedtheadditionalsaleproceedsasinterest incaseofcontractasperillustration(a)above,suchpaymentwouldnotbeprofits derivedfromindustrialundertaking,butincaseofillustration(b)above,ifthe paymentisdescribedassalepriceitwouldbeprofitsderivedfromtheindustrial undertaking.Thiscanneverbe,becauseinsumandsubstancetheseareonlytwo ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 41 modesofrealisingsaleconsideration,theobjectbeingtorealisesaleproceedsat theearliestandwithoutdelay.Purchaserpayshighersalepriceifitdelays paymentofsaleproceeds.Inotherwords,thisisaconversesituationtooffering ofcashdiscount.Thus,inprinciple,inreality,thetransactionremainsthesame andthereisnodistinctionastothesource.Itisincorrecttostatethatthesource forinterestistheout-standingsaleproceeds.Itisnottheassessee’sbusinessto lendfundsandearninterest.ThedistinctiondrawnbyRevenueisartificialin natureandisneitherinconsonancewithlawnorcommercialpractice. 30.TheTribunalwas,therefore,notjustifiedinholdingthatwhilecomputing deductionundersection80-IoftheAct,interestreceivedfromtradedebtors towardslatepaymentofsalesconsiderationisrequiredtobeexcludedfromthe profitsoftheindustrialundertakingasthesamecannotbestatedtohavebeen derivedfromthebusinessoftheindustrialundertaking. 31.Intheresult,boththequestionsstandansweredashereinbefore.Theappeal isaccordinglyallowedandstandsdisposedof. 80.1Fromtheprecedingdiscussionwenotethatthejudgmentwasrenderedin connectionwiththeinterestincomewhichiseligiblefordeductionundersection80-Iof theActbuttheprincipleslaiddownthereincanalsobeadoptedtotheprovisionsof section80-IAoftheActinthegivenfactsandcircumstances.Inviewoftheabovewedo notfindanyinfirmityintheorderoflearnedCIT(A).Hencetheissueraisedbythe revenueisdismissed. 58.1Beforeus,nomaterialhasbeenplacedonrecordbytheRevenueto demonstratethatthedecisionoftheTribunalasdiscussedabovehasbeenset aside/stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,Revenue hasneitherplacedanymaterialonrecordtopointoutanydistinguishingfeature inthefactsofthecasefortheyearunderconsiderationandthatoftheearlier yearnorhasplacedanycontrarybindingdecisioninitssupport.Thus,respectfully followingtheorderofthistribunalintheowncaseofassessee,weupholdthe findingofthelearnedCIT(A).Thus,weholdthattheassesseeiseligiblefora deductionundersection80-IAoftheActwithrespecttodelayedpaymentcharges fromcustomers. SaleofScrap 59.Theassesseeduringtheyearunderconsiderationrealizedanamount aggregatingtoRs.3,70,62,808/-onaccountofsaleofscrapfromtheeligibleunit ofBhiwandiandSurat.Theamountrealizedonsaleofscrapwasincludedinthe claimofdeductionundersection80-IAoftheAc.t.However,theAOwasofthe ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 42 viewthattheincomeshownbytheassesseebywayofscrapsaleisnotdirectly arisingfromtheactivityofpowergenerationbutincidentaltothebusinessofthe assessee.Accordingly,thesamecannotbemadesubjecttodeductionunder section80IAoftheAct. 59.1Onappeal,thelearnedCIT-Awaspleasedtoallowthedeductiontothe assesseeundertheprovisionsofsection80IAoftheActwithrespecttothesales ofscrapbyfollowingtheorderofhispredecessorintheowncaseoftheassessee forA.Y.2013-14whereinitwasheldasunder: 5.8.3Thesubmissionisconsidered.SofarasdeductionunderSection80-IAonsaleof scrapisconcerned,itisobservedthatsamehasbeenshownbyAppellantasbusiness incomeandthesameisacceptedbyAOassuch.TheAOhasnotbroughtanyevidencesto suggestthatsamerelatestocapitalassets.Theincomehasbeencreditedindistribution unitsandAOhasnotprovedthatsuchsaleofscrapdoesnotrelatetobusinessofpower distributionundertakenbyvariousunits.•.Hon'bleGujaratHighCourtinthecaseofCIT V/sJikarA.Saiyed42taxman.com403hasheldasunder: 'Section80-/BoftheIncome-taxAct,1961-Deductions-Profitsandgainsfrom industrialundertakingsotherthaninfrastructuredevelopmentundertakings [Computationofdeduction]-Assessmentyear2001-02-Whetherinviewoforders passedincasesofDy,CITv.Harjivanda$JuthabhaiZaveri[2002j258ITR785/[2003] 132Taxman923(Guj.)andCITv.SadhuForgingLtd.[2011]336ITR444/200 Taxman1/11taxmann.com322(Delhi),Tribunalwasjustifiedinholdingthat assesses,engagedinmanufacturingcardboxes,wasentitledtodeductionunder section80-iBinrespectofincomearisingfromsaleofscrap-Held,yes[Para6][ln favourofassesseej" RelyinguponthebindingdecisionoftheHon'bleCourt,supra,AOisdirectedto allowdeductionunderSection80-IAonsaleofscrap. 59.2BeingaggrievedbytheorderofthelearnedCIT(A),theRevenueisin appealbeforeus. 59.3ThelearnedDRbeforeuscontendedthattheincomeshownbythe assesseebywayofsaleofscrapisnotarisingfromtheactivityofpower generationanddistribution.Therefore,thesamecannotbeallowedasadeduction undertheprovisionsofsection80IAoftheAct. 59.4Ontheotherhand,thelearnedARcontendedthattheassesseeinsteadof adjustingtheimpugnedincomeagainsttheexpensehasclassifiedincomefrom ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 43 othersourcesinthefinancialstatement.Assuch,thereisnoincometothe assesseefromthesaleofscrap/consumablematerialsinrealsenseexceptitis reducingthecostincurredbytheassesseeinthecourseofitsbusinessi.e.power generationanddistribution.Therefore,thesameshouldbeeligiblefordeduction undersection80IAoftheAct. 59.5Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethatidenticalissuecame beforethistribunalintheowncaseoftheassesseeforAY2012-13and2013-14 inITANo.14&2047/Ahd/2018wheretheissuehasbeendecidedinfavourofthe assesseeandagainsttheRevenuevideorderdated28 th December2022.The relevantfindingoftheBenchisextractedasunder: 26.Wehaveheardtherivalcontentionsofboththepartiesandperusedthematerials availableonrecord.Thecontroversybeforeusrelateswhethertheincomeshownbythe assesseeundertheheadscrapsaleiseligiblefordeductionundersection80IAoftheAct. ThelearnedCIT-Ahasgivenacategoricalfindingthatthescrapsalehasbeengenerated bytheassesseefromthesaleofconsumableitemswhichhasnolinkwiththefixedassets. Generally,thesaleoffixedassetisadjustedagainsttheblockofassetsiftheparticular blockofassetexistsinthebooksofaccountsundertheprovisionsoftheIncomeTaxAct. However,inthecaseonhandsincethesaleofscraprepresentstheconsumableitems whichhavenotbeenclassifiedasfixedassetsandnodepreciationofwhatsoeverhasbeen claimedbytheassessee,thenthequestionofmakinganyadjustmentonaccountofsale ofscrapagainsttheblockofassetsdoesnotarise.ThelearnedDRatthetimeofhearing hasnotcontrovertedthefindingofthelearnedCIT-A. 26.1Whentheconsumablestoresarepurchasedbytheassessee,theyaredirectly debitedintheprofitandlossaccountandthebalanceifremainingattheendoftheyearis shownasclosingstockintheprofitandlossaccountaftermakingtheadjustmentofthe consumptionwhichisdebitedintheprofitandlossaccount.Thusineffectonlythe amountofmaterialconsumedisclaimedasdeductionagainsttheincomeoftheassessee. Ifobsoletestoreshavebeensoldoutintheyearunderconsiderationthesamewillbe shownasincomeintheprofitandlossaccountatthesalepriceandsimultaneouslythe correspondingmaterialcostoftheconsumableswillbedebitedintheprofitandloss account.Thusineffectthelossesthattheassesseehasincurredonaccountof obsolescenceofconsumablematerialsisreducedbytheamountofsale’srealization.Itisa mattermannerofpresentationinthebooksofaccountsaboutthesaleofconsumable materials.Iftheassesseeinsteadofshowingthesaleoftheconsumablematerialsas incomeandadjustingthesameagainstthecostoftheconsumablessoldbyittherewill notbeanyincomeinthebooksofaccountsoftheassesseeandaccordinglythequestion ofdisallowancesofdeductionunderthesection80IAoftheActwillnotarise.Thus,merely theassesseehaspresentedthesaleofconsumablestoresinaparticularmanner,the assesseecannotbedebarredfromclaimingthedeductionundertheprovisionsofsection 80IAoftheAct.Itisalsopertinenttonotethattheincomefromthesaleofconsumable storesusedintheeligibleunithasdirectlinkwiththegenerationanddistributionofpower, thereforeonthisscoreaswell,theassesseecannotbedeniedthebenefitofthededuction undersection80IAoftheAct.Accordingly,weupholdtheorderofthelearnedCIT-A,and ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 44 directtheAOtodeletetheadditionmadebyhim.Hencethegroundsofappealofthe revenueisdismissed. 59.6Beforeus,nomaterialhasbeenplacedonrecordbytheRevenueto demonstratethatthedecisionoftheTribunalasdiscussedabovehasbeenset aside/stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,Revenue hasnotplacedanymaterialonrecordtopointoutanydistinguishingfeaturein thefactsofthecasefortheyearunderconsiderationandthatoftheearlieryear norhasplacedanycontrarybindingdecisioninitssupport.Thus,respectfully followingtheorderofthistribunalintheowncaseofassessee,weupholdthe findingofthelearnedCIT(A).Thus,weholdthattheassesseeiseligiblefor deductionundersection80-IAoftheActwithrespecttoreceiptfromsaleofscrap consumablesstores. OtherMiscellaneousReceiptofRs.16,75,375/- 60.TheassesseeduringtheyearhasshownreceiptofRs.16,75,375/-being othermiscellaneousincomeinBhiwandiDistributionUnit.Theassesseesubmitted thatimpugnedamountincludesreceiptsforShiftingofServicesandDamageof Meter/Cable/MeterBoxetcwhicharedirectlyrelatedtoeligibleactivityof distributionofpower.Hencethesamewasclaimedaseligiblefordeductionunder section80-IAoftheAct. 60.1However,theAOdisagreedwiththecontentionoftheassesseeandheld thattheimpugnedreceiptsdonothaveanydirectnexuswiththeactivityofthe powerdistributionorgeneration.Assuchtheworkwascarriedoutformeterfixing, testing,andshiftingofserviceswhichhasneithertheelementofdistribution/ generationofpowernorthesamedependuponanyactivityofdistribution& generationofpower.Hence,theassesseeisnoteligiblefordeductionunder section80-IAoftheActonsuchreceiptsofRs.16,75,375/-only. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 45 60.2Onappeal,thelearnedCIT-Awaspleasedtoallowthedeductiontothe assesseeundertheprovisionsofsection80-IAoftheActwithrespecttometer fixing,testing,andshiftingofservicesbyfollowingtheorderofhispredecessorin owncaseoftheassesseeforA.Y.2013-14. 60.3BeingaggrievedbytheorderofthelearnedCIT(A)therevenueisinappeal beforeus. 60.4ThelearnedDRbeforeusreiteratedthefindingscontainedinthe assessmentorderandvehementlysupportedtheorderoftheAO. 60.5Ontheotherhand,thelearnedARbeforeusreiteratedthefindings containedintheappellateorderandvehementlysupportedtheorderoftheld. CIT-A. 60.6Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethattheidenticalissuecame upbeforethistribunalintheowncaseoftheassesseeforAY2011-12and2013- 14inITANo.3178/Ahd/2016and2047/AHD/2018wheretheissuehasbeen decidedinfavouroftheassesseeandagainsttheRevenuevideorderdated09- 12-2021and28-12-2022.TherelevantfindingoftheBenchisextractedasunder: 215.Beforeparting,Incomefromshiftingservicesofthemetersgiventothecustomers, havedirectproximitywiththebusinessoftheassessee.Therefore,wedonotfindany infirmityintheorderoflearnedCIT(A).Atthetimeofhearing,thelearnedARhasnot broughtanythingonrecordcontrarytothefindingofthelearnedCIT(A).Hencewe declinetointerfereintheorderofthelearnedCIT(A).Thusthegroundofappealofthe revenueisherebydismissed. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Wehaveheardtherivalcontentionsofboththepartiesandperusedthematerials availableonrecord.Fromtheprecedingdiscussion,wenotethattheassesseewasin receiptofanamountofRs.41,51,680/-fromthemeterfixingservices,testingfee,fault attendingfeeetc.TheAOheldthatsuchreceiptsarenotderivedfromtheactivityofthe generationordistributionofpower.Attheoutset,wenotethatelectricitytotheend customercannotmadeavailabletothecustomerwithoutfixingmeter.Further,meteris necessaryformeasurementofunitsuppliedtoparticularcustomerandbasedonwhich billsareissued.Thus,inourconsideredopinionmeterfixingserviceshasdirectlinkwith ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 46 theactivityofdistributionofpower.Therefore,theassesseeiseligiblefordeductionunder section80-IAoftheActonsuchreceipt. 60.7Beforeus,nomaterialhasbeenplacedonrecordbytheRevenueto demonstratethatthedecisionoftheTribunalasdiscussedabovehasbeenset aside/stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,Revenue hasneitherplacedanymaterialonrecordtopointoutanydistinguishingfeature inthefactsofthecasefortheyearunderconsiderationandthatoftheearlier yearnorhasplacedanycontrarybindingdecisioninitssupport.Thus,respectfully followingtheorderofthistribunalintheowncaseofassessee,weupholdthe findingofthelearnedCIT(A).Thus,weholdthattheassesseeiseligiblefor deductionundersection80-IAoftheActwithrespecttootherMiscellaneous IncomewhichincludesShiftingServices/meterfixing/testingetc. Liquidationdamage 61.TheassesseeduringtheyearhasshownreceiptofRs.9,13,422/-being liquidationdamagesinSuratgenerationunitandthesamewasclaimedaseligible fordeductionundersection80-IAoftheAct.However,theAOdisagreedwiththe assesseeandheldthattheimpugnedreceiptdoesnothaveanydirectnexuswith theactivityofthepowerdistributionorgeneration.Assuch,thesameisonly incidentaltothemainactivityandatthemost,itcanbeviewedasattributableto eligibleunitbutnotderivedfromeligibleactivity.Hence,theassesseeisnot eligiblefordeductionundersection80-IAoftheActonsuchreceiptsofRs. 9,13,422/-only. 61.1Onappealbytheassessee,thelearnedCIT(A)deletedthedisallowanceof thedeductionmadebytheAObyobservingasunder: (2)LiquidationdamagesforRs9,13,422 Theappellanthasarguedthatsuchincomepertaintoamountreceivedbyitfromvarious suppliersonaccountofshortorlatesupplyofmaterials,deficiencyinservicesetc.,hence, itwasonlythecompensationtotheappellantforlossofrevenuewhicharoseduetosuch defaultbythesuppliers. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 47 ItisobservedthatthefactofthecasearesimilartoA.Y2013-14asfarasliquidation damagesforRs.9,13,422isconcernedinwhichundersignedhasheldasunder "ItisobservedthatthefactsaresimilartoAY2012-13inwhichMypredecessor CIT(A)hasheldasunder:5.6.3Thesubmissionisconsidered.Sofarasincomein formofliquidateddamagesrecoveredfromlatepaymentmadebycustomersis concomed,itisinextricablylinkedwithpurchasecostofeligibleunitanditreduces thecostincurredbyappellant.Similarlyrebateisnothingbutreductionof purchasecostmadebyappellantasitistowardspromptpaymentoftransmission chargesHon'bleDelhiHighCourtincaseofBSNL(73faxmann.com98]hasheld asunder"Section80-1AoftheIncome-taxAct,1961Deductions-Profitsand gainsfrominfrastructureundertakings(Telecommunicationservices)Assessment years2004-05to2008-09Appellantwasengagedinbusinessofproviding telecommunicationservicesItclaimeddeduction4undersection80-IAinrespect ofprofitsandgainsderivedfromfollowingsixitems:extraordinaryitems,refund fromuniversalservicefund,interestfromothers,liquidateddamages,excess provisionwrittenbackandothersincludingsaleofdirectories,publications,form, wasterpaper,etc.AssessingOfficerheldthatintermsofprovisionsofsub-section (2A)ofsection80-IAprofitsandgainsderivedfromabovesixitemscouldnotbe saidtobederivedfromeligiblebusinessofappellantandaccordinglydisallowed claimfordeductionTribunalheldthatfirstdegreenexusimplicitinwords'derived from'usedinsection80-IA(1)wasnotrequiredforcomputationofdeductionin caseundertakingengagedinprovidingtelecommunicationservices,sincewordsof 'derivedfrom'didnotoccurinsub-section(2A)ofsection80-IAItaccordingly allowedappellant'sclaimfordeductionundersection80-IAWhetherTribunalwas justifiedinitsviewHeld,yes[Paras6and14][Infavourofappellant] SimilarviewistakenbyHon'bleMPHighCourtincaseofCITvPrakashOilsLtddated 08.03.2011[58DTR279]incaseofliquidateddamagesincome. Asfactsofunderconsiderationcontinuetobesameandinviewofthedirectand proximatenexusoftheactivitywiththeeligibleactivitydeductionu/s80IAonsuch incomeamountingtoRs.4,32,144/asclaimedisallowed.Therelatedgroundofappealis allowed. Factsofthecasecontinuetobesame,hence,forthesamereasonsdeductionu/s 80IAonsuchincometowardsLiquidationdamagesforRs.9,13,422isallowed.The relatedgroundofappealisallowed. 61.2BeingaggrievedbytheorderofthelearnedCIT(A),theRevenueisin appealbeforeus. 61.3ThelearnedDRbeforeuscontendedthatincometotheassesseeunderthe headliquidationdamagesandrebatedoesnotarisefromtheactivityofpower generationanddistribution.Therefore,thesameisnoteligiblefordeduction undersection80IAoftheAct. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 48 61.4Onthecontrary,thelearnedARcontendedthattheincometotheassessee asdiscussedabovedirectlyrelatestotheactivityofpowergenerationand distribution.Therefore,thesameiseligiblefordeductionundersection80IAof theAct. 61.5Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethatidenticalissuecame beforethistribunalintheowncaseoftheassesseeforAY2012-13and2013-14 inITANo.14&2047/Ahd/2018wheretheissuehasbeendecidedinfavourofthe assesseeandagainsttheRevenuevideorderdated28 th December2022.The relevantfindingoftheBenchisextractedasunder: 21.Wehaveheardtherivalcontentionsofboththepartiesandperusedthematerials availableonrecord.Fromtheprecedingdiscussionwenotethatthedamageswere receivedbytheassesseeinconnectionwiththepurchasesmadebytheeligibleunit.The amountofliquidateddamagesrepresentsthereceiptoftheassesseefromthesupplier whofailedtosupplyorcauseddelayinsupplyingthematerialstotheeligibleunit.Thus,it appearsthatsuchdamageshasdirectlinkfromtheactivitygenerationanddistributionof power.Besidestheabove,iftheassesseewouldhavereducedthecostofmaterial purchasebytheamountofliquidateddamages,therewouldnothavebeenanyquestion ofshowinganyincomeunderthecaptionedheadandconsequentlydenyingthededuction claimedbytheassesseeundersection80IAoftheAct.Itisjustamannerofpresentation. Assuch,theassesseehasrepresentedtheliquidateddamagesseparatelyasincomebutit hasalivelinkwiththeactivityoftheassessee.Accordingly,weholdthattheassesseeis eligiblefordeductiononsuchliquidateddamages. 61.6Beforeus,nomaterialhasbeenplacedonrecordbytheRevenueto demonstratethatthedecisionoftheTribunalasdiscussedabovehasbeenset aside/stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,Revenue hasneitherplacedanymaterialonrecordpointingoutanydistinguishingfeature inthefactsofthecasefortheyearunderconsiderationandthatoftheearlier yearnorhasplacedanycontrarybindingdecisioninitssupport.Thus,respectfully followingtheorderofthistribunalintheowncaseofassessee,weupholdthe findingofthelearnedCIT(A).Thus,weholdthattheassesseeiseligiblefor deductionundersection80-IAoftheActwithrespecttoreceiptonaccountof liquidationdamagesasdiscussedabove. Provisionofearlieryearwrittenback ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 49 62.Duringtheyearunderconsideration,theassesseeintheSUGENeligible unitwrittenbackcertainprovisionsmadeinearlieryearsandthesamewere includedintheprofiteligiblefordeductionundersection80-IAoftheAct.The amountsofdifferentprovisionswrittenbackareavailableonpages99to100of theld.CIT-Aorder. 62.1TheAOexcludedtheaboveincomecreditedintheprofitandlossaccount fromtheeligibleamountofdeductioncomputedundersection80IAoftheActon thereasoningthatsuchincomewasnotdirectlyderivedfromtheactivityof eligiblebusinessbeinggenerationanddistributionofpower. 62.2TheaggrievedassesseepreferredanappealbeforethelearnedCIT(A).The assesseesubmittedthatithadenteredintolongtermservice/maintenance agreementwithM/sSiemensLimitedandM/sSiemensAGforHotGasPath Inspection.Accordingly,itmadeprovisionforsuchagreementsbasedon EquipmentOperatingHours(EOH).However,oncompletionoftheHotGasPath Inspection,itwrittenbacktheexcessprovisionmadeintheearlieryearsforRs. 43,67,668/-only. 62.3Likewise,itenteredintoanagreementwithTorrentPowerGreedLimitedto haveaccesstocertaintransmissionlines.Thechargesforsameweredetermined onbasisoftransmissiontariffprescribedbyCentralElectricityRegulationAuthority (CERC).Thus,itmadeprovisionbasedontheapplicabletariffrateprescribedby theCERC.However,intheyearunderconsideration,thetransmissiontariffrate gotrevised.Hence,asperthenewrate,theexcessprovisioncreatedforRs. 1,12,08,198/-waswrittenbackintheprofitandlossaccount. 62.4Similarly,TorrentPowerGreedLimitedissuecreditnoteforRs. 1,29,44,716/-onaccountoffinalsettlementoftransmissionchargesandthesame wascreditedtoprofitandlossaccountasincome.Likewise,inearlieryear,it ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 50 issuedbillonTorrentEnergylimitedonaccountofenergysupplyand compensationforunderwithdrawalofcapacitybooked.However,theamountdue onaccountoftheabove-mentionedbillwasindoubt,henceitmadeprovisionand finallytheexcessamountofprovisionforRs.10,46,94,440/-waswrittenbackin theyearunderconsideration. 62.5Theassesseeinviewoftheabovecontendedthatatthetimeofmaking provisiontheeligibleprofitgotreducedduetosuchprovisionanditavailedthe deductionundersection80IAonthereducedprofit.Therefore,oncesuchamount writtenbankandcreditedtoprofitlossaccount,itisentitledtoavailbenefitof section80IAoftheActonsuchamounts. 62.6ThelearnedCIT(A)afterconsideringthesubmissionofassesseeand findingoftheAO,allowedtheclaimofassessee.Therelevantfindingoftheld. CIT-Aiscontainedonpages101to104ofhisorder. 62.7BeingaggrievedbytheorderofthelearnedCIT(A),theRevenueisin appealbeforeus. 62.8ThelearnedDRbeforeusreiteratedthefindingscontainedinthe assessmentorderandvehementlysupportedtheorderoftheAO. 62.9Ontheotherhand,thelearnedARbeforeusreiteratedthefindings containedintheappellateorderandvehementlysupportedtheorderoftheld. CIT-A. 62.10Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethattherewasidenticalissue camebeforethistribunalinowncaseoftheassesseeforA.Y.2009-10bearing ITANo.1581/Ahd/2012whereinthecoordinatebenchvideorderdated09-12- 2021decidedtheissueinfavouroftheassesseebyobservingasunder: ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 51 137.Beforeparting,wenotethat,thereversaloftheprovisionshownbytheassessee creditingtheprofitandlossaccount,isallowableforeligiblefordeductionundersection 80-IAoftheActonthesamereasoningasprovidedbyuswithrespecttoinsurancereceipt andbaddebtswrittenbackinITANo.776/AHD/2012fortheAY2008-09inParagraphNo. 26to32.3and39to45.1ofthisorder. 62.11Thereasoninggivenbythecoordinatebenchofthistribunalwhiledeciding theabove-mentionedappealreadsasunder: 45.Wehaveheardtherivalcontentionsofboththepartiesandperusedthematerials availableonrecord.Admittedly,thereisnodisputetothefactthatthebaddebsrecovery shownbytheassesseeasincomeintheyearunderconsiderationpertainstothe undertakingeligiblefordeductionundersection80IAoftheAct.TheallegationoftheAO wasthatthebaddebtsrecoveryrepresentstheamountwhichwasclaimedasdeduction bytheassesseeintheearlieryearwhentheundertakingswerenoteligiblefordeduction undersection80IAoftheAct.Thus,theassesseehasclaimeddoublebenefitfirstlyby claimingthedeductionofbaddebtswhentheundertakingswerenoteligiblefordeduction undersection80IAoftheActandsecondlybyshowingtheincomeofBaddebtrecovery whentheundertakingswereeligiblefordeductionundersection80IAoftheAct.Onthis reasoning,theAOdidnotallowthebenefitofdeductionundersection80IAoftheActqua suchbaddebtsrecovery.However,thisdisputehasbeenresolvedbytheITAT (Ahmedabad)inthecaseofRadhaMadhavIndustriesVs.ITOreportedin8taxmann.com 63whereinitwasheldasunder: 11.Wehaveconsideredtherivalsubmissionsandperusedthematerialonrecord. Inourconsideredviewthematterrequirestobere-examinedsoastogivea findingbytheAssessingOfficerwhethertheseamountswrittenbackbythe assesseewereclaimedasdeductioninanyearlieryear.Ifsuchdeductionwas claimedandallowedinanyearlieryearthenclearlytherewasreductionofprofitin thoseearlieryearsandoncethecreditorsremittheliabilityorliabilityceasedto existandassesseedeclareditaspartoftheprofitthennexusofsuchprofit writtenbackwiththeindustrialundertakingisnotsevered.Itisbecausewhile allowingdeductiontheeligibleprofitsofthebusinessderivedfromtheindustrial undertakingwerereducedastheywereallowableexpenditure.Oncetheliability ceasedtoexistinfavouroftheassesseethentheybecomeprofitsoftheassessee inthecurrentyearasperprovisionsofsection41(1).Whenweexaminethenexus oftheprofitwiththeindustrialundertakingitisnottobeseenastofromwhom theprofitisderivedbutitistobeseenwhetheritisderivedfromthebusiness.So longmoneyisrecoverablefromthepartiesorpayabletothepartiesduringthe courseofbusinessthetransactionshaveadirectnexuswiththebusinessandone cannotviewthesetransactionsawayfromthebusiness.Suchtransactionsinclude receiptsandpaymentofmoneyincashorinkindimmediatelyoroncreditandare partofbusinessactivities.Iftheassesseehastomakethepaymenttotheabove fourparties,whichwerestandinginthebalancesheetascreditorsandwhichhave beenclaimedasbusinessdeductioninanearlieryearthenonlycourselefttothe assesseeiseithertomakethepaymentorifnopaymentislegallyrequired,to showasprofitundersection41(1)whichhasbeensodonebytheassessee.There isaclearanddirectbusinessconnectionofsuchcessationorremissionandsuch profitstaxableundersection41(1)canbeheldasderivedfromindustrial undertaking.Theargumentsoftheld.DRthattheyarenotcurrentyear'sprofit frommanufacturingactivityisdevoidofanymeritbecausedeductionunder section80-IAisavailableonlyonprofitsderivedfromindustrialundertakingwhich iscarryingonmanufacturingactivitiesanditisnotconfinedtoonlycurrentyear's ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 52 profitasperP&Laccount.Thedeductionundersection80-IAor80-IBisavailable onprofitsandgainscomputedinaccordancewithsection20A-43Dwhichincludes section41(1)also. 12.ThuswhereAssessingOfficerfindsthatclaimhasalreadybeenallowedinthe earlieryearthensuchbenefitundersection80-IAshouldbegiventotheprofits taxedundersection41(1).Theargumentofld.ARisthatonceithasdeclared profitsundersection41(1)itwouldmeanthatassesseehasalreadyclaimedand alloweddeductionthereofinearlieryearsbutinourconsideredviewitrequires verificationandforthatmatterwerestorethemattertothefileofAssessing Officer.Accordinglythisgroundofassesseeisallowedforstatisticalpurposes. 45.1Fromtheabove,thereremainsnoambiguitytothefactthattheassesseeis eligiblefordeductionundersection80IAoftheActwithrespecttotheimpugnedbaddebt recoveryshownasincomeintheyearunderconsideration.Thusthegroundofappealof theassesseeisallowed. 62.12Beforeus,nomaterialhasbeenplacedonrecordbytheRevenueto demonstratethatthedecisionoftheTribunalasdiscussedabovehasbeenset aside/stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,Revenue hasnotplacedanymaterialonrecordpointingoutanydistinguishingfeaturesin thefactsofthecasefortheyearunderconsiderationandthatofearlieryearnor hasplacedanycontrarybindingdecisioninitssupport.Thus,respectfully followingtheorderofthistribunalintheowncaseofassessee,weupholdthe findingofthelearnedCIT(A).Thus,weholdthattheassesseeiseligiblefor deductionundersection80-IAoftheActwithrespecttotheprovisionswritten back. 63.InviewoftheabovediscussionmadevideparagraphNos.55to62,the issuesraisedbytheRevenuevidegroundNo.4ofitsappealareherebydismissed. 64.ThenextissueraisedbytheRevenueisthatthelearnedCIT(A)erredin deletingtheadditionmadeunderbookprofitbytheamountofdisallowance computedundersection14AoftheActamountingtoRs.15,23,10,540/-only. 65.TheAOduringtheassessmentproceedingsworkedouttheamountof disallowancesundersection14Ar.w.r.8DofIncomeTaxRuleforRs. 15,23,10,540/-asagainstthedisallowancemadebytheassesseeforRs. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 53 8,75,12,225/-only.TheAOfurther,whilecomputingthebookprofitaspersection 115JBoftheActmadeadditionbysuchamountofdisallowancesworkedoutas persection14Ar.w.r.8DoftheIncomeTaxRule. 66.Onappealbytheassessee,thelearnedCIT(A)waspleasedtodeletethe additionmadebytheAOinbookprofitundersection115JBoftheAct. 67.BeingaggrievedbytheorderofthelearnedCIT(A),theRevenueisin appealbeforeus. 68.ThelearnedDRbeforeusreiteratedthefindingscontainedinthe assessmentorderandvehementlysupportedtheorderoftheAO. 69.Ontheotherhand,thelearnedARbeforeusreiteratedthefindings containedintheappellateorderandvehementlysupportedtheorderoftheld. CIT-A. 70.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethattheidenticalissuecame upbeforethistribunalintheowncaseoftheassesseeforA.Y.2008-09inITANo. 738/Ahd/2012wheretheissuehasbeendecidedinfavouroftheassesseeand againsttheRevenuevideorderdated09-12-2021.Therelevantfindingofthe Benchisextractedasunder: 124.Wehaveheardtherivalcontentionsofboththepartiesandperusedthematerials availableonrecord.TheAOintheinstantcasehasmadethedisallowanceu/s14Ar.w.r. 8DoftheIncomeTaxRulesforRs.38,18,571/-whiledeterminingtheincomeunder normalcomputationofincome.Further,theAOwhiledeterminingtheincomeunder MinimumAlternateTax(MAT)aspertheprovisionsofsection115JBoftheAct,hasadded thedisallowancemadeunderthenormalcomputationofIncomeundersection14Ar.w.r. 8DofIncomeTaxRuleforRs.38,18,571/-tothebookprofitinpursuancetotheclause(f) ofexplanation1tosection115JBoftheAct. 124.1However,wenotethatintherecentjudgmentofSpecialBenchofHon’bleDelhi TribunalinthecaseofACITvs.VireetInvestmentPvt.Ltd.reportedin82Taxmann.com 415hasheldthatthedisallowancesmadeu/s14Ar.w.r.8Dcannotbethesubjectmatter ofadditionwhiledeterminingthenetprofitu/s115JBoftheAct.Therelevantportionof thesaidorderisreproducedbelow: ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 54 “Inviewofabovediscussion,thecomputationunderclause(f) ofExplanation1tosection115JB(2),istobemadewithoutresortingtothe computationascontemplatedundersection14A,readwithrule8Dofthe Income-taxRules,1962.” 124.2TheratiolaiddownbytheHon’bleTribunalissquarelyapplicabletothefactsofthe caseonhand.Thusitcanbeconcludedthatthedisallowancemadeundersection14A r.w.r.8Dcannotberesortedwhiledeterminingtheexpensesasmentionedunderclause(f) toexplanation1tosection115JBoftheAct.124.3However,itispertinenttonotethatthe disallowanceneedstobemadewithrespecttotheexemptedincomeintermsofthe provisionsofclause(f)tosection115JBoftheActwhiledeterminingthebookprofit.In holdingso,wedrawsupportfromthejudgmentofHon’bleCalcuttaHighCourtinthecase ofCITVs.JayshreeTeaIndustriesLtd.inGONo.1501of2014(ITATNo.47of2014)dated 19.11.14whereinitwasheldthatthedisallowanceregardingtheexemptedincomeneeds tobemadeaspertheclause(f)toExplanation-1ofSec.115JBoftheActindependently. Therelevantextractofthejudgmentisreproducedbelow:- “Wefindcomputationoftheamountofexpenditurerelatabletoexemptedincome oftheassesseemustbemadesincetheassesseehasnotclaimedsuch expendituretobeNil.Suchcomputationmustbemadebyapplyingclause(f)of Explanation1undersection115JBoftheAct.Weremandthematterforsuch computationtobemadebythelearnedTribunal. WeacceptthesubmissionofMr.Khaitan,learnedSeniorAdvocatethatthe provisionofsection115JBinthematterofcomputationisacompletecodeinitself andresortneednotandcannotbemadetosection14AoftheAct.” 124.4Givenabove,weholdthatthedisallowancesmadeundertheprovisionsofSec.14A r.w.r.8DoftheITRules,cannotbeappliedtotheprovisionofSec.115JBoftheActas perthedirectionoftheHon'bleCalcuttaHighCourtinthecaseofCITVs.JayshreeTea IndustriesLtd.(Supra). 124.5Nowthequestionarisestodeterminethedisallowanceaspertheclause(f)to Explanation-1ofSec.115JBoftheActindependently.Inthisregard,wenotethatthereis nomechanism/mannergivenundertheclause(f)toExplanation-1ofSec.115JBofthe Acttoworkout/determinetheexpenseswithrespecttotheexemptedincome.Therefore inthegivenfacts&circumstances,wefeelthatadhocdisallowancewillservethejusticeto theRevenueandassesseetoavoidthemultiplicityoftheproceedingsandunnecessary litigation.ThuswedirecttheAOtomakethedisallowanceof1%oftheexemptedincome asdiscussedaboveunderclause(f)toExplanation-1ofSec.115JBoftheAct.Wealsofeel tobringthisfactonrecordthatwehaverestoredothercasesinvolvingidenticalissuesto thefileofAOformakingthedisallowanceaspertheclause(f)toExplanation-1ofSec. 115JBoftheActindependently.Butnowwenotethatthereisnomechanismprovided undertheclause(f)toExplanation-1ofSec.115JBoftheActtomakethedisallowance independently.ThereforeouractionforrestoringbacktheissuetothefileofAOwould unnecessarilycausefurtherlitigation.Thuswelimitthedisallowanceonanad-hocbasis@ 1%oftheexemptedincomeaspertheclause(f)toExplanation-1ofSec.115JBofthe Act.ThusthegroundofappealoftheRevenueispartlyallowed. 70.1Beforeus,nomaterialhasbeenplacedonrecordbythelearnedARorDR todemonstratethatthedecisionofTribunalasdiscussedabovehasbeenset aside/stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,the learnedARorDRhasnotplacedanymaterialonrecordpointingoutany distinguishingfeatureinthefactsofthecasefortheyearunderconsiderationand ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 55 thatofearlieryearnorhasplacedanycontrarybindingdecisioninitssupport. Thus,respectfullyfollowingtheorderthistribunalintheowncaseofassessee,we set-asidethefindingofthelearnedCIT(A)anddirecttheAOmakead-hoc disallowances@1%ofexemptedincome.Hence,thegroundofappealofthe Revenueisherebypartlyallowed. 71.Intheresult,theappealoftheRevenueisherebypartlyallowed. ComingtoITANo.128/Ahd/2020,anappealbytheassesseeforAY 2015-16 72.Theassesseehasraisedfollowinggroundsofappeal: 1.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin confirmingthedisallowanceofRs.41,84,012outofappellant'sclaimfordeductionof preliminaryexpensesu/s35DoftheI.T.Act. 2.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin confirmingthedisallowanceofRs.497,56,14,198claimedbytheappellantbeing investmentallowanceadmissibleu/s.32ACinrespectofDGENunit. 3.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin confirmingthedisallowanceofadditionaldepreciationofRs.1,965/-onwallmount rackofthevalueofRs.7,861/-onthegroundthattheaforesaidassetcouldnotbe saidtobeanintegralpartoftheplantandmachineryandtherebyapplyingthe depreciationrateof10%,whichisapplicableinrespectofFurnitureandfittings. 4.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erred inconfirmingthedisallowanceofdeductionclaimedu/s80-IAoftheIT.Act onthefollowingitemsofincomeofSUGENUnit- Rs (a)Interestincome72,364 (b)Energyrelatedincome37,26,809 (c)LTOAcharges74,553 (d)Refundofexcesssalarypaid5,12,476 (e)Amountoftransportrecovery6,418 5.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin confirmingthedisallowanceofdeductionclaimedu/s.80-IAoftheI.T.Actonthe followingitemsofincomeofBhiwandiUnit:- Rs. (a)Baddebtrecovery(net)1,24,23,944 (InadvertentlystatedinAssessmentorderRs ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 56 21,61.48.897/-) (b)InvoiceTCDIncome27,25,688 (c)Incentiveincomeonaccountof20,77,660 collectionmadeonbehalfof MSEDCL'sarrears (d)Normativeincomeinthenatureof14,95,043 supervisioncharges (e)Incomefromconnection/reconnection36,94,197 chargesforservices. (f)Energyrelatedincome32,93,641 6.Onthefactandcircumstanceofthecase,theappellantrequesttheHon'bleITAT toadmitandallowitsadditionalclaimforreductionofitbookprofitu/s.115JBby Rs.23.80.78.403/-,beingDebentureRedemptionReservecreatedduringtheyear. 7.Theappellantcravesleavetoadd,alter,amendand/orwithdrawanygroundor groundsofappealeitherbeforeorduringthecourseofhearingoftheappeal. 73.ThefirstissueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingthedisallowancemadeforthedeductionclaimedundersection35Dof theActforRs.41,84,012/-only. 74.Thenecessaryfactsarethattherewasacompany,namelyM/sTorrent EnergyLimitedincorporatedinFY2008-09,amalgamatedwiththeassessee companyw.e.f.1 st April2014.Theimpugnedcompany,namelyM/sTorrent EnergyLimitedincurredcertainexpenditureaggregatingtoRs.2,09,20,060/-only inconnectionwiththeincreaseinitsauthorizedcapitalintheAY2011-12.The assesseecompanyafteramalgamationclaimed1/5 th ofsuchexpenditureunder section35DoftheAct. 74.1Aspertheassessee,theexpenditureincurredforincreaseinauthorized sharecapitaliseligiblefordeductionundersection35D(2)(c)oftheAct.Further theerstwhilecompanyM/sTorrentEnergyLimitedwasinanestablishmentphase anditsbusinessofdistributionofelectricityonlycommencedintheFY2010-11. Assuch,theconstructionworkofcapitalassetsforitsbusinessoperationwas ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 57 carriedoutinaphasedmannerandaccordingly,thesharecapitalwasraisedona needybasis.Theassesseecontended,hadtheerstwhilecompanyincurred expenditureforauthorizedsharecapitalinonego,therewouldnothavebeenany questionofdisallowance.Theassesseeaccordinglycontendedthatitshouldbe alloweddeductionof1/5 th oftheimpugnedexpenditureincurredbyerstwhile company. 74.2However,theAOheldthatthedeductionundersection35D(2)(c)ofthe Act,isonlyavailablefornewlyregisteredcompanieswhereasincaseofpresent assessee,theexpenditureincurredrelatedtoincreaseinauthorizedcapitalin subsequentyear.Further,suchexpendituresareinconnectionwiththeraisingof capitalwhichresultsinenduringbenefittoassessee’sbusiness.Hence,thesame iscapitalexpenditure.Thus,theAOdisallowedtheclaimoftheassesseeforRs. 41,84,012/andaddedtothetotalincomeoftheassessee. 75.TheaggrievedassesseepreferredanappealbeforethelearnedCIT(A)and reiterateditscontentionthattheexpenditureincurredinconnectionwithraising theauthorizedcapitalareallowableasdeductionundersection35D(1)r.w.sub- section2(c)ofsection35DoftheAct.Theassesseeinsupportofitscontention reliedonvariouscaselawswhichwereincorporatedintheorderofthelearned CIT(A). 75.1However,thelearnedCIT(A)confirmedtheorderoftheAObyfollowing theorderofhispredecessorinthecaseoferstwhilecompanynamelyTorrent EnergyLimited.ThepredecessorCIT(A)whiledecidingtheissueheldthat assesseecompanywasincorporatedinFebruary2008whereasexpenditurefor increaseinauthorizedcapitalwasincurredinF.Y.2010-11.Theprovisionsof section35DoftheActstatethatdeductionundersection35DoftheActafter commencementofbusinesswillbeallowedonlyincaseexpenditureincurredin connectionwithextensionofbusinessorsettingupofnewunit.Theassessee ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 58 failedtoestablishthatimpugnedexpenditureforincreaseinauthorizedcapital wasinconnectionwiththeextensionofbusinessundertaking. 76.BeingaggrievedbytheorderofthelearnedCIT(A),theassesseeisin appealbeforeus. 77.ThelearnedARbeforeusreiteratedthesubmissionsasmadebeforethe authoritiesbelow. 78.Ontheotherhand,thelearnedDRvehementlysupportedtheorderofthe authoritiesbelow. 79.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialavailableonrecord.Admittedlytheassesseeclaimeddeductionunder section35DoftheActbeing1/5 th ofexpenditureincurredbytheamalgamating companynamelyM/sTorrentEnergyLimitedinrelationtoincreaseinauthorize capitalinF.Y.2010-11whichgotamalgamatedwithassesseecompanyw.e.f1 st April2014.Thus,itappearsthattheamalgamatingcompanyhasclaimed deductionundersection35DforA.Ys.2011-12to2014-15i.e.forfirst4year whereastheassesseecompanyclaimedthedeductionfor5 th yeari.e.lastyear only.FromthefindingofthelearnedCIT(A),wenotethatdeductionclaimedby theamalgamatingcompanyonthefirst4yearhasbeendisallowedbytheAOand confirmedbytheld.predecessorCIT(A).Thereisnoinformationonrecord suggestingthatwhethertheassesseepursuedtheissuebeforethehigher authorityornot.Thisinformationisnecessarytodecidetheissueintheyear underconsideration.Itisbecausetheclaimoftheassesseecanonlybedisturbed inthefirstyearofdeduction/claim.Oncetheclaiminthefirstyearitselfisallowed ordisallowed,thesamewillbefollowedinsubsequentfouryears.Therefore,for thesakeofjusticeandfairplayweherebysetasidetheissuetofileoftheAO withdirectiondecidethematterasperoutcomeoffirstyearofclaim.Hencethe groundoftheassesseeisherebyallowedforstatisticalpurposes. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 59 80.ThenextissueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingthedisallowanceofdeductionofRs.497,56,14,198/-undersection 35ACofActforDGENunit. 81.Attheoutset,wenotethattheissueraisedbytheassesseeinitsgrounds ofappealforAY2015-16isidenticaltotheissuesraisedbytheassesseeinITA No.1598/Ahd/2019forAY2014-15.Therefore,thefindingsgiveninITANo. 1598/Ahd/2019shallalsobeapplicablefortheyearunderconsiderationi.e.2015- 16.ThegroundofappealoftheassesseefortheA.Y.2014-15hasbeendecided byusvideparagraphNo.10ofthisorderinfavouroftheassessee.Thelearned ARandtheDRalsoagreedthatwhateverwillbethefindingsfortheassessment year2014-15shallalsobeappliedfortheyearunderconsiderationi.e.2015-16. Hence,thegroundofappealoftheassesseeisherebyallowed. 82.ThenextissueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingthedisallowancesofadditionaldepreciationofRs.1965/-. 83.Attheoutset,wenotethatthelearnedARfortheassesseesubmittedthat hehasbeeninstructedbytheassesseenottopresstheissueonhandonaccount ofsmallnessofamountinvolvedindispute.Hence,thegroundofappealofthe assesseeisherebydismissedasnotpressed. 84.ThenextissueraisedbytheassesseevidegroundNos.4and5isthatthe learnedCIT(A)erredinconfirmingthedisallowanceofdeductionundersection 80IAoftheActwithrespecttocertainreceiptsonthereasoningofnotderived fromeligiblebusiness. 85.Therewereseveralincomesshownbytheassesseeunderdifferentheads whichwerenotthedirectincomeoftheassesseefromtheactivityofgeneration anddistributionofpower.Nevertheless,theassesseehasclaimeddeductionunder ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 60 section80IAoftheActbytreatingthemasprofitderivedfromthebusinessof generationordistributionofpower.However,theAOdisputedanddisallowedthe deductionwithrespecttosuchitemsofincome.Subsequently,thelearnedCIT(A) alsoconformedtotheorder/findingoftheAO.Thus,theassesseeisinappeal beforeusondifferentitemsofincomewhichareelaboratedserialwiseasunder: InterestonFDforRs.72,364/- 86.Attheoutset,wenotethattheissueofdeductionundersection80IAofthe Actoninterestincomefromfixeddepositraisedbytheassesseeinitsgroundsof appealforA.Y.2015-16isidenticaltotheissuesraisedbytheassesseeinITANo. 1598/Ahd/2019fortheAY2014-15.Therefore,thefindingsgiveninITANo. 1598/Ahd/2019shallalsobeapplicablefortheyearunderconsiderationi.e.2015- 16.ThegroundofappealoftheassesseefortheA.Y.2014-15hasbeendecided byusvideparagraphNo.18ofthisorderagainsttheassessee.ThelearnedAR andtheDRalsoagreedthatwhateverwillbethefindingsfortheassessmentyear 2014-15shallalsobeappliedfortheyearunderconsiderationi.e.2015-16.Hence thegroundofappealoftheassesseewithrespecttointerestincomeonFDis herebydismissed. EnergyRelatedincomeofRs.37,26,809/-andIncomefromconnection orreconnectionchargesofRs.36,94,197/- 87.Attheoutset,wenotethattheissueofdeductionundersection80IAofthe ActonEnergyRelatedincomeofRs.37,26,809/-andIncomefromconnectionor reconnectionchargesofRs.36,94,197/-raisedbytheassesseeinitsgroundsof appealforA.Y.2015-16isidenticaltotheissuesraisedbytheassesseeinITANo. 1598/Ahd/2019forAY2014-15.Therefore,thefindingsgiveninITANo. 1598/Ahd/2019shallalsobeapplicablefortheyearunderconsiderationi.e.2015- 16.ThegroundofappealoftheassesseefortheA.Y.2014-15hasbeendecided byusvideparagraphNo.25.3ofthisorderinfavouroftheassessee.Thelearned ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 61 ARandtheDRalsoagreedthatwhateverwillbethefindingsfortheassessment year2014-15shallalsobeappliedfortheyearunderconsiderationi.e.2015-16. HencethegroundofappealoftheassesseewithrespecttoEnergyRelated incomeofRs.37,26,809/-andIncomefromconnectionorreconnectioncharges ofRs.36,94,197/-areherebyallowed. RefundofexcesssalaryofRs.5,12,476/-andTrasportrecoveryofRs. 6,418/- 88.Attheoutset,wenotethatthecaptionedissueraisedbytheassesseeinits groundsofappealfortheAY2015-16isidenticaltotheissuesraisedbythe assesseeinITANo.1598/Ahd/2019forAY2014-15.Therefore,thefindingsgiven inITANo.1598/Ahd/2019shallalsobeapplicablefortheyearunderconsideration i.e.2015-16.ThegroundofappealoftheassesseefortheA.Y.2014-15hasbeen decidedbyusvideparagraphNo.25.2ofthisorderinfavouroftheassessee.The learnedARandtheDRalsoagreedthatwhateverwillbethefindingsforthe assessmentyear2014-15shallalsobeappliedfortheyearunderconsiderationi.e. 2015-16.Hence,thegroundofappealoftheassesseewithrespecttorefundof excesssalaryandTransportrecoveryareherebyallowed. BadDebtRecovery 89.Theassesseeduringtheyearintheeligibleunithasshownincomeon accountofrecoveryofbaddebtsamountingtoRs.21,61,48,897/-andsamewas includedinthedeductionclaimedundersection80IAoftheAct.Theassessee submittedthatbaddebtanditsrecoveryarisesfromthebusinessofdistribution ofpower,therefore,thesameiseligiblefordeductionundersection80-IAofthe Act.Theassesseealternativelysubmittedthatduringtheyear,ithaswrittenoff baddebtstothetuneofRs.20,37,24,953/-inrespectofeligibleunit.Therefore, incasetheincomeonaccountofbaddebtrecoveryisnotconsideredfor deductionundersection80-IAoftheAct,thentheamountofbaddebtshouldalso beexcludedwhilecomputingthedeductionundersection80-IAoftheAct. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 62 89.1However,theAOwasoftheviewthatnobenefitonaccountofbaddebts recoverycanbegrantedbyallowingdeductionundersection80IAoftheAct becausetheamountofbaddebtwasrecognizedbytheassesseewhenitsunit wasnoteligiblefordeductionundersection80-IAoftheAct.Ifthededuction undersection80-IAoftheActisallowed,thenthesamewouldleadtothedouble deductiontotheassessee.Firstly,whenthesebaddebtswerewrittenoffinthe booksofaccountintheearlieryearandsecondlywhenthesebaddebtswere recoveredintheformofdeductionundersection80-IAoftheAct.However,the AOfoundthattherewerebaddebtswrittenoffintheyearunderconsiderationof Rs.20,37,24,953/-whichwasallowedtobenettedoffagainstsuchbaddebts recovered.Thus,theAOeffectivelyexcludedthesumofRs.1,24,23,944/-from theamountofdeductionclaimedundersection80IAoftheAct. 89.2AggrievedassesseepreferredanappealtothelearnedCIT(A)who confirmedtheorderoftheAObyfollowingtheorderhispredecessorCIT(A)inthe owncaseoftheassesseeforAY2012-13. 89.3BeingaggrievedbytheorderofthelearnedCIT(A),theassesseeisin appealbeforeus. 89.4ThelearnedARbeforeuscontendedthatthebaddebtswererecovered withrespecttotheeligibleundertakings.Therefore,thesameshouldbeeligible fordeductionundersection80IAoftheAct. 89.5Ontheotherhand,theld.DRvehementlysupportedtheorderofthe authoritiesbelow. 89.6Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethatidenticalissuewith respecttotheeligibilityofdeductionofincomeonaccountofbaddebtrecovery ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 63 camebeforethisTribunalintheowncaseoftheassesseeforAY2008-09inITA No.776&738/Ahd/2012wheretheissuehasbeendecidedinfavourofthe assesseevideorderdated09-12-2021.TherelevantfindingoftheBenchis extractedasunder: 45.Wehaveheardtherivalcontentionsofboththepartiesandperusedthematerials availableonrecord.Admittedly,thereisnodisputetothefactthatthebaddebsrecovery shownbytheassesseeasincomeintheyearunderconsiderationpertainstothe undertakingeligiblefordeductionundersection80IAoftheAct.TheallegationoftheAO wasthatthebaddebtsrecoveryrepresentstheamountwhichwasclaimedasdeduction bytheassesseeintheearlieryearwhentheundertakingswerenoteligiblefordeduction undersection80IAoftheAct.Thus,theassesseehasclaimeddoublebenefitfirstlyby claimingthedeductionofbaddebtswhentheundertakingswerenoteligiblefordeduction undersection80IAoftheActandsecondlybyshowingtheincomeofBaddebtrecovery whentheundertakingswereeligiblefordeductionundersection80IAoftheAct.Onthis reasoning,theAOdidnotallowthebenefitofdeductionundersection80IAoftheActqua suchbaddebtsrecovery.However,thisdisputehasbeenresolvedbytheITAT (Ahmedabad)inthecaseofRadhaMadhavIndustriesVs.ITOreportedin8taxmann.com 63whereinitwasheldasunder: 11.Wehaveconsideredtherivalsubmissionsandperusedthematerialonrecord. Inourconsideredviewthematterrequirestobere-examinedsoastogivea findingbytheAssessingOfficerwhethertheseamountswrittenbackbythe assesseewereclaimedasdeductioninanyearlieryear.Ifsuchdeductionwas claimedandallowedinanyearlieryearthenclearlytherewasreductionofprofitin thoseearlieryearsandoncethecreditorsremittheliabilityorliabilityceasedto existandassesseedeclareditaspartoftheprofitthennexusofsuchprofit writtenbackwiththeindustrialundertakingisnotsevered.Itisbecausewhile allowingdeductiontheeligibleprofitsofthebusinessderivedfromtheindustrial undertakingwerereducedastheywereallowableexpenditure.Oncetheliability ceasedtoexistinfavouroftheassesseethentheybecomeprofitsoftheassessee inthecurrentyearasperprovisionsofsection41(1).Whenweexaminethenexus oftheprofitwiththeindustrialundertakingitisnottobeseenastofromwhom theprofitisderivedbutitistobeseenwhetheritisderivedfromthebusiness.So longmoneyisrecoverablefromthepartiesorpayabletothepartiesduringthe courseofbusinessthetransactionshaveadirectnexuswiththebusinessandone cannotviewthesetransactionsawayfromthebusiness.Suchtransactionsinclude receiptsandpaymentofmoneyincashorinkindimmediatelyoroncreditandare partofbusinessactivities.Iftheassesseehastomakethepaymenttotheabove fourparties,whichwerestandinginthebalancesheetascreditorsandwhichhave beenclaimedasbusinessdeductioninanearlieryearthenonlycourselefttothe assesseeiseithertomakethepaymentorifnopaymentislegallyrequired,to showasprofitundersection41(1)whichhasbeensodonebytheassessee.There isaclearanddirectbusinessconnectionofsuchcessationorremissionandsuch profitstaxableundersection41(1)canbeheldasderivedfromindustrial undertaking.Theargumentsoftheld.DRthattheyarenotcurrentyear'sprofit frommanufacturingactivityisdevoidofanymeritbecausedeductionunder section80-IAisavailableonlyonprofitsderivedfromindustrialundertakingwhich iscarryingonmanufacturingactivitiesanditisnotconfinedtoonlycurrentyear's profitasperP&Laccount.Thedeductionundersection80-IAor80-IBisavailable onprofitsandgainscomputedinaccordancewithsection20A-43Dwhichincludes section41(1)also. 12.ThuswhereAssessingOfficerfindsthatclaimhasalreadybeenallowedinthe earlieryearthensuchbenefitundersection80-IAshouldbegiventotheprofits ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 64 taxedundersection41(1).Theargumentofld.ARisthatonceithasdeclared profitsundersection41(1)itwouldmeanthatassesseehasalreadyclaimedand alloweddeductionthereofinearlieryearsbutinourconsideredviewitrequires verificationandforthatmatterwerestorethemattertothefileofAssessing Officer.Accordinglythisgroundofassesseeisallowedforstatisticalpurposes. 45.1Fromtheabove,thereremainsnoambiguitytothefactthattheassesseeis eligiblefordeductionundersection80IAoftheActwithrespecttotheimpugnedbaddebt recoveryshownasincomeintheyearunderconsideration.Thusthegroundofappealof theassesseeisallowed. 89.7Beforeus,nomaterialhasbeenplacedonrecordbytheRevenueto demonstratethatthedecisionoftheTribunalasdiscussedabovehasbeenset aside/stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,the Revenuehasnotplacedanymaterialonrecordpointingoutanydistinguishing featureinthefactsofthecasefortheyearunderconsiderationandthatofthe earlieryearnorhasplacedanycontrarybindingdecisioninitssupport.Thus, respectfullyfollowingtheorderofthistribunalintheowncaseofassessee,we herebysetasidethefindingofthelearnedCIT(A).Thus,thegroundofappeal raisedbytheAssesseewithrespecttoincomeonaccountofBadDebtrecoveryis herebyallowed. InvoiceTDCIncome 90.Theassesseeduringtheyearreceivedcertainreceiptsonaccountoflate submissionofbillbythecontractor,penaltyforpoorqualityworketcshownas InvoiceTDCincomeforRs.27,25,688/-andthesamewasincludedinthe computationofeligibleprofitundersection80IAoftheAct. 90.1However,theAOexcludedthesamefromthecomputationofeligibleprofit byholdingthattheimpugnedreceiptsarenotderivedfromeligiblebusiness activity. 90.2Onappealbytheassessee,thelearnedCIT(A)alsoconfirmedthefindingof theAO. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 65 90.3BeingaggrievedbytheorderofthelearnedCIT(A),theassesseeisin appealbeforeus. 90.4ThelearnedARbeforeussubmittedthatissueonhandiscoveredbythe orderofthistribunalinowncaseoftheassesseeforAY2012-13. 90.5Ontheotherhand,thelearnedDRvehementlysupportedtheorderofthe lowerauthoritiesbyreiteratingthefindingscontainedintheirrespectiveorders. 90.6Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethatidenticalissuewith respecttotheeligibilityofdeductionofInvoiceTDCincomecamebeforethis TribunalintheowncaseoftheassesseeforAY2012-13inCONo.41/Ahd/2019 wheretheissuehasbeendecidedpartlyinfavoroftheassesseevideorderdated 09-12-2021.TherelevantfindingoftheBenchisextractedasunder: 90.2Movingfurther,wenotethattheamountof₹14,53,059/-representsthereceipts fromthecontractorsonaccountofvariousreasonssuchasdetailedbelow: i.latesubmissionofthebill ii.penaltyforpoorquality iii.HRpenalty iv.safetyviolationpenalty 90.3Admittedly,themiscellaneousreceiptsdiscussedaboveisnotconnectedwiththe generationanddistributionactivityoftheassessee.Thus,thesameisnoteligiblefor deductionundertheprovisionsofsection80IAoftheAct.However,whileexcludingthe impugnedmiscellaneousreceipt,theassesseeiseligiblefordeductionoftheexpensesincurred, ifany,againstsuchmiscellaneousreceipt. 90.7Beforeus,nomaterialhasbeenplacedonrecordbythelearnedARorDR demonstratingthatthedecisionoftheTribunalasdiscussedabovehasbeenset aside/stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,the Revenuehasnotplacedanymaterialonrecordpointingoutanydistinguishing featuresinthefactsofthecasefortheyearunderconsiderationandthatofthe earlieryearnorhasplacedanycontrarybindingdecisioninitssupport.Thus, respectfullyfollowingtheorderofthistribunalintheowncaseofassessee,we ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 66 herebysetasidethefindingofthelearnedCIT(A)subjecttoabovedirection.Thus, thegroundofappealraisedbytheAssesseewithrespecttoInvoiceTDCincomeis herebypartlyallowed. IncentiveIncomeofRs.20,77,660/- 91.Attheoutset,wenotethatthecaptionedissueraisedbytheassesseeinits groundsofappealforA.Y.2015-16isidenticaltotheissuesraisedbythe assesseeinITANo.1598/Ahd/2019forAY2014-15.Therefore,thefindingsgiven inITANo.1598/Ahd/2019shallalsobeapplicablefortheyearunderconsideration i.e.2015-16.ThegroundofappealoftheassesseefortheAY2014-15hasbeen decidedbyusvideparagraphNo.25.1ofthisorderpartlyinfavourofthe assessee.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2014-15shallalsobeappliedfortheyearunder considerationi.e.2015-16.Hence,thegroundofappealoftheassesseewith respecttoincentiveincomeisherebypartlyallowed. NormativeincomeofRs.14,95,043/- 92.Attheoutset,wenotethatthecaptionedissueraisedbytheassesseeinits groundsofappealforA.Y.2015-16isidenticaltotheissuesraisedbythe assesseeinITANo.1598/Ahd/2019forAY2014-15.Therefore,thefindingsgiven inITANo.1598/Ahd/2019shallalsobeapplicablefortheyearunderconsideration i.e.2015-16.ThegroundofappealoftheassesseefortheAY2014-15hasbeen decidedbyusvideparagraphNo.25.4ofthisorderpartlyinfavourofthe assessee.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2014-15shallalsobeappliedfortheyearunder considerationi.e.2015-16.Hence,thegroundsofappealoftheassesseewith respecttonormativeincomeisherebypartlyallowed. LTOAChargesofRs.74,553/- ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 67 93.Atthetimeofhearing,thelearnedCounselfortheassesseehasnotbrought anymaterialonrecordsuggestingthattheincomecaptionedabovewasderived fromtheeligibleactivity.Therefore,intheabsenceofanydetail,wedenythe claimmadebytheassessee.However,atthesametime,itisdirectedtheAOto reducesuchincomebytheamountofcorrespondingexpenditureifanyincurred bytheassessee.Thus,thegroundofappealoftheassesseetotheextentofLTOA ChargesofRs.74,553/-onlyispartlyallowed. 94.InviewoftheabovediscussionmadeinparagraphNos.86to93ofthis order,theissueraisedbytheassesseevidegroundNos.4and5ofitsappealare herebypartlyallowed. 95.Theassesseeinnextgroundno.6requestedtoadmitandallowthe additionalclaimbyreducingtheamountofbookprofitonaccountofDebenture RedemptionReservebyRs.23,80,78,403/-only. 96.Attheoutset,wenotethattheissueraisedbytheassesseeinitsgrounds ofappealforA.Y.2015-16isidenticaltotheissuesraisedbytheassesseeinITA No.1598/Ahd/2019forAY2014-15.Therefore,thefindingsgiveninITANo. 1598/Ahd/2019shallalsobeapplicablefortheyearunderconsiderationie2015- 16.ThegroundofappealoftheassesseefortheA.Y.2014-15hasbeendecided byusvideparagraphNo.26ofthisorderinfavouroftheassessee.Thelearned ARandtheDRalsoagreedthatwhateverwillbethefindingsfortheassessment year2014-15shallalsobeappliedfortheyearunderconsiderationi.e2015-16. Hence,thegroundofappealoftheassesseeisherebyallowed. 97.Theassesseevideletterdated26-11-2021raisedfollowingadditional groundsofappeal: AppellantcravesleavetoraisetheseadditionalgroundsofappealbeforetheHon'bleITAT. Thesearelegalgroundsandtherefore,asperthedecisionofHon'bleSupremecourtinthe caseofNationalThermalPower(229ITR383),itcanberaisedbeforetheHon'bleITAT. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 68 Inviewoftheabove,theappellantherebyraisesfollowinggroundsasadditionalgrounds ofappeal,whichiswithoutprejudicetothegroundsraisedbytheappellantwhilefiling appealinForm36. "1.Withoutprejudicetoallthegroundsraised,inlawandinthefactsandcircumstances oftheappellant'scase,theappellantrequestsforadmissionofitsadditionalclaimandfor allowingdeductionofRs.4,28,31,232/-inrespectofEducationCessandtheSecondary andHigherEducationCessonincometax,onthegroundthatsuchexpenditureis allowablebusinessexpenditureu/s37(1)oftheActaspersettledlegalprecedents.• 2.Withoutprejudicetoallthegroundsraised,inlawandinthefactsand circumstancesoftheappellant'scase,theappellantrequestsforadmissionofitsadditional claimandforallowingdeductionofRs.10,02,385/-inrespectofEducationCessandthe SecondaryandHigherEducationCessonDividendDistributionTax,onthegroundthat suchexpenditureisallowableexpenditureu/s.37(1)oftheActaspersettledlegal precedents. 3.Withoutprejudicetoallthegroundsraised,inlawandinthefactsandcircumstances oftheappellant’scase,theappellantrequestsforadmissionofitsadditionalclaimand fornotincludingtheproceedsofRs.1,76,05.125/-receivedonsaleofcarboncredits, whilecomputingtheBookProfitsU/s.115JBoftheActonthegroundthatitisincome inthenatureof“”capitalreceipts”asperthesettledlegalprecedents. Inviewoftheabove,theadditionalgroundsraisedmaykindlybeadmittedinviewof naturaljusticetotheappellant. 98.Attheoutset,regardingfirst2additionalgroundsofappealinconnection withallowancesofCess,thelearnedARfortheassesseeatthetimeofhearing submittedthathehasbeeninstructedbytheassesseenottothepresssuch additionalgroundsofappeal.Hencethesameisherebydismissedasnotpressed. 99.Comingtothirdadditionalgroundofappealbywhichtheassesseeprayed toreducethebookprofitundersection115JBbytheamountofsaleproceedsof carboncreditsforRs.1,76,05,125/-. 100.Attheoutset,wefindthattheissueraisedbytheassesseevideimpugned additionalgroundofappealislegalinnature,therefore,followingthejudgmentof Hon’bleSupremeCourtincaseofNationalThermalPowerCo.Limitedvs.CIT reportedin229ITR383,weherebyadmitthesame. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 69 101.Thenecessaryfactsarethattheassesseeduringtheyearreceivedan amountofRs.1,76,05,125/-onaccountofsaleofCarbonCredit.Theimpugned receiptwasheldascapitalreceiptbythelearnedCIT(A)whiledeterminingthe taxableincome.Now,theassesseethroughthisadditionalgroundofappealhas prayedthatoncetheproceedsfromcarboncredithasbeenheldascapitalreceipt undernormaltaxscheme,thenthesameshouldalsobereducedfromthebook profitcomputedundersection115JBoftheAct.Thus,aquestionariseswhena receiptbeingcapitalinnaturenotliabletotaxundernormalprovisionoftheAct canbemadesubjecttotaxundertheschemeofMATasprovidedundersection 115JBoftheAct.Thelawisfairlysettledinthisregardbytheorderoftheseveral judicialauthoritiesincludingtheorderoftheHon’bleCalcuttaHighCourtincaseof CITvs.AnkitMetal&PowerLtdreportedin109taxmann.com93whereinthe Hon’blebenchheldthatonceanyreceiptwhichisnotincomeundertheprovision ofsection2(24)oftheActi.e.notliabletobetaxthensuchreceiptcannotbe includedinthebookprofitundersection115JBoftheAct.Therelevant observationoftheHon’bleCourtisextractedasunder: 27.Inthiscasesincewehavealreadyheldthatinrelevantassessmentyear2010-11the incentives'Interestsubsidy'and'Powersubsidy'isa'capitalreceipt'anddoesnotfall withinthedefinitionof'Income'underSection2(24)ofIncomeTaxAct,1961andwhena receiptisnotoninthecharacterofincomeitcannotformpartofthebookprofitunder Section115JBoftheAct,1961.InthecaseofAppolloTyresLtd.(supra)theincomein questionwastaxablebutwasexemptunderaspecificprovisionoftheActassuchitwas tobeincludedasapartofthebookprofit.Butwhereareceiptisnotinthenatureof incomeatallitcannotbeincludedinbookprofitforthepurposeofcomputationunder Section115JBoftheIncomeTaxAct,1961.Fortheaforesaidreason,weholdthatthe interestandpowersubsidyundertheschemesinquestionwouldhavetobeexcluded whilecomputingbookprofitunderSection115JBoftheIncomeTaxAct,1961. 101.1Inadditiontotheabove,wefindthattheCoordinatebenchofLucknow ITATincaseofACITvs.M/sL.H.SugarFactoryLtdbearingITANo.417& 418/LKW/2013inidenticalfactandcircumstancesandafterconsideringseveral judicialpronouncementsheldthattheproceedfromsaleofCarbonCreditcannot beincludedinthebookprofitasprescribedundersection115JBoftheAct.The relevantfindingoftheLucknowITATbenchisextractedasunder: ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 70 50.Fromtheaboveparas,wefindthattheTribunalhasdulyconsideredthejudgmentof theHon’bleApexCourtrenderedinthecaseofApolloTyresLtd.((Supra)andthereafter,it wasnotedbytheTribunalinthiscasethatasperthedecisionofSpecialBenchofthe TribunalrenderedinthecaseofRainCommoditiesLtd.Vs.DCIT,41DTR449,ifprofitand lossaccountisnotinaccordancewithPartII&PartIIIofScheduleVItotheCompanies Act,1956becauseitisprerequisiteforSection115JBoftheAct.TheTribunalinthiscase alsoconsideredtwoanotherTribunal’sordersrenderedinthecaseofDCITVs.Bombay DiamondCompanyLtd.33DTR59andSyndicateBankVs.ACIT,7SOT51Bangalore whereitwasheldbytheTribunalafterconsideringthedecisionofHon’bleApexCourt renderedinthecaseofApolloTyresLtd.(Supra),andafterexplainingthesamethat adjustmenttoprofitandlossaccountispossibletomakeitcompliantwithScheduleVI PartIIandPartIIIoftheCompaniesAct,1956whichisprerequisiteofSection115JBof theAct.Onthisbasis,theTribunalinthecaseofShreeCementLtd.(Supra)decidedthis issueinfavouroftheassesseeanditwasheldthatcapitalreceiptintheformofsalestax subsidyneedstobeexcludedfromprofitasperP&Laccountforthepurposeofcomputing bookprofitu/s115JBoftheAct.ByrespectfullyfollowingtheseTribunal’sorders,wehold thatinthepresentcasealso,thereceiptonaccountoftransferofcarboncreditwhichis heldtobeacapitalreceiptneedstobeexcludedfromprofitasperP&Laccountforthe presentyearwhilecomputingthebookprofitu/s115JBoftheAct.Thisissueisdecidedin favouroftheassesseeandaccordinglyGroundNos.1to5areallowed.Theassesseegets reliefofRs.27,70,880/-andconsequentinterestbeing10%ofamountreceivedbythe assesseeonsaleofcarboncreditofRs.277,08,800/-. 101.2Inviewoftheabove,respectfullyfollowingtheratiolaiddownbythe Hon’bleCalcuttaHighCourtinthecasediscussedaboveaswellasLucknowbench oftribunal,weherebydirecttheAOtoexcludetheproceedofsaleofcarbon creditfromthecomputationofbookprofitundersection115JBoftheAct.Thus, theadditionalgroundofappealoftheassesseeisherebyallowed. 102.Intheresult,theappealoftheassesseeisherebypartlyallowed. ComingtoITANo.231/Ahd/2020anappealbytherevenueforA.Y. 2015-16 103.TheRevenuehasraisedfollowinggroundsofappeal: 1.WhethertheLd.CITYA)haserredinlawandonfactsindeletingthedisallowanceofRs. 54,49,673/-u/s14Ar.w.r.8DoftheIncome-TaxAct,1961. 2.WhethertheLd.CITIA)haserredinlawandonfactsindeletingtheadditionmadeto bookprofitofRs.1,36,58,324/-? 3.WhethertheLd.CITYA)haserredinlawandonfactsindeletingthedisallowanceof interestexpensesofRs.11,57,85,836/-? ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 71 4.WhethertheLd.CIT(A)haserredinlawandonfactsindeletingthedisallowanceof claimamountingtoRs.42,203/-beingdepreciationincludingadditionaldepreciation claimedbytheassessee? 5.WhethertheLdCIT(A)haserredinlawandonfactsindeletingtheadditionof unutilizedMODVAT/CANVATcreditofRs.3,17,43,147/-u/s.145AoftheIT.Act. 1961? 6.WhethertheLd.CIT(A)haserredinlawandonfactsindeletingthedisallowancemade u/s.801AoftheIncomeTaxAct,1961inrespectofthefollowing? i)SaleofCERSforRs.1,76,05,125/- ii)InterestincomeofRs.72,364/-anddelayedpaymentchargeofRs.7,94,11,399/- iii)DelayedpaymentchargesofRs.5,94,11,013/- iv)GainoncurrencytransactionforRs.41,99,66,936/- v)SaleofscrapofRs.35,84,291/-forSugenunitandRs.1,68,99,291/-forBhiwandi Unit. vi)WarrantyclaimreceiptofRs.26,49,86,015/- vii)Othermisc.incomedeletedbytheLd.CIT(A)ofRs.48,84,743/-inrespectof BhiwandiUnit viii)ProvisionofearlieryearwrittenbackofRs.1,69,64,70,078/- 7.WhethertheLd.CIT(A)haserredinlawandonfactsindeletingthedisallowancemade ondeductionclaimedbytheassesseecompanyofRS,3,43,88,385/-u/s.80GandRs. 3,75,89,037/u/s.80GGBoftheIncomeTaxAct,1961? 104.ThefirstissueraisedbytherevenueisthatthelearnedCIT(A)erredin deletingtheaddition/disallowancesmadeundersection14AoftheActforRs. 54,49,673/-only. 105.Attheoutset,wenotethattheissueraisedbytheRevenueinitsgrounds ofappealforA.Y.2015-16isidenticaltotheissuesraisedbytheRevenueinITA No.1652/Ahd/2019forAY2014-15.Therefore,thefindingsgiveninITANo. 1652/Ahd/2019shallalsobeapplicablefortheyearunderconsiderationi.e.2015- 16.ThegroundofappealoftheRevenuefortheAY2014-15hasbeendecidedby usvideparagraphNo.38ofthisorderagainsttherevenue.ThelearnedARand theDRalsoagreedthatwhateverwillbethefindingsfortheassessmentyear 2014-15shallalsobeappliedfortheyearunderconsiderationi.e.2015-16.Hence, thegroundofappealoftherevenueisherebydismissed. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 72 106.ThenextissueraisedbytherevenueisthatthelearnedCIT(A)erredin deletingtheadditionmadeinthebookprofitundersection115JBoftheActforRs. 1,36,58,524/-onaccountofdisallowancesundersection14AoftheAct. 107.Attheoutset,wenotethattheissueraisedbytheRevenueinitsgrounds ofappealforA.Y.2015-16isidenticaltotheissuesraisedbytheRevenueinITA No.1652/Ahd/2019forAY2014-15.Therefore,thefindingsgiveninITANo. 1652/Ahd/2019shallalsobeapplicablefortheyearunderconsiderationi.e.2015- 16.ThegroundofappealoftheRevenuefortheA.Y.2014-15hasbeendecided byusvideparagraphNo.70ofthisorderpartlyinfavouroftherevenue.The learnedARandtheDRalsoagreedthatwhateverwillbethefindingsforthe assessmentyear2014-15shallalsobeappliedfortheyearunderconsiderationi.e. 2015-16.Hence,thegroundofappealoftherevenueisherebypartlyallowed. 108.ThenextissueraisedbytherevenueisthatthelearnedCIT(A)erredin deletingthedisallowancesofinterestexpensesforRs.11,57,85,836/-onaccount ofdiversionoffund. 109.Attheoutset,wenotethattheissueraisedbytheRevenueinitsgrounds ofappealforA.Y.2015-16isidenticaltotheissuesraisedbytheRevenueinITA No.1652/Ahd/2019forAY2014-15.Therefore,thefindingsgiveninITANo. 1652/Ahd/2019shallalsobeapplicablefortheyearunderconsiderationi.e.2015- 16.ThegroundofappealoftheRevenuefortheA.Y.2014-15hasbeendecided byusvideparagraphNo.44ofthisorderagainsttherevenue.ThelearnedAR andtheDRalsoagreedthatwhateverwillbethefindingsfortheassessmentyear 2014-15shallalsobeappliedfortheyearunderconsiderationi.e.2015-16.Hence, thegroundofappealoftheRevenueisherebydismissed. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 73 110.ThenextissueraisedbytheRevenueisthatthelearnedCIT(A)erredin deletingthedisallowanceofdepreciationincludingadditionaldepreciationforRs. 42,203/-only. 111.Theassesseeduringtheyearhasclaimedthattherewerecertainitemsof electricalfittingsandapparatuswhichwereusedexclusivelyforplantsand machinery.Therefore,theassesseeclaimeddepreciationonsuchelectricalfittings andapparatusattherateapplicabletotheplantandmachineryi.e.15%andat thesametimetheassesseealsoclaimedadditionaldepreciationtreatingthesame aspartoftheplantandmachineries.However,theAOwasoftheviewthatthe electricalfittingsanditsapparatuscarrythedepreciationattherateof10%under theprovisionsoflawandlikewisethesamecannotbeapartofplantand machinery.Accordingly,theassesseewasnoteligibleforadditionaldepreciation. Thus,theAOcomputedtheexcessdepreciationclaimedbytheassessee amountingtoRs.42,203.00anddisallowedthesamebyaddingtothetotal incomeoftheassessee. 112.Aggrieved,assesseepreferredanappealtothelearnedCIT-Awhodeleted theadditionmadebytheAO. 113.BeingaggrievedbytheorderofthelearnedCIT-A,theRevenueisin appealbeforeus. 114.BoththelearnedDRandARbeforeusvehementlysupportedtheorderof theauthoritiesbelowasfavourabletothem. 115.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Fromtheprecedingdiscussion,wenotethatthe contentionoftheassesseethatelectricalfittingsandapparatusonwhichthe depreciationandadditionaldepreciationclaimedbyitattherateapplicabletothe plantandmachinerythatthesamewasusedalongwiththeplantandmachinery ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 74 wasnowheredoubtedbytherevenue.Assuch,theelectricalfittingswhichcannot operateonstandalonebasis,meaningtherebysuchelectricalfittingsarepartof theplantandmachineryandthereforethesameshouldbetreatedaspartofthe machinery.Weareconsciousofthefactthatsofaraselectricalfittingsare concerned,therecanbenogeneralization.Itwoulddependuponthefactsofa particularcase.TheAhmedabadtheTribunalinthecaseofMadhuIndustriesLtd versusITOreportedin132TTJ233hasheldasunder: Heldthatthenatureofassetswaselectricalinstallationthatconsistedofelectricalwires, switches,plugs,cables,MCBboxandelectricalitemswhichcouldnotfunction independentlyofplantandmachineryand,hence,couldnotbeclassifiedunderfurniture andfittingsand,accordingly,theassesseewaseligiblefordepreciationundertheblockof plantandmachineryattherateof25percentonelectricalinstallation. 115.1Inthepresentcase,thelearnedCIT-Ahasgivenadetailedfindingthatthe electricalfittingsinthegivencasewerepartandparceloftheplantand machinery,thereforethehigherrateofdepreciationwasallowed.Thefindingof thelearnedCIT-AwasnotcontrovertedbythelearnedDRappearingonbehalfof therevenuebeforeus.Thus,wedonotfindanyreasontointerfereinthefinding ofthelearnedCIT-A.Hence,thegroundofappealoftherevenueishereby dismissed. 116.ThenextissueraisedbytherevenueisthatthelearnedCIT(A)erredin deletingtheadditionmadebytheAOonaccountofunutilizedMODVAT/CENVAT creditofRs.3,17,43,147.00tothetotalincomeoftheassessee. 117.TheAOduringtheassessmentproceedingsfoundthattheassesseeinthe yearunderconsiderationhasshownunutilizedCENVATcreditofRs. 3,17,43,147.00whichwasnotincludedinthevalueofclosinginventoryasperthe provisionofsection145AoftheAct.However,theAOheldthatasperthe provisionofsection145AoftheAct,theassesseewasrequiredtouseinclusive methodofaccountingfortheCENVATwhereasasassesseeisfollowingthe exclusivemethodofaccounting.Duetotheexclusivemethodofaccounting employedbytheassessee,theunutilizedCENVATwaskeptoutsidethevalueof ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 75 closinginventorywhichisagainsttheprovisionoflaw.Therefore,theAOadded theunutilizedCENVATcreditofRs.3,17,43,147.00tothetotalincomeofthe assessee. 118.TheassesseepreferredanappealbeforethelearnedCIT(A)andreiterated thatithasbeenaccountingallitspurchasesandsaleswithoutincludingthe amountofCENVAT.Likewise,therewasnotincludedtheamountofCENVATin theopeningstock.Thus,itisataxneutralexerciseandaccordinglynoadditionis warrantedinthegivenfactsandcircumstancesundertheprovisionsofsection 145AoftheAct. 119.ThelearnedCIT(A)afterconsideringthesubmissionsmadebytheassessee hasdeletedtheadditionmadebytheAO. 120.BeingaggrievedbytheorderofthelearnedCIT(A),theRevenueisin appealbeforeus. 121.ThelearnedDRbeforeusvehementlysupportedthestandoftheAOby reiteratingthefindingscontainedintheassessmentorderwhichwehavealready detailedintheprecedingparagraph.Therefore,wearenotrepeatingthesamefor thesakeofbrevity. 122.Ontheotherhand,thelearnedARsubmittedthattheissueiscoveredinits favorseriesofjudgements.Theld.ARvehementlysupportedtheorderoftheld. CIT-A. 123.Wehaveheardtherivalsubmissions,perusedthematerialavailableon recordandgonethroughtheordersoftheauthoritiesbelow.Theissueinthe presentcaseiswithrespecttotheinclusionofunutilizedCENVATcreditonthe closingstock.WefindthatId.CIT(A)whiledeletingtheadditionhasgivena findingthattheassesseewasfollowingexclusivemethodofaccountingandthe ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 76 CENVATwasnotdebitedorcreditedtotheProfit&Lossaccountandtheaforesaid methodhasbeenconsistentlyfollowedbytheassesseeinearlierandsucceeding yearsandthesameistaxnaturalexcursive.WefurtherfindthattheHon'bleApex CourtinthecaseofCITvs.IndoNipponChemicalsCo.Ltd.reportedat(2003) 261ITR275(SC)observedthatun-availedMODVATcreditcannotbeconstruedas incomeandthereisnoliabilitytopaytaxonsuchun-availedMODVATcredit. Further,beforeus,Revenuehasnotbroughtanycontrarybindingdecisioninits support.Inviewoftheaforesaidfacts,wedonotseeanyreasontointerferewith theorderoftheld.CIT(A).Thus,thegroundofRevenue’sappealisdismissed. 124.ThenextissueraisedbytheRevenueisthatthelearnedCIT(A)erredin confirmingthedisallowancesofdeductionundersection80IAofthewithrespect tocertainreceiptsasnotderivedfromeligiblebusiness. 125.Therewereseveralincomesshownbytheassesseeunderdifferentheads whichwerenotthedirectincomeoftheassesseefromtheactivityofgeneration anddistributionofpower.Nevertheless,theassesseehasclaimeddeductionunder section80IAoftheActbytreatingthemasprofitderivedfromthebusinessof generationordistributionofpower.However,theAOdisputedanddisallowedthe deductionwithrespecttosuchitemsofincome.Subsequently,thelearnedCIT(A) deletedthedisallowancemadebytheAO.Thus,theRevenueisinappealbefore usondifferentitemsofincomewhichareelaboratedserialwiseasunder: SaleofCERsofRs.1,76,05,125/- 126.TheassesseehasshownincomeofRs.1,76,05,125/-fromthesaleof CarbonCredit(certifiedEmissionReduction)whichwasincludedintheeligible profitofeligibleunitandclaimeddeductionundersection80-IAoftheAct.The assesseeduringtheassessmentproceedingalternativelysubmittedthatif deductionundersection80IAisnotallowedthenthesameshouldbeconsidered ascapitalreceipt. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 77 127.However,theAOdisagreedwiththecontentionoftheassessee.Asperthe AOthebenefitofcarboncreditandtheactivitycarriedoutbytheassesseeare separateandindependentactivities.Itdoesnotrepresentanybyproductofthe activitycarriedoutbythecompany.Thebenefitofcarboncreditisworkedout basedonsomecomplexformulawhichhasnolinkwiththegenerationofpower. Thus,thesamecannotbetreatedasprofiteligiblefordeductionundersection 80IAoftheAct.TheAOfurtherobservedthatthecarboncreditisintheformof theincentivegiventotheassesseeonaccountofreductionintheemissionof carbonwhichultimatelyresultsinthereductionofpollution.Thus,suchan incentiveisgiventoencouragetheindustrialundertaking,forreductioninthe emissionofcarbon.Thus,suchbenefittotheassesseeisincentivewhichis taxableundertheprovisionsofsection28(iv)oftheAct.Accordingly,theAOdid nottreatthesameascapitalreceiptoftheassessee. 128.OnappealbytheassesseethelearnedCIT(A)deletedtheadditionmadeby theAObyholdingthatreceiptonaccountofsaleofcarboncreditiscapitalreceipt notliabletotax.ThelearnedCIT(A)accordinglyheldthatthequestionof allowanceofdeductiononsuchreceiptundersection80IAoftheActdoesnot ariseasthesamerepresentscapitalreceipt. 129.BeingaggrievedbytheorderofthelearnedCIT(A),theRevenueisin appealbeforeus. 130.ThelearnedDRbeforeusvehementlysupportedthestandoftheAOby reiteratingthefindingscontainedintheassessmentorderwhichwehavealready detailedintheprecedingparagraph. 131.Ontheotherhand,thelearnedARbeforeussubmittedthattheissueis coveredinitsfavorintheseriesofjudgements.Theld.ARvehementlysupported theorderoftheld.CIT-A. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 78 132.Wehaveheardtherivalcontentionofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethattheidenticalissuecame beforethistribunalintheowncaseoftheassesseeforAY2012-13inITANo. 14/Ahd/2018wheretheissuehasbeendecidedagainsttheRevenuevideorder dated28-12-2022.TherelevantfindingoftheBenchisextractedasunder: 10.Wehaveheardtherivalcontentionsofboththepartiesandperusedthematerials availableonrecord.Attheoutset,wenotethatthereareseveralorders/judgments whereinithasbeenheldthatthecarboncreditreceivedbytheassesseerepresentsthe capitalreceiptwhichisnotchargeabletotax.Someofthejudgmentsareillustratedbelow: 10.1TheHon’bleAndhraPradeshHighCourtincaseofCITvs.MyHomePowerLtd reportedin46taxmann.com314inidenticalfactandcircumstanceshasheldasunder: 3.Wehaveconsideredtheaforesaidsubmissionandweareunabletoacceptthe same,asthelearnedTribunalhasfactuallyfoundthat"CarbonCreditisnotan offshootofbusinessbutanoffshootofenvironmentalconcerns.Noassetis generatedinthecourseofbusinessbutitisgeneratedduetoenvironmental concerns."Weagreewiththisfactualanalysisastheassesseeiscarryingonthe businessofpowergeneration.TheCarbonCreditisnotevendirectlylinkedwith powergeneration.OnthesaleofexcessCarbonCreditstheincomewasreceived andhenceascorrectlyheldbytheTribunalitiscapitalreceiptanditcannotbe businessreceiptorincome.Inthecircumstances,wedonotfindanyelementof lawinthisappeal. 10.2Likewise,thisTribunalincaseofGujaratFluorochemicalsLtdvs.DCITreportedin97 taxmann.com10afterconsideringseveraljudicialPronouncementincludingthe observationofHon’bleJurisdictionalHighCourtincaseofAlembicLtdinTaxAppealNo. 553of2017hasheldthatthereceiptonaccountofsaleofCarboncreditaretobetreated ascapitalreceiptswhichisnotchargeabletotax.TherelevantfindingoftheTribunalis extractedasunder: 41.Thus,takingintoconsiderationresolutionoflitigationonthisissuebythe Legislatureitself,whichhadmadeprovisionfortaxationofsuchreceiptsatthe rateof10%fromtheassessmentyear2018-19aswellasauthoritative pronouncementsofHon'blejurisdictionalHighCourt,weareoftheviewthat receiptsreceivedbytheassesseeonsaleofcarboncreditaretobetreatedas capitalreceiptsandnotliabletotax. 10.3Inviewoftheaboveandafterconsideringthefactsintotality,wedonotfindany infirmityintheorderofthelearnedCIT-A.HenceweupholdthesameanddirecttheAOto deletetheadditionmadebytheAO.Hence,thegroundofappealoftherevenueishereby dismissed. 132.1Beforeus,nomaterialhasbeenplacedonrecordbythelearnedDR demonstratingthatthedecisionofTribunalasdiscussedabovehasbeensetaside /stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,theRevenue hasnotplacedanymaterialonrecordpointingoutanydistinguishingfeaturein ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 79 thefactsofthecasefortheyearunderconsiderationandthatoftheearlieryear norhasplacedanycontrarybindingdecisioninitssupport.Thus,respectfully followingtheorderofthistribunalintheowncaseofassessee,weherebyconfirm thefindingofthelearnedCIT(A).Thus,thegroundofappealraisedbythe revenuewiththeproceedsfromsaleofCERs(CarbonCredit)isherebydismissed. InterestondelayedPayment- 133.Attheoutset,wenotethatthecaptionedissueraisedbytheRevenueinits groundsofappealforA.Y.2015-16isidenticaltotheissuesraisedbytheRevenue inITANo.1652/Ahd/2019forAY2014-15.Therefore,thefindingsgiveninITANo. 1652/Ahd/2019shallalsobeapplicablefortheyearunderconsiderationi.e.2015- 16.ThegroundofappealoftheRevenuefortheA.Y.2014-15hasbeendecided byusvideparagraphNo.55ofthisorderagainsttherevenue.ThelearnedAR andtheDRalsoagreedthatwhateverwillbethefindingsfortheassessmentyear 2014-15shallalsobeappliedfortheyearunderconsiderationi.e.2015-16.Hence thegroundofappealoftherevenueisherebydismissed. DelayedPaymentCharges 134.Attheoutset,wenotethatthecaptionedissueraisedbytheRevenueinits groundsofappealforA.Y.2015-16isidenticaltotheissuesraisedbytheRevenue inITANo.1652/Ahd/2019forAY2014-15.Therefore,thefindingsgiveninITANo. 1652/Ahd/2019shallalsobeapplicablefortheyearunderconsiderationi.e.2015- 16.ThegroundofappealoftheRevenuefortheA.Y.2014-15hasbeendecided byusvideparagraphNo.58ofthisorderagainsttherevenue.ThelearnedAR andtheDRalsoagreedthatwhateverwillbethefindingsfortheassessmentyear 2014-15shallalsobeappliedfortheyearunderconsiderationi.e.2015-16.Hence thegroundofappealoftherevenueisherebydismissed. GainonforeigncurrencyexchangeofRs.41,99,66,936/- ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 80 135.TheassesseeclaimedgainofRs.41,99,66,936/-onaccountofforeign currencyfluctuationasincomeeligiblefordeductionundersection80IAoftheAct foritsPowerGenerationunit.Theassesseeinsupportofitsclaimsubmittedthat suchcurrencyfluctuationgainarisesbecauseofimportofmaterial,naturalgas andequipmentusedforthepurposeofgenerationofpower.Hence,the impugnedgainofcurrencyfluctuationhasdirectnexuswiththeactivityofpower generation.Therefore,thesameiseligiblefordeductionundersection80IAofthe Act.Theassesseeinsupportofitscontentionalsoreferredtovariouscaselaws. 136.However,theAOdisagreedwiththeclaimoftheassessee.TheAOfound thattheloss/gainarisingfromthereceiptorpaymentofforeigncurrencyhas nothingtodowiththebusinessactivityoftheassessee.Suchagainorlossis purelybasedonthemarketconditionofthecurrency,whichisnotinthecontrol oftheassessee.Further,suchgainorlossrecognizedinthebooksseparately fromsaleorpurchasesisasperthedisclosurerequirementmadeunderthe accountingstandard11issuedbytheICAI.TheAOfurtherfoundthatdeduction undersection80IAiseligibletotheassesseeonlyfortheincomederivedfromthe eligiblebusinessi.e.generationordistributionofpowerbutthegainoncurrency ratefluctuationisnotderivedfromtheeligiblebusiness.Hence,theAOexcluded thesamefromtheeligibleincomecomputedundersection80IAoftheAct. 137.Onappealbytheassessee,thelearnedCIT(A)afterfollowingtheorderof hispredecessorintheowncaseoftheassesseeforA.Y.2013-14deletedthe disallowancemadebytheAO. 138.ThelearnedDRbeforeuscontendedthatthesaidincomedoesnothave directnexuswiththeeligiblebusinessoftheassessee.Assuch,theabovesaid receiptisonlyincidentaltotheactivityoftheassessee.Hence,thesamecannot beallowedfordeductionundersection80IAoftheAct. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 81 139.Ontheotherhand,thelearnedARbeforeuscontendedthatimpugned incomeisdirectlyconnectedtotheunitofpowergenerationanddistribution. Therefore,thesameshouldbeconsideredforthepurposeofthedeductionunder section80IAoftheAct. 140.Wehaveheardtherivalcontentionofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethattheidenticalissuecame beforethistribunalintheowncaseoftheassesseeforAY2013-14inITANo. 2047/Ahd/2018wheretheissuehasbeendecidedagainsttheRevenuevideorder dated28-12-2022.TherelevantfindingoftheBenchisextractedasunder: 139.Wehaveheardtherivalcontentionsofboththepartiesandperusedthematerials availableonrecord.Fromtheprecedingdiscussion,wenotethatgainonaccountofforeign currencyratefluctuationarisestotheassesseeontheoutstandingliabilityagainstimport ofmaterials,equipmentandnaturalgasutilizedingenerationofpower.Suchgainwas treatedasincomenotderivedfromtheeligiblebusinessactivitybytheAO.However,on appealthelearnedCIT-Awaspleasedtoallowedthepleaoftheassesseethatsuch incomeisderivedfromtheeligiblebusiness. 139.1Fromtheprecedingdiscussionwenotethatimpugnedgainofforeigncurrencyrate fluctuationarisesonimportofmaterial,equipmentandnaturalgaswhichwereutilizedin generationofpower.Thus,thesamehasdirectandlivenexuswiththeeligiblebusiness. Atthispoint,wealsoreferredthejudgmentofHon’bleGujaratHighCourtincaseofCIT vs.DeversonIndustriesLtd.reportedin55taxmann.com440whereitwasheldasunder: 5.Sofarasquestionregardingforeignexchangedifferenceisconcerned,the sameissquarelygovernedbythedecisionofthisCourtinthecase ofCITv.PriyankaGems[2014]367ITR575/51taxmann.com259(Guj.)wherein thisCourthasansweredthequestioninfavouroftheassesseeandheldthatthat theforeignexchangegainarisingoutofthefluctuationintherateofforeign exchangecannotbedivestedfromtheexportbusinessoftheassesseeandonce exportismade,duetovarietyofreasons,theremissionoftheexportsale considerationmaynotbemadeimmediatelyandthatallforeigncurrencies receivedbytheassesseeneednotbeconvertedintoIndianRupeesonthelast dateoftheaccountingperiod. 139.2Theabovecaselawisinrelationtoexportbusinesswhereasthecaseonhandof theappellantassesseehasmadeimportofmaterialsandequipmentfortheeligibleunit. ButtheprinciplelaiddownbytheHon’bleCourtinthecasecitedaboveissquarely applicableinthecaseonhand.Thus,inviewoftheabove,thegroundofappealofthe Revenueisherebydismissed. 140.1Beforeus,nomaterialhasbeenplacedonrecordbythelearnedDR demonstratingthatthedecisionofTribunalasdiscussedabovehasbeensetaside /stayedoroverruledbytheHigherJudicialAuthorities.Beforeus,theRevenue hasnotplacedanymaterialonrecordtopointoutanydistinguishingfeaturein ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 82 thefactsofthecasefortheyearunderconsiderationandthatoftheearlieryear norhasplacedanycontrarybindingdecisioninitssupport.Thus,respectfully followingtheorderofthistribunalintheowncaseofassessee,weherebyconfirm thefindingofthelearnedCIT(A).Thus,thegroundofappealraisedbythe revenuewithrespecttogainonforeigncurrencyfluctuationisherebydismissed. SaleofScrap 141.Attheoutset,wenotethatthecaptionedissueraisedbytheRevenueinits groundsofappealforA.Y.2015-16isidenticaltotheissuesraisedbytheRevenue inITANo.1652/Ahd/2019forAY2014-15.Therefore,thefindingsgiveninITANo. 1652/Ahd/2019shallalsobeapplicablefortheyearunderconsiderationi.e.2015- 16.ThegroundofappealoftheRevenuefortheA.Y.2014-15hasbeendecided byusvideparagraphNo.59ofthisorderagainsttherevenue.ThelearnedAR andtheDRalsoagreedthatwhateverwillbethefindingsfortheassessmentyear 2014-15shallalsobeappliedfortheyearunderconsiderationi.e.2015-16.Hence thegroundofappealoftherevenueisherebydismissed. Warrantyclaimreceipt 142.TheassesseehadenteredintoanagreementwithM/sSiemensAGand SiemensLimitedforsupplyofcriticalspares,components,andmaintenanceof plant.Suchanagreementalsoincludedawarrantyclausei.e.incaseofany disruptionfacedduetothesupplyofdamagedorsub-standardpartsthenthe assesseewillclaimcompensationforthelossincurredduetodisruption.During theyearunderconsideration,theassesseereceivedwarrantychargesofRs. 26,49,86,015/-andshownasseparateitemofincomeaswellasincludedinthe computationofeligibleprofitundersection80IAoftheAct. 143.However,theAOexcludedthesameformtheeligibleprofitcomputed undersection80IAoftheActbyholdingthattheimpugnedreceiptofwarranty ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 83 chargesdoesnotdirectlylinktotheeligiblebusinessactivityofpowergeneration ordistribution. 144.AggrievedassesseepreferredanappealbeforethelearnedCIT(A)who deletedthedisallowancesmadebytheAObyobservingasunder: TheAppellantCompanyhasenteredintolongtermsupply/serviceagreementwith SiemensAGandSiemensLimitedwhichincludessupplyofcriticalsparesincluding replacementofcriticalcomponentsandmaintenanceofplant.TheclaimofAppellantthat suchpartsarecoveredwarrantyandAppellantCompanycanclaimacompensationforloss incurredordisruptionfacedbyitonaccountofdamage/sub-standardpartsarenotin dispute.AsAppellanthasreceivedsuchwarrantyclaimincurrentyear,whichisnothing butcompensationtowardslossoccurredduetodisruptionorpart/sparecostrelatableto industrialundertaking,suchreceiptsarerequiredtobereducedfromcostincurredby AppellantforearningincomeeligiblefordeductionunderSection80-1A.Thecaseof AppellantiscoveredbyratioofdecisionofHon'bleDelhiHighCourtinthecaseofBSNL73 taxmann.com98]dated01.08.2016whereinitisheldasunder. "Section80-IAoftheIncome-taxAct.1961-Deductions-Profitsandgainsfrom infrastructureundertakings(Telecommunicationservices)-Assessmentyears 2004-05to2008-09-Appellantwasengagedinbusinessofproviding telecommunicationservices-Itclaimeddeductionundersection80-IAinrespect ofprofitsandgainsderivedfromfollowingsixitems:extraordinaryitems,refund fromuniversalservicefund,interestfromothers,liquidateddamages,excess provisionwrittenbackandothersincludingsaleofdirectories,publications,form, wasterpaper,etc.-AssessingOfficerheldthatintermsofprovisionsofsub- section(2A)ofsection80-IAprofitsandgainsderivedfromabovesixitemscould notbesaidtobederivedfromeligiblebusinessofappellantandaccordingly disallowedclaimfordeduction-Tribunalheldthatfirstdegreenexusimplicitin words'derivedfrom'usedinsection80-IA(1)wasnotrequiredforcomputationof deductionincaseofundertakingengagedinprovidingtelecommunicationservices, sincewords'derivedfrom'didnotoccurinsub-section(2A)ofsection80-IA-It accordinglyallowedappellant'sclaimfordeductionundersection80-IA-Whether Tribunalwasjustifiedinitsview-Held,yes(Paras6and14][Infavourof appellant] Onthesefacts,deductionunderSection80-IAclaimedbyAppellantcwarrantyclaimof Rs.26,49,86,015isallowed.Therelevantgroundappealisallowed. 145.BeingaggrievedbytheorderofthelearnedCIT(A)theRevenueisin appealbeforeus. 146.BoththelearnedDRandARbeforeusvehementlysupportedtheorderof theAuthoritiesbelowtotheextentfavorabletothem. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 84 147.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Thecontroversybeforeusrelatestowhetherthe incomeshownbytheassesseeundertheheadwarrantyclaimreceiptiseligible fordeductionundersection80IAoftheAct.ThelearnedCIT-Ahasgivena categoricalfindingthattheimpugnedreceipthasbeengeneratedbytheassessee fromcostincurredwithrespecttocriticalspares,components,andmaintenance ofplant.Whenthecostsareincurredbytheassessee,theyaredirectlydebited intotheprofitandlossaccountandwhenanycompensationisreceivedfromthe partytowhomsuchcostwaspaid,thesamehasbeenshownasincomeinthe profitandlossaccount.Thus,ineffectonlytheamountofcostforcriticalspares, components,andmaintenanceisdebited.Itisamattermannerofpresentationin thebooksofaccountsaboutthecostforsparesandmaintenanceand compensationreceivedagainstsuchcostseparately.Iftheassessee,insteadof showingthewarrantyclaimasincomeandadjuststhesameagainstthecostof thesparesandmaintenance,therewillnotbeanyincomeinthebooksof accountsoftheassessee.Accordingly,thequestionofdisallowanceofdeduction undersection80IAoftheActwillnotarise.Thus,merelytheassesseehas presentedthereceiptofwarrantyclaiminaparticularmanner,theassessee cannotbedebarredfromclaimingthedeductionundertheprovisionsofsection 80IAoftheAct.Itisalsopertinenttonotethattheincomeonaccountof warrantyclaimisintheeligibleunithasdirectlinkwiththegenerationand distributionofpower,thereforeonthisscoreaswell,theassesseecannotbe deniedthebenefitofthedeductionundersection80IAoftheAct.Accordingly,we upholdtheorderofthelearnedCIT-A,anddirecttheAOtodeletetheaddition madebyhim.Hencethegroundofappealoftherevenueisherebydismissed. Othermiscellaneousreceipt 148.Attheoutset,wenotethatthecaptionedissueraisedbytheRevenueinits groundsofappealforA.Y.2015-16isidenticaltotheissuesraisedbytheRevenue inITANo.1652/Ahd/2019forAY2014-15.Therefore,thefindingsgiveninITANo. ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 85 1652/Ahd/2019shallalsobeapplicablefortheyearunderconsiderationi.e.2015- 16.ThegroundofappealoftheRevenuefortheA.Y.2014-15hasbeendecided byusvideparagraphNo.60ofthisorderagainsttherevenue.ThelearnedAR andtheDRalsoagreedthatwhateverwillbethefindingsfortheassessmentyear 2014-15shallalsobeappliedfortheyearunderconsiderationi.e.2015-16.Hence, thegroundofappealoftherevenueisherebydismissed. Provisionofearlieryearwrittenback 149.Attheoutset,wenotethatthecaptionedissueraisedbytheRevenueinits groundofappealforA.Y.2015-16isidenticaltotheissuesraisedbytheRevenue inITANo.1652/Ahd/2019forAY2014-15.Therefore,thefindingsgiveninITANo. 1652/Ahd/2019shallalsobeapplicablefortheyearunderconsiderationi.e.2015- 16.ThegroundofappealoftheRevenuefortheA.Y.2014-15hasbeendecided byusvideparagraphNo.62ofthisorderagainsttherevenue.ThelearnedAR andtheDRalsoagreedthatwhateverwillbethefindingsfortheassessmentyear 2014-15shallalsobeappliedfortheyearunderconsiderationi.e.2015-16.Hence, thegroundofappealoftherevenueisherebydismissed.Inviewoftheabove discussions,theissuesraisedbytheRevenuevidegroundNos.6ofitsappealare herebydismissed. 150.ThenextissueraisedbytheRevenuevidegroundNo.7ofitsappealis thatthelearnedCIT(A)erredindeletingthedisallowanceofdeductionmadeby theAOundersection80Gand80GGBoftheAct. 151.Attheoutset,wenotethatthecaptionedissueraisedbytheRevenueinits groundsofappealforA.Y.2015-16isidenticaltotheissuesraisedbytheRevenue inITANo.1652/Ahd/2019forAY2014-15.Therefore,thefindingsgiveninITANo. 1652/Ahd/2019shallalsobeapplicablefortheyearunderconsiderationi.e.2015- 16.ThegroundofappealoftheRevenuefortheA.Y.2014-15hasbeendecided byusvideparagraphno.52ofthisorderagainsttherevenue.ThelearnedARand ITAnos.1598/AHD/2019with3others Asstt.Years2014-15&others 86 theDRalsoagreedthatwhateverwillbethefindingsfortheassessmentyear 2014-15shallalsobeappliedfortheyearunderconsiderationi.e.2015-16.Hence thegroundofappealoftherevenueisherebydismissed. 152.Intheresult,theappealoftheRevenueisherebydismissed. 153.InthecombinedResults, Sr No. ITANo.A.YAppealByResult 1.1598/Ahd/20192014-15 AssesseePartly allowed 2.1652/Ahd/20192014-15 RevenuePartly allowed 3.128/Ahd/20202015-16 AssesseePartly allowed 4.231/Ahd/20202015-16 RevenuePartly allowed OrderpronouncedintheCourton21/09/2023atAhmedabad. Sd/-Sd/- (T.RSENTHILKUMAR)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated21/09/2023 Manish