Kirloskar Brothers Limited, Pune V. Dy. CIT, Circle 11(1), Pune

ITA 2031/PUN/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85065 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 19-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Keywords: Capital asset; Opportunity of being heard
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.2027/PN/2012 (A.Y: 2007-08) ACIT, CIRCLE 11(1), PUNE APPELLANT VS. KIRLOSKAR BROTHERS LIMITED YAMUNA, S.NO.98 (3 TO 7), BANER, PUNE 411045 PAN: AAACK7300E RESPONDENT ITA NO.2031/PN/2012 (A.Y: 2007-08) KIRLOSKAR BROTHERS LIMITED YAMUNA, S.NO.98 (3 TO 7), BANER, PUNE 411045 PAN: AAACK7300E APPELLANT VS. ACIT, CIRCLE 11(1), PUNE RESPONDENT ASSESSEE BY : SHRI C.H. NAN IWADEKAR DEPARTMENT BY : SHRI A.K. MODI DATE OF HEARING: 09.10.2014 DATE OF ORDER : 10.10.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THE ABOVE CROSS APPEALS PERTAIN TO THE SAME ASSESSE E ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL)- I, PUNE FOR A.Y. 2007-08. 2. IN ITA NO.2027/PN/2012 FOR A.Y. 2007-08, THE REV ENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS. 2 ITA NOS.2027 & 2031/PN/12 KIRLOSKAR BROTHERS LTD 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GRO SSLY ERRED IN DELETING THE DISALLOWANCE OF RS.3,59,81,38 4/- MADE BY THE ASSESSING OFFICER OUT OF THE DEDUCTION CLAIM ED U/S.80IA IN RESPECT OF PROFIT EARNED FROM THE PROJE CT GODAWARI LIFT IRRIGATION SCHEME DEVELOPED BY THE GO VT. OF ANDHRA PRADESH, INSTEAD OF CONFIRMING THE SAID DISALLOWANCE. 3. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GRO SSLY ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF RS.3,59,81,384/- OUT OF THE TOTAL DISALLOWANCE OF RS.3,62,84,404/- IN THE COMPUTATION OF DEDUCTION U/S.80IA(4) WITHOUT APPRECIATING THAT, AS THE ASSESSEE HAD DISCLOSED ABNORMALLY HIGH PROFIT IN RE SPECT OF THE GODAWARI LIFT IRRIGATION SCHEME, THE ASSESSING OFFICER HAD CORRECTLY INVOKED THE PROVISIONS OF SUB SEC. (8 ) OF SEC.80IA OF THE INCOME TAX ACT, 1961 IN ORDER TO A RRIVE AT THE DEDUCTION ELIGIBLE U/S.80IA ON THE PROFIT OF THE SAID PROJECT. 4. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GRO SSLY ERRED IN DELETING THE DISALLOWANCE OF RS.82,87,446/ - MADE BY THE ASSESSING OFFICER OUT OF THE DEDUCTION CLAIM ED U/S.80IA IN RESPECT OF PROFIT EARNED FROM THE PROJE CT GUTHPA LIFT IRRIGATION SCHEME DEVELOPED BY THE GOVT. OF AN DHRA PRADESH, INSTEAD OF CONFIRMING THE SAID DISALLOWANC E. 5. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GRO SSLY ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF RS.82,87,446/- OUT OF THE TOTAL DISALLOWANCE OF RS.86,42,971/- IN THE COMPUTATION O F DEDUCTION U/S.80IA(4) WITHOUT APPRECIATING THAT, AS THE ASSESSEE HAD DISCLOSED ABNORMALLY HIGH PROFIT IN RE SPECT OF THE GUTHPA LIFT IRRIGATION SCHEME, THE ASSESSING OF FICER HAD CORRECTLY INVOKED THE PROVISIONS OF SUB SEC. (8) OF SEC.80IA OF THE INCOME TAX ACT, 1961 IN ORDER TO ARRIVE AT THE DEDUCTION ELIGIBLE U/S.80IA ON THE PROFITS OF THE SAID PROJEC T. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GROSSLY ERRED IN GRANTING RELIEF OF RS.83,85,380/- IN RESPECT OF DISALLOWANCE OF WARRANTY PROVISION. 3 ITA NOS.2027 & 2031/PN/12 KIRLOSKAR BROTHERS LTD 7. WITHOUT PREJUDICE TO THE FOREGOING, THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GROSSLY ERRE D IN NOT CONSIDERING THE FACT THAT THE COMPUTATION OF PROVIS ION MADE BY THE ASSESSEE WAS UNSCIENTIFIC AND UNREASONABLE A ND HENCE THE EXCESS PROVISION SHOULD IN ANY CASE HAVE BEEN DISALLOWED. 8. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT (APPE ALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RES TORED. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY O R ALL THE GROUNDS OF APPEAL. 3. THE FIRST ISSUE IS WITH REGARD TO DISALLOWANCE O UT OF DEDUCTION U/S.80IA OF THE ACT IN RESPECT OF PROFIT EARNED FROM THE PROJECT GODAWARI LIFT IRRIGATION SCHEME OF RS.3,59, 81,384/-. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OUT OF DE DUCTION U/S.80IA OF THE ACT IN RESPECT OF PROFITS EARNED FR OM THE PROJECT GUTHPA LIFT IRRIGATION SCHEME AMOUNTING TO RS.82,87 ,446/-. 3.1 THE LEARNED AUTHORIZED REPRESENTATIVE HAS POINT ED OUT THAT BOTH THE ISSUES HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE BY ITAT, PUNE IN ITA NOS.657/PN /2010 AND 671/PN/2010 VIDE ORDER DATED 17.09.2014 FOR A.Y. 20 06-07, WHEREIN THE TRIBUNAL HAS DECIDED THE SIMILAR ISSUE BY OBSERVING AS UNDER: 40. HAVING CONSIDERED THE RIVAL STANDS AS WELL AS THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THE C IT(A) MADE NO MISTAKE IN DISREGARDING THE ACTION OF THE ASSESS ING OFFICER SCALING DOWN THE DEDUCTION U/S 80IA OF THE ACT TO THE EXTENT OF RS.6,63,61,181/- IN RESPECT OF PROFIT S EARNED FROM GODAVARI PROJECT. IN SO FAR AS THE ASSESSEES ELIGIBILITY FOR THE CLAIM OF DEDUCTION U/S 80IA OF THE ACT WITH RESPECT TO THE GODAVARI PROJECT IS CONCERNED THERE IS NO DI SPUTE. WE ARE IN AGREEMENT WITH THE CIT(A) THAT THE PROFIT SH OWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT RELATING TO TH E GODAVARI PROJECT HAS BEEN DISREGARDED BY THE ASSESSING OFFIC ER ON MERE CONJECTURES AND SURMISES. NO DOUBT, THE PROFI T RATIO IN CASE OF THE GODAVARI PROJECT IS HIGHER IN COMPAR ISON TO OTHER PROJECTS UNDERTAKEN BY THE ASSESSEE IN DIFFER ENT 4 ITA NOS.2027 & 2031/PN/12 KIRLOSKAR BROTHERS LTD ASSESSMENT YEARS. SO HOWEVER, SUCH A DIFFERENCE CA N ONLY BE A BASIS TO FURTHER VERIFY THE FACTUAL ASPECTS, B UT THE DIFFERENCE IN PROFIT-RATIO BY ITSELF, CANNOT BE A G ROUND TO DISBELIEVE THE SAME. THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY COGENT MATERIAL OR EVIDENCE TO SAY THAT THE PROFITS DECLARED BY THE ASSESSEE, BASED ON THE AUDITED BOOK S OF ACCOUNT SUFFER FROM ANY INFIRMITY. THEREFORE, ACTI ON OF THE CIT(A) DELETING THE DISALLOWANCE OF RS.6,63,61,181/ - OUT OF DEDUCTION U/S 80IA OF THE ACT IS HEREBY AFFIRMED. 41. IN SO FAR AS THE ACTION OF THE CIT(A) IN SCALIN G DOWN THE DEDUCTION U/S 80IA OF THE ACT TO THE EXTENT OF RS.18,70,849/- ON ACCOUNT OF ALLOCATION OF INTEREST EXPENDITURE IS CONCERNED, WE FIND THAT THE SAME IS QUITE JUSTIFIED. THE ASSESSEE HAS NOT ASSAILED THE FACTU AL APPRECIATION OF MATTER UNDERTAKEN BY THE CIT(A) WIT H RESPECT TO THE VARIATION IN ALLOCATION OF INTEREST EXPENDITURE AND THUS THE ACTION OF THE CIT(A) IS HEREBY AFFIRME D ON THIS ASPECT ALSO. 42. RESULTANTLY, THE GROUNDS RAISED BY THE REVENUE AS WELL AS ASSESSEE WITH RESPECT TO THE QUANTIFICATION OF DEDUCTION U/S 80IA OF THE ACT RELATING TO THE GODAV ARI PROJECT ARE DISMISSED. 3.2 NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWLE DGE ON BEHALF OF THE REVENUE. FACTS BEING SIMILAR, SO FOL LOWING THE SAME REASONING, WE ARE NOT INCLINED TO INTERFERE WITH TH E FINDING OF CIT(A) WHO HAS DELETED THE DISALLOWANCES OF RS.3,59 ,81,384/- AND RS.82,87,446/- U/S.80IA OF THE ACT IN RESPECT O F PROFIT EARNED FROM THE PROJECT GODAWARI LIFT IRRIGATION SC HEME AND GUTHPA LIFT IRRIGATION SCHEME RESPECTIVELY. WE UPH OLD THE SAME. 4. THE NEXT ISSUE IS WITH REGARD TO RELIEF IN RESPE CT OF DISALLOWANCE OF THE WARRANTY PROVISION AMOUNTING TO RS.83,85,380/-. THE LEARNED AUTHORIZED REPRESENTAT IVE HAS POINTED OUT THAT THIS ISSUE HAS BEEN DECIDED IN FAV OUR OF THE ASSESSEE IN ASSESSEES OWN CASE BY ITAT, PUNE IN IT A NOS.657/PN/2010 AND 671/PN/2010 VIDE ORDER DATED 17.09.2014 FOR A.Y. 2006-07, WHEREIN THE TRIBUNAL H AS DECIDED THE SIMILAR ISSUE BY OBSERVING AS UNDER: 5 ITA NOS.2027 & 2031/PN/12 KIRLOSKAR BROTHERS LTD 45. IN BRIEF, THE RELEVANT FACTS ARE THAT THE ASSE SSING OFFICER MADE A TOTAL DISALLOWANCE OF RS.1,76,13,328 /- ON ACCOUNT OF PROVISION FOR WARRANTY. THE ASSESSING O FFICER DENIED THE CLAIM OF THE ASSESSEE ON THE BASIS OF A SIMILAR DISALLOWANCE MADE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2005-06. HOWEVER, IN THE COURSE OF PROCEEDINGS BEFORE THE CIT(A), ASSESSEE CONTENDED T HAT THE ASSESSING OFFICER ERRED IN CONFUSING THE CALCULATIO N MADE FOR ASSESSMENT YEARS 2005-06 AND 2006-07 BECAUSE TH E PROVISION MADE FOR THE YEAR UNDER CONSIDERATION WAS ON A SCIENTIFIC BASIS BY TAKING AVERAGE OF EXPENDITURE F OR THE LAST THREE YEARS AS AGAINST TWO YEARS ADOPTED IN THE ASS ESSMENT YEAR 2005-06. IN-PRINCIPLE, THE ASSESSEE ALSO RELI ED UPON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE C ASE OF ROTORK CONTROL INDIA P. LTD. VS. CIT, 314 ITR 62 (S C). THE CIT(A) NOTED THAT IN-PRINCIPLE THE ISSUE WAS LIABLE TO THE DECIDED IN FAVOUR OF THE ASSESSEE HAVING REGARD TO THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF R OTORK CONTROL INDIA P. LTD. (SUPRA). HOWEVER, THE CIT(A) NOTED THAT WHILE DISALLOWING THE PROVISION FOR WARRANTY A MOUNTING TO RS.1,76,13,328/-, THE ASSESSING OFFICER ALLOWED DEDUCTION OF AN AMOUNT OF RS.1,67,03,218/- ON THE G ROUND THAT THE SAME WAS ACTUALLY UTILIZED FOR THE PRODUCT WARRANTIES. SINCE THE CIT(A) DIRECTED THAT THE ENT IRE PROVISION FOR WARRANTY AMOUNTING TO RS.1,76,13,328/ - IS AN ALLOWABLE EXPENDITURE, HE DIRECTED THAT AMOUNT OF RS.1,67,03,218/- ALLOWED BY THE ASSESSING OFFICER B E REVERSED. IN THIS MANNER, THE NET RELIEF ALLOWED T O THE ASSESSEE ON THIS GROUND WAS RS.9,10,110/-, WHICH IS SUBJECT-MATTER OF APPEAL PREFERRED BY THE REVENUE. 46. AT THE TIME OF HEARING, IT WAS A COMMON POINT B ETWEEN THE PARTIES THAT THE PROVISION FOR WARRANTY CANNOT BE CONSIDERED AS A CONTINGENT LIABILITY FOLLOWING THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ROTORK CONTROL INDIA P. LTD. (SUPRA). THE CIT(A), IN OUR VIEW, HA S CORRECTLY DECIDED THE ISSUE IN THE LIGHT OF THE JUDGEMENT OF THE HONBLE SUPREME COURT, WHICH WE HEREBY AFFIRM. THU S, ON THIS ASPECT, THE APPEAL OF THE REVENUE IS DISMISSED . 4.1 NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWLE DGE ON BEHALF OF THE REVENUE. FACTS BEING SIMILAR, SO FOL LOWING THE SAME REASONING, WE HOLD THAT THE CIT(A) HAS RIGHTLY DECI DED THE ISSUE IN THE LIGHT OF JUDGEMENT OF THE HONBLE SUPREME CO URT IN THE 6 ITA NOS.2027 & 2031/PN/12 KIRLOSKAR BROTHERS LTD CASE OF ROTORK CONTROL INDIA P. LTD. (SUPRA). WE U PHOLD THE SAME. 5. AS A RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 6. IN ITA NO.2031/PN/2012 FOR A.Y. 2007-08, THE ASS ESSEE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS. 1. GROUND OF APPEAL NO.1:- CLAIM U/S 80IA OF THE A CT: RS. 31.73.97,655/-. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED ON FACTS & IN LAW IN UPHOLDING DISALLOWANCE OF RS.31,73,97,655/- U/S 80IA OF THE ACT, IN RESPECT O F INFRASTRUCTURE FACILITY DEVELOPED FOR M/S SARDAR SA ROVAR NARMADA NIGAM LIMITED (SSNNL) (SPV DEVELOPED BY THE GOVERNMENT OF GUJARAT). IN PARTICULAR HE ERRED IN P LACING HIS OWN INTERPRETATION TO SEC 80IA; HE FAILED TO AP PRECIATE CONTENTION AND ARGUMENTS ADVANCED BY THE 'ASSESSEE' IN THIS REGARD. 2. GROUND OF APPEAL NO.2:- DISALLOWANCE U/S 40(A) (IA) OF THE ACT: AMOUNT UNDER DISPUTE - RS. 80,00,000/-. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN CONSIDERING THE PAYMENT OF COMMISSION TO 'NON EXECU TIVE DIRECTORS' AS- A) COVERED UNDER THE PROVISIONS OF SECTION 194H OF THE ACT, B) THEREBY COVERED FOR THE PURPOSES OF DEDUCTION OF TA X AT SOURCE AS PER THE APPLICABLE RATE AND C) IN ABSENCE OF DEDUCTION OF TAX AT SOURCE, COVERED F OR THE PURPOSES OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT. 3. GROUND OF APPEAL NO.3:- COMPUTATION OF BOOK PRO FIT U/S 115JB OF THE ACT. PROFIT ON SALE OF INVESTMENTS SHOWN IN PROFIT & LOS S ACCOUNT, TO EXCLUDE FOR THE PURPOSES OF CALCULATION OF BOOK PROFIT U/S 115JB OF THE ACT BEING INVESTED IN PRESC RIBED SECURITIES:- AMOUNT UNDER DISPUTE: RS.177,77,56,572 /-. THE LEARNED CIT (APPEALS) ERRED IN REJECTING ASSESS EE'S CLAIM THAT THE AMOUNT INVESTED IN PRESCRIBED SECURI TIES OUT 7 ITA NOS.2027 & 2031/PN/12 KIRLOSKAR BROTHERS LTD OF CAPITAL GAINS, SHOULD NOT BE CONSIDERED FOR THE PURPOSES OF CALCULATION OF PROFITS U/S 115JB OF THE ACT. 4. GROUND OF APPEAL NO.4:- MEDICAL EXPENSES REIMBURSED TO EMPLOYEES AND PAYMENT OF FRINGE BENEFIT TAX:- AM OUNT UNDER DISPUTE: RS.1,65,65,947/-. THE LEARNED CIT (A) ERRED IN HOLDING THAT MEDICAL E XPENSES REIMBURSED TO EMPLOYEES TOTALING TO RS.1,65,65,947/ - THOUGH BEING LESS THAN RS.15000/- PER EMPLOYEE, ARE LIABLE FOR THE CALCULATION AND PAYMENT OF FRINGE BENEFIT T AX. THE 'APPELLANT' CRAVES, LEAVE TO ADD, ALTER, AMEND OR MODIFY ANY OF THE 'GROUNDS OF APPEAL' STATED ABOVE. 7. THE FIRST ISSUE IS WITH REGARD TO DISALLOWANCE O F RS.31,73,97,655/- U/S.80IA OF THE ACT IN RESPECT OF INFRASTRUCTURE FACILITY DEVELOPED FOR M/S. SARDAR S AROVAR NARMADA NIGAM LIMITED (SSNNL) (SPV DEVELOPED BY THE GOVERNMENT OF GUJARAT). IN THIS REGARD, THE LEARNE D AUTHORIZED REPRESENTATIVE HAS POINTED OUT THAT THIS ISSUE HAS BEEN DECIDED BY ITAT, PUNE IN FAVOUR OF THE ASSESSEE IN ASSESSEE S OWN CASE IN ITA NOS.657/PN/2010 AND 671/PN/2010 VIDE ORDER DATE D 17.09.2014 FOR A.Y. 2006-07, WHEREIN THE TRIBUNAL H AS DECIDED THE SIMILAR ISSUE BY OBSERVING AS UNDER: 26. HAVING REGARD TO THE SCOPE OF WORK EXECUTED BY THE ASSESSEE, IT IS DIFFICULT TO COMPREHENDED THAT ASSE SSEE WAS MERELY ACTING AS A CONTRACTOR. IN COMMON PARLANCE, A CONTRACTOR IS UNDERSTOOD AS A PERSON WHO CARRIES OU T THE ASSIGNED WORK AS PER THE DIRECTIONS GIVEN BY THE CO NTRACTEE. IN THE PRESENT CASE, THE ASSESSEE HAS USED OWN-DEVE LOPED TECHNOLOGY AND ITS OWN RESOURCES TO CONCEPTUALIZE, DESIGN, ERECT, COMMISSION, TEST AND OPERATE THE SAURASHTRA BRANCH CANAL PUMPING SCHEME. THEREFORE, IN OUR VIEW, ASS ESSEE IS TO BE UNDERSTOOD AS A DEVELOPER, AND DISTINCT FRO M A CONTRACTOR QUA THE IMPUGNED CONTRACT AWARDED BY S SNNL. THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF AC IT VS. INDWEL LINGINS (P) LTD., 122 TTJ 137 (CHENNAI) HAS NOTED THAT A DEVELOPER IS A PERSON WHO DESIGNS AND CREATE S NEW PROJECTS WHEREAS A CONTRACTOR IS A PERSON WHO HAS A CONTRACT TO DO WORK. IN THE PRESENT CASE, AS THE S COPE OF WORK SHOWS, ASSESSEE DID NOT MERELY CARRY OUT A CON TRACT TO 8 ITA NOS.2027 & 2031/PN/12 KIRLOSKAR BROTHERS LTD DO WORK BUT WAS RESPONSIBLE FOR CONCEPTUALIZING, DE SIGNING, ERECTING, COMMISSIONING AND OPERATING THE WATER PUM PING SCHEME. ON THE ABOVE ASPECT, THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD., 322 ITR 323 (BOM), CLEARLY SUPPOR TS THE PLEA OF THE ASSESSEE OF BEING A DEVELOPER. IN THE CASE BEFORE THE HONBLE HIGH COURT, ASSESSEE WAS AWARDED A CONT RACT BY JAWAHARLAL NEHRU PORT TRUST (JNPT) TO SUPPLY, INSTA LL, TEST, COMMISSION AND MAINTAIN THE CONTAINER HANDLING EQUIPMENT, NAMELY, THE CRANES. JNPT WAS OWING THE DEDICATED CONTAINER HANDLING TERMINAL. THE STAND O F THE REVENUE WAS THAT ASSESSEE WAS NOT A DEVELOPER OF TH E INFRASTRUCTURE FACILITY BUT HAD ONLY SUPPLIED AND I NSTALLED THE CONTAINER HANDLING CRANES AT THE JNPT PORT. TH EREFORE, IT WAS CONTENDED BY THE REVENUE THAT ASSESSEE WAS N OT ELIGIBLE FOR THE BENEFITS OF SECTION 80IA OF THE AC T. THE HONBLE HIGH COURT HAS NEGATED THE STAND OF THE REV ENUE AND HELD THAT THE CONTRACT EXECUTED BY THE ASSESSEE FOR SUPPLY, INSTALLATION, TESTING, COMMISSIONING AND MAINTENANCE OF CONTAINER HANDLING CRANES AT THE JNP T TERMINAL TANTAMOUNTED TO DEVELOPMENT OF AN INFRASTR UCTURE FACILITY WITHIN THE MEANING OF SECTION 80IA OF THE ACT. IN OUR CONSIDERED OPINION, THE SAID JUDGEMENT OF THE HONB LE HIGH COURT CLEARLY COVERS THE CASE OF THE ASSESSEE OF BE ING A DEVELOPER AND NOT MERELY A CONTRACTOR FOR THE P URPOSES OF SECTION 80IA(4) OF THE ACT. 27. REMAINING ON THIS OBJECTION, IT HAS ALSO BEEN A SSERTED BY THE ASSESSEE BEFORE US THAT THE SCOPE OF WORK AS SIGNED BY THE SSNNL WAS IDENTICAL TO THE SCOPE OF WORK ASS IGNED BY THE GOVERNMENT OF ANDHRA PRADESH TO THE ASSESSEE FOR ITS GODAVARI LIFT IRRIGATION SCHEME. IN SO FAR AS THE PROFITS RELATING TO THE PROJECT OF GODAVARI LIFT IRRIGATION SCHEME IS CONCERNED, THE BENEFITS OF SECTION 80IA HAS BEEN AL LOWED TO THE ASSESSEE AND THE ASSESSEE HAS NOT BEEN TREATED AS A CONTRACTOR. IT HAS BEEN POINTED OUT THAT ON ACCO UNT OF THE AFORESAID, THE STAND OF THE REVENUE IN RELATION TO THE PROJECT EXECUTED FOR SSNNL IS SELF-CONTRADICTORY. 28. BEFORE US, THE AFORESAID ASSERTIONS OF THE ASSE SSEE HAVE NOT BEEN ASSAILED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. BE THAT AS IT MAY, IN OUR VIEW, HA VING REGARD TO THE AFORESAID DISCUSSION, ASSESSEE CANNOT BE TREATED AS A CONTRACTOR FOR THE WORK ASSIGNED BY SS NNL AND IT IS TO BE UNDERSTOOD AS A DEVELOPER WITHIN THE MEANING OF SECTION 80IA(4) OF THE ACT. 29. ANOTHER OBJECTION TAKEN BY THE REVENUE IS THAT ASSESSEE ONLY CONSTRUCTED/DEVELOPED THE INFRASTRUCT URE 9 ITA NOS.2027 & 2031/PN/12 KIRLOSKAR BROTHERS LTD FACILITY BUT DID NOT OPERATE THE SAME. THIS ASPECT OF THE CONTROVERSY HAS BEEN CLEARLY ANSWERED BY THE HONBL E BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRI ES LTD. (SUPRA). EVEN AN ENTERPRISE WHICH IS ENGAGED ONLY IN DEVELOPMENT OF AN INFRASTRUCTURE FACILITY HAS ALSO BEEN HELD TO BE ELIGIBLE FOR SECTION 80IA BENEFITS. THEREFOR E, THE SAID OBJECTION OF THE REVENUE IS NOT JUSTIFIED. IN ANY CASE, IT HAS ALSO BEEN POINTED OUT BEFORE US THAT ASSESSEE HAS O PERATED THE INFRASTRUCTURE FACILITY FOR A PERIOD OF TWO YEA RS. BE THAT AS IT MAY, WE FIND NO JUSTIFICATION IN THE AFORESAI D OBJECTION, WHICH IS DISMISSED. 30. IT IS ALSO A PLEA OF THE REVENUE THAT THE INFRA STRUCTURE FACILITY IS TO BE OWNED BY THE ASSESSEE FOR THE PUR POSES OF CLAIMING BENEFIT U/S 80IA OF THE ACT. IN OUR VIEW, THE AFORESAID OBJECTION OF THE REVENUE IS DEVOID OF ANY STATUTORY SUPPORT FROM THE PROVISIONS OF SECTION 80IA(4)(I) O F THE ACT. THE SAME IS THEREFORE REJECTED. 31. ONE OF THE OBJECTIONS OF THE ASSESSING OFFICER WAS THAT THE ENTIRE INVESTMENT IN THE INFRASTRUCTURE PROJECT HAS NOT BEEN MADE BY THE ASSESSEE AND THAT 80% OF THE PROJE CT COST HAS BEEN RECEIVED FROM SSNNL. THEREFORE, ACCORDING TO THE REVENUE, ASSESSEE-COMPANY HAS NOT FUNDED THE PROJEC T WITHOUT ANY ASSISTANCE FROM SSNNL. THIS OBJECTION OF THE REVENUE, IN OUR VIEW, IS QUITE MISCONCEIVED BECAUSE A DEVELOPER WOULD HAVE INCOME ONLY IF HE IS PAID FOR DEVELOPMENT OF THE INFRASTRUCTURE FACILITY. THE MU MBAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. BHARA T UDYOG LTD., 118 ITD 336 (MUM) NOTED THAT THE BUSINESS ACT IVITY OF THE NATURE BUILD AND TRANSFER ALSO FALLS WITHIN T HE ELIGIBLE ACTIVITIES FOR DEDUCTION U/S 80IA OF THE ACT. THE MUMBAI BENCH OF THE TRIBUNAL HAS MADE THE AFORESAID OBSERV ATIONS IN THE CONTEXT OF OBJECTION RAISED BEFORE IT REGARD ING THE CLAIM U/S 80IA OF THE ACT ON THE GROUND THAT ASSESS EE WAS PAID BY THE GOVERNMENT FOR THE DEVELOPMENT WORK. T HE AFORESAID OBJECTION WAS NEGATED BY THE TRIBUNAL AND THE CLAIM OF DEDUCTION WAS ALLOWED U/S 80IA OF THE ACT. THUS, WE DO NOT FIND ANY JUSTIFICATION TO DENY THE CLAIM OF DEDUCTION U/S 80IA(4) OF THE ACT MERELY BECAUSE THE COST OF THE PROJECT EXECUTED BY THE ASSESSEE WAS NOT FULLY FUNDED BY THE ASSESSEE ITSELF. 32. IN VIEW OF THE AFORESAID DISCUSSION, WE THEREFO RE HOLD THAT ASSESSEE IS ELIGIBLE FOR THE CLAIM OF DEDUCTIO N U/S 80IA OF THE ACT AMOUNTING TO RS.40,02,10,981/- IN RESPEC T OF THE PROFITS DERIVED FROM DEVELOPMENT OF INFRASTRUCTURE FACILITY FOR SSNNL. THE ORDER OF THE CIT(A) IS SET-ASIDE AN D THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE DEDUCTIO N. 10 ITA NOS.2027 & 2031/PN/12 KIRLOSKAR BROTHERS LTD 7.1 NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWLE DGE ON BEHALF OF THE REVENUE. FACTS BEING SIMILAR, SO FOL LOWING THE SAME REASONING, WE HOLD THAT THE ASSESSEE IS ELIGIBLE FO R CLAIM OF DEDUCTION U/S.80IA AMOUNTING TO RS.31,73,97,655/- I N RESPECT OF THE PROFITS DERIVED FROM THE DEVELOPMENT OF INFRAST RUCTURE FACILITY FOR SSNNL. ACCORDINGLY, THE ORDER OF CIT(A) IS SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE DEDUCTIO N IN QUESTION. 8. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE U/ S.40(A)(IA) OF THE ACT AMOUNTING TO RS.80,00,000/-. THE ASSESSING OFFICER HAS DISALLOWED THE SAID AMOUNT ON THE GROUND THAT THE A SSESSEE HAS NOT DEDUCTED TAX AT SOURCE ON PAYMENT OF COMMISSION TO THE NON-EXECUTIVE DIRECTORS, WHICH WAS CONFIRMED BY THE CIT(A). THE LEARNED AUTHORIZED REPRESENTATIVE HAS POINTED OUT T HAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER O F ITAT, PUNE BENCH IN THE CASE OF BHARAT FORGE LTD. VS. ADDL.CIT IN ITA NOS.1326, 1327, 1357 & 1358/PN/2010 VIDE ORDER DATE D 31.01.2013 FOR A.YS. 2007-08 & 2008-09, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: AS PER THE EXPLANATION TO PROVISIONS OF SECTION 19 4J PROFESSIONAL SERVICE MEANS SERVICES RENDERED BY A P ERSON IN THE COURSE OF CARRYING ON LEGAL, MEDICAL, ENGINEERI NG OR ARCHITECTURAL PROFESSION OR THE PROFESSION OF ACCOU NTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR ADV ERTISING OR SUCH OTHER PROFESSION AS IS NOTIFIED BY THE BOAR D. THUS THE SITTING FEES PAID TO THE DIRECTORS DOES NOT AMO UNT TO FEES PAID FOR ANY PROFESSIONAL SERVICES AS HAS BEEN MENT IONED IN THE EXPLANATION TO SECTION 194J(1). THE PROVISIONS OF SECTION 194J(1)(BA) SPEAKS OF ANY REMUNERATION OR FEES OR COMMISSION BY WHATEVER NAME CALLED OTHER THAN THOSE ON WHICH TAX IS DEDUCTIBLE U/S.192 TO A DIRECTOR OF A COMPANY ON WHICH TAX HAS TO BE DEDUCTED AT THE APPLICABLE R ATE AND THE PROVISION HAS BEEN INSERTED BY THE FINANCE ACT, 2012 W.E.F., 01-07-2012. THUS NO TAX WAS REQUIRED TO BE DEDUCTED U/S.194J OUT OF SUCH DIRECTOR'S SITTING FEES FOR TH E A.Y. 2007-08. IN THIS VIEW OF THE MATTER, THE ORDER OF T HE CIT(A) 11 ITA NOS.2027 & 2031/PN/12 KIRLOSKAR BROTHERS LTD IS SET-ASIDE AND THE GROUND RAISED BY THE ASSESSEE ON THE ISSUE OF TDS ON SITTING FEES PAID TO DIRECTORS IS A LLOWED. SITTING FEES PAID TO THE NON-EXECUTIVE RESIDENT DIR ECTORS FOR THE A.Y. 2007-08 DOES NOT AMOUNT TO FEE PAID FOR AN Y PROFESSIONAL SERVICES U/S 194J. 8.1 THE CASE RELIED BY THE LEARNED AUTHORIZED REPRE SENTATIVE DOES NOT TOUCH THE ISSUE BEFORE US. THE ISSUE BEFO RE US IS WITH REGARD TO COMMISSION PAID TO DIRECTOR. THE ISSUE H AS TO BE LOOKED INTO ITS FACTS AND CIRCUMSTANCES WHICH NEEDS DEEP PROBE INTO THE MATTER. SO, IN THE INTEREST OF JUSTICE, W E RESTORE THIS ISSUE TO THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE SAME AS PER FACT AND LAW AFTER PROVIDING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9. THE NEXT ISSUE IS WITH REGARD TO COMPUTATION OF BOOK PROFIT OF RS.177,77,56,572/- U/S.115JB OF THE ACT. IN APP EAL, THE CIT(A) FOLLOWING ITS PREDECESSORS DECISION FOR A.Y . 2006-07, HAS DECIDED THE ISSUE AGAINST THE ASSESSEE BY OBSERVING AS UNDER: '8.3 THE SUBMISSIONS MADE BY THE APPELLANT ARE CAREFULLY EXAMINED WITH REFERENCE TO THE FACTS OF T HE CASE AND THE LEGAL POSITION. IN THE FIRST INSTANCE, IT IS TO BE MENTIONED THAT IN THE PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER APPEAL, THE PROFIT ON SALE OF INVESTMENT S IS INCLUDED UNDER THE HEAD OTHER INCOME AS SHOWN IN SCHEDULE 19 TO THE PROFIT & LOSS ACCOUNT. THUS, TH IS IS NOT A CASE WHERE THE PROFIT ON SALE OF INVESTMENTS IS DIRECTLY TAKEN TO THE CAPITAL RESERVE IN THE BALANC E SHEET OF THE COMPANY AND NOT CREDITED TO THE PROFIT & LOSS ACCOUNT OF THE RELEVANT YEAR. THEREFORE, THE DECISION OF THE SPECIAL BENCH, ITAT CALCUTTA IN THE CASE OF SUTLEJ COTTON MILLS LTD. VS. ACIT REPORTED IN 45 ITD 22 IS NOT APPLICABLE TO THE FACTS OF THE PRESEN T CASE. IN THAT CASE, THE PROFIT ON SALE OF INVESTMEN TS WAS DIRECTLY TAKEN TO CAPITAL RESERVE IN THE BALANC E SHEET AND NOT SHOWN AS INCOME IN THE PROFIT & LOSS ACCOUNT AND IN THAT CONTEXT, THE SPECIAL BENCH HELD THAT THE A.O. IS BOUND TO COMPUTE THE MAT ONLY ON T HE BASIS OF BOOK PROFITS SHOWN IN THE P&L A/C AND ADJUSTMENT MADE BY THE ASSESSING OFFICER TO THE BOO K PROFITS IS NOT CORRECT. 12 ITA NOS.2027 & 2031/PN/12 KIRLOSKAR BROTHERS LTD 8.3.1 THE EXEMPTION CLAIMED U/S.54EC IN RESPECT OF CAPITAL GAINS ON SALE OF INVESTMENTS CANNOT BE REDU CED FROM THE BOOK PROFIT AS CONTEMPLATED U/S. 115JB AS THERE IS NO PROVISION UNDER 115JB FOR MAKING SUCH ADJUSTMENT TO THE BOOK PROFIT. THE DEDUCTION UNDER SEC. 54EC ARE NOT COVERED UNDER CLAUSE (I), TO (VII I) OF THE EXPLANATION TO SEC. 115JB AND THEREFORE, THE DEDUCTION CLAIMED U/S. 54EC IS NOT A PERMISSIBLE ADJUSTMENT U/S. 115JB. THIS ISSUE IS SQUARELY COVER ED IN FAVOUR OF THE REVENUE BY THE DECISION OF THE KER ALA HIGH COURT IN THE CASE OF N.J. JOSE & CO. VS. ACIT REPORTED IN 217 CTR 479 WHEREIN THE HON'BLE COURT HELD AS UNDER :- 'THE CONTENTION OF THE ASSESSEE THAT CAPITAL GAIN UNDER SECTION 45 IS A PROFIT ARISING ON TRANSFER OF CAPITAL ASSETS AND THOUGH CHARGEABLE TO INCOME- TAX, THE BENEFIT OF DEDUCTION/EXEMPTION AVAILABLE ON INVESTMENTS MADE IN SPECIFIED ASSETS IN TERMS OF SECTION 54E COULD NOT BE DENIED TO IT EVEN IF ASSESSMENT WAS MADE UNDER SECTION 115J, COULD NOT BE ACCEPTED, BECAUSE ASSESSMENT UNDER CHAPTER XII-B ON BOOK PROFIT IS A SELF-CONTAINED CODE. THE SCHEME THERE UNDER IS TO ADOPT THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE PREPARED IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT, 1956 AND TO TREAT THE NET PROFIT SHOWN THEREIN AS BOOK PROFIT. THE PERMISSIBLE ADJUSTMENTS IN THE FORM OF ADDITIONS AND DEDUCTIONS ARE PROVIDED UNDER EXPLANATION TO SECTION 115J(1A). NO DEDUCTIONS, REBATES OR ALLOWANCES OTHER THAN WHAT IS STATED IN THE EXPLANATION ARE AVAILABLE FOR COMPUTATION OF BOOK PROFIT. IN FACT, IT IS VERY CLEAR FROM THE NON OBSTANTE CLAUSE IN SECTION 115J(1) THAT THE ASSESSMENT UNDER SECTION 115J OVERRIDES OTHER PROVISIONS OF ACT. IN FACT, THE ASSESSING OFFICER GETS JURISDICTION TO MAKE ASSESSMENT UNDER SECTION 115J ONLY WHEN THE TOTAL INCOME COMPUTED UNDER THE PROVISIONS OF THE ACT IS BELOW 30 PER CENT OF THE BOOK PROFIT OF THE ASSESSEE AS CONTEMPLATED UNDER THE SAID SECTION. WHILE DEDUCTIONS, REBATES AND ALLOWANCES ARE AVAILABLE IN THE COMPUTATION OF INCOME FOR NORMAL ASSESSMENT, ADDITIONS, DEDUCTIONS AND ADJUSTMENTS EXCEPT TO THE EXTENT COVERED BY THE EXPLANATION TO SECTION 115J(1A) 13 ITA NOS.2027 & 2031/PN/12 KIRLOSKAR BROTHERS LTD ARE NOT AVAILABLE IN THE COMPUTATION OF BOOK PROFIT. IN OTHER WORDS, ONCE THE ASSESSING OFFICER FINDS THAT TOTAL INCOME AS COMPUTED UNDER THE PROVISIONS OF THE ACT IS LESS THAN 30 PER CENT OF THE BOOK PROFIT, HE HAS TO GIVE UP NORMAL ASSESSMENT AND HAS TO OPT FOR THE ASSESSMENT UNDER SECTION 115J WHICH DOES NOT PROVIDE FOR ANY DEDUCTION IN TERMS OF SECTION 54E. THE ASSESSEE HAD NO CASE THAT THE LONG-TERM CAPITAL GAIN WAS NOT PROFIT INCLUDIBLE IN THE PROFIT AND LOSS ACCOUNT PREPARED IN TERMS OF SCHEDULE VI TO THE COMPANIES ACT. SINCE THERE IS NO PROVISION IN CHAPTER XII-B FOR DEDUCTION OF CAPITAL GAINS IN THE COMPUTATION OF BOOK PROFIT, THE ASSESSEE WAS NOT ENTITLED TO THE DEDUCTION CLAIMED. SO LONG AS LONG-TERM CAPITAL GAIN IS PART OF PROFIT INCLUDED IN THE PROFIT AND LOSS ACCOUNT PREPARED UNDER CHAPTER VI OF THE COMPANIES ACT, IT CANNOT BE EXCLUDED UNLESS SO PROVIDED UNDER EXPLANATION TO SECTION 115J(1A). IN THE ABSENCE OF ANY PROVISION FOR EXCLUSION OF CAPITAL GAINS IN THE COMPUTATION OF BOOK PROFIT UNDER THE ABOVE PROVISION, THE ASSESSEE WAS NOT ENTITLED TO THE EXCLUSION CLAIMED. IN OTHER WORDS, SECTION 54E HAS NO APPLICATION IN THE COMPUTATION OF BOOK PROFIT UNDER SECTION 115J. THEREFORE, THE ORDER OF THE TRIBUNAL WAS JUSTIFIED. THE APPEAL WAS, ACCORDINGLY, TO BE DISMISSED. ' [PARA 3]. 8.3.2 IN THIS REGARD, REFERENCE CAN ALSO BE MADE TO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE REPORTED IN 262 ITR 330 WHEREIN THE HON'BLE BOMBAY HIGH COURT, RELYING ON THE DECISION OF APEX COURT I N THE CASE OF APPOLO TYRES LTD. REPORTED IN 255 ITR 2 73 HELD AS UNDER :- ' IN APOLLO TYRES LTD. V. CIT [2002] 255 ITR 273 IT HAS BEEN HELD BY THE APEX COURT THAT WHILE COMPUTING THE INCOME UNDER SECTION 115J, THE ASSESSING OFFICER HAS ONLY POWER TO EXAMINE WHETHER THE BOOKS OF ACCOUNT ARE CERTIFIED BY THE AUTHORITIES UNDER THE COMPANIES ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THAT ACT. IT HAS FURTHER BEEN HELD THAT THE ASSESSING OFFICER HAS LIMITED POWERS OF MAKING INCREASES AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO THE SAID SECTION AND THAT HE DOES NOT HAVE THE JURISDICTION TO GO BEYOND THE NET PROFITS SHOWN IN 14 ITA NOS.2027 & 2031/PN/12 KIRLOSKAR BROTHERS LTD THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION TO SECTION 115J. IN THE INSTANT CASE, THE ACCOUNTS MAINTAINED BY THE ASSESSEE WERE CERTIFIED BY THE AUDITORS. UNDER THE CIRCUMSTANCES, THE BOOK ADJUSTMENT MADE BY THE ASSESSING OFFICER BEING CONTRARY TO THE DECISION OF THE APEX COURT, IT WAS NOT PERMISSIBLE FOR THE ASSESSING OFFICER TO MAKE ADJUSTMENTS TO THE BOOK PROFIT BEYOND THOSE AUTHORIZED BY THE SECTION AND TO RECAST THE PROFIT AND LOSS ACCOUNT.' [PARA 9] 8.3.3 IN THE CASE OF THE APPELLANT ALSO, THE PROFIT ON SALE OF INVESTMENT IS CREDITED TO THE PROFIT & LOSS ACCOUNT AND THE BOOKS OF ACCOUNT MAINTAINED BY THE APPELLANT WERE CERTIFIED BY THE AUDITORS. THE DEDUC TION CLAIMED BY THE APPELLANT IS NOT ONE OF THE PERMISSI BLE DEDUCTIONS PROVIDED UNDER THE EXPLANATION TO SEC. 115JB AND THEREFORE, THE ACTION OF THE ASSESSING OFFICER IN NOT ALLOWING THE SAID DEDUCTION FROM THE BOOK PROFIT IS JUSTIFIED. IN THIS REGARD, REFERENCE CAN ALSO BE MADE TO THE DECISION OF THE BOMBAY HIGH COU RT IN THE CASE OF VEEKAY LAI AS REPORTED IN 249 ITR 59 7 WHEREIN THE JURISDICTIONAL COURT OBSERVED AS UNDER IN RELATION TO INCLUSION OF PROFIT ON SALE OF INVESTME NT IN THE BOOK PROFITS U/S. 115JA: ' .... FURTHER, UNDER CLAUSE (1) OF PART II OF SCHEDULE VI TO THE COMPANIES ACT WHERE A COMPANY RECEIVES THE AMOUNT ON ACCOUNT OF SURRENDER OF LEASEHOLD RIGHTS, THE COMPANY IS BOUND TO DISCLOSE IN THE PROFIT AND LOSS ACCOUNT THE SAID AMOUNT AS NON-RECURRING TRANSACTION OR A TRANSACTION OF AN EXCEPTIONAL NATURE IRRESPECTIVE OF ITS NATURE, I.E., WHETHER CAPITAL O R REVENUE. IT WOULD BE INAPPROPRIATE TO DIRECTLY TRANSFER SUCH AMOUNT TO CAPITAL RESERVE. SUCH RECEIPTS ARE ALSO COVERED BY CLAUSE 2(B) OF PART II OF SCHEDULE-VI OF THE COMPANIES ACT WHICH, INTER ALIA, STATES THAT PROFIT AND LOSS ACCOUNT SHALL DISCLOSE EVERY MATERIAL FEATURE, INCLUDING CREDITS OR RECEIPTS AND DEBITS OR EXPENSES IN RESPECT OF NON-RECURRING TRANSACTIONS OR TRANSACTIONS OF AN EXCEPTIONAL NATURE. LASTLY, EVEN UNDER CLAUSE 3(XII)(B) PROFITS OR LOSSES IN RESPECT OF TRANSACTI ONS NOT USUALLY UNDERTAKEN BY THE COMPANY OR UNDERTAKEN IN CIRCUMSTANCES OF EXCEPTIONAL OR NON-RECURRING NATURE SHOW CLEARLY THAT CAPITAL GAINS SHOULD BE INCLUDED FOR THE PURPOSES OF 15 ITA NOS.2027 & 2031/PN/12 KIRLOSKAR BROTHERS LTD COMPUTING BOOK PROFITS. CAPITAL GAINS WOULD CERTAINLY BE ONE OF THE VARIOUS ITEMS WHOSE INFORMATION IS REQUIRED TO BE GIVEN TO THE SHARE- HOLDERS UNDER THE SAID CLAUSE 3(XII)(B). SO ALSO, THE DISCLOSURE IS REQUIRED TO BE MADE IN RESPECT OF INVESTMENT IN THE CAPITAL OF A PARTNERSHIP FIRM IF THE COMPANY IS A PARTNER ON THE DATE OF THE BALANCE SHEET. SIMILARLY, PROFITS OR LOSSES ON SUCH INVESTMENTS ARE ALSO REQUIRED TO BE DISCLOSED. (CLAUSE 3(XII)(A) OF PART II OF SCHEDULE-VI OF THE COMPANIES ACT.)' 8.3.4 IN VIEW OF THE ABOVE LEGAL POSITION, IT IS NO T CORRECT TO EXCLUDE THE PROFIT ON SALE OF INVESTMENT S SHOWN IN THE PROFIT AND LOSS A/C FROM THE BOOK PROF ITS FOR THE PURPOSE OF COMPUTATION OF MAT U/S. 115JB. SECTIONS 54E, 54EC ETC., HAVE NO APPLICATION IN THE COMPUTATION OF BOOK PROFIT UNDER SECTION 115JB. ACCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFFICER TO THE BOOK PROFIT AS DEFINED UNDER THE EXPLANATION TO SEC. 115JB IS UPHELD. GROUND NO. 7 O F APPEAL FAILS.' 9.2 AS DISCUSSED ABOVE, SINCE THE FACTS AND CIRCUMS TANCES OF THIS GROUND IS SIMILAR TO THE ONE ALREADY DECIDE D IN APPELLANTS OWN CASE BY CIT(A)-I, PUNE IN A.Y. 2006 -07, QUOTED SUPRA, FOLLOWING THE SAME, GROUND NO.7 OF TH IS YEAR IS ALSO TREATED AS DISMISSED IN THIS ASSESSMENT YEA R. 9.1 NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWLE DGE ON BEHALF OF THE ASSESSEE. FACTS BEING SIMILAR, SO FO LLOWING THE SAME REASONING, WE ARE NOT INCLINED TO INTERFERE WITH TH E FINDING OF CIT(A) WHO HAS UPHELD THE ADDITION MADE BY THE ASSE SSING OFFICER TO THE BOOK PROFIT AS DEFINED UNDER EXPLANA TION TO SECTION 115JB. WE UPHOLD THE SAME. 10. THE NEXT ISSUE IS WITH REGARD TO MEDICAL EXPENS ES REIMBURSED TO EMPLOYEES AND PAYMENT OF FRINGE BENEF IT TAX AMOUNTING TO RS.1,65,65,947/-. THE ASSESSING OFFIC ER HAS DISALLOWED THE ABOVE SAID MEDICAL EXPENSES REIMBURS ED TO EMPLOYEES WHICH WAS UPHELD BY THE CIT(A) BY FOLLOWI NG ORDER OF 16 ITA NOS.2027 & 2031/PN/12 KIRLOSKAR BROTHERS LTD CIT(A) IN A.Y. 2006-07, WHEREIN THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY OBSERVING AS UNDER: '9.2 THE CONTENTIONS OF THE LEARNED COUNSEL FOR THE APPELLANT ARE CAREFULLY CONSIDERED WITH REFERENCE T O THE PROVISIONS OF CHAPTER XII-H OF THE ACT I.E. PROVISI ONS OF FRINGE BENEFIT TAX AND THE CLARIFICATIONS ISSUED BY THE CBDT FROM TIME TO TIME ON VARIOUS POINTS RELATING T O TAXABILITY OF FRINGE BENEFITS. THE CLAIM OF THE APP ELLANT IS THAT SINCE THE REIMBURSEMENT OF MEDICAL EXPENSES TO THE EXTENT OF RS.15,000/- IS NOT A PERQUISITE IN TH E HANDS OF THE EMPLOYEE, SUCH BENEFIT CANNOT BE CONSIDERED AS FRINGE BENEFIT UNDER SEC. 115WB. HOWEVER, THE BOARD HAS CLARIFIED THIS MATTER IN CIRCULAR NO. 8 OF 2005 VIDE QUESTION NO.69 OF THE CIRCULAR, WHICH READS AS UNDER:- WHETHER MEDICAL REIMBURSEMENT UP TO RS. 15,000 (EXEMPT IN THE HANDS OF THE EMPLOYEES) AND MEDICAL REIMBURSEMENT OVER RS. 15,000 (TAXED AS PERQUISITE IN THE HANDS OF THE EMPLOYEE) IS LIABLE TO FBT? 69. AT PRESENT, IF ANY SUM IS PAID BY THE EMPLOYER FOR EXPENDITURE ACTUALLY INCURRED BY THE EMPLOYEE*FOR MEDICAL TREATMENT IN AN UNAPPROVED HOSPITAL AND IT EXCEEDS RS.15,000 DURING THE YEAR, SUCH SUM IS 'SALARY' AS DEFINED IN CLAUSE (1) OF SECTION 17 OF THE INCOME-TAX ACT AND LIABLE TO INCOME-TAX IN THE HANDS OF THE EMPLOYEE. THERE IS NO CHANGE IN THIS POSITION. SINCE SUCH SUM IS TAXABLE IN THE HANDS OF THE EMPLOYEE, THE SAME IS NOT LIABLE TO FBT. HOWEVER, IF ANY SUM IS PAID BY THE EMPLOYER FOR EXPENDITURE ACTUALLY INCURRED BY THE EMPLOYEE FOR MEDICAL TREATMENT IN AN UNAPPROVED HOSPITAL AND IT DOES NOT EXCEED RS.15,000 DURING THE YEAR, SUCH SUM DOES NOT FALL WITHIN THE MEANING OF 'SALARY' AS DEFINED IN CLAUSE (1) OF SECTION 17 OF THE INCOME-TAX ACT AND NOT LIABLE TO INCOME-TAX IN THE HANDS OF THE EMPLOYEE. THERE IS NO CHANGE IN THIS POSITION. SINCE SUCH SUM IS NOT TAXABLE IN THE HANDS OF THE EMPLOYEE, THE SAME IS LIABLE TO FBT. 9.2.1 IN VIEW OF THE CLARIFICATION ISSUED BY THE BO ARD, IT IS CLEAR THAT ANY SUM PAID BY THE EMPLOYER FOR 17 ITA NOS.2027 & 2031/PN/12 KIRLOSKAR BROTHERS LTD EXPENDITURE ACTUALLY INCURRED BY THE EMPLOYEE FOR MEDICAL TREATMENT AND WHICH DOES NOT EXCEED RS.15,000/- DURING THE YEAR, IS TAXABLE AS FRINGE BENEFIT IN THE HANDS OF THE EMPLOYER. THE HON'BLE SUPREME COURT HAD AN OCCASION TO CONSIDER THE BINDING NATURE OF CIRCULAR ISSUED BY THE CBDT ON TH E TAXABILITY OF VARIOUS FRINGE BENEFITS IN A RECENT C ASE REPORTED IN 301 ITR 289 AND OBSERVED AS UNDER:- CBDT HAS THE REQUISITE JURISDICTION TO INTERPRET THE PROVISIONS OF INCOME-TAX ACT. THE INTERPRETATION OF CBDT BEING IN THE REALM OF EXECUTIVE CONSTRUCTION, SHOULD ORDINARILY BE HELD TO BE BINDING, SAVE AND EXCEPT WHERE IT VIOLATES ANY PROVISIONS OF LAW OR IS CONTRARY TO ANY JUDGMENT RENDERED BY THE COURTS. THE REASON FOR GIVING EFFECT TO SUCH EXECUTIVE CONSTRUCTION IS NOT ONLY SAME AS CONTEMPORANEOUS WHICH WOULD COME WITHIN THE PURVIEW OF THE MAXIM TEMPORANIA CASTE PESTO, EVEN IN CERTAIN (SITUATION A REPRESENTATION MADE BY AN AUTHORITY LIKE MINISTER PRESENTING THE BILL BEFORE THE PARLIAMENT MAY ALSO BE FOUND BOUND THEREBY. 23. RULES OF EXECUTIVE CONSTRUCTION IN A SITUATION OF THIS NATURE MAY ALSO BE APPLIED. WHERE A REPRESENTATION IS MADE BY THE MAKER OF LEGISLATION AT THE TIME OF INTRODUCTION OF THE BILL OR CONSTRUCTION THEREUPON IS PUT B EXECUTIVE UPON ITS COMING INTO FORCE, THE SAME CARRIES A GREAT WEIGHT.' 9.2.2 THUS, THE CIRCULAR ISSUED BY THE CBDT AT THE TIME OF ANY INTRODUCTION OF NEW LAW HAS GREATER SANCTITY ON THE PRINCIPLE OF CONTEMPORANEA EXPOSITIO, AS IT EXPLAINS THE INTENTION BEHIND THE LAW AT A TIME CONTEMPORANEOUS WITH THE LAW ITSELF. SINCE THE C BDT HAS ISSUED CLARIFICATION THAT REIMBURSEMENT OF MEDI CAL EXPENSES UP TO RS.15,000/- IS TAXABLE AS A FRINGE BENEFIT IN THE HANDS OF THE EMPLOYER, THE ASSESSING OFFICER FOLLOWING THE CIRCULAR HAS RIGHTLY TREATED THE REIMBURSEMENT OF MEDICAL EXPENSES TO EMPLOYEES AND NON-WORKING DIRECTORS OF THE COMPANY AS A FRINGE BENEFIT UNDER SEC 115 WB(2)(E). ACCORDINGLY, THE AC TION OF THE ASSESSING OFFICER ON THIS GROUND IS UPHELD. GROUND NO.8 OF APPEAL FAILS.' 18 ITA NOS.2027 & 2031/PN/12 KIRLOSKAR BROTHERS LTD 10.1 AS DISCUSSED ABOVE, THE HONBLE SUPREME COUR T HAD OCCASION TO CONSIDER THE BINDING NATURE OF THE CIRC ULAR ISSUED BY THE CBDT ON THE TAXABILITY OF VARIOUS FRINGE BENEFI TS IN A RECENT CASE REPORTED IN 301 ITR 289. SINCE THE CBDT HAS I SSUED CLARIFICATION THAT REIMBURSEMENT OF MEDICAL EXPENSE S UP TO RS.15,000/- IS TAXABLE AS A FRINGE BENEFIT IN THE H ANDS OF THE EMPLOYER, THE ASSESSING OFFICER FOLLOWING THE CIRCU LAR HAS RIGHTLY TREATED THE REIMBURSEMENT OF MEDICAL EXPENSES TO EM PLOYEES AND NON-WORKING DIRECTORS OF THE COMPANY AS A FRINGE BE NEFIT UNDER SECTION 115 WB(2)(E) OF THE ACT. ACCORDINGLY, THE A CTION OF THE ASSESSING OFFICER ON THIS GROUND IS UPHELD. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THAT OF ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 10 TH DAY OF OCTOBER, 2014. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 10 TH OCTOBER, 2014 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-I, PUNE 4) THE CIT-I, PUNE 5) THE DR, B BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE