ASSISTANT COMMISSIONER OF INCOME TAX, NAGPUR V. M/s. BILT GRAPHIC PAPER PRODUCTS LIMITED , GURGAON

ITA 213/NAG/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2230 (ITAT-NAGPUR)
• Duration Of Justice: 5 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 14-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PIYUSH KOLHE
• Keywords: Business income; Depreciation; Business expenditure; Question of law; Capital receipt; Revenue expenditure; Capital expenditure; Set aside
• Section: 143(3); 115JB; 80G; 264

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SANDEEP GOSAIN, JM & SHRI ARUN KHODPIA, AM ITA No. 213/NAG/2017 Assessment Year: 2011-12 The ACIT Circle-5 Nagpur Vs. M/s.BILT Graphic Paper Products Ltd. First India Place, Tower ‘C’, Mehrauli – Gurgaon Road, Gurgaon-Haryana 122 022 PAN No.:AADCB 2230 M Appellant Respondent Assessee by: Shri K.P. Dewani Adv. Revenue by :Shri Piyush Kolhe (CIT-DR) Date of Hearing: 28/04/2022 Date of Pronouncement: 28 / 06 /2022 ORDER PER: SANDEEP GOSAIN, J.M. This is an appeal by Revenue against order of learned Commissioner of Income Tax (Appeals)-4, Nagpur for Assessment Year 2011-12 dated 30.03.2017 in appeal No CIT(A)-4/59/15-16. Grounds of appeal of Revenue for Assessment Year 2011-12 are as under : 1) Whether on the facts and in the circumstances of the case the Ld. CIT(A) was justified in law in deleting the sales tax incentive received of Rs.28,42,41,299/- treating the same as Capital receipt relying the decision of Hon’ble High Court in the case of Shri Balaji Alloys where the Hon’ble Apex Court has referred the matter back to the Tribunal for denovo consideration. 2) Whether under the facts and in the circumstances of the case ,the Ld. CIT(A) was justified in law in allowing the assessee’s claim of Rs.1,26,96,462/- in respect of Contribution to various institutions/ 2 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. workmen’s Welfare Fund disallowed by the Assessing Officers U/s 40A(9) of the Income Tax Act,1961? 3) Whether on the facts and in circumstances of the case, the Ld. CIT(A) was justified in law in allowing the assessee’s claim of Rs. 30,31,682/- under Corporate Social Responsibility Expenses? 4) Whether on the facts and in the circumstances of the case, The Ld. CIT(A) was right in allowing the sales tax incentive of Rs.16,35,05,235/- received under the Package Scheme of Incentive of Govt. of Maharashtra as in the nature of capital receipt? 5) Whether on the facts and in the circumstances of the case the Ld. CIT(A) was justified in law in allowing the assessee’s claim of commission expenses of Rs.68,21,654/- paid to M/s. Avantha Holding Ltd. (a sister concern)? 6) Whether on the facts and in the circumstances of the case the Ld. CIT(A) was right in allowing the festival celebration expenses at Rs.21,46,738/- disallowed by the Assessing Officer? 7) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in law in holding the sales tax incentive of Rs.28,42,41,299/- be allowed while computing the profits u/s. 115JB? 8) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in allowing the addition of expenses incurred towards issue of debenture at Rs.80,35,716/-? 9) Any other ground that may be raised at the time of hearing of this appeal. 2. The brief facts of the case are that assessee company is engaged in the business of manufacturing and sale of paper, rayon pulp, caustic, chlorine etc. The assessment has been completed u/s 143(3) r.w.s. 144C(3) by making various disallowances to determine total income at NIL after set off of unabsorbed depreciation of earlier years. Tax is 3 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. charged u/s 115JB of Income Act 1961 on book profit determined 3. Against the order passed by the Assessing officer, assessee appealed before learned CIT(A) wherein detailed submission were made to submit that various addition made in assessment framed are unjustified. The Learned CIT (A) has dealt with the facts and evidences on record and discussed legal precedents extensively while granting relief in the case of assessee. 4. Aggrieved by the order of learned CIT (A) Revenue is in appeal before us on the grounds of appeal mentioned hereinabove: 5. In Ground No.1 of appeal Revenue has challenged the relief granted by learned CIT(A) at Rs.28,42,41,299/- by holding that sales tax incentive received is capital receipt. Learned DR relied upon the order of Assessing Officer and submitted that relief granted in earlier year is not accepted by revenue and is in challenge before Hon’ble High Court. Learned CIT(A) has granted relief by holding as under: ‘’5.2 I have considered the submissions made by counsel of the appellant and perused the evidence on record and assessment order. The A.O. has discussed the addition at para 4.2 of the assessment order. The addition made by A.O is on same 1.nes as was made in the case of appellant in A.Y 2010-11. The issue in dispute had come up in the case of appellant in the appellate proceedings for assessment year 2010-11. In assessment year 2010-11, the CIT (A) in appeal No.CIT(A)-4/69/14-1: vide order dated 22/08/2016 has deleted the similar addition made by 4 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. A.O. The operative part of the order of CIT (A) is reproduced herein under for ready reference: "I have considered the submissions made by counsel of the appellant and perused the evidence on record and assessment order. The A.O. has discussed the addition at para 4.1 of the assessment order. The addition made by A.O is on same lines as was made in the case of appellant in A.Y 2008-09. Facts & circumstances are identical to that in A.Y 2008-09.The issue in dispute had come up for consideration in the case of appellant in the appellate proceedings for assessment year 2008- 09.In assessment year 2008-09 the Hon'ble CIT (A} in appeal No.CIT(A)-II 559/2010-11 vide order dated 27/06/2013 has deleted the similar addition made by A.O. The operative part of the order of CIT (A) is reproduced herein under for ready reference: "I have considered the submissions made by counsel of the assessee and perused the evidence on record. The A.O. has discussed the disallwance at para 4.1 of the assessment order. The addition made is in line with similar addition made on this issue in the case of Ballarpur Industries in earlier assessment year. During the course of appellate proceedings AR of the appellant has also pointed out that in the case of M/s Bal!arpur Industries Ltd. the Hon'ble Tribunal and CIT{A) have decided the issue in favour of the appellant in all the years beginning from 1994-95. The A.R of the appellant has also enclosed the copies of the orders passed by Hon'ble Tribunal and CIT{A) . Respectfully following the same I hold that sales tax incentives availed under the Package Scheme of Incentives of Govt of Maharashtra is capital receipt and not chargeable to tax. This ground is therefore allowed’’ It is also noticed that the order passed by Hon'ble CIT(A) for the assessment year 2008-09 has been upheld by Hon'ble ITAT, Nagpur Bench, Nagpur in ITA No. 342/Nag/2013 vide order dated 25/02/2016. The facts and circumstances for the year are identical to that in assessment year 2008-09, I agree 5 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. with the detailed reasons as observed in the appellate order. for assessment year 2008-09 for deletion of similar addition made at the hands of assesse. The Hon’ble High Court of Jammu & Kashmir in the case of Shree Balaji Alloys & Ors vs CIT reported at 331 ITR 335 has held that Excise Duty refund and interest subsidy received in pursuance to New Industrial Policy of Government with the objects of acceleration of Industrial Development and generation of employment is capital receipt at the hands of assessee. Civil appeal filed by revenue in C.A. No.10061 of 2011 before Apex Court has been dismissed vide judgement dated 19-04-2016. The ratio laid down squarely applies to the facts in the case of assesee and supports the submission of appellant. Respectfully following the appellate order in Asstt. Year 2008-09 and decision of Hon’ble Apex Court in the case of Shree Balaji, I hereby direct AO to delete the addition made at Rs.22,28,72,177/- in respect to incentive under package scheme of Govt. of Mahrashtra being capital receipt and not exigible to tax. This ground of appeal is therefore allowed.’’ 5.3 The facts and circumstances for the year are identical to that in assessment year 2010-11, I have given the detailed reasons as observed in appellate order for Assessment Year 2010-11 for deletion of identical addition made at the hands of assessee. Respectfully following the same, I hereby direct AO to delete the addition made at Rs.28,42,41,299/- in respect to incentive under package scheme of Govt. of Maharashtra being capital receipt not exigible to tax. This ground of appeal is therefore allowed.’’ 6. The learned counsel of assessee before us has made submission as under: 6 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. A) Sales tax incentive availed under the Package Scheme of Incentive of Government of Maharashtra is for setting up of Industrial Unit and is capital receipt. B) Issue covered in favour of assessee by decision in the case of assessee in Asstt. Year 2008-09 by order of ITAT in ITA No.342 & 344/Nag/2013. ( Para 4 page 4) C) In ground of revenue it is observed that in Shri Balaji Alloys Hon’ble Apex Court has referred matter back to ITAT for denovo consideration is factually incorrect ( Page 20 to 25) 7. It is noted that learned CIT(A) has granted relief by following the order of ITAT, Nagpur Bench, Nagpur in ITA No.342/Nag/2013 vide order dated 25/02/2016 and judgment of Hon’ble Apex Court in the case of Shree Balaji Alloys in Civil Appeal No.10061 of 2011 dated 19/04/2016. It is noted that Hon’ble Apex Court has dismissed the appeal of Revenue. It is mentioned in Ground No.1 that Hon’ble Apex Court has referred the matter back to the Tribunal for de novo consideration is factually incorrect on bare perusal of judgement of Hon’ble Apex Court placed in paper book. The learned CIT(A) has dealt with the facts and evidence on record extensively while granting relief in the case of assessee . Detailed order passed by the ld. CIT(A) indicating reason for deleting the addition has been reproduced in the paragraphs hereinabove. We are in agreement with the findings and reasoning recorded by ld. CIT(A) deleting the addition in the case of assessee . This Tribunal in assessee’s own 7 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. case in Asstt. Year 2008-09 in ITA No.342/Nag/2013 has held that sales tax incentive is capital receipt in order dated 25/02/2016. We uphold the order of learned CIT(A) on this issue. In view of above ground No. 1 of appeal of Revenue is dismissed. 8. In Ground No.2 of appeal revenue has challenged the relief granted by learned CIT(A) at Rs.1,26,96,462/- in respect of Contribution to various institutions / workmen’s Welfare Fund. Learned DR relied upon the order of Assessing Officer and submitted that relief granted in earlier year is not accepted by revenue and is in challenge before Hon’ble High Court. The assessee has made detailed written submission before learned CIT(A) . Learned CIT(A) has granted relief by holding as under: ‘’7.2 I have considered the submissions made by counsel of the appellant and perused the assessment order. The A.O. has discussed the addition in para 4.1 of the assessment order. The issue in dispute had come up for consideration in the case of assessee in the appellate proceedings for assessment year 2010-11. In assessment year 2010- 11, the CIT (A) in appeal No CIT(A)-4/69/14-15 vide order dated 22/0812016 has deleted the identical addition made by A.O. The operative part of the order of CIT (A) is reproduced herein under for ready reference: "I have considered the submissions made and perused the assessment order. The A.O. has discussed the addition in para 4.3 of the assessment order. The addition made is in line with similar addition made on this issue in the case of Ball:arpur Industries in earlier assessment year. During the course of appellate proceedings AR of the appellant has also pointed out that in the case of M/s Ballarpur Industries Ltd. the Hon'ble 8 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. Tribunal and CIT(A) have decided the issue in favour of the appellant in all the years beginning from 1985-86 and enclosed the copies of the orders passed by Hon’ble Tribunal and CIT{A) .On similar issue in the case of M/s Ballarpur Industries Ltd. The CIT(A) in appellate order off assessment year 2006-07 at para 4 has deleted the addition made in respect to distribution to educational institution and employee's club located in the vicinity of industrial undertaking of the company. The order passed by CIT{A) for A.Y 2004-05 has been upheld by ITAT in the appeal filed by revenue in ITA No.226/Nag/2008 vide order dated 12 th August 2009 at par 45. Respectfully following the said decision, the addition made by A.O. at Rs.79,91,335/- is unsustainable and is hereby directed to be deleted. This ground is therefore allowed. It is also noticed that the order passed by Hon'ble CIT(A) for the assessment year 2008-09 has been upheld by Hon'ble ITAT, Nagpur Bench, Nagpur fn !TA No. 342/Nag/2013 viae order dated 25/02/2016. The facts and circumstances for the year are identical to that in assessment year 2008-09, I agree with detailed reason as observed in the appellate order for assessment year 2008-09 for deletion of similar addition made at the hands of assessee. Respectfully following the same, I hereby direct to delete the addition made at Rs.1,07,47,218/- in respect to payment made to educational institution and office clubs. This Ground of appeal is therefore allowed.’’ 7.3 The facts and circumstances for the year under consideration are identical to that in assessment year -2010-11, I have given detailed reason as observed in the appellate order for assessment year 2010-11 for deletion of identical addition made at the hands of assessee. Respectfully following the same, I hereby direct to delete the addition made at Rs.1,26,96,462/ - in respect to payment made to educational Institution and office clubs. This ground of appeal is therefore allowed.’’ 9. The learned counsel of assessee before us has made submission as 9 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. under: A) Expenditure is in the nature of staff welfare or meant for business developing and is in the nature of allowable business expenditure. B) CIT(A) has relied up on order in the case of assessee for earlier year to decide issue in favour of assessee. C) Issue covered in favour of assessee by decision in the case of assessee in Asstt. Year 2008-09 by order of Hon’ble ITAT, Nagpur Bench in ITA Nos.342 & 344/Nag/2013. (Para 6 - Page 4 10. It is noted that learned CIT(A) has granted relief by following the order of ITAT, Nagpur Bench, Nagpur in ITA No.342 & 344/Nag/2013 vide order dated 25/02/2016. The learned CIT(A) has dealt with the facts and evidence on record extensively while granting relief in the case of assessee. Detailed order passed by ld. CIT(A) indicating reason for deleting the addition has been reproduced in the paragraphs hereinabove. We are in agreement with the findings and reasoning recorded by CIT(A) deleting the addition in the case of assessee. This Tribunal in assessee’s own case in Asstt. Year 2008-09 in ITA No.342 & 344/Nag/2013 has held that contribution to various institutions and clubs is not to be disallowed in its order. We, therefore, uphold the order of learned CIT(A) on this issue. In view of above ground of appeal of revenue is dismissed. 11. In Ground No.3 of appeal revenue has challenged the relief granted by 10 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. learned CIT(A) at Rs.30,31,682/- in respect to Corporate Social Responsibility Expenses. Learned DR relied upon the order of Assessing Officer and submitted that relief granted in earlier year is not accepted by revenue. The assessee has made detailed written submission before learned CIT(A). Learned CIT(A) has granted relief by holding as under: ‘’8.2 I have considered the submissions made by counsel of the assessee and perused the evidence on record. The A.O. has discussed the disallowance at para 4.4 of the assessment order. The Assessing Officer has considered the claim of assessee and has observed that similar disallowance has been made in earlier assessment yeas and thus same is disallowed in the year under consideration. The issue in dispute had come up for consideration in the case of assessee in the appellate proceedings for assessment year 2010-11. In assessment year 2010-11 the Hon'ble CIT(A) in appeal No.CIT(A)-4/69/14-15 vide order dated 22/08/2016 has directed to consider the claim of appellant in terms of direction given in appellate order for identical addition made by A.O. The operative part of the order of CIT (A) is reproduced herein under for ready reference: ‘’I have considered the submissions made by counsel of the assessee and perused the evidence on record. The AO has discussed the disallowance at para 4.4 of the assessment order. The Assessing Officer has considered the claim of assesse and has observed that similar disallowance has been made in earlier assessment year and thus same is disallowed in the year under consideration. The issue in dispute had come up for consideration in the case of assessee in the appellate proceedings for assessment year 2008-09. In assessment year 2008-09 the Hon’ble CIT(A) in appeal No. CIT(A)-II 559/2010-11 vide order dated 27-06- 2013 has directed to consider the claim of assessee as per direction of ITAT, Nagpur Bench, Nagpur as reproducing in appellate order. The operative part of the order of CIT(A) is reproduced herein under for ready reference: 11 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. " I have considered the submissions made by counsel of the assessee and perused the evidence on record. The A.O. has discussed the disallowance at para 4.4 of the assessment order. The addition made is in line with similar addition made on this issue in the case of BILT in earlier assessment year. In assessment year 2004-05 the CIT (A) has discussed these addition at para 7 of the appellant order wherein addition made by A.O has been upheld . In appeal filed by appellant on similar issue on disallowance as made in assessment order the Hon'ble ITAT has resorted the matter to file of A.O. to consider the same in accordance with decision referred to in appellate order. The Hon'ble ITAT in /TA No 261/Nag/2007 has held as under. "On the first ground the learned A.R. submitted that these are all contribution to school and institutions. Carrying the attention of the bench to the relevant portion of the order of the A.O. and the CIT (Appeals) he relied on two case laws i.e. i) 264 ITR 83 (Bom.). CIT vs. B.G. Shrike& Co. and (ii) 266 /TR 170 (Mad.), CIT vs. Madras Refineries Ltd. he also submitted that assessee had made similar claims in earlier years which were rejected by the CIT (Appeals) and the assessee did not prefer further appeal against the same. Alternatively, he argued that the matter may be set aside to the file of the A.O. with a decision to verify the claim of the assessee in the light of the judicial pronouncement cited supra in the case reported in 264 ITR 83 (Bom.) (supra) the Hon'ble Bombay High Court held that there was no material abducted by the Income Tax Officer to establish that either the creation of the trust was not bona fide in the funds contributed by the assessee were utilized for purposes other than the welfare of the employees. Therefore the decision of the assessee to establish welfare trust for the employees in the year in which the firm earned huge profits was prudent: commercial decision. The expenditure incurred by assessee by way of contribution to the welfare trust of the employee was rightly held to be deductible under section 37. In the case reported in 265 /TR 170 (supra) the Hon'ble High Court has 12 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. held that "the amount spent for drinking drinking water as also for establishing or improving the school meant for the resident of the locality in which the business was situated could not be regarded as being wholly outside the ambit of the business concerns of the assessee was one which was to some extent a pollution industry. The expenditure was deductible." Although the learned DR strongly supported the orders of the authorities below, we find force in the argument of the assessee's counsel and respectfully following the aforementioned decisions of the Hon'ble High Courts, we set aside the matter to the file of the A.O. with a decision to verify and allow the claim of the assessee as per law. Respectfully following the same, I direct AO consider the claim of assessee accordingly as per directions of ITAT referred to hereinabove. The ground of appeal is disposed off as per directions given hereinabove.’’ I t is also noticed that the order passed by Hon'ble CIT(A) for the assessment year 2008-09 has been upheld by Hon'ble /TAT, Nagpur Bench, Nagpur in /TA No. 342/Nag/2013 vide order dated 25/02/2016. The Hon'ble Bombay High Court in case of CIT vs. M/s. Pruthvi Brokers and Shareholders (P) Ltd. reported at 349 /TR 336 had considered the decision, of Hon'ble Apex Court in case of M/s. Goetze India Ltd. and had concluded that appellate authorities can entertain the claim even if it not made before the A.O. The alternate claim of the appellant as regard to deduction u/s BOG can be entertained in the appellate proceeding s. It has been held by me that the claim of appellant for corporate social responsibilities expenses to be examined in light of direction of Hon'ble /TAT referred to hereinabove. The A.O. is also directed to examine the alternate prayer of the appellant for deduction u/s BOG of I.T.Act 1961. The ground of appeal of appellant is disposed 13 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. of as per direction given hereinabove." 8.3 The facts and circumstances for the year under consideration are identical to that in assessment year 2010-11. It has been held by me in the case of appellant Asstt. Year 2010-11 that the claim of appellant for corporate social responsibilities expenses to be examined in light of direction of Hon'ble ITAT referred to hereinabove. Also A.O. was directed to examine the alternate prayer of the appellant for deduction u/s 80G of I.T. Act 1961. Respectfully following the same I hereby direct to examine the claim of appellant for corporate social responsibility and also direct AO to examine the alternate prayer for deduction u/s 80G of l.T. Act 1961. The ground of appeal of appellant is disposed of as per direction given hereinabove.’’ 12. The learned counsel of assessee before us has made submission as under: A) Expenditure is in the nature of staff welfare or meant for business developing and is in the nature of allowable business expenditure. B) CIT(A) has relied upon order in the case of assessee for earlier year to decide issue in favour of assessee by setting aside to A.O. and decide as per orders of ITAT in earlier years. C) Hon’ble ITAT, Nagpur Bench, Nagpur in ITA Nos. 342 and 344/Nag/2013 in the case of assessee vide order dated 25/02/2016 has decided issue in favour of assessee. (Para 7 Page 5) 13. It is noted that learned CIT(A) has granted relief by following the order of ITAT, Nagpur Bench, Nagpur in ITA No.261/Nag/2007. The learned CIT(A) has 14 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. dealt with the facts and evidence on record extensively while granting relief in the case of assessee. Detailed order passed by CIT(A) indicating reason for relief granted has been reproduced in the paragraphs hereinabove. We are in agreement with the findings and reasoning recorded by ld. CIT(A) directing to examine claim of CSR expenses and to consider alternate prayer for deduction u/s 80G of I.T. Act 1961. We therefore uphold the order of learned CIT(A) on this issue. In view of above ground of appeal of revenue is dismissed. 14. In Ground No.4 of appeal Rvenue has challenged the relief granted by learned CIT(A) at Rs.16,35,05,235/- by holding that sales tax incentive received under the Package Scheme of Incentive of Govt. of Maharashtra is capital receipt. Learned DR relied upon the order of Assessing Officer and submitted that relief granted in earlier year is not accepted by revenue. The assessee has made detailed written submission before learned CIT(A). Learned CIT(A) has granted relief by holding as under: ‘’9.2 I have considered the submissions made by counsel of the assessee and perused the evidence on record. The A.O has discussed the addition at para 4.5 of the assessment order. It is seen that the appellant has set up the Mega project at Bhigwan and is eligible for incentives under the Package Scheme of Incentives of Govt. of Maharashtra. The A.O. has made the addition of Rs.16,35,05,235/- being an amount of VAT receivable on accrual basis in Asstt. Year 2011 -12. The entry in Books of account in respect to such Incentives has been made in F.Y. 2011-lZ. The incentives has been identified as industrial promotional subsidy under Package Scheme of Incentives of Govt. of Maharashtra. The issue as to accessibility of industrial promotion subsidy received under Package Scheme of Incentive of Govt. of Maharashtra has 15 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. been considered by CIT(A), Nagpur in case of assessee for A.Y. 2010-11, in appeal No. CIT(A)-4/69/14-15 vide order dated 22- 08-2016. The CIT(A) in its appellate order had examined the nature of industrial promotion subsidyreceived under the Package Scheme of Incentive of Govt. of Maharashtra and has concluded the same to be in nature of capital receipt. The operative part of the order of CIT(A) is reproduced herein under for ready reference. "I have considered the submission made by the counsel of appellant and peruse the evidence on record .It is seen that the appellant has set up the Mega project at Bhigwan and is eligible for incentives under the Package Scheme of Incentives of Govt. of Maharashtra. The A.O. has made the addition of Rs.8,74,03,000/- being an amount of VAT receivable on accrual basis in Asstt. Year 2010-11. The entry in Books of account in respect to such Incentives has been made in F.Y. 2011-12. The incentives has been identified as industrial promotional subsidy under Package Scheme of Incentives of Govt. of Maharashtra. The issue as to assessebility of industrial promotion subsidy received under Package Scheme of Incentive of Govt. of Maharashtra has been considered by C!T{A) - 11, Nagpur in case of M/s. Sanvijay Rolling and Engineering Ltd. for A.Y.2012-13 in Appeal No. CIT(A)- 2/248/14-15 vide, order dated 07/05/2015. The Hon'ble CIT(A) in its appellate order had examined the nature of industrial promotion subsidy received under the Package Scheme of Incentive of Govt. of Maharashtra and has concluded the same to be in nature of capital receipt. The findings recorded to arrive at conclusions are reproduced hereunder for your ready reference. ''I have considered the facts of the case and the submissions of the appellant. I find substantial merits in the submissions made. It is not disputed that the appellant company has set up an industrial undertaking at Plot Nos. B-203 to 206 in Butibori Industrial area which is a Mega Project in terms of Package Scheme of Incentives of 2001 of Government of Maharashtra and in terms of the said scheme the appellant is eligible for incentives as provided under the scheme. It is also evident from the various legal pronouncements relied upon by the appellant (including the judgement of the Hon’ble ITAT Nagpur Bench in the appellants own case) that the object of the incentive scheme of Government of Maharashtra was to achieve dispersal of industries out of Bombay, Thane, Pune belt and the objective of the scheme being in the nature of incentive for setting up of industries, the incentive availed cannot be held to be in the nature of revenue receipt at the hands of assessee. In this context. it is vital to peruse the basic purpose behind the Package Scheme of Incentive (PSI) of the Government of Maharashtra in pursuance of which the said amount of Rs.891.13 lacs has been received by the appellant. Also, since it is the contention of the Id. AO that the various decisions relied upon by the appellant related to "Sales Tax Incentive" and "Deferment of Sales Tax Collected" while in the case under consideration the appellant had directly received a sum of Rs.891.13 lacs from the State Government of Maharashtra, it has to be examined if the basic nature of the scheme has undergone any change or has remained the same over its successive versions. If the objects of the various versions of the package scheme of inventive remains the same and if such receipts have been held to be capital in nature in earlier versions, there would be no reason to hold the said receipts to be revenue in nature under PSI-2001 merely because the method of dispersal of the subsidy has changed. 16 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. In this context, it is important to read the preamble of the PSI- 2001 to understand and appreciate the intention behind introducing tile said scheme. The same has been reproduced above at para G of the appellants submissions. :n the preamble itself it is stated that in order to encourage the dispersal of industries to the less developed areas of thee State, Government has been giving a Package of Incentives to New/Expansion Units set up in the developing region of the State Since 1964 and it concludes by again stating that the intent of the Package Scheme of Incentives. 2001 is for intensifying and accelerating the process of dispersal of industries to the less developed regions and prom, ti".!g high-tech industry in developed areas of the State coupled with the object of generating mass employment opportunities. The said package scherr.es of incentives were originally declared by the Government of Mahara htra in 1964 and the same has been amended and modified from time to time on various occasions by issue of Government resolutions. However it is vital to note that the object of preamble of various versions declared by the government of Maharashtra remains the same i.e. incentives ere provided for setting up of industries in the State of Maharashtra considering the object of dispersal of industries from Bombay, Thane and Pune belt and to generate mass employment opportunities. In this context, the various judicial pronouncements on similar faces are new considered. In the case of Commissioner of Income-tax, Madras v. Ponni Sugars & Chemicals Ltd. (supra) it was held that the object for which the subsidy/incentive is given determines the nature of the incentive subsidy and that the form of the mechanism through which the subsidy is given is irrelevant. In this case the assessee-company had received subsidy under the incentive subsidy scheme, 1980. The incentives conferred under the scheme were two fold; first, in nature of a higher free sale price of the free sale sugar in excess of the normal quota, but to pay to the Government only the excise duty payable on the price of levy sugar. As per the scheme, the assessee was obliged to utilize the subsidy or.ly for repayment of term loans undertaken by if for setting up new units/expansion of existing business. The assessee claimed that incentive received by it was a capital receipt, not includible in the total income. According to the department, since incentives were given through price and duty differentials, the character of the impugned incentives ·was revenue and not capital in nature. The High Court held that incentive subsidy received by the assessee was a capital receipt. On the revenue's appeal to the Supreme Court it was held as under:- ‘’The importance of the judgement of this Court in Sahney Steel & P ress Work's Ltd.case (supra) lies in the fact that 1t has discussed and analyzed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the scheme with w hich we are concerned in this case is that the incentive must be utilized for repayment: of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. if the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant. 17 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. In the decision of House of Lords in the case of Seaham Harbour Dock Co. v. Crook (1931) 16 TC 333 the Harbour Dock Co. had applied for grants from the Unemployment Grants Committee from funds appropriated by Parliament. The said grants were paid as the work progressed the payments were made several times for some years. The Dock Co. had undertaken the work of extension of its docks. The extended dock was for relieving the unemployment. The main purpose was relief from unemployment. Therefore, the House of Lords held that the financial assistance given to the company Jo, dock extension cannot be regarded as a trade receipt. It was found by the House of Lords that the assistance had nothing to do with the trading of the company because the work undertaken was dock extension. Accordingly to the house of Lords, the assistance in the form of a grant was made by the Government with the object that by its use men might be kept in employment and, therefore, its receipt was capital in nature. The importance of the judgment lies in the fact that the company had applied for financial ass.-stance tc the Unemployment Grants Committee. The Committee gave financial assistance from time to time as the work progressed and the payments were equivalent to half the interest for two years on approved expenditure met out of loans. Even though the payment was equivalent to half the interest amount payable on the loan (interest subsidy) still the House of Lords held that money received by the company was not in the course of trade but was of subsidy nature. The judgment of House of Lords shows that the source of payment or the form in which the subsidy is paid or the mechanism through which it is paid is immaterial and that what is relevant is the purpose for payment of assistance. Ordinarily such payments would have been on revenue account but since the purpose of the payment was to curtail/obliterate unemployment and since the purpose was dock extension, the House of Lords held that the payment made was of capital nature. One more aspect needs to be mentioned. In Sahney Steel & Press Works Ltd.'s case (supra) this Court found that the assessee was free to use the money in its business entirely as it liked. It was not obliged to spend the money for a particular purpose. In the case of Seaham Harbour Dock Co. (supra) assessee was obliged to spend the money for extension of its docks. This aspect is very important. In the present case also, receipt . of the subsidy was capital in nature as the assessee was obliged to utilize the subsidy only for repayment of term loans undertaken by the assessee for setting up new units/expansion of existing business. Applying the above tests to the facts of the present case and keeping in mind the object behind the payment of the incentive subsidy we are satisfied that such payment received by the assessee under the scheme was not in the course of a trade but was of capital nature. Accordingly, the first question if answered in favour of the assessee and against the Department. Thus it has been held by the Supreme Court that the object for which the subsidy/incentive is given determines the nature of the incentive subsidy, and that the form of the mechanism through which the subsidy is given is irrelevant. The High Court of Delhi in the recent case of Commissioner of Income-tax-Iv. Bougainvillea Multiplex Entertainment Centre (P.) Ltd. {2015} 55 taxmann.com 26 (Delhi) examined a similar issue. The assesee was engaged in the business of running of multiplex cinema Hall and shopping malls. It had been the beneficiary of a scheme promulgated by the State Government wherein it had been 18 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. granted exemption f for entertainment tax payment. It claimed deduction to the extent of entertainment tax collected in the corresponding financial years terming the amounts as capital receipts. On such facts it was held that the appellant is entitled, in terms of the U.P. Scheme, to treat the amounts collected towards entertainment tax as capital. The key findings in the said judgment were as under: *The U.P. Scheme under which the assessee claims exemption to the extent of entertainment tax subsidy, claiming it to be capital receipt, is clearly designed to promote the investors in the cinema industry encouraging establishment of new multiplexes. A subsidy of such nature cannot possibly be granted by the Government directly. Entertainment tax is leviable on the admission tickets to cinema halls only after the facility becomes operational. Since the source of the subsidy is the public at large which is to be attracted as viewers to the cinema halls, the funds to support s uch and incentive cannot be generated until and unless the cinema halls become functional. [Para 32]. *The State Government had offered 100 per cent tax exemptions for the first three years reduced to 75 per cent in the remaining two years. Thus, the amount of subsidy earned would depend on the extent of ownership the cinema hall is able to attract. After all, the collections of entertainment tax would correspond to the number of admission tickets sold. Since the maximum amount of subsidy made available is subject to the ceiling equivalent to the amount invested by the assessee in the construction of multiplex as also the actual cost incurred in arranging the requisite equipment installed therein, it naturally follows that the purpose is to assist the entrepreneur in meeting the expenditure incurred on such accounts. Given the uncertainties of a business of this nature, it is also possible that a multiplex owner may not be able to muster enough viewership to recover all his investments in the five year period. [Para 33]. *See in the above light, it was unreasonable on the part of the Assessing Officer to decline the claim of the assessee about the subsidy being capital receipt. Such a subsidy by its very nature, was bound to come in the hands of the assessee after the cinema hall had become functional and definitely not before the commencement of production. Since the purpose was to offset the expenditure incurred in setting up of the project, such receipt (subject, of course, to the cap of amount and period under the scheme) could not have been treated as assistance for the purposes of trade. [Para 34}. *The facts that the subsidy granted through deemed deposit of entertainment tax collected does not require it to be linked to any particular fixed asset or that is accorded year after year' do not make any difference. The scheme makes it clear that the grant would stand exhausted the moment entertainment tax has been collected (and retained) by the multiplex owner meeting the entire cost of construction (apparatus, interiors etc. included}, even if it were before completion of five years [Para 35). *For the foregoing reasons, Tribunal in the impugned orders has taken a correct view of law on the basis of available facts to conclude that the assessee is entitled, in terms of the U.P. Scheme, co treat the amounts collected towards entertainment tax as capital. The question of law 19 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. raised in these appeal is, thus answered in the negative against the revenue. [Para 39) On similar facts, it was held by the Bombay High Court in the case of Commissioner of lncome-tax-1, Kolhapur v Chaphalkar Brothers (supra) as under: "5. Since the object of subsidy was to promote construction of multiplex theatre complexes, in our opinion, receipt of subsidy would be on capital account. The fact that the subsidy was not meant for repaying the loan taken for construction of multiplexes cannot be a ground to hold that subsidy receipt was on revenue account, because, if the object of the scheme was to promote cinema houses by constructing multiplex theatres, then irrespective of the fact that the multiplexes have been constructed out of own funds or borrowed funds, the receipt of subsidy would be on capital account. In the light of the aforesaid objects of the Scheme framed by the State Government, the decision of the Income Tax Appellate Tribunal that the amount of subsidy received by the assessee is on capital account cannot be fault ed. According, ly both the appeals are dismissed with no order as to costs." In all the above cases, the incentives received by the appellant for setting up of industry were held to be capital in nature and it has been held that what is important is the purpose of the incentive/subsidy and a mere change in the method of disbursement cannot be lead to a different treatment and the said receipt ca •wt be brought to tax as a revenue receipt. The Special Bench of the Tribunal Reliance Industries Ltd. (supra) relying on the principles laid down by Supreme Court in the case of Sahney Steel & Press Works Ltd. (supra) came to the conclusion that since the incentives were given for bringing about addition to necessary infrastructure in developing the backward area, it would be in the nature of capital receipt not Hable to tax "!'he aforesaid decision of the Special Bench has been rendered on identical facts and is on all fours with the facts of the assessee's case. This is because the objectives of the successive PSis have remained identical in its successive avatars. The purpose of granting incentive is clearly only to provide an incentive for establishment of new industries m the underdeveloped regions or to expand its existing unit s of the State of Maharashtra. The intention is not to increase the viability of the eligible units but to promote development of further industry and infrastructure in the region and to provide employment. Also, as held by the Honorable Supreme Court, the character of the receipt in the hands of the assesse has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid, the form in which it is paid or its source is immaterial. The Honorable Supreme Court held that the crucial aspect was the object of the scheme and if the object of tile subsidy scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account and on the order hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account. It held that it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy and the form of the mechanism through which 20 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. the subsidy is given is irrelevant . As discussed above, in "the case of the appellant, the purpose of granting incentive is clearly only to provide .1 incentive for establishment of new industries in the underdeveloped regions or to expand its existing units of the State of Maharashtra. The variaion in methodology of availment of various incentives under the scheme will not alter the character of receipt being capital nature. The ratio laid down by the various binding judicial pronouncements discussed hereinabove squarely applies to the facts of the case. Respectfully following the same I hold that the amount received by the appellant during the year under consideration as promotional subsidy under the PSI of Maharashtra in the capital field and not liable to tax. In view of the above facts, the action of the ld. AO of treating the said amount of Rs.8,91,13,000/- as revenue receipts is erroneous end consequentially the addition made by the Id. AO in this regard is therefore hereby deleted. These grounds are therefore allowed.’’ 9.3 . The facts and circumstances for the year under consideration are identical to that in Asstt. Year 2010-11. I have given detailed reason as observed in the appellate order for the assessment year 2010-11. Following the aforesaid appellate order and decision referred in appellate order, I hold that addition made at Rs.16,35,05,235/-in respect to industrial promotion subsidy received under Package scheme of Incentives of Govt. of Maharashtra is un justified and is directed to be deleted. The Industrial Promotional Subsidy under Package Scheme of Incentive is capital receipt and not exigible to tax. This ground of appeal is therefore allowed.’’ 15. The learned counsel of assessee before us has made submission as under: A) Sales tax incentive for Mega Project under Package Scheme of Incentive is capital receipt. B) CIT(A) has relied upon order in the case of assessee for earlier year to decide issue in favour of assessee. C) Issue covered in favour of assessee by order of Hon’ble ITAT in the case of Sanvijay Rolling and Engineering Ltd. in ITA No.224/Nag/2015 vide order dated 30/03/2017. (Page 10 to 16) 21 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. 16. It is noted that learned CIT(A) has granted relief by follwoisng the order of Hon’ble Bombay High Court in the case of CIT-1 Kolhapur vs. Chaphalkar Borbhers reported at 351 ITR 309 (Bom.) apart from other judgements discussed in appellate order. Receipt of Industrial Promotion Subsidy is held to be capital receipt by Hon’ble ITAT, Nagpur Bench, Nagpur in ITA No.224/Nag/2015 in the case of Sanvijay Rolling and Engineering Ltd. vide order dated 30/03/2017. The learned CIT(A) has dealt with the facts and evidence on record extensively while granting relief in the case of assessee. Detailed order passed by CIT(A) indicating reason for deleting the addition has been reproduced in the paragraphs hereinabove. We are in agreement with the findings and reasoning recorded by CIT(A) deleting the addition in the case of assessee. Respectfully following the decision of Co-ordinate Bench in the case of Sanvijay Rolling and Engineering Ltd. we hold that Industrial Promotion Subsidy under Package Scheme of Incentives of Government of Maharashtra is capital receipt. We therefore uphold the order of learned CIT(A) on this issue. In view of above ground of appeal of revenue is dismissed. 17. In Ground No.5 of appeal revenue has challenged the relief granted by learned CIT(A) at Rs.68,21,654/- in respect to Commission Expenses. Learned DR relied upon the order of Assessing Officer and submitted that relief granted in earlier year is not accepted by revenue. The assessee has made detailed 22 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. written submission before learned CIT(A). Learned CIT(A) has granted relief by holding as under: ‘’10.2 I have considered the submissions made by counsel of the assessee and perused the evidence on record. The A.O. has discussed the disallowance at para 4 7 of the assessment order. The Assessing Officer has considered the claim of assessee and has observed that similar disallowance has been made in earlier assessment years and thus same is disallowed in the year under consideraticn. The issue in dispute had come u;:i for consideration in the case of assessee in the appellate proceedings for assessment year 2009-10 & 2010-11 .ln assessment year 2010-11 the CIT (A) in appeal No.CIT(A)- 4/ 69/ 14-15 vide order dated 22/08/2016 has deleted the identical addition made by AO. The operative part of the order of CIT(A) is reproduced herein under for ready reference.: "I have considered the submission made by the counsel of appellant and peruse the evidence on record. The agreement dated 08/09/2005 is between M/s. Ballarpur Industries Ltd. and M/s. New Quest Corporation Ltd. The name of the company, M/s New Quest Corporation Ltd. has been changed to of M/ s.Avantha Holdings Ltd. The assessee company in terms of restructuring as approved by Hon'ble jurisdictional High Court has obtained Business undertaking belonging to M/s Ballarpur Industries Ltd. from June 2007 onwards. The various Contracts, licenses and agreements entered by business undertaking with outside parties prior to restructuring was vested with the appellant company in terms of Restructuring scheme approved by Hon'ble High court of Bombay, Nagpur Bench, Nagpur. In view of above facts appellant company was bound by legally enforceable agreements entered by the business undertaking prior to restructuring in terms of clause 3.2(v) of scheme of demerged approved by judgement of Hon’ble Bombay High Court on 30-11-2007. The appellant has received services in terms of agreement dated 08-09-2005 entered by the business undertaking and has paid consideration for the same through proper banking channels. The aforesaid payment made has also been subjected to tax deducted at source in accordance with law. The recipient company has declared the payment received from appellant as business receipts and paid tax thereupon. It is observed that both the companies and are subjected to tax at maximum marginal rate and there is no loss of revenue. The genuineness of payment for contractual services rendered is not disputed by AO during assessment proceedings. It is worthwhile to observed that the payment made under similar agreement has been allowed in case of appellant company in assessment framed u/s 143(3) of I.T. Act for assessment year 2012-13 as is evident from the evidence on record. In view of above factual position, I hold that the addition made by the AO at Rs.44,91,419/- in respect to Commission and service charges is unjustified and the same is directed to be deleted,’’ 10.3 The facts and circumstances for the year under consideration are 23 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. identical to that in assessment year 2010-11, I have given detailed reasons as observed in the appellate order for assessment year 2010-11 for deletion of identical addition made at the hands of appellant. It has also been that similar payments were made in Asstt. Year 2012-13 which has not been disallowed by AO in assessment proceedings. In view of above, I hold that the addition made by the AO at Rs.68,21,654/- in respect to commission and service charges is unjustified and the same is directed to be deleted.’’’ 18. The learned counsel of assessee before us has made submission as under: A) Details submitted before A.O. explaining claim of assessee and services rendered. B) Payment is to associate company and proper tax is deducted at source. C) Receipt is subjected to tax at the hands of recipient. D) Similar expenditure accepted by A.O. in subsequent year and is not disallowed 19. It is noted that learned CIT(A) has granted relief by observing at para 10.3 that identical addition has been deleted in earlier year and similar payments made in Asstt. Year 2012-13 has not been disallowed by A.O. The learned CIT(A) has dealt with the facts and evidence on record extensively while granting relief in the case of assessee. Detailed order passed by CIT(A) indicating reason for deleting the addition has been reproduced in the paragraphs hereinabove. We are in agreement with the findings and reasoning recorded by CIT(A) deleting the addition in the case of assessee. Payment is for receipt of services 24 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. and same is not in dispute. It is not even alleged before us that no services are rendered. In the case of assessee similar payment has been allowed by A.O. in Asstt. Year 2012-13. We therefore uphold the order of learned CIT(A) on this issue. In view of above ground of appeal of revenue is dismissed. 20. In Ground No.6 of appeal revenue has challenged the relief granted by learned CIT(A) at Rs.21,46,738/- in respect to Festival Celebration Expenses. Learned DR relied upon the order of Assessing Officer and submitted that relief granted in earlier year is not accepted by revenue. The assessee has made detailed written submission before learned CIT(A). Learned CIT(A) has granted relief by holding as under: 11.2 I have considered the submissions made by counsel of the assessee and perused the evidence on record. The A.O. has discussed the disallowance at para 4.8 of the assessment order. The Assessing Officer has considered the claim of assessee and has observed that similar disallowance has been made in earlier assessment years and thus same is disallowed in the year under consideration The issue in dispute had come up for consideration in the case of assessee in the appellate proceedings for assessment year 2008-09 to 2010-11. In assessment year 2010-11 :he Hon'ble CIT (A) in appeal :"lo CIT(A)- 4/69/14-15 vide order dated 22/08;2016 has deleted the Similar addition made by A.O. The operative part of the order of CIT (A) is reproduced herein under for ready reference. "I have considered the submissions made by counsel of the assessee and perused the evidence on record. The A.O. has discussed the disallowance at para 4.8 of the assessment order. The Assessing Officer has considered the claim of assessee and has observed that similar disallowance has been made in earlier assessment years and thus same is disallowed in the year under consideration. The issue in dispute had come up for consideration in the case of assessee in the appellate proceedings for assessment year 2008-09 Before Hon'ble ITAT Nagpur Bench, Nagpur ITA No.344/ Nag/ 20 3.The operative part of the order of !TAT order is reproduced herein under for ready reference: 25 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. ‘’13. We have heard both the counsel and perused the records. Learned counsel of the assessee submitted that the assessee has incurred these expenditure on account of festival celebration. These are in the nature of employees welfare expenses. Learned counsel submitted that details of the same have also been submitted before the A.O. as well as the CIT (Appeal). In this regard learned counsel referred to the paper book page No.77 to 96 which give the details of expenditure in this regard. Learned counsel submitted that perusal of the nature of expenses clearly indicate that the same are allowable business expenditure in the course of carrying on of activity of business. In this regard learned counsel placed reliance on the following case laws: 1. Punjab Power Packs Ltd. vs. DCIT 71 ITD 163 (Chd.) 2. ACIT vs. Anil Alums {P) Ltd. 98 TT] 56 {Asr.) 3. Vi jay Seeds Co. (P) ltd. vs. ACIT 79 ITD 233 (Pune) 4. ITO vs. SimManeklal Industries Ltd. 5. Hindustan Construction Co. Ltd. vs. DCIT 140 !TD 642(Murn.) Learned counsel further submitted that the expenditure in this regard are also allowable as the assessee has been subjected to fringe benefit tax by the A.O. u/s 115WB(2)(L) of the I.T. Act, 1961. He submitted that the expenditure having been assessed to Fringe Benefit Tax of I.T. Act 1961 cannot be disallowed for determining the business income of the assessee. For this proposition learned counsel placed reliance upon following !TAT decisions: 1. ITAT order in ITA No.2397/Mum/2010 in the case of Hansraj Mathuradas vide order dated 16/09/2011. 2. ITAT order in ITA No.1605/Del/2010 in the case of M/s. Indiar Carriers Pvt. Ltd. vide order dated 13/05/2011. 14. per contra learned DR supported the orders of the authorities below 15. We have carefully considered the submissions documentary evidence. We find that the AO has made disallowance of the expenditure on the ground that the assessee has not been able to substantiate the claim alongwith documentary evidence. We find that the A.O. in the initial part of the assessment order has admitted that the assessee has submitted the details of accounts using the word "etc.". Hence the A.O. has not drawn any adverse inference regarding submission of books of accounts and records qua the return of income. Now coming to this point of the assessment order, the A.O. observed that the assessee has not been able to give the necessary documentary evidence. In this regard it is the claim of the learned counsel of the assessee that the assessee is a huge organization with branches and offices spread across vast area. Learned counsel has claimed that the A.O. has never put before the assessee as to what documentary evidence in this regard was required. Learned Counsel submitted that the necessary details of the expenditures have been duly given. 26 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. That the A.O. was disallowing the claim for lack of any documentary evidence came to the knowledge of the assessee onyx when it received the assessment order. Hence learned counsel submitted that when no defect has been found in the books of accounts and no specific requsition has been done by the A.O., no disallowance can be made on the ground that documentary evidences were not produced.] 16. Upon careful consideration we find considerable cogency in the submission of the learned counsel of the assessee in this regard. Furthermore we also note that it is the plea of the learned counsel of the assessee that the said expenditure has also been subjected to fri.nge benefit tax by the A.O. u/s 115WB(2)(L) of the l.T. Act, 1961. This is not disputed by the Revenue. We find that in /TA No.2397/Mum/2010 in the case of HansrajMath.1radas vs. IT'J vide order dated 16/09/2011, ITAT has held that "In our opinion, once fringe benefit tax is levied en :.uch expenses as has beer. done in the present case, it follows that the s me are treated as fringe benefits provided by the assessee as employer to its employees and the same have to be appropriately allowed as expenses incurred wholly and exclusively incurred by the assessee for the purpose of its business. 17. Similarly, /TAT, Delhi Bench in the case of ACIT vs. M/s. India Carriers Pvt. Ltd. in /TA No.1 605/ Del/2010 has held that when the assessee has made payment of tax on fringe benefit, no further. disallowance can be made in the hands of the assessee on the ground that expenditure was not incurred wholly and exclusively for the purpose of business. 18. Thus we find that the issue is duly covered in favour of the assessee by the /TAT decisions cited above. No case has been made out before us that the A.O. has not assessed the impugned amount as fringe benefit and subjected the cssessee to fringe benefit tax on the said amount. Hence respectfully _following the precedents as above, we hold that the impugned expenditure cannot be disallowed in the hands of the assessee. Hence we set aside the orders of authorities below and decide . the issue in favour of the assessee." The facts and circumstances for the year are identical to that in assessment year 2008-09 and reason for disallowance by A.O. is also that simila:- disallowance is made in Asstt. Year 2009-10. In appellate proceedings similar disallowance made by A.O. is deleted by Hon'ble /TAT, Nagpur Bench, Nagpur in /TA No.344/Nag/2013 vide order dated 25/02/2016. I agree with the detailed reasons as observed in the aforesaid /TAT order for assessment year 2008-09 for deletion of similar addition made at the hands of assessee. Respectfully following the same, I hereby direct AO to delete the addition made at Rs9,38,713/- in respect to festival celebration expenses. The ground of app'eal is therefore allowed." 11.3 The facts and circumstances for the year are identical to that in As tt. Year 2010-11. Respectfully following the aforesaid appellate order \ 27 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. and decision of Hon'ble ITAT, Nagpur Bench, Nagpur in case of assessee for Asstt. Year 2008-09 referred in appellate order for Asstt Year 2010-11, I hold that addition made at Rs.21,46,738/- in respect of festivals celebration expenses in factory is unjustified and are directed to be deleted.’’ 21. The learned counsel of assessee before us has made submission as under: A) Hon’ble ITAT, Nagpur Bench in ITA Nos.342 & 344/Nag/2013 in the case of assessee in Asstt. Year 2008-09 has decided issue in favour of assessee. (Para 9 to 18) (Page 5 to 8) 22. It is noted that learned CIT(A) has granted relief by following the order of ITAT, Nagpur Bench, Nagpur in ITA No.344/Nag/2013 vide order dated 25/02/2016. The learned CIT(A) has dealt with the facts and evidence on record extensively while granting relief in the case of assessee. Detailed order passed by CIT(A) indicating reason for deleting the addition has been reproduced in the paragraphs hereinabove. We are in agreement with the findings and reasoning recorded by CIT(A) deleting the addition in the case of assessee. This Tribunal in assessee’s own case in Asstt. Year 2008-09 in ITA No.344/Nag/2013 has concluded that festival expenses is allowable business expenditure and cannot be disallowed. We therefore uphold the order of learned CIT(A) on this issue. In view of above ground of appeal of revenue is dismissed. 23. In Ground No.7 of appeal revenue has challenged the relief granted by learned CIT(A) at Rs.28,42,41,299/- by holding that sales tax incentive be 28 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. allowed while computing the profit u/s 115JB. Learned DR relied upon the order of Assessing Officer and submitted that relief granted in earlier year is not accepted by revenue and is in challenge before Hon’ble High Court. The assessee has made detailed written submission before learned CIT(A). Learned CIT(A) has granted relief by holding as under: 13.3 I have considered the submissions made by counsel of appellant and perused, the assessment order. The A.O. has discussed the addition at para 4.10 of assessment order. The A.O. has held that sales tax incentive availed under the package Scheme of Incentives of Govt. of Maharashtra is revenue receipt and same cannot be considered for reduction for the purpose of provisions of section 115 JB of l.T. Act 1961. The issue in dispute had come up for under consideration in the case of assessee in the appellate proceedings for assessment year 2008-09 to 2010-11. In assessment year 2010-11 the CIT (A) in appeal No. CIT (A) -4/69/14-15 vide order dated 22/08/2016 has deleted the similar addition made by A.O The CIT (A) after considering the facts in details has held that sales tax incentives have got to be reduced to determine the book profit u/s 115JB as it is capital receipt. The operative part of the order of appellate order is reproduced herein under for ready reference. " I have considered the submissions made by counsel of appellant and perused the assessment order. The A.O. has discussed the addition at para 4.10 of assessment order. The A.O. has held that sales tax incentive availed under the package Scheme of Incentives of Govt. of Maharashtra is revenue receipt and same cannot be considered for reduction for the purpose of provision of section 115JB of I.T. Act 1961. The issue in dispute had come up for under consideration in the case of assessee in the appellate proceedings for assessment year 2008-09. In assessment year 2008-09 the Hon'ble CIT {A) in appeal No. CIT (A) -Il/559/2010-11 vide order dated 27/06/2013 has deleted the similar addition made by A.0 The CIT {A) after considering the facts in details has held that sales tax incentives have got to be reduced to determine the book profit u/s 115JB as it is capital receipt. The operative part of the order of appellate ore.er is reproduced herein under for ready reference. ‘’I have considered the submission made by counsel of the assessee and perused the assessment order. The AO has discussed the addition at para 4.2 of assessment order. The AO has held that sales tax incentive availed under the package scheme of incentive of Govt. of Maharashtra is revenue receipt and same cannot be considered for reduction for the purpose of provision of section 115JB of I.T. Act 1961. Similar issue was considered by the Hon’ble CIT(A) in case of BILT for assessment year 2004-05 at para 16 of the assessment order. The CIT(A) after considering the facts in detail has held that 29 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. sales tax incentive have to go to be reduced from net profit as per Profit & Loss account to determine the book profit u/s 115JB. The appeal filed by Revenue in respect to order passed by CIT(A) has been dismissed in ITA No. 226/Nag/2008. Respectfully following the order of CIT(A) and ITAT in the case of assessee in earlier assessment y8ear the ground of appeal is allowed.’’ The appeal filed by revenue in respect to order passed by VIT(A) has been dismissed by Hon’ble ITAT Nagpur Bench, Nagpur in ITA No. 342/Nag/2013 vide order dated 25/02/2016. The facts and circumstances for the year are identical to that in assessment year 2008-09, I agree with the detailed reasons as observed in CIT(A) and ITAT order for assessment year 2008-09 for deletion of similar addition at the hands of assessee. Respectfully following the same I hold that sale tax incentive to be reduced to determine the book profit u/s 115JB of I.T. Act 1961. The ground of appeal is therefore allowed. 13.4 The facts and circumstances for the year are identical to that in assessment year 2010-11, I have given detailed reasons as observed in CIT(A) and Hon'ble !TAT order for assessment year 2008-09 referred in appellate order for Asstt Year 2010-11 for the deletion of similar addition made at the hands of assessee. Respectfully following the same I hold that sale tax incentive to be reduced to determine the book profit u/s 115JB of LT Act 1961. The ground of appeal is therefore allowed.’’ 24. The learned counsel of assessee before us has made submission as under: A) Hon’ble ITAT, Nagpur Bench, Nagpur in ITA Nos.342 & 344/Nag/2013 in the case of assessee in Asstt. Year 2008-09 has decided issue in favour of assessee. (Para 5 Page 4) 25. It is noted that learned CIT(A) has granted relief by following the order of ITAT, Nagpur Bench, Nagpur in ITA No.342/Nag/2013 vide order dated 25/02/2016. The learned CIT(A) has dealt with the facts and evidence on record extensively while granting relief in the case of assessee. Detailed order passed 30 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. by CIT(A) indicating reason for deleting the addition has been reproduced in the paragraphs hereinabove. We are in agreement with the findings and reasoning recorded by CIT(A) deleting the addition in the case of assessee. This Tribunal in assessee’s own case in Asstt. Year 2008-09 in ITA No.342/Nag/2013 has held that sales tax incentive is to be excluded from computing book profit u/s 115JB of I.T. Act 1961 in its order. We therefore uphold the order of learned CIT(A) on this issue. In view of above ground of appeal of revenue is dismissed. 26. In Ground No.8 of appeal revenue has challenged the relief granted by learned CIT(A) at Rs 80,35,716/- in respect to expenses towards issue of Debenture. Learned DR relied upon the order of Assessing Officer and submitted that relief granted in earlier year is not accepted by revenue. The assessee has made detailed written submission before learned CIT(A). Learned CIT(A) has granted relief by holding as under: 14.2 I have considered the submissions made by counsel of appellant and perused the assessment order. The A.O. has discussed the addition at para 4.6 of assessment order and observed that debentures issued in A.Y 2008-09 and subsequently converted into shares , expenditure for issue of same be treated as capital expenditure . The issue in dispute had come up for under consideration in the case of assessee in the appellate proceedings for assessment year 2010-11. In assessment year 2010-11 the CIT (A) in appeal No. CIT (A) - 4/ 69/ 1 4-15 vide order dated 22/08/2016 has deleted the similar addition made by A.O.The CIT (A) after considering the facts in details has held amortization of expenditure over the life of Debenture cannot be faulted .The operative part of the order of appellate order is reproduced herein under for ready reference. "I have considered the submission made by the counsel of appellant and peruse the evidence on record. The Hon'ble Bombay 31 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. High Court in case of M/s Jaiswal Neco Ltd. in Income Tax Application No 16 of 1998.vide, Judgment dated 30/09/2000 held that the expenditure incurred in respect to convertible debenture are allowable as revenue expenditure. The ratio laid down by Hon'ble Bombay High Court in aforesaid judgement is binding precedent as long as the same is not reversed by the Hon'bie Apex Court Mere filing of SLP is no reason for not following the binding precedent of jurisdictional High Court by A.O. In case of appellant expenditure incurred on debenture debited in the books of account for Asstt. Year 2008-09 has not been disallowed in the assessment framed u/s 143(3) of I.T. Act 1961. It is seen that debenture issued were for a period of eight years and expenditure incurred by appellant has been spread over the period for which the debenture have been issued. The aforesaid treatment in the accounts is in line with the decision of Hon'ble Apex Court in case of Madras Industrial Investment Corporation Ltd. reported at 225 ITR 802 (SC). In view of above claim of appellant as regard to amortization of expenditure incurred over the tenure of debenture cannot be faulted. Thus the addition made by A.O in case of appellant in unjustified and is therefore be directed to be deleted. The ground of appeal of the appellant is allowed.’’ 14.3 The facts and circumstances for the year are identical to that in assessment year 2010-11, I agree with the detailed reasons as observed by CIT(A) for the deletion of identical deletion made at the hands of assesee. Respectfully following the same I hold that amortization of expenditure over the tenure of Debenture cannot be faulted and thus addition made by AO in case of appellant is unjustified and is therefore be directed to be deleted. The ground of appeal is allowed.’’ 27. The learned counsel of assessee before us has made submission as under: A) A.O. has not disputed that it is allowable business expenditure and issue is covered in favour of assessee by judgement of Hon’ble Bombay High Court in the case of Jaiswal Neco Ltd. However SLP is filed before Supreme Court. 32 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. B) Issue covered in favour of assessee by judgement of Hon’ble Bombay High Court in the case of Jaiswal Neco Ltd. in IT Application No.16 of 1998 vide order dated 03/09/2010. (P- 18 – 19) C) SLP filed by revenue in respect to judgement of Hon’ble Bombay High Court is dismissed by Apex Court (CC 7233/2011) vide order dated 05/09/2011. (P- 17) 28. It is noted that learned CIT(A) has granted relief by following judgement of Hon’ble Bombay High Court in case of M/s. Jayaswal Neco Ltd. in ITA No.16 of 1998 dated 03/09/2010 and after noting that no disallowance was made by A.O. in Asstt. Year 2008-09. The learned CIT(A) has dealt with the facts and evidence on record extensively while granting relief in the case of assessee. Detailed order passed by CIT(A) indicating reason for deleting the addition has been reproduced in the paragraphs hereinabove. We are in agreement with the findings and reasoning recorded by CIT(A) deleting the addition in the case of assessee. It is noted that in A.O. in assessment order at para 4.6 has observed that as SLP has been filed before Hon’ble Supreme Court therefore addition is made. In paper book at page 17 judgement of Supreme Court dated 05/09/2011 in the case Jaiswal Neco Ltd. dismissing SLP of revenue is placed on record. Thus nothing remains for making any disallowance. We therefore 33 ITA NO.213/NAG/2017 ACIT CIRCLE-5, NAGPUR VS M/S. BILT GRAPHIC PAPER PRODUCTS LTD. uphold the order of learned CIT(A) on this issue. In view of above ground of appeal of revenue is dismissed. 29. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 28/ 06 /2022 Sd/- Sd/- Sd/- (ARUN KHODPIA) ACCOUNTANT MEMBER Sd/- (SANDEEP GOSAIN) JUDICIAL MEMBER Nagpur DATED: 28 /06 /2022 *Mishra Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Nagpur City concerned; (5) The DR, ITAT, Nagpur; (6) Guard file. True Copy By Order Assistant Registrar ITAT, Nagpur