ACIT, Circle - 5(2), Kolkata, Kolkata V. M/s. Balmer Lawrie & Co. Ltd., , Kolkata

ITA 2264/KOL/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9756 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 02-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANKAR HALDER
• Assessee Lawyers: D S DAMLE
• Keywords: Capital asset; Business income; Depreciation; Business expenditure; Notional interest; Revenue expenditure; Capital expenditure
• Section: 143(3); 37(1); 80IA; 32

Judgement Text

1 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 2264/KOL/2017 ASSESSMENT YEAR: 2014-15 ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-5(2), KOLKATA. VS. M/S. BALMER LAWRIE & CO. LTD. (PAN: AABCB0984E) APPELLANT RESPONDENT & I.T.A NO.2483/KOL/2017 ASSESSMENT YEAR: 2014-15 M/S. BALMER LAWRIE & CO. LTD. (PAN: AABCB0984E) VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-5(2), KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 12.06.2019 DATE OF PRONOUNCEMENT 01.07.2019 FOR THE REVENUE SHRI SANKAR HALDER, JCIT, SR. DR FOR THE ASSESSEE SHRI D. S. DAMLE, FCA ORDER PER SHRI A.T.VARKEY, JM BOTH THESE CROSS APPEALS FILED BY THE REVENUE AND A SSESSEE ARE AGAINST THE ORDER OF LD. CIT(A)-2, KOLKATA DATED 10.08.2017 FOR AY 2014- 15. WE SHALL FIRST DEAL WITH THE APPEAL OF THE REVENUE IN ITA NO. 2264/KOL/2017. 2. THE SOLITARY ISSUE INVOLVED IN THIS APPEAL IS W HETHER THE LD. CIT(A) WAS JUSTIFIED IN NOT TREATING THE PAYMENT OF ADVANCE RENT TO THE LES SORS IN RESPECT OF DIFFERENT LANDS TAKEN ON LEASE FOR THE PURPOSE OF BUSINESS AMOUNTING TO RS.7 9,68,169/- AS CAPITAL EXPENDITURE. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT IN ITS PROFIT & LOSS ACCOUNT THE ASSESSEE, BY WAY OF AMORTIZATION DEBITED A SUM OF RS.79,68,169/- BEING PRO-RATA AMOUNT OF LEASE PREMIUM WHICH THE APPELLANT HAD PAID IN RESPECT OF SEVERAL PLOTS OF LAND OBTAINED FOR SETTING UP 2 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 INDUSTRIAL / INFRASTRUCTURE UNDERTAKINGS. THE LEASE PERIOD VARIED FROM 15 TO 99 YEARS AND THE PROPORTIONATE AMOUNT OF LEASE PREMIUM, SPREAD OVER THE LEASE PERIOD, WAS CLAIMED BY AS DEDUCTION IN ARRIVING ATITS BUSINESS INCOME ON THE PLEA THAT THE LEASE PREMIUM PAID WAS NOTHING BUT UPFRONT PAYMENT OF LEASE RENT. IN THE A SSESSMENT ORDER THE AO HELD THAT THE AMOUNT WAS SPENT TO ACQUIRE LEASEHOLD RIGHT FOR A L ONG PERIOD, WHICH WAS CAPITAL ASSET, AND THE BENEFIT ENJOYED BY THE APPELLANT IN THE FORM OF LEASEHOLD RIGHT WAS ENDURING IN NATURE. RELYING ON THE DECISION OF THE HONBLE DELHI HIGH C OURT IN GAIL INDIA LTD VS JT.CIT (211 TAXMAN 387) THE AO HELD THAT THE AMOUNT CLAIMED AS AMORTIZATION OF LEASE PREMIUM WAS CAPITAL EXPENDITURE AND THEREFORE NOT ALLOWABLE AS DEDUCTION IN COMPUTATION OF BUSINESS INCOME. ON APPEAL THE LD. CIT(A) DELETED THE DISALL OWANCE FOLLOWING THE ORDER OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2003-04 IN ITA NO.348/KOL/2007 DATED 11.04.2008. BEING AGGRIEVED B Y THE SAID ORDER, THE REVENUE IS NOW IN APPEAL BEFORE US. 3. AT THE TIME OF HEARING OF THE APPEAL, THE LD. DR ADMITTED THAT THE ASSESSEES CLAIM FOR PRO-RATA WRITE OFF IN RESPECT OF LEASE PREMIUM WAS ALLOWED BY THIS TRIBUNAL IN ITS ORDER DATED 11.04.2008. HE HOWEVER BROUGHT TO OUR ATTENTI ON THAT THE SPECIAL BENCH OF THIS TRIBUNAL AT MUMBAI IN ITS DECISION IN THE CASE OF J T.CIT VS MUKUND LTD (106 ITD 291) (AT) HAD HOWEVER HELD THAT PRO-RATA AMORTIZATION OF ADVANCE RENT FOR OBTAINING LEASEHOLD LAND WAS NOT PERMISSIBLE AS DEDUCTION. HE SUBMITTED THAT ALTHOUGH THE COORDINATE BENCH OF THE TRIBUNAL DECIDED THE APPEAL OF THE ASSESSEE FOR AY 2003-04 IN ASSESSEES FAVOR BY THE ORDER DATED 11.04.2008; THE SAME WAS RENDERED WITHO UT CONSIDERING THE BINDING DECISION OF THE SPECIAL BENCH, WHICH WAS PRONOUNCED 15.02.2007. HE FURTHER DREW OUR ATTENTION TO THE DECISION OF B BENCH, KOLKATA OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2008-09 IN ITA NO. 1481/KOL/2011 DATED 30.04.2012 WHEREIN THE COORDINATE BENCH OF THIS TRIBUNAL TAKING NOTE OF THE DECISION OF THE SPECIAL BENCH, M UMBAI IN THE CASE OF JT.CIT VS MUKUND LTD (SUPRA) DECLINED TO FOLLOW EARLIER DECISION IN ASSESSEES FAVOR FOR THE AY 2003-04. RELYING ON THE LATER DECISION OF THIS TRIBUNAL IN A SSESSEES OWN CASE FOR AY 2008-09, THE LD. DR URGED THAT THE ORDER OF THE AO BE UPHELD. 3 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 4. PER CONTRA THE LD. AR OF THE APPELLANT SUBMITTED THAT THE LD. CIT(A) WAS FULLY JUSTIFIED IN ALLOWING THE ASSESSEES CLAIM. DRAWING ATTENTION TO THE GROUNDS OF APPEAL THE LD. AR POINTED OUT THAT THE REVENUE HAS NOT PER SE QUES TIONED THAT THE AMOUNT PAID BY THE ASSESSEE AT THE TIME OF OBTAINING LEASE, WAS UPFRON T PAYMENT OF RENT FOR THE BUSINESS PURPOSE AND WHICH WAS AMORTIZED OVER THE DURATION OF LEASE ON PROPORTIONATE BASIS. THE LD. AR SUBMITTED THAT UNDER THE LEASE AGREEMENT THE ASSESS EE PAID UPFRONT LEASE PREMIUM AND THEREAFTER THE ASSESSEE WAS PAYING TOKEN RENT OF RE .1/- TO RS.100/- ANNUALLY WHICH DID NOT CONSTITUTE THE FAIR RENT HAVING REGARD TO THE AREAS OF LANDS TAKEN ON LEASE. HE THEREFORE SUBMITTED THAT THE BASIC CHARACTER OF THE PAYMENT M ADE AT THE TIME OF OBTAINING LEASE WAS LUMP-SUM PAYMENT OF RENT FOR THE ENTIRE DURATION OF THE LEASE AND THEREFORE THE PRO-RATA WRITE OFF WAS ALLOWABLE AS REVENUE EXPENDITURE. THE LD. AR FURTHER SUBMITTED THAT IN ITS DECISION DATED 30.04.2012 FOR THE AY 2008-09 THE C OORDINATE BENCH OF THIS TRIBUNAL REFUSED TO FOLLOW ITS OWN ORDER FOR AY 2003-04 ONLY FOR THE REASON THAT THE SPECIAL BENCH, MUMBAI IN ITS ORDER DATED 15.02.2007 IN THE CASE OF JT.CIT VS MUKUND LTD (SUPRA) HAD TAKEN A CONTRARY VIEW. IN THE SAID DECISION THE TRI BUNAL HAD HELD THAT THE LUMPSUM LEASE PREMIUM PAID FOR OBTAINING LONG-TERM LEASE CONSTITU TED CAPITAL EXPENDITURE AND THEREFORE NO DEDUCTION THEREFORE WAS PERMISSIBLE EITHER IN LUMP- SUM IN THE YEAR OF PAYMENT OR ON PRO- RATA BASIS OVER THE DURATION OF LEASE. THE LD. AR H OWEVER DREW OUR ATTENTION TO THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF DC IT VS SUN PHARMACEUTICALS INDUSTRIES LTD (329 ITR 479) WHEREIN THE HONBLE GUJARAT HIGH COURT TOOK A VIEW CONTRARY TO THE DECISION OF THE SPECIAL BENCH AND ALLOWED THE DEDUC TION FOR THE ENTIRE UPFRONT LEASE PREMIUM PAID IN SINGLE YEAR, HOLDING THAT THE EXPEN DITURE INCURRED WAS REVENUE IN NATURE AND THEREFORE FULLY ALLOWABLE IN THE YEAR OF ITS IN CURRENCE. THE LD. AR ALSO BROUGHT TO OUR ATTENTION THE DECISION OF THE COORDINATE BENCH OF T HIS TRIBUNAL AT DELHI IN THE CASE OF ACIT VS DELHI INTERNATIONAL AIRPORT PVT LTD DATED 14.12. 2017 IN ITA NOS. 2720/DEL/2011 WHEREIN THIS TRIBUNAL SIMILARLY ALLOWED THE ASSESSE ES CLAIM FOR DEDUCTION OF UPFRONT LEASE PREMIUM OF RS.150 CRORES PAID BY THE ASSESSEE TO AI RPORT AUTHORITY OF INDIA FOR OBTAINING THE LEASE OF AIRPORT PROPERTY AT DELHI FOR A PERIOD OF 30 YEARS. DRAWING ATTENTION TO THE FACTS OF THE CASE THE LD. AR SUBMITTED THAT IN THE DECIDE D CASE THE ASSESSEE HAD PAID UPFRONT LEASE PREMIUM OF RS.150 CRORES FOR OBTAINING LEASE OF LAN D FOR A PERIOD OF 30 YEARS AND IN THE 4 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 ASSESSMENT ORDER THE AO HIMSELF HAD ALLOWED THE DED UCTION ON PRO-RATA BASIS FOR 1/30 TH OF THE LEASE PREMIUM. BEFORE THE TRIBUNAL, RELYING STR ONGLY ON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF CIT VS MADRAS INDUSTRIAL INVESTMENT CORPORATION (225 ITR 802) THE REVENUE HAD URGED THAT SINCE THE PREMIUM WAS PA ID FOR OBTAINING LEASE OF LAND FOR A PERIOD OF 30 YEARS THE ASSESSEE COULD ONLY CLAIM TH E PRO-RATA DEDUCTION OVER THE DURATION OF LEASE AND COULD NOT CLAIM THE SAME IN THE INITIAL Y EAR WHEN THE LEASE PREMIUM WAS PAID. THE LD. AR URGED THAT THE INCOME-TAX ACT, 1961 BEING AN ALL INDIA STATUTE, THE REVENUE COULD NOT ADOPT DIAMETRICALLY OPPOSITE STANDS IN DIFFEREN T CASES INVOLVING IDENTICAL FACTS. HE THEREFORE SUBMITTED THAT IF IN THE CASE OF ACIT VS DELHI INTERNATIONAL AIRPORT PVT LTD(SUPRA) THE REVENUE, IN PRINCIPLE, ENDORSED THE CLAIM FOR P RO-RATA WRITE OFF OF LEASE PREMIUM PAID OVER THE DURATION OF LEASE THEN IT COULD NOT OPPOSE THE SAME PRINCIPLE IN THE APPELLANTS CASE TO DENY THE RIGHTFUL DEDUCTION. 5. THE LD. AR FURTHER SUBMITTED THAT OUT OF THE TOT AL CLAIM OF RS.79,68,169/-, THE DEDUCTION OF RS.78,78,111/- PERTAINED TO LEASES OBT AINED FOR SETTING UP, MAINTAINING AND OPERATING CONTAINER FREIGHT STATIONS IN MAHARASHTRA AND BENGAL. THE LD. AR SUBMITTED THAT MINISTRY OF FINANCE, DEPARTMENT OF REVENUE PERMITTE D THE ASSESSEE TO SET-UP, OPERATE AND MAINTAIN CFSS WHICH FOR THE PURPOSES OF SECTION 80I A(4) IS REGARDED AS INFRASTRUCTURE FACILITY. HE DREW OUR ATTENTION TO THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DY.CIT VS CENTURY PLYBOARDS INDIA LTD D ATED 31.07.2017 IN ITA NO.1873/KOL/2014 WHEREIN IDENTICAL ISSUE WAS CONSID ERED AND DECIDED BY THE TRIBUNAL IN ASSESSEES FAVOR. HE SUBMITTED THAT IN THE DECIDED CASE THE TRIBUNAL, FOLLOWING THE CIRCULAR NO.9/2014 DATED 23.04.2014 ISSUED BY THE CBDT, ALLO WED THE ASSESSEES CLAIM FOR PRO-RATA WRITE OFF FOR UPFRONT LEASE PREMIUM PAID OVER THE D URATION OF LEASE. THE LD. AR POINTED OUT THAT THE BOARD CIRCULAR WAS ISSUED AFTER THE DECISI ON OF THIS TRIBUNAL WAS RENDERED IN ASSESSEES CASE FOR AY 2008-09 AND THE SAID CIRCULA R BEING BENEFICIAL IN NATURE, THE DEDUCTION FOR PRO-RATA WRITE OFF FOR LEASE PREMIUM PAID BE UPHELD. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED VARIO US JUDICIAL DECISIONS RELIED UPON AS WELL AS THE APPLICABLE LEGAL PROVISIONS. FROM THE F ACTS NARRATED BEFORE US, WE FIND THAT THE ASSESSEE HAS BEEN CLAIMING AMORTIZATION OF LEASE PR EMIUM PAYMENTS SINCE EARLIER YEARS AND 5 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 TILL AY 2002-03 NO DISPUTE AROSE BETWEEN THE PARTIE S. IN THE ASSESSMENT FOR THE AY 2003-04 THE AO HOWEVER DISALLOWED THE ASSESSEES AMORTIZATI ON CLAIM HOLDING IT TO BE CAPITAL IN NATURE AND IN SUPPORT OF THIS CONCLUSION, HE RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ADITYA MINERALS PVT LTD VS CIT (239 ITR 817). THE AOS ORDER WAS UPHELD BY THE LD. CIT(A) BUT ON FURTHER APPEAL THE B BENCH OF THIS TRIBUNAL IN ITA NO.348/KOL/2007 DATED 11.04.2008 UPHELD THE ASSESSE ES CLAIM. IN ARRIVING AT ITS DECISION THE TRIBUNAL HAD CONSIDERED THE JUDGMENT OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS HMT LTD (203 ITR 803) WHICH IN TURN WAS B ASED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS PANBARI TEA CO. LTD (57 ITR 422). IN THE SAID JUDGMENT THE HONBLE SUPREME COURT HAD OBSERVED THA T THE USE OF THE WORD PREMIUM IN RESPECT OF ADVANCE RENT DID NOT RENDER THE PAYMENT ANYTHING MORE THAN RENT PAID IN ADVANCE, INSTEAD OF PAYING THE SAME IN FUTURE PERIODICALLY. THE COORDINATE BENCH OF THIS TRIBUNAL ALSO TOOK NOTE OF THE JUDGMENT OF THE HONBLE SUPREME CO URT IN THE CASE OF CIT VS ASSOCIATED CEMENT CO LTD (172 ITR 257) WHEREIN IT WAS HELD THA T ENTIRE PREMIUM PAID IN LUMPSUM WAS DEDUCTIBLE AS BUSINESS EXPENDITURE IN THE VERY FIRST YEAR BECAUSE SUCH PAYMENT OBVIATED THE NEED OF MAKING PERIODICAL PAYMENTS OF HIGHER RE NT. THE TRIBUNAL ALSO NOTED THAT THE HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTR IAL INVESTMENT CORPORATION LTD VS CIT (SUPRA) HAD HELD THAT THE FACTS OF THE CASE MAY JUSTIFY AN ASSESSEE TO SPREAD AND CLAIM THE EXPENDITURE INCURRED IN A PARTICULAR YEAR OVER A PERIOD OF ENSUING YEARS IF ALLOWING THE ENTIRE EXPENDITURE IN ONE YEAR GIVES DISTORTED PICT URE OF PROFITS OF THAT PARTICULAR YEAR. KEEPING IN MIND THESE DECISIONS, THE COORDINATE BEN CH OF THIS TRIBUNAL ALLOWED THE ASSESSEES CLAIM FOR AMORTIZATION OF LUMP-SUM LEASE PREMIUM PAID. IT IS TRUE THAT IN A LATER DECISION DATED 30.04.2012 IN ITA NO. 1481/KOL/2011 FOR AY 2008-09 THE B BENCH OF THIS TRIBUNAL DECLINED TO FOLLOW THE RATIO LAID DOWN IN THE APPELLATE ORDER PASSED IN ASSESSEES OWN CASE FOR AY 2003-04. ON PERUSAL OF THE SAID ORD ER WE HOWEVER FIND THAT DECISION OF THE TRIBUNAL IN AY 2008-09 WAS INFLUENCED MORE BY THE F ACT THAT WHILE DECIDING THE APPEAL FOR AY 2003-04 ON 11.04.2008 THE BENCH HAD NOT CONSIDER ED THE DECISION OF THE SPECIAL BENCH, MUMBAI IN THE CASE OF MUKUND LIMITED (SUPRA) WHICH WAS PRONOUNCED ON 15.02.2007 AND WAS BINDING ON THE DIVISION BENCH. IN THE CONSIDERE D VIEW OF THE TRIBUNAL THEREFORE THE ORDER OF THE COORDINATE BENCH FOR AY 2003-04 WAS PE R IN CURIUM BECAUSE THE DECISION OF 6 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 THE SPECIAL BENCH WAS NOT CONSIDERED EVEN THOUGH TH E FACTS OF THE ASSESSEES CASE AND THE FACTS INVOLVED IN THE CASE OF MUKUND LIMITED (SUPRA ) WERE IDENTICAL. WE THEREFORE FIND THAT THE DECISION OF THE COORDINATE BENCH IN THE ASSESSE ES CASE FOR AY 2008-09 WAS RENDERED SOLELY ON THE BASIS OF THE DECISION OF THE SPECIAL BENCH, MUMBAI RENDERED IN THE CASE OF MUKUND LIMITED (SUPRA). 7. ON PERUSAL OF THE DECISION IN THE CASE OF MUKUND LIMITED (SUPRA), WE NOTE THAT IN ARRIVING AT ITS FINDING THE SPECIAL BENCH OF THIS T RIBUNAL HAD RELIED ON VARIOUS DECISIONS INTER ALIA INCLUDING THE DECISION OF THE KHIMLINE P UMPSPVT LTD VS CIT (258 ITR 429) WHEREIN THE HONBLE BOMBAY HIGH COURT HAD HELD THAT EXPENDITURE ON ACCOUNT OF LEASE PREMIUM WAS CAPITAL IN NATURE AND THEREFORE NO DEDU CTION WAS PERMISSIBLE IN RESPECT OF SUCH EXPENDITURE EITHER IN ONE LUMP-SUM OR BY AMORTIZATI ON OVER THE TENURE OF THE LEASE. SINCE THE SPECIAL BENCH WAS CONSTITUTED AT MUMBAI, THE JU DGMENT OF THE HONBLE BOMBAY HIGH COURT WAS BINDING BEING THE DECISION OF THE JURISDI CTIONAL HIGH COURT. WE HOWEVER FIND THAT ON THE IDENTICAL FACTS THE HONBLE GUJARAT HIGH COU RT IN ITS LATER JUDGMENT DATED 23.03.2009 IN THE CASE OF DY. CIT VS SUN PHARMACEUTICALS INDUS TRIES LTD (SUPRA) TOOK THE VIEW, WHICH WAS CONTRARY TO THE VIEW TAKEN BY THE HONBLE BOMBA Y HIGH COURT. IN THE DECIDED CASE THE HONBLE GUJARAT HIGH COURT NOTED THAT THE LEASE REN T PAID ANNUALLY WAS VERY NOMINALLY AND BY OBTAINING BY WAY OF LEASE THE CAPITAL STRUCTURE OF THE ASSESSEE HAD NOT CHANGED. IT WAS THEREFORE NOTED THAT, BY MAKING SUCH PAYMENT, THE A SSETS OF THE ASSESSEE COMPANY HAD NOT INCREASED BECAUSE THE LAND CONTINUED TO BELONG TO G IDC. THE HONBLE HIGH COURT NOTED THAT THE ONLY BENEFIT, WHICH THE ASSESSEE GOT, WAS THE ADVANTAGE OF CARRYING ON THE BUSINESS MORE PROFITABLY BY PAYING NOMINAL RENT ON LAND. THE HONBLE HIGH COURT THEREFORE DID NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE TRIBUNAL WHEREIN THE TRIBUNAL HAD ALLOWED THE DEDUCTION FOR UPFRONT LEASE PREMIUM OF RS.42,02 ,616/- PAID TO GIDC HOLDING IT TO BE REVENUE EXPENDITURE. WE THEREFORE FIND THAT IN THE DECISION RENDERED IN MARCH 2009 THE HONBLE GUJARAT HIGH COURT CONCURRED WITH THE VIEW EXPRESSED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS HMT LTD (SUPRA). I N BOTH THESE DECISIONS THE HONBLE HIGH COURTS HAD HELD THAT THE LEASE PREMIUM PAID DI D NOT CONSTITUTE CAPITAL EXPENDITURE BUT IT WAS A REVENUE EXPENDITURE BECAUSE BY INCURRING S UCH EXPENDITURE THE ASSESSEES DID NOT ACQUIRE ANY ASSET BUT ONLY FACILITATED CARRYING ON THE BUSINESS MORE PROFITABLY BY PAYING 7 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 TOKEN RENT. IN ARRIVING AT SUCH CONCLUSION THE HON BLE GUJARAT HIGH COURT HAD RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VSMADRAS AUTO SERVICE (233 ITR 468). WE NOTE THAT ALTHOUGH THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT WAS RENDERED ON 23.03.2009, THE COORDINATE BENCH OF THI S TRIBUNAL WHILE DECIDING THE REVENUES APPEAL IN THE ASSESSEES CASE FOR AY 2008-09 HAD NO T TAKEN NOTE OF THE SAME AND WENT ON TO HOLD THE EXPENDITURE CLAIMED TO BE CAPITAL IN NATUR E. WE HOWEVER FIND THAT IN THE DECISION THE HONBLE GUJARAT HIGH COURT RENDERED SUBSEQUENT TO THE DECISION OF THE SPECIAL BENCH IN MUKUND LTD (SUPRA), IT HAS BEEN SPECIFICALLY HELD T HAT THE NATURE OF LEASE PREMIUM PAID WAS REVENUE IN NATURE AND THEREFORE ALLOWABLE IN COMPUT ING BUSINESS INCOME. IN LIGHT OF THE FOREGOING AND THE LATER DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL AT DELHI IN THE CASE OF ACIT VS DELHI INTERNATIONAL AIRPORT PVT LTD (SUPRA) FOR REASONS DISCUSSED IN DETAIL (INFRA), AND ALSO THE CBDT CIRCULAR NO. 9/2014 DAT ED 23.04.2014 (INFRA), WE ARE INCLINED TO FOLLOW THE LATER JUDGMENT OF HONBLE GUJARAT HIG H COURT IN THE CASE OF DY. CIT VS SUN PHARMACEUTICALS INDUSTRIES LTD (SUPRA). 8. WE ALSO NOTE THAT SIMILAR ISSUE WAS CONSIDERED B Y THE COORDINATE BENCH OF THIS TRIBUNAL AT DELHI IN THE CASE OF ACIT VS DELHI INTE RNATIONAL AIRPORT PVT LTD (SUPRA). IN THAT CASE THE ASSESSEE, INCORPORATED AS A SPECIAL PURPOS E VEHICLE, OBTAINED RIGHT TO OPERATE AND MAINTAIN AN INTERNATIONAL AIRPORT AT NEW DELHI FROM AIRPORT AUTHORITY OF INDIA. THE ASSESSEE WAS GRANTED AIRPORT CONCESSIONAIRES RIGHT IN CONSI DERATION OF THE ASSESSEE MAKING PAYMENT OF NON-REFUNDABLE UPFRONT FEES OF RS.150 CRORES. UP ON MAKING SUCH PAYMENT THE ASSESSEE BECAME ENTITLED TO USE AND OCCUPY THE AIRPORT PROPE RTY FOR A PERIOD OF 30 YEARS AND AFTER THE EXPIRY OF LEASE THE AIRPORT SITE WAS TO THE HANDED OVER BACK TO THE AIRPORT AUTHORITY OF INDIA. IN THE ASSESSEES BOOKS IT HAD CAPITALIZED THE UPFR ONT FEES OF RS.150 CRORES PAID. IN THE COMPUTATION OF TOTAL INCOME THE ASSESSEE HOWEVER CL AIMED THE DEDUCTION FOR THE ENTIRE UPFRONT LEASE PREMIUM PAID ON THE PLEA THAT IT WAS REVENUE IN NATURE AND SINCE BY MAKING PAYMENT ASSESSEE DID NOT ACQUIRE ANY ASSET, THE DED UCTION WAS PERMISSIBLE FOR THE UPFRONT PAYMENT IN SUCH YEAR ITSELF. THE ASSESSEES PLEA W AS REJECTED BY THE AO ON THE GROUND THAT THE PAYMENT OF RS.150 CRORES PERMITTED THE ASSESSEE RIGHT TO USE THE AIRPORT PREMISES FOR A PERIOD OF THIRTY YEARS AND THEREFORE APPLYING THE R ATIO LAID DOWN IN THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTR IAL INVESTMENT CORPORATION LTD VS 8 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 CIT (SUPRA) THE AO HELD THAT THE ASSESSEE WAS ENTIT LED TO CLAIM THE EXPENDITURE ON PRORATE BASIS I.E.1/30 TH OF THE PREMIUM AMOUNT IN EACH YEAR DURING THE TENU RE OF THE LEASE. ON APPEAL THE LD. CIT(A) AGREED WITH ASSESSEES CONTENTION AN D ALLOWED THE DEDUCTION FOR ENTIRE UPFRONT FEE OF RS.150 CRORES PAID TO AIRPORT AUTHOR ITY OF INDIA IN THE INITIAL YEAR. ON APPEAL THE REVENUE RELYING ON THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL AT MUMBAI IN THE CASE OF JT.CIT VS MUKUND LTD (SUPRA) AND DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF ENTERPRISING ENTERPRISES VS DCIT (293 ITR 4 37) CLAIMED THAT SUCH EXPENDITURE WAS CAPITAL IN NATURE AND THEREFORE NOT PERMISSIBLE. RA THER IT WAS CANVASSED BY THE REVENUE THAT IN TERMS OF THE JUDGMENT OF HONBLE SUPREME COURT I N THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD VS CIT (SUPRA), THE ORDE R OF THE AO BE UPHELD. AFTER CONSIDERING THE SUBMISSIONS OF THE PARTIES AND THE JUDICIAL DECISIONS RELIED UPON, THE TRIBUNAL IN PARAS 30-31 OF ITS ORDER HELD AS FOLLOW S: 30. THUS, HEREIN THIS CASE THE TEST OF ENDURING BE NEFIT IN ACQUISITION OF CAPITAL ASSET AS PROPAGATED BY THE REVENUE WOULD FAIL FOR THE REASON THAT, FOR THE LEASE OF AIRPORT SITE WHICH WAS FOR 30 YEARS, THE PAYMENT OF RS. 150 CRORES WAS A ONETIME PAYMENT SO THAT THE ANNUAL LEASE RENT WAS CHARGEABLE AT A VERY NOMINAL RATE OF RS.100/- FOR A HUGE AIRPORT AREA OF MORE THAN 4609 ACRES. SUCH A MINISCULE ANNUAL RENT OF HU GE AREA AND FACILITY (ENTIRE AIRPORT SITE) DEFINITELY WOULD DEFY ALL COMMERCIAL PARLANCES. ONC E THE ANY RECURRING PAYMENT TOWARDS LEASE RENT IS RECKONED OR CLASSIFIED AS REVENUE EXP ENDITURE, THEN EVEN THE LUMP-SUM PAYMENT OR ONE-TIME PAYMENT FOR THE SAME PURPOSE HAS TO BE GIVEN THE SIMILAR TREATMENT AS IT PARTAKES THE SAME CHARACTER. THERE COULD NOT BE TWO DIFFEREN T CLASSIFICATION OF SAME NATURE OF EXPENDITURE. THAT APART, SUCH ONETIME PAYMENT CANNO T BE CLASSIFIED AS CREATING ANY CAPITAL ASSET OR ANY KIND OF PROFIT MAKING APPARATUS OR GIV ING ANY ENDURING ADVANTAGE OF A BENEFIT OF A TRADE. AT THE MOST THE SAID PAYMENT CAN BE RECKON ED AS LEASE PREMIUM OR LICENCE FEE FOR THE AIRPORT SITE TAKEN ON LEASE FOR A PERIOD OF 30 YEAR S. IN THIS CASE, SUCH A PAYMENT CANNOT BE RECKONED FOR THE PURPOSE OF ACQUISITION OF BUSINESS ALSO, BECAUSE BOTH THE PARTIES HAVE AGREED TO TRANSFER THE RIGHT OF OPERATING, DEVELOPMENT AND MAINTENANCE OF THE AIRPORT ON REVENUE SHARING BASIS WHICH HAS BEEN TERMED AN 'ANNUAL FEE' WHICH IS RECURRING IN NATURE. NOW IF SUCH A LUMP SUM PAYMENT FOR THE LEASE OF THE AIRPORT SIT E FOR A PERIOD OF 30 YEARS CAN BE RECKONED AS REVENUE OR NOT, APPEARS TO BE QUITE SETTLED PROP OSITION IN WAKE OF THE FOLLOWING JUDGEMENTS WHICH HAS BEEN HIGHLIGHTED AND STRESSED UPON BY THE LD. SR. COUNSEL FOR THE ASSESSEE BEFORE US:- I. DCIT VS. SUN PHARMACEUTICAL IND. LTD. - 329 ITR 479 (GUJ HC) - IN THIS CASE, THE ASSESSEE WAS THE LESSEE OF LAND. THE PERIOD OF LEASE WAS 99 YEARS. IN ADDITION TO AN ANNUAL LEASE RENT OF RS.40 PER ANNUM, THE ASSESSEE PAID RS.48 LAKH TO GIDC AS ADVANCE RENT. THE AO DISALLOWED THE CLAIM FOR THE REASON THAT THE ASSESS EE OBTAINED AN ENDURING BENEFIT FOR A 9 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 PERIOD OF 99 YEARS IN THE FORM OF USE OF THE LAND A ND THEREFORE HE HELD THAT THE PAYMENT WAS CAPITAL IN NATURE. THE HIGH COURT UPHELD THE FINDIN G OF THE TRIBUNAL THAT THE LAND IN QUESTION WAS NOT ACQUIRED BY THE ASSESSEE AND THAT THE LEASE RENT WAS VERY NOMINAL AND THE SUM OF RS.48 LAKH WAS IN THE NATURE OF RENT AND THE ASSESS EE ONLY ACQUIRED A FACILITY TO CARRY ON BUSINESS PROFITABLY BY PAYING A NOMINAL LEASE RENT TOGETHER WITH LUMP SUM AMOUNT OF RS.48 LAKH. THE FACT THAT THE LEASE DEED WAS REGISTERED W AS IRRELEVANT. THEREFORE, IT WAS HELD THAT THE PAYMENT WAS REVENUE IN NATURE. II. CIT VS. H.M.T LTD - 203 ITR 820 (KAR HC) - A LE ASE AGREEMENT WAS ENTERED INTO WITH MIDC FOR THE LEASE OF THE PLOT ON WHICH THE ASSESSE E WAS MANDATORILY TO CONSTRUCT A BUILDING WITHIN A PERIOD OF 2 YEARS FOR THE USE OF THE ASSES SEE. AFTER THE CONSTRUCTION, THE ASSESSEE WAS ENTITLED TO USE BOTH THE LAND AND BUILDING FOR 95 Y EARS. UNDER THE AGREEMENT, THE ASSESSEE PAID A PREMIUM OF RS.12,09,200 FOR ACQUIRING LEASEH OLD RIGHTS. THE ANNUAL RENT WAS FIXED AT A NOMINAL SUM OF RE.1 PER ANNUM. THE ASSESSEE MADE A CLAIM FOR DEDUCTION OF THE PREMIUM PAID FOR THE REASON THAT IT WAS ACTUALLY RENT PAID IN ADVANCE AND, THEREFORE, WAS TO BE CONSIDERED AS REVENUE EXPENDITURE. IT WAS HELD BY THE KARNATAKA HIGH COURT THAT WHAT W AS TERMED AS PREMIUM AND PAID IN A LUMP-SUM TO MIDC WAS FUTURE RENT PAYABLE BY IT AND THAT IS EVIDENT FROM THE FACT THAT THE ASSESSEE WAS PAYING ONLY RE. 1 PER ANNUM WHICH IS F OR THE PURPOSE OF EVIDENCING THE CHARACTER OF THE TRANSFER OF PROPERTY AS A LESSEE A ND NOT FOR, ANY OTHER PURPOSE. APART FROM THAT CERTAIN OTHER JUDGMENTS WERE ALSO R EFERRED AND RELIED UPON WHICH HAS ALSO HAS BEEN TAKEN NOTE BY THE LD. CIT (APPEALS) IN THE IMPUGNED ORDER. THUS, THE AMOUNT OF RS. 150 CRORES PAID AS ONETIME PAYMENT FOR TAKING THE A IRPORT SITE FOR 30 YEARS ON THE FACTS OF THE PRESENT CASE HAS TO BE TREATED AS REVENUE EXPENDITU RE. 31. HERE ONE VERY IMPORTANT FACT WHICH IS NOT IN DI SPUTE IS THAT AO HIMSELF HAS TREATED THE PAYMENT OF 'UPFRONT FEES' AS REVENUE EXPENDITURE, I N THE SENSE THAT HE HAS ALLOWED PART OF THE EXPENDITURE IN THIS YEAR AND IT IS NOT THE CASE OF AO THAT IT IS CAPITAL EXPENDITURE IN WHICH CASE NO PART COULD BE ALLOWED IN TERMS OF SECTION 37(1) OF THE ACT. THIS ACTION OF THE AO ITSELF EXONERATES THE CASE OF THE ASSESSEE. 9. FROM THE FOREGOING FINDINGS OF THE COORDINATE BE NCH WE FIND THAT ON THE ANALOGOUS FACTS WHERE THE ASSESSEE HAD PAID UPFRONT LEASE PRE MIUM FOR OBTAINING 30 YEARS LEASE, THE TRIBUNAL HELD THE PAYMENT TO BE REVENUE IN NATURE A ND NEGATED THE REVENUES CONTENTION THAT THE EXPENDITURE WAS CAPITAL IN NATURE AND HEN CE NOT PERMISSIBLE IN COMPUTING BUSINESS INCOME. IN ARRIVING AT THIS CONCLUSION THE COORDINA TE BENCH HAD TAKEN NOTE OF THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL AT MUMBAI IN THE CAS E OF JT. CIT VS MUKUND LTD (SUPRA) AS ALSO THE JUDGMENTS OF THE HONBLE GUJARAT & KARNATA KA HIGH COURTS EXPRESSING CONTRARY 10 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 VIEW. WE FIND THAT ON THE ANALOGOUS FACTS THE TRIBU NAL HELD THAT THE LEASE PREMIUM PAID WAS NOTHING BUT IN THE NATURE OF LEASE RENT PAID ON LUM P SUM BASIS AND NO CAPITAL ASSET WAS ACQUIRED BY THE ASSESSEE BY MAKING SUCH PAYMENT SO AS TO JUSTIFY ITS CHARACTERIZATION AS CAPITAL EXPENDITURE. ONCE THE NATURE OF THE EXPENDI TURE IN QUESTION IS HELD TO BE IN THE REVENUE FIELD THEN THE QUESTION WHICH NEEDS TO ANSW ERED IN THE PRESENT APPEAL IS WHETHER THE ASSESSEES PLEA FOR AMORTIZATION OF THE LEASE PREMI UM OVER THE TENURE OF THE LEASE CAN BE ALLOWED PARTICULARLY WHEN IN THE CASE DECIDED BY TH E COORDINATE BENCH AT DELHI, IT WAS HELD THAT WHOLE OF THE EXPENDITURE WAS ELIGIBLE FOR DEDU CTION IN THE YEAR IN WHICH THE UPFRONT LEASE PREMIUM WAS PAID. IN THIS REGARD WE FIND THAT BEFORE THE DELHI BENCH OF THIS TRIBUNAL THE REVENUE ITSELF HAD CANVASSED THE PROPOSITION TH AT PAYMENT OF UPFRONT FEE WAS REVENUE EXPENDITURE BUT THE DEDUCTION THEREFORE WAS REQUIRE D TO BE ALLOWED ON PRO-RATA BASIS BY FOLLOWING THE RATIO LAID DOWN IN THE JUDGMENT OF TH E HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD (SUPRA ). WE FIND THAT IN THE GROUNDS OF APPEAL TAKEN BEFORE US THE AO HAS STATED THAT THE CLAIM OF THE ASSESSEE WAS FOR PROPORTIONATE WRITE OFF FOR ADVANCE RENT TO THE LESSORS IN RESPECT OF D IFFERENT LANDS TAKEN ON LEASE FOR THE PURPOSES OF BUSINESS. WE THEREFORE FIND THAT IN PRI NCIPLE THE AO DID NOT DISPUTE THE ASSESSEES CONTENTION THAT THE AMOUNT PAID BY THE A SSESSEE AT THE TIME OF OBTAINING LEASE WAS IN THE NATURE OF LEASE RENT PAID IN ADVANCE AND BY MAKING SUCH PAYMENT THE ASSESSEE HAD OBTAINED RIGHT TO USE SUCH LAND FOR CARRYING ON ITS BUSINESS. IN THE CIRCUMSTANCES ONCE THE NATURE OF PAYMENT IS FOUND TO BE FOR THE PURPOSE OF CARRYING ON BUSINESS AND NOT TO ACQUIRE CAPITAL ASSET THEN SUCH EXPENDITURE HAS TO BE CONSI DERED TO BE IN THE REVENUE FIELD AND THEREFORE ALLOWABLE AS PER THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE. 10. IT IS NO DOUBT TRUE THAT IN THE CASE OF ACIT VS DELHI INTERNATIONAL AIRPORT PVT LTD (SUPRA) THE COORDINATE BENCH ALLOWED THE DEDUCTION FOR THE ENTIRE UPFRONT FEE PAID FOR OBTAINING LEASE IN THE YEAR OF PAYMENT ITSELF EVEN THOUGH THE LEASE PERIOD WAS 30 YEARS. SIMILARLY THEHONBLE KARNATAKA HIGH COURT IN THE CA SE OF HMT LTD (SUPRA) AND HONBLE GUJARAT HIGH COURT IN THE CASE OF SUN PHARMACEUTICA LS INDUSTRIES LTD (SUPRA) ALLOWED THE DEDUCTION FOR ENTIRE UPFRONT LEASE PREMIUM IN THE Y EAR OF PAYMENT ITSELF THOUGH THE LEASE PERIODS WERE MORE THAN 90 YEARS. IN THE PRESENT CAS E HOWEVER THE ASSESSEE HAS NOT MADE 11 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 CLAIM FOR THE DEDUCTION IN THE YEAR OF PAYMENT OF U PFRONT FEES BUT HAS SOUGHT SPREAD OVER OF SUCH LEASE PREMIUM OVER THE EFFECTIVE LIFE OF THE L EASE. THE ASSESSEES CLAIM FOR AMORTIZATION OVER THE LEASE PERIOD IS SUPPORTED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT C ORPORATION LTD (SUPRA). THE FOLLOWING OBSERVATIONS IN THAT JUDGMENT SUPPORT THE ASSESSEE S METHODOLOGY OF CLAIMING PRO-RATA DEDUCTION FOR THE UPFRONT LEASE PREMIUM OVER THE LE ASE PERIOD. '15. THE TRIBUNAL, HOWEVER, HELD THAT SINCE THE ENT IRE LIABILITY TO PAY THE DISCOUNT HAD BEEN INCURRED IN THE ACCOUNTING YEAR IN QUESTION, THE AS SESSEE WAS ENTITLED TO DEDUCT THE ENTIRE AMOUNT OF RS.3,00,000 IN THAT ACCOUNTING YEAR. THIS CONCLUSION DOES NOT APPEAR TO BE JUSTIFIED LOOKING TO THE NATURE OF THE LIABILITY. IT IS TRUE THAT THE LIABILITY HAS BEEN INCURRED IN THE ACCOUNTING YEAR. BUT THE LIABILITY IS A CONTINUING LIABILITY WHICH STRETCHES OVER A PERIOD OF 12 YEARS. IT IS, THEREFORE, A LIABILITY SPREAD OVER A PERIOD OF 12 YEARS. ORDINARILY, REVENUE EXPENDITURE WHICH IS INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS MUST BE ALLOWED IN ITS ENTIRETY IN THE YEAR IN WHICH IT IS INCURRED. IT CANNOT BE SPREAD OVER A NUMBER OF YEARS EVEN IF THE ASSESSEE HAS WRITTEN IT OFF IN HI S BOOKS OVER A PERIOD OF YEARS. HOWEVER, THE FACTS MAY JUSTIFY AN ASSESSEE WHO HAS INCURRED EXPE NDITURE IN A PARTICULAR YEAR TO SPREAD AND CLAIM IT OVER A PERIOD OF ENSUING YEARS. IN FACT, A LLOWING THE ENTIRE EXPENDITURE IN ONE YEAR MIGHT GIVE A VERY DISTORTED PICTURE OF THE PROFITS OF A PARTICULAR YEAR. THUS IN THE CASE OF HINDUSTAN ALUMINIUM CORPORATION LTD. VS. CIT, ( 198 2) 30 CTR (CAL) 363: (]983) 144 ITR 474 (CAL) THE CALCUTTA HIGH COURT UPHELD THE CLAIM OF THE ASSESSEE TO SPREAD OUT A LUMP SUM PAYMENT TO SECURE TECHNICAL ASSISTANCE AND TRAINING OVER A NUMBER OF YEARS AND ALLOWED A PROPORTIONATE DEDUCTION IN THE ACCOUNTING YEAR IN Q UESTION. 16. ISSUING DEBENTURES AT A DISCOUNT IS ANOTHER SUC H INSTANCE WHERE, ALTHOUGH THE ASSESSEE HAS INCURRED THE LIABILITY TO PAY THE DISCOUNT IN T HE YEAR OF ISSUE OF DEBENTURES, THE PAYMENT IS TO SECURE A BENEFIT OVER A NUMBER OF YEARS. THERE I S A CONTINUING BENEFIT TO THE BUSINESS OF THE COMPANY OVER THE ENTIRE PERIOD. THE LIABILITY SHOUL D, THEREFORE, BE SPREAD OVER THE PERIOD OF THE DEBENTURES.' 11. WE MAY ALSO GAINFULLY REFER TO THE OBSERVATIONS OF THE HONBLE SUPREME COURT MADE IN THE CASE OF TAPARIA TOOLS LTD VS JT. CIT (372 IT R 605) WHICH ARE AS FOLLOWS: 17. THUS, THE FIRST THING WHICH IS TO BE NOTICED I S THAT THOUGH THE ENTIRE EXPENDITURE WAS INCURRED IN THAT YEAR, IT WAS THE ASSESSEE WHO WANT ED THE SPREAD OVER. THE COURT WAS CONSCIOUS OF THE PRINCIPLE THAT NORMALLY REVENUE EX PENDITURE IS TO BE ALLOWED IN THE SAME YEAR IN WHICH IT IS INCURRED, BUT AT THE INSTANCE OF THE ASSESSEE, WHO WANTED SPREADING OVER, THE 12 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 COURT AGREED TO ALLOW THE ASSESSEE THAT BENEFIT WHE N IT WAS FOUND THAT THERE WAS A CONTINUING BENEFIT TO THE BUSINESS OF THE COMPANY OVER THE ENT IRE PERIOD. 18. WHAT FOLLOWS FROM THE ABOVE IS THAT NORMALLY TH E ORDINARY RULE IS TO BE APPLIED, NAMELY, REVENUE EXPENDITURE INCURRED IN A PARTICULAR YEAR I S TO BE ALLOWED IN THAT YEAR. THUS, IF THE ASSESSEE CLAIMS THAT EXPENDITURE IN THAT YEAR, THE IT DEPARTMENT CANNOT DENY THE SAME. HOWEVER, IN THOSE CASES WHERE THE ASSESSEE HIMSELF WANTS TO SPREAD THE EXPENDITURE OVER A PERIOD OF ENSUING YEARS, IT CAN BE ALLOWED ONLY IF THE PRINCIPLE OF 'MATCHING CONCEPT' IS SATISFIED, WHICH UPTO NOW HAS BEEN RESTRICTED TO TH E CASES OF DEBENTURES. 12. FROM THE FOREGOING OBSERVATIONS IT IS EVIDENT T HAT IN THE OPINION OF THE HONBLE SUPREME COURT IN CERTAIN CASES WHERE THE ASSESSEES THEMSELVES OPT TO SPREAD THE EXPENDITURE OVER A PERIOD OF ENSUING YEARS THEN SUC H A CLAIM OF THE ASSESSEE CAN BE ALLOWED ONLY IF THE PRINCIPLE OF MATCHING CONCEPT IS SATISF IED. IN THE PRESENT ADMITTEDLY THE ASSESSEE HAS OBTAINED LEASES FROM GOVERNMENTAL AUTONOMOUS BO DIES SUCH AS CIDCO, KPT ETC. FOR THE PURPOSE OF CARRYING ON ASSESSEES BUSINESS AND USED THESE LEASE HOLD LANDS FOR SETTING UP INDUSTRIAL UNDERTAKINGS/INFRASTRUCTURE FACILITIES T HEREON. AS SUCH THE BENEFIT OF THE LEASE IS BEING ENJOYED BY THE ASSESSEE OVER THE LEASE PERIOD . THE ASSESSEE THEREFORE IS ASSURED OF DERIVING REVENUE FROM THE BUSINESS CARRIED FROM THE SE LEASED PREMISES OVER THE TENURE OF LEASE AND THEREFORE THE CORRESPONDING COST IN THE F ORM OF PRO-RATA LEASE PREMIUM IS REQUIRED TO BE NETTED OFF AGAINST REVENUES GENERATED FROM TH E BUSINESS, APPLYING THE PRINCIPLE OF MATCHING OF COST WITH REVENUE SO AS TO DISCLOSE TRU E & FAIR AMOUNT OF OPERATING PROFITS OF EACH YEAR. WE THEREFORE FIND THAT SINCE IN THE PRES ENT CASE THE ASSESSEE HAS SATISFIED THE MATCHING CONCEPT TEST, AS PRESCRIBED BY THE HONBLE SUPREME COURT, THE ASSESSEES CLAIM FOR AMORTIZATION OF LEASE PREMIUM IS ALLOWABLE. 13. WE ALSO NOTE THAT THE ASSESSEES CLAIM FOR AMOR TIZATION OF LEASE PREMIUM PRINCIPALLY RELATED TO LEASES OF FOUR PLOTS OF LAND AT MUMBAI & KOLKATA WHICH ARE USED FOR SETTING UP CONTAINER FREIGHT STATIONS (CFS), CONSIDERED AS IN FRASTRUCTURE FACILITY FOR THE PURPOSES OF SECTION 80IA OF THE ACT. WITH THE PERMISSIONS OBTA INED FROM THE MINISTRY OF FINANCE, DEPT. OF REVENUE, THE ASSESSEE HAS SET UP DEVEL CFSS ON T HE LEASED PREMISES. THE ISSUE OF ALLOWABILITY OF AMORTIZATION OF LEASE PREMIUM PAID IN RESPECT OF LEASED LAND ON WHICH CFS WAS SET UP, WAS CONSIDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DY.CIT 13 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 VS CENTURY PLYBOARDS INDIA LTD (SUPRA). IN THAT CAS E ALSO THE ASSESSEE HAD PAID LEASE PREMIUM OF RS.156 LACS FOR OBTAINING LEASE OF LAND FROM KOLKATA PORT TRUST FOR A PERIOD OF 15 YEARS. IN ITS BOOKS AS WELL AS IN THE RETURN OF INCOME THE ASSESSEE CLAIMED AMORTIZATION OF THE LEASE PREMIUM OVER THE PERIOD OF 15 YEARS. THIS CLAIM WAS REJECTED BY THE AO. ON APPEAL THE LD. CIT(A) ALLOWED THE DEDUCTION BY FOLL OWING THE CBDT CIRCULAR NO. 9/2014 DATED 23.04.2014. ON APPEAL RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ENTERPRISING ENTERPRISES VS CIT (SUPRA) THE REVENUE CLAIMED THAT SUCH EXPENDITURE BEING CAPITAL IN NATURE WAS NOT ALLOWABLE IN COMPUT ING BUSINESS INCOME OF THE ASSESSEE. THE TRIBUNAL HOWEVER NOTED THAT THE JUDGMENT OF THE HON BLE SUPREME COURT WAS RENDERED ON 04.12.2006 BUT THEREAFTER THE CBDT ISSUED THE CIRCU LAR ON 23.04.2014 WHEREIN EXPENDITURE OF SUCH NATURE WAS PERMITTED TO BE SPREAD OVER THE LEASE PERIOD AFTER THE COMMENCEMENT OF BUSINESS. THE RELEVANT FINDINGS OF THE COORDINATE B ENCH OF THIS TRIBUNAL WAS AS FOLLOWS: 16. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE P ARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED AND PLACED RELIANCE UPON. THE ISSUE IN THE INSTANT CASE REVOLV ES TO THE AMOUNT OF THE LEASE PREMIUM AMORTIZED BY THE ASSESSEE OVER A LEASE PERIOD AS DI SCUSSED ABOVE. THE ASSESSEE AFTER THE COMMENCEMENT OF THE BUSINESS HAS CLAIMED THE PROPOR TIONATE DEDUCTION OF THE AFORESAID EXPENDITURE PERTAINING TO THE YEAR UNDER CONSIDERAT ION. UNDISPUTEDLY THE PROPORTIONATE DEDUCTION WAS CLAIMED BY ASSESSEE U/S 37(1) OF THE ACT AFTER THE COMMENCEMENT OF ITS BUSINESS. 16.1. INDEED, CASE LAW RELIED ON BY LD DR AS DISC USSED ABOVE IS AGAINST THE ASSESSEE WHEREIN IT HAS BEEN HELD BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF ENTERPRISING ENTERPRISE (SUPRA) AND AFORESAID JUDGEMENT WAS DELI VERED BY THE HONBLE MADRAS HIGH COURT VIDE ORDER DATED 01.04.2004 WHICH WAS SUBSEQUENTLY AFFIRMED BY HONBLE SUPREME COURT VIDE ORDER DATED 04.12.2006. HOWEVER, SUBSEQUENT TO THE AFORESAID JUDGMENT, WE FIND THAT THE CBDT HAS ISSUED A CIRCULAR 9/2014 DATED 23.04.2014 WHEREIN THE IMPUGNED EXPENDITURE WAS ALLOWED OVER THE LEASE PERIOD AFTER THE COMMENCEMEN T OF BUSINESS AND RELEVANT EXTRACT OF THE CIRCULAR IS REPRODUCED BELOW:- 2. IN SUCH PROJECT, THE DEVELOPER (HEREINAFTER REF ERRED TO AS ASSESSEE), IN TERMS OF CONCESSIONAIRE AGREEMENT WITH GOVERNMENT OR ITS AGE NCIES IS REQUIRED TO CONSTRUCT, DEVELOP AND MAINTAIN THE INFRASTRUCTURAL FACILITY OF ROADS/ HIGHWAYS WHICH, INTER-ALIA, INCLUDES LAYING OF ROADS, BRIDGES, HIGHWAYS, APPROACH ROADS, CULVER TS, PUBLIC AMENITIES ETC. AT ITS OWN COST AND ITS UTILIZATION THEREOF FOR A SPECIFIED PERIOD. IN LIEU OF CONSIDERATION OF THE EXPENDITURE INCURRED ON CONSTRUCTION, OPERATION AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY COVERED BY 14 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 THE PERIOD OF THE AGREEMENT, THE ASSESSEE IS ACCORD ED A RIGHT TO COLLECT TOLL FROM USERS OF SUCH FACILITY. THE EXPENDITURE INCURRED BY SUCH ASSESSE E ON DEVELOPMENT AND CONSTRUCTION OF SUCH INFRASTRUCTURAL FACILITY ARE CAPITALIZED IN THE ACC OUNTS. IT IS SEEN THAT IN RETURNS-OF-INCOME, ASSESSEE ARE GENERALLY CLAIMING DEPRECIATION ON SUC H CAPITALIZED EXPENDITURE TREATING IT AS AN INTANGIBLE ASSET IN TERMS OF SECTION 32(1)(II) OF THE ACT WHILE IN ASSESSMENTS, SUCH CLAIMS ARE BEING DISALLOWED BY THE ASSESSING OFFICER ON THE GR OUNDS THAT SUCH INFRASTRUCTURAL FACILITY IS NOT OWNED, WHOLLY OR PARTLY, BY THE TAX PAYER WHICH IS AN ESSENTIAL CONDITION FOR CLAIMING DEPRECIATION AND FURTHER RIGHT TO COLLECT TOLL DOES NOT FALL IN AN OF THE CATEGORIES OF INTANGIBLE ASSETS SPECIFIED IN SUB-CLAUSE (II)OF SUB-SECTION (1) OF SECTION 32 OF THE ACT. 3. IN BOT ARRANGEMENTS FOR DEVELOPMENT OF ROADS/HIG HWAYS, AS A MATTER OF GENERAL PRACTICE, POSSESSION OF LAND IS HANDED OVER TO THE ASSESSEE B Y THE GOVERNMENT/NOTIFIED AUTHORITYFOR THE PURPOSES OF CONSTRUCTION OF THE PROJECT WITHOUT ANY ACTUAL TRANSFER OF OWNERSHIP AND SUCH ASSESSEE HAS ONLY A RIGHT TO DEVELOP AND MAINTAIN S UCH ASSET. IT ALSO ENJOYS THE BENEFITS ARISING FROM USE OF ASSET THROUGH COLLECTION OF TOL L FOR A SPECIFIED PERIOD WITHOUT HAVING ACTUAL OWNERSHIP OVER SUCH ASSET. THEREFORE, THE R IGHTS IN THE LAND REMAIN VESTED WITH THE GOVERNMENT OR ITS AGENCIES. THUS, AS ASSESSEE DOES NOT HOLD ANY RIGHTS IN THE PROJECT EXCEPT RECOVERY OF TOLL FEE TO RECOUP THE EXPENDITURE INCU RRED, IT CANNOT THEREFORE BE TREATED AS AN OWNER OF THE PROPERTY, EITHER WHOLLY OR PARTLY, FOR PURPOSES OF ALLOWABILITY OF DEPRECIATION UNDER SECTION 32(1)(II) OF THE ACT. THUS, PRESENT PROVISIONS OF THE ACT DO NOT ALLOW CLAIM OF DEPRECIATION ON TOLL WAYS DUE TO NON FULFILMENT OF OWNERSHIP CRITERIA IN SUCH CASES. 4. THERE IS NO DOUBT THAT WHERE THE ASSESSEE INCUR S EXPENDITURE ON A PROJECT FOR DEVELOPMENT OF ROADS/HIGHWAYS, HE IS ENTITLED TO RECOVER COST I NCURRED BY HIM TOWARDS DEVELOPMENT OF SUCH FACILITY (COMPRISING OF CONSTRUCTION COST AND OTHER PRE-OPERATIVE EXPENSES) DURING THE CONSTRUCTIONS COST AND OTHER PRE-OPERATIVE EXPENSES ) DURING THE CONSTRUCTION PERIOD. FURTHER, EXPENDITURE INCURRED BY THE ASSESSEE ON SUCH BOT PR OJECTS BRINGS TO IT AN ENDURING BENEFIT IN THE FORM OF RIGHT TO COLLECT THE TOLL DURING THE PE RIOD OF THE AGREEMENT. HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT C ORPORATION LTD. VS. CIT IN 225 ITR 802= 2002-TIOL-290-SC-IT-LB ALLOWED SPREADING OVER OF LI ABILITY OVER A NUMBER OF YEARS ON THE GROUND THAT THERE WAS CONTINUING BENEFIT TO THE COM PANY OVER A PERIOD. THEREFORE, ANALOGOUSLY, EXPENDITURE INCURRED ON AN INFRASTRUCT URE PROJECT FOR DEVELOPMENT OF ROADS/HIGHWAYS UNDER BOT AGREEMENT MAY BE TREATED A S HAVING BEEN MADE/INCURRED FOR THE PURPOSES OF BUSINESS OR PROFESSION OF THE ASSESSEE AND SAME MAY BE ALLOWED TO BE SPREAD DURING THE TENURE OF CONCESSIONAIRE AGREEMENT. 5. IN VIEW OF ABOVE, CENTRAL BOARD OF DIRECT TAXES , IN EXERCISE OF THE POWERS CONFERRED UNDER SECTION 119 OF THE ACT HEREBY CLARIFIES THAT THE CO ST OF CONSTRUCTION ON DEVELOPMENT OF INFRASTRUCTURE FACILITY OF ROADS/HIGHWAYS UNDER BOT PROJECTS MAY BE AMORTIZED AND CLAIMED AS ALLOWABLE BUSINESS EXPENDITURE UNDER THE ACT. 6. THE AMORTIZATION ALLOWABLE MAY BE COMPUTED AT T HE RATE WHICH ENSURES THAT THE WHOLE OF THE COST INCURRED IN CREATION OF INFRASTRUCTURAL FA CILITY OF ROAD/HIGHWAY IS AMORTIZED EVENLY 15 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 OVER THE PERIOD OF CONCESSIONAIRE AGREEMENT AFTER E XCLUDING THE TIME TAKE FOR CREATION OF SUCH FACILITY. 7. IN THE CASE WHERE AN ASSESSEE HAS CLAIMED ANY D EDUCTION OUT OF INITIAL COST OF DEVELOPMENT OF INFRASTRUCTURE FACILITY OF ROADS/HIGHWAYS UNDER BOT PROJECTS IN EARLIER YEAR, THE TOTAL DEDUCTION SO CLAIMED FOR THE ASSESSMENT YEARS PRIOR TO THE ASSESSMENT YEAR UNDER CONSIDERATION MAY BE DEDUCTED FROM THE INITIAL COST OF INFRASTRUCTURE FACILITY OF ROADS/HIGHWAYS AND THE COST SO REDUCED SHALL BE A MORTIZED EQUALLY OVER THE REMAINING PERIOD OF TOLL CONCESSIONAIRE AGREEMENT. 8. IT IS HEREBY CLARIFIED THAT THIS CIRCULAR IS AP PLICABLE ONLY TO THOSE INFRASTRUCTURE PROJECTS FOR DEVELOPMENT OF ROAD/HIGHWAYS ON BOT BASIS WHERE OWNERSHIP IS NOT VESTED WITH THE ASSESSEE UNDER THE CONCESSIONAIRE AGREEMENT. 9. THIS, MAY BE BROUGHT TO THE NOTICE OF ALL CONCE RNED. THE AFORESAID CIRCULAR WAS ISSUED ON 23.04.2014 AND SUBSEQUENT TO THE JUDGMENT OF HONBLE MADRAS HIGH COURT AS WELL AS HONBLE SUPREME COURT. THE CIRCULAR BEING BENEFICIAL TO THE ASSESSEE IS BINDING ON THE LOWER AUTHORITIES. IN O UR CONSIDERED VIEW, THE AO BEFORE MAKING ANY DISALLOWANCE SHOULD HAVE REFERRED TO THE AFORES AID CIRCULAR. IN THE BACKGROUND OF THE ABOVE DISCUSSION AND PRECEDENT OF THE CASES WE DO N OT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) AND ACCORDINGLY WE UPHOLD THE SAME. THIS GR OUND OF REVENUE IS DISMISSED. 14. WE THUS FIND THAT THE ON IDENTICAL FACTS THE CO ORDINATE BENCH OF THIS TRIBUNAL BY APPLYING THE CBDT CIRCULAR NO. 9/2014 DATED 23.04.2 014 GRANTED THE ASSESSEES CLAIM FOR AMORTIZATION OF LEASE PREMIUM OVER THE EFFECTIVE LI FE OF LEASE. FOR THE REASONS DISCUSSED IN THE FOREGOING THEREFORE WE DO NOT FIND ANY INFIRMIT Y IN THE ORDER OF THE LD. CIT(A) GRANTING AMORTIZATION OF LEASE PREMIUM OF RS.79,68,169/- IN COMPUTING BUSINESS INCOME OF THE ASSESSEE. IN THE RESULT, THE APPEAL OF THE REVENUE FAILS. 15. NOW WE TAKE UP THE ASSESSEES APPEAL IN ITA NO. 2483/KOL/2017. IN THIS APPEAL THE ASSESSEE HAS OBJECTED TO THE LD. CIT(A)S ORDER UPH OLDING THE DISALLOWANCE OF RS.2,90,26,398/- OUT OF THE APPELLANTS CLAIM FOR D EDUCTION U/S 80IA OF THE ACT. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT IN THE RETURN OF INCOME THE APPELLANT CLAIMED DEDUCTION OF RS.19,77,40,855/- U/S. 80IA OF THE ACT BEING THE PROFIT DERIVED FROM CFS UNDERTAKING. ON PERUSAL OF THE PROFIT & LOSS ACCOUNT OF THE ELIG IBLE UNDERTAKING THE AO FOUND THAT RS.2,90,26,398/- WAS ACCOUNTED AS INTEREST FROM THE CURRENT ACCOUNT. THE AO HELD THAT SINCE 16 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 SUCH INTEREST WAS NOT DERIVED FROM THE INDUSTRIAL U NDERTAKING HE SHOW CAUSED THE ASSEESSEE TO FURNISH ITS EXPLANATION. SINCE NO EXPLANATION WA S FORTHCOMING, RELYING ON THE JUDGMENTS OF THE HONBLE SUPREME COURT IN THE CASE OF STERLI NG FOODS LTD (237 ITR 53), PANDIAN CHEMICALS LTD (262 ITR 278) AND LIBERTY INDIA LTD ( 183 TAXMAN 349) THE AO HELD THAT THE INTEREST AMOUNT WAS LIABLE TO BE EXCLUDED. IN AOS OPINION IN ORDER TO CLAIM THE DEDUCTION UNDER SECTION 80IA/80HH ETC. IT WAS NECESSARY FOR T HE ASSESSEE TO PROVE FIRST DEGREE NEXUS OF THE INCOME WITH THE OPERATIONS OF THE ELIGIBLE U NDERTAKING. SINCE THE ASSESSEE FAILED TO PROVE SUCH NEXUS, THE AO HELD THAT THE INTEREST ON CURRENT ACCOUNT AMOUNTING TO RS.2,90,26,398/- WAS TO BE EXCLUDED FROM THE DEDUCT IBLE PROFITS OF THE ELIGIBLE UNDERTAKING. ON APPEAL THE LD. CIT(A) CONFIRMED THE IMPUGNED DIS ALLOWANCE. BEING AGGRIEVED THE APPELLANT IS IN APPEAL BEFORE US. 16. ASSAILING THE ORDER OF THE LD. CIT(A), THE LD. AR ARGUED THAT THE AUTHORITIES BELOW DID NOT UNDERSTAND THE BASIC JURISDICTIONAL FACTS N OR UNDERSTOOD THE ENTRIES MADE IN THE AUDITED ACCOUNTS OF THE ELIGIBLE UNDERTAKING FURNIS HED IN PRESCRIBED FORM 10CCB. HE SUBMITTED THAT THE BOTH THE AUTHORITIES FAILED TO N OTE THE BASIC FACT THAT THE SUM OF RS.2,90,26,398/- WAS NEVER CREDITED IN THE STAND-AL ONE P&L A/C OF THE ELIGIBLE UNDERTAKING. RATHER THE SAID AMOUNT REPRESENTED NET INTEREST DEB ITED TO THE P&L A/C OF THE ELIGIBLE UNDERTAKING AND THEREFORE ON THIS MATERIAL FACT ALO NE THE DECISIONS OF THE HONBLE SUPREME COURT RELIED UPON BY THE AO HAD NO APPLICATION. DRA WING ATTENTION TO THE SUBMISSIONS FILED BEFORE THE LD. CIT(A) EXTRACTED AT PAGES 6 TO 8 OF THE IMPUGNED ORDER AND ALSO THE AUDITED ACCOUNTS OF THE COMPANY AND OF THE ELIGIBLE UNDERTA KING, THE LD. AR SUBMITTED THAT IN THE ACCOUNTS OF THE ELIGIBLE UNDERTAKING ONLY MEMORANDU M ENTRIES RELATING TO INTEREST WERE MADE BOTH ON THE CREDIT AND DEBIT SIDE. LD. AR EXPL AINED THAT BOTH THE INTEREST AMOUNTS REPRESENTED NOTIONAL INTEREST ON THE FUNDS TRANSACT ED BETWEEN THE ELIGIBLE UNDERTAKING AND THE HEAD OFFICE OF THE APPELLANT AT KOLKATA. HE EXP LAINED THAT THE ELIGIBLE UNDERTAKING CARRIED ON CFS BUSINESS IN THE COURSE OF WHICH THE UNDERTAKING ALWAYS POSSESSED SURPLUS FUNDS WHICH WERE TRANSFERRED TO THE HEAD OFFICE TO FINANCE APPELLANTS OTHER BUSINESS ACTIVITIES. HE FURTHER SUBMITTED THAT FOR SETTING U P THE CFS PROJECT, THE HEAD OFFICE HAD UTILIZED ITS OWN FUNDS FOR MEETING THE COST OF FIXE D ASSETS. AS PER THE ACCOUNTING PRACTICE 17 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 REGULARLY FOLLOWED BY THE APPELLANT FOR DETERMINING PROFITABILITY OF EACH PROFIT CENTRE, ENTRIES FOR CHARGING NOTIONAL INTEREST WERE PASSED IN THE BOOKS OF THE RESPECTIVE UNDERTAKINGS/ COST CENTRES. TO DETERMINE STAND ALON E PROFITABILITY OF CFS UNDERTAKING INTEREST @ 11% WAS DEBITED ON THE FUNDS INVESTED BY THE HO. FOLLOWING THE METHODOLOGY CONSISTENTLY FOLLOWED IN THE PAST, IN THE P&L A/C O F CFS UNDERTAKING OF THE AY 2014/15, INTEREST OF RS.3,28,20,202/- WAS DEBITED. SUCH INTE REST WAS NEVER ACTUALLY PAID BY CFS UNDERTAKING TO THE HO. SIMILARLY IN RESPECT OF THE FUNDS PROVIDED BY THE CFS UNDERTAKING TO THE HO DURING THE RELEVANT YEAR, INTEREST @ OF 11% , AMOUNTING TO RS. 37,93,804/-WAS CREDITED IN THE STAND-ALONE P&L ACCOUNT OF CFS UNDE RTAKING. SUCH INTEREST WAS ALSO RECOGNIZED IN THE BOOKS ON NOTIONAL BASIS WITHOUT T HERE BEING ACTUAL INTEREST PAYMENT BY THE HO. THE LD. AR SUBMITTED THAT BOTH DEBIT & CREDIT E NTRIES IN THE P&L A/C OF THE ELIGIBLE UNDERTAKING WERE MADE ON HYPOTHETICAL BASIS AND NO ACTUAL PAYMENT OF INTEREST BETWEEN THE HO AND THE ELIGIBLE UNDERTAKING WAS AFFECTED. THE L D. AR FURTHER SUBMITTED THAT THE ASSESSEE PREPARED ONE CONSOLIDATED AUDITED FINANCIA L STATEMENT IN RESPECT OF ALL ITS BUSINESS ACTIVITIES AND ONLY ONE RETURN OF INCOME WAS FILED ON CONSOLIDATED BASIS. IN DRAWING UP THE CONSOLIDATED PROFIT & LOSS ACCOUNT OF THE COMPANY A S WHOLE, INTRA UNIT TRANSACTIONS STOOD CANCELLED OUT AND THEREBY NEITHER ANY INTEREST INCO ME NOR INTEREST EXPENDITURE IN RESPECT OF INTRA-UNIT FUND TRANSFERS APPEARED IN THE ANNUAL AU DITED FINANCIALS OF THE COMPANY. THE LD. AR SUBMITTED THAT STAND-ALONE ACCOUNTS OF THE ELIGI BLE UNDERTAKING ACCOUNTED FOR INTEREST EXPENSE& INCOME OF RS.37,93,804/- &RS.3,28,20,202/- RESPECTIVELY, THE NET EFFECT OF THESE TWO FIGURES I.E. RS.2,90,26,398/-, REPRESENTED NOTI ONAL CHARGE OF INTEREST TO THE P&L A/C OF THE CFS UNDERTAKING. BOTH THE LOWER AUTHORITIES HOW EVER WRONGLY UNDERSTOOD THE SAID AMOUNT TO BE INTEREST INCOME CREDITED IN THE P&L A/ C OF THE ELIGIBLE UNDERTAKING. THE LD. AR SUBMITTED THAT IN ARRIVING AT THE OPERATING PROF IT OF CFS UNDERTAKING, ELIGIBLE FOR DEDUCTION U/S.80IA, THE NET NOTIONAL INTEREST CHARG E OF RS.2,90,26,398/- WAS RIGHTLY IGNORED. HE THEREFORE PRAYED THAT THE DISALLOWANCE MADE BY T HE AO BE DELETED. PER CONTRA THE LD. DR STRONGLY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 17. WE HAVE HEARD THE SUBMISSIONS OF BOTH PARTIES A ND GONE THROUGH THE DOCUMENTS PLACED ON RECORD. ON SCRUTINY OF THE AUDITED P&L A/ C OF THE CFS UNDERTAKING WE FIND MERIT 18 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 IN THE LD. ARS INITIAL CONTENTION THAT DISALLOWANC E BY THE AO WAS MADE ON ASSUMPTION OF INCORRECT FACTS. IN THE IMPUGNED ORDER THE AO PROCE EDED ON THE PREMISE THAT IN THE P&L A/C OF THE ELIGIBLE UNDERTAKING THE ASSESSEE HAD CREDIT ED INTEREST INCOME OF RS.2,90,26,398/- IN RESPECT OF CURRENT ACCOUNT BALANCE. BASED ON ASSUMP TION OF SUCH FACT THE AO INVOKED THE RATIO LAID DOWN IN THE DECISIONS OF THE HONBLE APE X COURT WHEREIN IT HAS BEEN HELD THAT INTEREST INCOME IS NOT ELIGIBLE TO BE INCLUDED IN T HE PROFITS OF THE UNDERTAKINGS WHICH ARE ELIGIBLE FOR CLAIMING PROFIT-BASED DEDUCTIONS U/S 8 0HH/80I ETC. WE HOWEVER FIND THAT THE ASSESSEE HAD BOTH CREDITED AND DEBITED NOTIONAL INT EREST IN RESPECT OF INTRA-UNIT FUND TRANSFERS AND IN REALITY NO INTEREST WAS EITHER PAID OR RECEI VED BY ANY OF PARTIES. IN ANY CASE WE FIND THAT ULTIMATELY IN THE P&L A/C OF CFS UNDERTAKING T HERE WAS NET DEBIT OF RS.2,90,26,398/- ON ACCOUNT OF INTEREST ON INTRA-UNIT FUND TRANSFERS . IN OTHER WORDS THE NET PROFIT OF THE CFS UNDERTAKING WAS ARRIVED AT AFTER THE NET CHARGE OF INTEREST OF RS. 2,90,26,398/-. ON THESE FACTS THEREFORE WE FIND MERIT IN THE LD. ARS SUBMI SSIONS THAT ON FACTS; DECISIONS OF THE HONBLE SUPREME COURT RELIED UPON BY THE AO HAD NO APPLICATION AND THEREFORE THE BASIS ADOPTED BY THE AO FOR MAKING THE IMPUGNED DISALLOWA NCE BEING FACTUALLY INCORRECT, THE DISALLOWANCE MADE BY THE AO WAS UNWARRANTED. 18. WE ALSO NOTE THAT NET INTEREST OF RS.2,90,26,3 98/- WAS NEVER PAID BY THE ELIGIBLE UNDERTAKING TO ITS HO OR ANY OTHER PERSON, AND THER EFORE IN ARRIVING AT THE OPERATING PROFIT, ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA, THE ASSE SSEE RIGHTLY IGNORED THE NOTIONAL CHARGE OF INTEREST. THE LD AR BROUGHT TO OUR ATTENTION THA T THE METHODOLOGY OF ACCOUNTING NOTIONAL INTEREST ON INTRA UNIT FUND TRANSFERS WAS CONSISTEN TLY FOLLOWED IN THE EARLIER YEARS AS WELL. EVEN IN THE PAST YEARS P&L A/C OF THE ELIGIBLE UND ERTAKING, SUCH NOTIONAL INTEREST WAS CHARGED BUT IN ARRIVING AT THE PROFITS ELIGIBLE FOR DEDUCTION U/S 80IA, THE SAME WAS IGNORED AND ON THE ENHANCED INCOME THE DEDUCTION WAS CLAIME D AND WAS ALSO ALLOWED IN THE ASSESSMENTS FRAMED U/S 143(3) OF THE ACT. FROM THE CHART PROVIDED BY THE APPELLANT IN THE PAPER-BOOK, WE FIND THAT EVEN THOUGH THE AOS MADE C ERTAIN ADJUSTMENTS TO THE PROFITS OF THE ELIGIBLE UNDERTAKING IN THE EARLIER YEARS ASSESSME NTS BUT IN NONE OF THE ASSESSMENTS EXCEPT FOR THE AY 2012-13 ANY ADVERSE INFERENCE WAS DRAWN IN RESPECT OF THE ASSESSEES CLAIM FOR EXCLUSION OF NOTIONAL INTEREST EXPENSES ACCOUNTED I N RESPECT OF INTRA-UNIT FUND TRANSFERS. 19 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 SIMILAR INTEREST DISALLOWANCE WAS MADE BY THE AO IN THE ASSESSMENT ORDER FOR THE AY 2012- 13 WHICH WAS DELETED BY THE LD. CIT (A) 6 KOLKATA I N HIS ORDER DATED 27/10/2017 IN APPEAL NO. 222/CIT(A)-6/KOL/2015-16 AND THE DECISION OF TH E CIT(A) ON THIS ISSUE WAS ACCEPTED BY THE REVENUE BY NOT FILING SECOND APPEAL THERE A GAINST. WE ALSO FIND FROM THE ANNUAL AUDITED ACCOUNTS THAT IN FACT THE ASSESSEE COMPANY DID NOT INCUR INTEREST EXPENDITURE. RATHER THE ASSESSEE COMPANY EARNED SUBSTANTIAL INTEREST WH ICH WAS ASSESSED TO TAX IN THE IMPUGNED ORDER. FROM EXAMINATION OF THE AUDITED ACCOUNTS IT WAS FOUND THAT THE APPELLANTS NET OWN FUNDS IN THE FORM OF CAPITAL & RESERVES AS ON 31.3. 2014 WERE RS.819.65 CRORES WHICH WERE FAR IN EXCESS OF THE INVESTMENT IN ASSETS OF CFS UN DERTAKING. MOREOVER PROFITS OF CFS UNDERTAKING IN THE TEN YEARS OF ITS OPERATIONS WERE SUBSTANTIALLY MORE THAN THE FUNDS INVESTED BY HO, ON SETTING UP OF CFS PROJECT. WE AL SO NOTE THAT DURING THE RELEVANT YEAR THE GROSS INTEREST COST OF THE ASSESSEE WAS RS.4.18 CRO RES WHEREAS INTEREST INCOME CREDITED IN THE P&L A/C WAS RS.35.44 CRORES. WE THEREFORE FIND THAT DURING THE RELEVANT YEAR THE ASSESSEE COMPANY MADE NET INTEREST EARNING OF RS.31.26 CRORE S. VIEWED FROM ANY ANGLE THEREFORE WE FIND THAT THE ASSESSEE COMPANY DID NOT INCUR ANY IN TEREST EXPENDITURE IN RELATION TO ITS CFS UNDERTAKING REQUIRING ANY ADJUSTMENT TO THE PROFITS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. THE DISALLOWANCE OF RS.2,90,26,398/-MADE BY TH E AO IN GRANTING DEDUCTION U/S 80IA IS THEREFORE DELETED. 19. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 01.07.2019 SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1ST JULY, 2019 JD.(SR.P.S.) 20 ITA NOS. 2264 & 2483/KOL/2017 BALMER LAWRIE & CO. LTD., AYS- 2014-15 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT ACIT/DCIT, CIRCLE-5(2), KOLKATA. 2 RESPONDENT M/S. BALMER LAWRIE & CO. LTD., 21, N ETAJI SUBHAS ROAD, BALMER LAWRIE HOUSE, KOLKATA-700 001. 3. 4. CIT(A)-2, KOLKATA (SENT THROUGH E-MAIL) CIT-, , KOLKATA. 5. DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR