Appeal details
Counselvise Citation
[2019] 112 COUNSELVISE.COM (IT) 0296 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
5 year(s) 8 month(s) 4 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
20-12-2019
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Next Hearing Date
19-05-2016
Assessment Year
2009-2010
Appeal Filed On
15-04-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL K , BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH , JM & SHRI M.BALAGANESH, AM ITA NO. 2525 /MUM/201 4 ( ASSESSMENT YEAR : 2009 - 10 ) M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD., ) ADITYA BIRLA CENTRE A - WING , SK AHIRE MARG WORLI, MUMBAI - 400030 VS. ADDITIONAL COMMISSIONER OF INCOME TAX, LARGE TAX PAYER UNIT CENTRE - 1, 29 TH FLOOR WORLD TRADE CENTRE CUFFE PARADE, MUMBAI 400 005 PAN/GIR NO. AAACI1747H (APPELLANT ) .. (RESPONDENT ) ITA NO. 2963 /MUM/201 4 ( ASSESSMENT YEAR : 2009 - 10 ) DEPUTY COMMISSIONER OF INCOME TAX, LARGE TAX PAYER UNIT CENTRE - 1, 29 TH FLOOR WORLD TRADE CENTRE CUFFE PARADE, MUMBAI 400 005 VS. M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIR LA NUVO LTD.,) ADITYA BIRLA CENTRE A - WING,SK AHIRE MARG WORLI, MUMBAI - 400030 PAN/GIR NO. AAACI1747H (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI JEHANGIR D MISTRI & SHRI HARDIK NIRMAL & MS.RIDDHI MARU ASSESSEE BY SHRI ANAND MOHAN DATE OF HEARING 30 / 09 /2019 DATE OF PRONOUNCEMENT 20 / 12 /2019 ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 2 / O R D E R PER M. BALAGANESH (A.M) : THESE CROSS APPEAL S IN ITA NO. 2525/MUM/2014 & 2963/MUM/2014 FOR A.Y. 2009 - 10 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) - 24, MUMBAI IN APPEAL NO. CIT(A) - LTU/ADDL. CIT - LTU/190/2011 - 12 DATED 24/01/2014 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 01/11/2011 BY THE LD. ADDL. COMMISSI ONER OF INCOME TAX , LTU (HEREINAFTER REFERRED TO AS LD. AO). DISALLOWANCE U/S.14A OF THE ACT GROUND NO.1 OF ORIGINAL GROUNDS OF APPEAL AND ADDITIONAL GROUNDS 1 & 2 OF ASSESSEE APPEAL & GROUND NO.1 OF REVENUE APPEAL 2. WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE DESERVES TO BE ADMITTED AS IT GOES TO THE ROOT OF THE MATTER AND ACCORDINGLY, THE SAME IS TAKEN UP FOR ADJUDICATION ALONGWITH THE ORIGINAL GROUNDS OF APPEAL. WE FIND THAT THE ASSESSEE HAD DERIVED DIVID END INCOME OF RS. 16,81,44,106/ - AND CLAIMED THE SAME AS EXEMPT IN THE RETURN OF INCOME. WE FIND THAT THE ASSESSEE HAD MADE VOLUNTARY DISALLOWANCE U/S.14A OF THE ACT IN THE SUM OF RS.83,04,00,000/ - WORKED OUT AS UNDER: - INTEREST ON SPECIFIC BORROWINGS - RS.59.66 CRORES INTEREST ON GENERAL BORROWINGS - RS.20.36 CRORES DIRECT / INDIRECT EXPENSES - RS. 3.02 CRORES =========== TOTAL RS.83.04 CRORES ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 3 2.1. THE LD. AO ON VERIFICATION OF DETAILS OF VARIOUS EXPENSES AND THE FINANCIAL STATEMENTS OF THE ASSESSEE AGREED TO THE DISALLOWANCE MADE BY THE ASSESSEE TOWARDS INTEREST ON SPECIFIC BORROWINGS AND GENERAL BORROWINGS AS STATED SUPRA. BUT HOWEVER, WITH REGARD TO DISALLOWANCE MADE IN THE SUM OF RS.3.02 CRORES TOWARDS DIRECT / INDIRECT EXPENSES, THE LD. AO PROCEEDED TO MAKE THE DISALLOWANCE BASED ON THE COMPUTATION MECHANISM PROVIDED UNDER RULE 8D(2)(III) OF THE RULES AND ARRIVED AT THE DISALLOWANCE OF RS.22.46 CRORES THEREON. AFTER REDUCING THE AMOUNT DISALLOWED BY THE ASSESSEE IN THE SUM OF RS.3.02 CRORES TOWARDS ADMINISTRATIVE EXPENSES, THE LD. AO DISALLOWED THE REMAINING SUM OF RS.19.44 CRORES UNDER RULE 8D(2)(III) OF THE RULES. 2.1.1. WE FIND THAT THE ASSESSEE HAD GIVEN BREAK - UP OF DIVIDEND RECEIVED BY IT AS UNDER: - DIVIDEND FROM HINDALCO INDU STRIES LTD. - RS.3,77,31,050/ - DIVIDEND FROM BIRLA GLOBAL FINANCE CO. LTD. - RS.10,59,64,841/ - DIVIDEND FROM BIRLA GLOBAL FINANCE CO. LTD. - RS. 96,36,986/ - UTI MASTER SHARES - RS. 700/ - MANGALORE REFINERY & P ETROCHEMICALS LTD. - RS. 480/ - MASTER SHARES - RS. 7,992/ - ============== TOTAL RS.15,33,42,049/ - ============ 2.2. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE MADE A PLEA THAT IT HAD MADE THE ENTIRE INVESTMENTS OUT OF ITS OWN FUNDS AND INTERNAL ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 4 A CCRU ALS AND GAVE DETAILS OF AVAILABILITY OF OWN FUNDS AS ON 31/03/2009 AS UNDER: - PARTICULARS RS.(IN CRORES) SHARE CAPITAL 95.01 SHARE WARRANTS 377.41 RESE RVES AND SURPLUS 3649.24 DEFERRED TAX LIABILITIES 180.24 ACCUMULATED DEPRECIATION 1813.95 ======= TOTAL 6115.85 ======= 2.3. THE ASSESSEE PLEADED THAT IT HAS VARIOUS MANUFACTURING UNITS SITUATED AT GUJARAT, WEST B ENGAL, UTTAR PRADESH AND TAMIL N ADU. IT WAS ALSO PLEADED THAT IT IS HAVING A SEPARATE CORPORATE FINANCE DIVISION. IT WAS SUBMITTED THAT ITS VARIOUS UNITS ARE ONLY MANUFACTURING UNITS OPERATED AND MANAGED AS PROFIT CENTRES. THE MANUFACTURING UNITS ARE NOT INVOLVED IN INVESTMENT ACTIVITIES. IT WAS SUBMITTED THAT EACH UNIT MAINTAINS ITS SEPARATE BOOKS OF ACCOUNTS AND ALSO MAINTAINS ITS SEPARATE BANK ACCOUNTS AND THEREFORE, THE EXPENSES AND INTEREST AT MANUFACTURING UNITS HAVE NO RELATION WITH THE INVESTMENT AND ACCORDINGLY , CANNOT BE CONSIDERED FOR DISALLOWANCE U/S.14A OF THE ACT. THE ASSESSEE FURTHER SUBMITTED BEFORE THE LD. CIT(A) THAT ITS CORPORATE FINANCE DIVISION AT MUMBAI COMPRISES VARIOUS ACTIVITIES LIKE MANAGEMENT OF TREASURY OPERATIONS, LEGAL COMPLIA NCE, CORPORATE TAXATION, CORPORATE MIS AND CORPORATE ACCOUNTS ETC. CORPORATE F INANCE D IVISION (CFD) AT MUMBAI IS INVOLVED IN PLACING OF ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 5 SURPLUS FUNDS IN TEMPORARY AND LONG TERM INVESTMENTS INCLUDING SHARES, UNITS OF MUTUAL FUNDS, GOVERNMENT SECURITIES, BON DS ETC , ON WHICH DIVIDENDS AND INTEREST INCOME WERE EARNED. ACCORDINGLY, IT WAS PLEADED THAT EXPENSES INCURRED IN SUCH C ORPORATE FINANCE D IVISION ALONE PERTAINING TO TREASURY DEPARTMENT COULD BE CONSIDERED FOR THE PURPOSE OF MAKING DISALLOWANCE OF ADMINIST RATIVE EXPENSES U/S.14A OF THE ACT. 2.4. IT WAS FURTHER PLEADED THAT MAJORITY OF DIVIDENDS WERE RECEIVED ONLY FROM THE GROUP COMPANIES OF THE ASSESSEE WHERE DIVIDEND GETS CREDITED DIRECTLY THROUGH ELECTRONIC CLEARING SERVICE (ECS) IN THE BANK ACCOUNT OF THE ASSESSEE FOR WHICH NO EXPENSES NEED TO BE INCURRED BY THE ASSESSEE. THE ASSESSEE PLEADED BEFORE THE LD. CIT(A) THAT IT HAD WORKED OUT THE DISALLOWANCE ON A SCIENTIFIC METHOD BASED ON ACTUAL EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT AND HENCE, THE RE IS NO NEED TO MAKE FURTHER DISALLOWANCE BY APPLYING THE RULE 8D (2)(III) OF THE RULES. 2.5. WE FIND THAT THE ASSESSEE VIDE LETTER DATED 22/01/2014 HAD FURNISHED THE DETAILS OF ADMINISTRATIVE EXPENSES AND ITS RELATION WITH REGARD TO THE INVESTMENT ACTIV ITY IN THE FOLLOWING TABULAR FORM: - DETAILS OF ADMINISTRATION EXPENSES INCURRED AT CFD LEVEL TOTAL EXPENSES AS PER CFD AUDITED BALANCE SHEET ALREADY DISALLOWED IN RETURN BALANCE EXPENSES NOT RELATED TO INVESTMEN T ACTIVITY BALANCE COMMON . EXPENSES REMARKS AUDIT FEE 8,683,178 - 8,683,178 8,683,178 . STATUTORY AND TAX AUDIT FEES REPAIR BUILDINGS 231,707 - 231,707 . 231,707 ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 6 REPAIR OTHERS 13,842,728 - 13,842,728 13,842,728 RENT 1,255,493 - 1,255,493 1,255,493 RATES & T AXES 3,622,956 2,750,000 872,956 872,956 RS 27.50 LACS TOWARDS WEALTH TAX PROVISION ALREADY DISALLOWED INSURANCE 830,527 830,527 . 830,527 DONATIONS 3,250,000 3,250,000 ADVERTISEMENT 999,612 999,612 832,765 166,847 S PECIFIC EXPENSES PERTAINING TO NEWS PAPER ADVERTISEMENT FOR QUARTERLY RESULTS AND BALANCE SHEET & SHAREHOLDER COMMUNICATION RELATED EXPENSES PRINTING & STATIONERY 7,396,909 7,396,909 4,920,462 2,476,447 POSTAGE 4,438,833 4,438,833 4,032,37 2 406,461 COURIER CHARGES 2,166,280 2,166,280 1,799,943 366,337 TRAVELLING EXP.& CONVEYANCE 7,208,241 7,208,241 7,208,241 COMPUTER STATIONERY 2,243,230 - 2,243,230 - 2,243,230 TELEPHONE EXP . 1,105,808 1,105,808 - , 1,105,808 MOTOR CAR EXP. 2,009,172 2,009,172 2,009,172 ELECTRICITY CHG 2,336,285 2,336,285 . 2,336,285 ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 7 PHOTO COPY CHG 23,101 . 23,101 . 23,101 ENTERTAINMENT EXP. 211,832 . 211,832 . 211, 832 TRAINING & RECRUITMENT EXP 58,708 58,708 58,708 MEMBERSHIP FEE 2,200,327 *. 2,200,327 _ 2,200,327 BOOKS & PERIODICALS 129,383 . 129,383 129,383 LEGAL & PROFESSIONAL CHARGES 31,475,551 14,667,421 16,808,130 16,808, 130 RS. 1.46CR SPECIFIC TO INVESTMENT IS ALREADY DISALLOWED U/S 14A OTHERS PERTAINING TO VARIOUS COMPANY LEVEL LITIGATION MATTERS LISTING FEES 675,993 675,993 675,993 . VAT PAID 13,792 13,792 13,792 0 RECRUITMENT EXP. 349,826 3 49,826 . 349,826 GENERAL EXP. 18,419,454 5,433,276 12,986,178 5,435,306 7,550,872 CONFERENCE EXP 1,110,143 1,110,143 . 1,110,143 LOSS ON SALE OF FIXED ASSETS 18,622 18,622 18,622 INTER UNIT EXPENSES RECOVERED (11,662,77 8) (11,662,778) (11,662.778) EXPENSES INCURRED AT CFD 106,175,412 26,100,697 80,074,715 43,220,563 36,854,152 ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 8 BAD DEBTS &. PROVISIONS FOR DOUBTFUL DEBTS & ADVANCES (27,726,000) (27,726,000) (27,726,000) UNSPENT LIABI LITIES, EXCESS PROVISIONS AND UNCLAIMED BALANCES IN RESPECT OF EARLIER YEARS WRITTEN BACK (NET OF SHORT PROVISIONS AND SUNDRY BALANCES WRITTEN OFF) (2,125,053) (2,125,053) - (2,125,053) TOTAL 76,324,359 26,100,697 50,223,662 43,220,563 7,003,099 2.6. WE FIND THAT THE LD. CIT(A) ON VERIFICATION OF THE AFORESAID TABULATION HAD OBSERVED AS UNDER: - I HAVE CAREFULLY EXAMINED THE SUBMISSIONS MADE BY THE ASSESSEE ON 22/01/2014 IN CONTINUATION WITH THE EARLIER SUBMISSIONS, WI TH REGARD TO EXCLUSION OF ITEMS OF EXPENDITURE THAT WERE NOT DIRECTLY OR INDIRECTLY RELATED TO EARNING EXEMPT INCOME AND FOUND THAT THE EXPENSES WITH RESPECT TO PRINTING & STATIONARY OF RS. 49,20,462/ - , POSTAGE OF RS. 40,33,372/ - , COURIER CHANGES OF RS. 17 ,99,943/ - , EXPENSES ON VAT OF RS. 13,792/ - , LISTING FEE OF RS. 6,75,993/ - , ADVERTISEMENT EXPENSES OF RS. 8,32,765/ - AND LOSS ON FIXED ASSETS OF RS. 18,622/ - , THE CONTENTIONS OF THE ASSESSEE ARE CORRECT THAT THESE EXPENSES WILL NOT HAVE ANY CONNECTION WITH THE EARNING OF EXEMPT INCOME. WITH REGARD TO EXPENSES ON AUDIT FEE OF RS. 86,83,178/ - , THE CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED FOR THE REASON THAT THE SERVICES RENDERED BY THE PROFESSIONALS IN TAX MATTERS, ADVICES GIVEN AND SUGGESTIONS MADE FOR F UTURE INVESTMENTS AND ALSO PREPARATION OF FINANCIAL STATEMENTS ETC. ALL THESE DEFINITELY WILL HAVE BEARING ON THE INVESTMENTS TO BE MADE WHICH INTURN YIELD EXEMPT INCOME, THEREFORE EXPENDITURE UNDER AUDIT FEE HAS TO BE ALLOCATED. THEREFORE, TAKING INTO CON SIDERATION OF TOTAL ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 9 FUNDS DEPLOYED IN INVESTMENTS VIS - A - VIS TOTAL FUNDS AVAILABLE WITH THE ASSESSEE 50% OF EXPENSES ON AUDIT FEE MAY BE ALLOCATED FOR DISALLOWANCE U/S 14A. COMING TO GENERAL EXPENSES OF RS. 1,84,19,454/ - , THE ASSESSEE HAS ALREADY DISALLOWED A SUM OF RS. 54,33,276/ - FOR DISALLOWANCE U/S 14A, OUT OF THE BALANCE AMOUNT OF RS. 1,29,86,178/ - , THE ASSESSEE SUBMITTED THAT A SUM OF RS. 54,35 , 306/ - IS NOT RELATED TO EARNING OF EXEMPT INCOME, HOWEVER, THE ASSESSEE HAS NOT SUBMITTED ANY DETAILS OR REAS ON FOR EXCLUDING THIS AMOUNT. IN THE ABSENCE OF THESE DETAILS, THE ASSESSEE'S SUBMISSION IS NOT CONSIDERED. LASTLY, THE EXPENSES OF RS. 3,14,75,551/ - ON ACCOUNT OF LEGAL AND PROFESSIONAL CHARGES, THE ASSESSEE HAS ALREADY DISALLOWED RS. 1,46,67,421/ - FOR TH E PURPOSES OF 14A. THE ASSESSEE'S CLAIM, THAT THE BALANCE OF RS. 1,68,08,130/ - WAS SPENT FOR OTHER LITIGATION MATTERS, APPEARS TO BE REASONABLE AS THE ASSESSEE HAS ALREADY DISALLOWED NEARLY 50% OF THESE EXPENSES FOR THE PURPOSE OF DISALLOWANCE. THEREFORE, THE AMOUNT OF RS. 1,68,08,130/ - IS NOT CONSIDERED FOR DISALLOWANCE U/S 14A. FURTHER IN THE BRAKE UP OF TOTAL EXPENSES THE ASSESSEE SEGREGATED A SUM OF RS. 3,68,54,152/ - UNDER THE CATEGORY OF BALANCE COMMON EXPENSES WHICH CANNOT BE CONSIDERED FOR EXCLUSION F ROM THE DISALLOWANCE U/S 14A, IN THE ABSENCE OF ANY DETAILS OR EXPLANATION. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE HAS POINTED OUT THAT THERE WAS AN INADVERTENT MISTAKE IN ARRIVING AT THE EXPENDITURE OF RS. 7,63,34,352/ - AS MENTIONED IN SCHEDULE 12 OF BALANCE SHEET OF ADITYA BIRLA NUVO LTD. - CORPORATE FINANCE DIVISION WHERE IN THE ASSESSEE REDUCED A SUM OF RS. 2,77,26,000/ - , PERTAINING TO POSITIVE BALANCE OF PROVISION FOR BAD AND DOUBTFUL DEBTS FROM THE EXPENSES. AFTER VERIFICATION, IT IS FOUND THA T THE SAME IS CORRECTLY POINTED OUT. THEREFORE THE SUM OF RS. 2,77,26,000/ - IS TO BE ADDED TO THE TOTAL EXPENDITURE OF CFD OF THE ASSESSEE. IN LIGHT OF THESE COMMENTS, THE AMOUNT DISALLOWABLE UNDER RULE 8D(2)(III) IS ARRIVED AT AS UNDER: - NET EXPENSES: RS. 12,50,08,837/ - ADD: BAD DEBTS PROVISIONS RS. 2,77,26,000/ - LESS: PRINTING AND STATIONARY RS. 49,00,462/ - POSTAGE RS. 17,99,943/ COURIER CHARGES RS. 6,75,993/ - VAT PAID RS. 13,792/ - S ALE OF ASSETS RS. 18,622/ - AUDIT FEE 50% RS. 43,41,586/ - ADVERTISEMENT RS. 8,32,765/ - LESS: LEGAL AND PROFESSIONAL CHARGES RS. 1,68,08,130/ - DISALLOWANCE U/S 14A RS. 11,92,91,169/ - ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 10 IT IS, THEREFORE, HELD THAT THE DISALLOWANCE UNDER SECTION 14 A OF I.T. ACT, 1961 READ WITH RULE 8D(2)(III) OF I.T. RULES, 1962 SHOULD BE RESTRICTED TO RS. 1,92,91,169/ - INSTEAD OF RS. 22.46 CRORES. IN SHORT, ASSESSEE'S APPEAL IS PARTLY ALLOWED AND DISALLOWANCE U/S. 14A WILL BE RESTRICTED TO RS. 11,92,91,169/ - (WHICH INCLUDES RS. 3.02 CR ALREADY DISALLOWED BY THE ASSESSEE) INSTEAD OF RS. 22.46 CRORES WHILE COMPUTING THE BUSINESS INCOME. HAVING CONSIDERED AND DECIDED THE ISSUE AS ABOVE, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE CAN NOT BE CONSIDERED, HENCE DISMISSED. 2.7. FROM THE ABOVE, IT COULD BE SEEN THAT THE DISPUTE WHICH WENT TO THE LD. CIT(A) WAS ONLY WITH REGARD TO DISALLOWANCE OF INDIRECT EXPENSES VIS - - VIS RULE 8D(2) (III) OF THE RULES. OUT OF THE TOTAL DISALLOWANCES, WORKED OUT BY THE LD. AO AT 22.46 CRORE S TOWARDS ADMINISTRATIVE EXPENSES, THE LD. CIT(A) RESTRICTED THE SAME TO 11.93 CRORES AS DETAILED SUPRA. THE ISSUE WHICH HAS TO BE DECIDED BY US ALSO IS ONLY WITH REGARD TO DISALLOWANCE MADE UNDER RULE 8D(2)(III) OF THE RULES FOR WHICH PURPOSE, THE AVAILAB ILITY OF OWN FUNDS WITH THE ASSESSEE COMPANY HAS GOT NO RELEVANCE, HENCE, THE ARGUMENT MADE BY THE LD. AR IN THAT REGARD AND RELIANCE PLACED BY HIM ON CERTAIN DECISIONS NEED NOT BE ADJUDICATED AT ALL. WE FIND THAT A SPECIAL BENCH OF DELHI TRIBUNAL IN THE C ASE OF VIREET INVESTMENTS REPORTED IN 165 ITD 27 HAD HELD THAT ONLY THOSE INVESTMENTS WHICH HAD YIELDED EXEMPT INCOME SHOULD BE CONSIDERED FOR THE PURPOSE OF WORKING OUT THE DISALLOWANCE UNDER RULE 8D(2) OF THE RULES. ACCORDINGLY, WE DIRECT THE LD. AO TO R ECOMPUTE THE DISALLOWANCE UNDER RULE 8D(2)(III) OF THE RULES BY CONSIDERING ONLY THOSE INVESTMENTS WHICH ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 11 HAD ACTUALLY YIELDED EXEMPT INCOME AND REDUCE A SUM OF RS.3.02 CRORES WHICH HAD ALREADY BEEN DISALLOWED BY THE ASSESSEE IN THE RETURN OF INCOME TOWARDS ADMINISTRATIVE EXPENSES. ACCORDINGLY, THE GROUND NO.1 OF ORIGINAL GROUNDS AND ADDITIONAL GROUNDS 1 & 2 RAISED BY THE ASSESSEE AND GROUND NO.1 OF REVENUE ARE PARTLY ALLOWED. DISALLOWANCE U/S.40(A)(IA) OF THE ACT ON PROVISIONS MADE AT THE END OF THE YEAR RS.3,62,83,302/ - GROUND NO.2 OF THE ORIGINAL GROUND S OF APPEAL 3. WE HAVE HEARD THE RIVAL SUBMISSIONS. BOTH THE PARTIES FAIRLY AGREED THAT THIS ISSUE IS ALREADY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDERS OF THIS TRIBUNAL FOR A.YRS 2006 - 07 TO 2008 - 09. WE FIND THAT THIS ISSUE HAS ALREADY BEEN DECIDED BY THIS TRIBUNAL IN FAVOUR OF THE ASSESSEE IN ITA NO.3033/MUM/2012 DATED 09/12/2015 FOR A.Y.2008 - 09 IN ASSESSEES OWN CASE WHEREIN IT WAS HELD AS UNDER: - 6.GROUND NO.2 IS ABOUT DISALLOWANCE OF RS.4.83CRORES U/S.40(A)(IA) OF THE ACT TOWARDS PROVISIONS MADE FOR EXPENSES AT THE YEAR END. 6.1.BEFORE US,REPRESENTATIVES OF BOTH THE SIDES AGREED THAT TRIBUNAL HAD IN THE AY.2007 - 08(SUPRA)HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE.WE WOULD LIKE TO REPRODUCE THE ORDER FOR THAT YEAR: '5.NEXT GROUND IS REGARDING DISALLOWANCE OF RS.1,33,57,668/ - U/S. 40(A)(IA) TOWARDS PROVISION MADE FOR EXPENSES AT THE YEAR - END AS PER BEST ESTIMATES. BEFORE US,REPRESENTATIVES OF BOTH THE SIDES AGREED THAT TRIBUNAL HAD IN THE AY.2006 - 07(SUPRA)HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN FOLLOWING MANNER: '3.2.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE AO HAD INVOKED THE PROVISIONS OF SECTION 40(A)(IA) ,THOUGH HE HAS ALSO DISCUSSED ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 12 THE PRINCIPLES OF CONTINGENT LIABILITY,WHILE MAKING THE DISALLOWANCE.WE FIND THAT FAA HAS PASSED A NON - SPEAKING ORDER AND JUST ENDORSED THE VIEWS OF THE AO BUT HE WAS ALSO OF THE OPINION THAT PROVISIONS O F SECTION 40(A)(IA) WERE APPLICABLE.IT IS FOUND THAT ASSESSEE HAD SPECIFICALLY MENTIONED DURING THE ASSESSMENT PROCEEDINGS, THAT IT HAD NOT RECEIVED THE BILLS UNDER VARIOUS HEADS, THAT PROVISIONS OF TAX DEDUCTING AT SOURCE WERE NOT APPLICABLE FOR THE PROVISIONS MADE. WE FIND THAT SIMILAR ISSUE HAD ARISEN IN THE CASE OF MAHINDRA & MAHINDRA LTD. (SUPRA). IN THAT MATTER IT WAS HELD THAT TDS PROVISIONS WERE NOT APPLICABLE FOR THE PROVISIONS MADE AT THE YEAR - END. SIMILARLY,IN THE CASE OF INDUSTRIAL DEVELOPMENT BANKING COMPANY(SUPRA),THE TRIBUNAL HAD HELD AS UNDER: 'THE DEDUCTION OF TAX AT SOURCE CAN ONLY BE EFFECTED WHEN PAYEE IS KNOWN. AS FAR AS THE SITUATION BEFORE US IS CONCERNED, THE REGULAR RETURN BONDS BEING TRANSFERABLE ON SIMPLE ENDORSEMENT AND DELIVERY AND THE RELEVANT REGISTRATION DATE BEING A DATE SUBSEQUENT TO THE CLOSURE OF BOOKS OF ACCOUNT, THE ASSESSEE COULD NOT HAVE ASCERTAINED THE PAYEES AT THE POINT OF TIME WHEN THE PROVISION FOR INTEREST ACC RUED BUT NOT DUE WAS MADE. ACCORDINGLY, NO TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE IN RESPECT OF THE PROVISION FOR INTEREST PAYABLE MADE BY THE ASSESSEE WHICH REFLECTED PROVISION FOR 'INTEREST ACCRUED BUT NOT DUE' IN A SITUATION WHERE THE ULTIMATE RECIPI ENT OF SUCH 'INTEREST ACCRUED BUT NOT DUE' COULD NOT HAVE ASCERTAINED AT THE POINT OF TIME WHEN THE PROVISION IS MADE' IN THE CASE UNDER CONSIDERATION, THE ASSESSEE HAD MADE PROVISIONS BUT HAD NOT RECEIVED THE BILLS, THAT IN THE SUBSEQUENT YEAR THE PROVISI ONS MADE BY IT WERE OFFERED FOR TAXATION. CONSIDERING THESE FACTS AND FOLLOWING THE ORDERS OF THE TRIBUNAL IN THE CASE OF MAHINDRA & MAHINDRA LTD. & INDUSTRIAL DEVELOPMENT BANKING COMPANY (SUPRA),WE DECIDE GROUND NO.2 IN FAVOUR OF THE ASSESSEE.' FOLLOWING THE ABOVE, GROUND NO.5 IS DECIDED IN FAVOUR OF THE ASSESSEE .' CONSIDERING THE ABOVE, SECOND GROUND OF APPEAL IS ALLOWED. 3.1. RESPECTFULLY FOLLOWING THE SAID DECISION, THE GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED. DISALLOWANCE ON PROVISION MADE FOR L EAVE SALARY / COMPENSATED ABSENCE AS PER ACTUARIAL VALUATION GROUND NO.3 OF ORIGINAL GROUND S OF APPEAL ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 13 4. WE HAVE HEARD RIVAL SUBMISSIONS. BOTH THE PARTIES FAIRLY AGREED THAT THIS ISSUE IS COVERED BY THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN IT A NO.3033/MUM/2012 DATED 09/12/2015 FOR A.Y.2008 - 09. BUT WE FIND THAT THOUGH THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD. VS UNION OF INDIA REPORTED IN 292 ITR 4 7 0 (C AL ) HAD STRUCK DOWN THE PROVISIONS OF SECTION 43B CLAUSE (F) OF TH E ACT AS UNCONSTITUTIONAL , THE REVENUE HAD CARRIED THE MATTER FURTHER TO THE HONBLE SUPREME COURT WHICH INITIALLY IN SPECIAL LEAVE TO APPEAL (CIVIL) CC12060/2008 DATED 08/09/2008 HAD HELD AS UNDER: - THE PETITION WAS CALLED ON FOR HEARING TODAY. UPON HEAR ING THE COUNSEL, THE COURT MADE FOLLOWING ORDER. ISSUE NOTICE IN THE MEANTIME, THERE SHALL BE STAY OF THE IMPUGNED JUDGMENT, UNTIL FURTHER ORDERS. 4.1. LATER, THE HONBLE SUPREME COURT IN SPECIAL LEAVE TO APPEAL (CIVIL) NO.(S) CC22889/2008 DATED 08/05/20 09 HAD HELD AS UNDER: - THE PETITION WAS CALLED ON FOR HEARING TODAY. UPON HEARING THE COUNSEL, THE COURT MADE FOLLOWING ORDER. DELAY CONDONED LEAVE GRANTED. UPON HEARING THE FINAL DISPOSAL OF THE CIVIL APPEAL, THE DEPARTMENT IS RESTRAINED FROM RECOVERING PENALTY AND INTEREST WHICH HAS ACCRUED TILL DATE. IT IS MADE CLEAR THAT AS FAR AS THE OUTSTANDING INTEREST DEMAND AS ON DATE IS CONCERNED, IT WOULD BE OPEN TO THE DEPARTMENT TO RECOVER THAT AMOUNT IN CASE CIVIL APPEAL OF THE DEPARTMENT IS ALLOWED. WE FURT HER MAKE IT CLEAR THAT THE ASSESSEE WOULD DURING THE PENDENCY OF THIS CIVIL APPEAL PAY TAX AS IF SECTION 43B(F) IS ON THE STATUTE BOOK BUT AT THE SAME TIME IT WOULD BE ENTITLED TO MAKE A CLAIM IN ITS RETURNS. ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 14 4.2. HENCE, FROM THE AFORESAID HONBLE SUPREME COURT JUDGMENT , IT CAN BE INFERRED THAT THE HONBLE SUPREME COURT IN THE SUBSEQUENT ORDER HAD NOT STAYED THE JUDGEMENT OF HONBLE CALCUTTA HIGH COURT. WE FIND THAT THE HONBLE SUPREME COURT HAD PASSED AN INTERIM ORDER GIVING THE AFORESAID OBSERVATIONS . HE NCE, WE DEEM IT FIT AND APPROPRIATE , IN THE INTEREST OF JUSTICE AND FAIR PLAY , TO REMAND THIS ISSUE TO THE FILE OF THE LD. AO TO PASS ORDERS BASED ON THE OUTCOME OF THE MAIN APPEAL ON MERITS BY THE HONBLE SUPREME COURT AS STATED SUPRA. ACCORDINGLY, THE GR OUND NO.3 OF ORIGINAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. CLAIM OF DEDUCTION U/S.80IA OF THE ACT VIS - - VIS ALLOCATION OF HEAD OFFICE EXPENSES RS.18,79,821/ - GROUND NO.4 OF ORIGINAL GROUNDS OF APPEAL 5 . WE HAVE HE ARD RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE IS ALREADY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDERS OF THIS TRIBUNAL FROM A.YRS 2003 - 04 TO 2008 - 09. WE ALSO FIND THAT FOR A.Y.2006 - 07, THE REVENUE HAD CARRIED THIS MATTER TO THE HONBLE JURISDICTIONAL H IGH COURT AND THE HONBLE JURISDICTIONAL HIGH COURT IN INCOME TAX APPEAL NO.433/2015 DATED 15/01/2018 HAD HELD THAT THE QUESTION RAISED BY THE REVENUE DOES NOT GIVE RAISE TO ANY SUBSTANTIAL QUESTION OF LAW AND ACCORDINGLY, DID NOT ENTERTAIN THE SAME. THIS GOES TO PROVE THAT THE ORDER PASSED BY THIS ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 15 TRIBUNAL ON THE IMPUGNED ISSUE HAD ATTAINED FINALITY. RESPECTFULLY FOLLOWING THE SAME, THE GROUND NO. 4 RAISED BY THE ASSESSEE IS ALLOWED. DISALLOWANCE OF ADDITIONAL DEPRECIATION ON ASSETS ACQUIRED AND PUT TO US E FOR LESS THAN 180 DAYS IN THE EARLIER ASSESSMENT YEAR RS.4,17,69,559/ - . GROUND NO.5 OF ORIGINAL GROUNDS OF APPEAL. 6. WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT THERE IS ABSOLUTELY NO DISPUTE THAT ASSETS WERE ACQUIRED AND PUT TO USE BY THE ASSESSEE IN THE EARLIER ASSESSMENT YEARS FOR LESS THAN 180 DAYS. THE ASSESSEE HAD CLAIMED THE REMAINING PORTION OF ADDITIONAL DEPRECIATION IN THE YEAR UNDER CONSIDERATION. WE FIND THAT THIS ISSUE HAS ALREADY BEEN HELD IN FAVOUR OF THE ASSESSEE BY THE DECISION OF TH E HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PCIT VS. GODREJ INDUSTRIES LTD. IN INCOME TAX APPEAL NO.511/2016 DATED 24/11/2018 WHEREIN THE OPERATIVE PORTION OF THE JUDGEMENT IS AS UNDER: - 5 . HAVING HEARD COUNSEL FOR THE REVENUE AND FOR THE ASSESSEE, WE NOTICE THAT THE ASSESSEE'S CLAIM OF ADDITIONAL DEPRECIATION ARISES OUT OF CLAUSE (IIA) OF SUBSECTION 1 OF SECTION 32 OF THE ACT. CLAUSE (II) OF SUBSECTION 1 OF SECTION 32 OF THE ACT RECOGNIZES THE DEPRECIATION ON BLOCK OF ASSETS. CLAUSE (IIA) GRANTS AD DITIONAL DEPRECIATION IN CASE OF ACQUISITION AND INSTALLATION OF NEW MACHINERY OR PLANT BY AN ASSESSEE AFTER 31 ST MARCH, 2005, THE ASSESSEE BEING ENGAGED IN BUSINESS OF MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THINGS. ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 16 6 . WE MAY ALSO NOTICE THAT THE SEC OND PROVISO TO CLAUSE (II) OF SUBSECTION 1 OF SECTION 32 OF THE ACT, WOULD RESTRICT ASSESSEE'S CLAIM OF DEPRECIATION TO 50% IN CASE, THE ASSETS ARE ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND PUT TO USE FOR THE PURPOSES OF BUSINESS OR PROFESSION FOR A PERIOD LESS THAN 180 DAYS IN THE SAID PREVIOUS YEAR. 7 . IN THE CONTEXT OF SUCH STATUTORY PROVISIONS, THE REVENUE HAS RAISED THE QUESTION WHETHER WHEN 50% OF THE ADDITIONAL DEPRECIATION IS CLAIMED BY THE ASSESSEE IN A PARTICULAR ASSESSMENT YEAR, S INCE THE ACQUISITION AND PUTTING IN TO USE OF THE ASSETS IN THE PREVIOUS YEAR WAS FOR LESS THAN 180 DAYS, THE ASSESSEE CAN CLAIM THE REMAINING DEPRECIATION IN THE SUBSEQUENT ASSESSMENT YEAR. SUCH A QUESTION CAME UP FOR CONSIDERATION BEFORE THE DIVISION BEN CH OF KARNATAKA HIGH COURT IN COMMISSIONER OF INCOME TAX AND ANOTHER V/S. RITTAL INDIA PVT. LTD. , REPORTED IN 380 ITR 423. THE COURT, AFTER REFERRING TO THE STATUTORY PROVISIONS, HELD AND OBSERVED IN PARA 8 AS UNDER: 8 . THE AFORESAID TWO CONDITIONS, I.E ., THE UNDERTAKING ACQUIRING NEW PLANT AND MACHI NERY SHOULD BE A NEW INDUSTRIAL U NDERTAKING, OR THAT IT SHOULD BE CLAIMED IN ONE YEAR, HAVE BEEN DONE AWAY BY SUBSTITUTING CLAUSE (IIA) WITH EFFECT FROM APRIL 1, 2006. THE GRANT OF ADDITIONAL DEPRECIATION, UN DER THE AFORESAID PROVISION, IS FOR THE BENEFIT OF THE ASSESSEE AND WITH THE PURPOSE OF ENCOURAGING INDUSTRIALIZATION, BY EITHER SETTING UP A NEW INDUSTRIAL UNIT OR BY EXPANDING THE EXISTING UNIT BY PURCHASE OF NEW PLANT AND MACHINERY, AND PUTTING IT TO US E FOR THE PURPOSES OF BUSINESS. THE PROVISO TO CLAUSE (II) OF THE SAID SECTION MAKES IT CLEAR THAT ONLY 50 PER CENT OF THE 20 PER CENT WOULD BE ALLOWABLE, IF THE NEW PLANT AND MACHINERY SO ACQUIRED IS OUT TO USE FOR LESS THAN 180 DAYS IN A FINANCIAL YEAR. HOWEVER, IT NOWHERE RESTRICTS THAT THE BALANCE 10 PER CENT WOULD NOT BE ALLOWED TO BE CLAIMED BY THE ASSESSEE IN THE NEXT ASSESSMENT YEAR. THE LANGUAGE USED IN CLAUSE (IIA) OF THE SAID SECTION CLEARLY P ROVIDES THAT A FURTHER SUM EQUAL TO 20 PER CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS D EDUCTION U NDER CLAUSE (II). THE WORD SHALL USED IN THE SAID CLAUSE IS VERY SIGNIFICANT. THE BENEFIT WHICH IS TO BE GRANTED IS 20 PER CENT ADDITIONAL DEPRECIATION. BY VIRTUE OF THE PROVISO R EFERRED TO ABOVE, ONLY 10 PER CENT CAN BE CLAIMED IN ONE YEAR, IF PLANT AND MACHINERY IS PUT TO USE FOR LESS THAN 180 DAYS IN THE SAIDF INANCIAL YEAR. THIS WOULD NECESSARILY MEAN THAT THE BALANCE 10 PER CENT ADDITIONAL DEDUCTION CAN BE AVAILED OF IN THE SUB SEQUENT ASSESSMENT YEAR, OTHERWISE THE VERY PURPOSE OF INSERTION OF ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 17 CLAUSE (IIA) WOULD BE DEFEATED BECAUSE IT PROVIDES FOR 20 PER CENT DEDUCTION WHICH SHALL BE ALLOWED. IT HAS BEEN CONSISTENTLY HELD BY THIS COURT, AS WELL AS THE APEX COURT, THAT THE BENE FICIAL LEGISLATION, AS IN THE PRESENT CASE, SHOULD BE GIVEN LIBERAL INTERPRETATION SO AS TO BENEFIT THE ASSESSEE. IN THIS CASE, THE INTENTION OF THE LEGISLATION IS ABSOLUTELY CLEAR, THAT THE ASSESSEE SHALL BE ALLOWED CERTAIN ADDITIONAL BENEFIT, WHICH WAS R ESTRICTED BY THE PROVISO TO ONLY HALF OF THE SAME BEING GRANTED IN ONE ASSESSMENT YEAR, IF CERTAIN CONDITION WAS NOT FULFILLED. BUT, THAT, IN OUR CONSIDERED VIEW, WOULD NOT RESTRAIN THE ASSESSEE FROM CLAIMING THE BALANCE OF THE BENEFIT IN THE SUBSEQUENT AS SESSMENT YEAR. THE TRIBUNAL, IN OUR VIEW, HAS RIGHTLY HELD, THAT ADDITIONAL DEPRECIATION ALLOWED UNDER SECTION 32(1)(IIA) OF THE ACT IS A ONETIME BENEFIT TO ENCOURAGE INDUSTRIALIZATION, AND THE PROVISIONS RELATED TO IT HAVE TO BE CONSTRUED REASONABLY, LIBE RALLY AND PURPOSIVELY, TO MAKE THE PROVISION MEANINGFUL WHILE GRANTING THE ADDITIONAL ALLOWANCE. WE ARE IN FULL AGREEMENT WITH SUCH OBSERVATIONS MADE BY THE TRIBUNAL. IN VIEW OF THE AFORESAID, WE DO NOT FIND THAT ANY INTERFERENCE IS CALLED FOR WITH THE ORD ER OF THE TRIBUNAL, OR THAT ANY QUES T ION OF LAW ARISES IN THIS APPEAL FOR DETERMINATION BY THIS COURT. A FTER THE SAID JUDGMENT OF THE KARNATAKA HIGH COURT IN RITTAL INDIA PVT. LTD., (SUPRA), LEGISLATION HAS ALSO AMENDED THE STATUTORY PROVISIONS BY ADDING T HE THIRD PROVISO CLAUSE (II) OF S UB - S ECTION 1 OF SECTION 32 OF THE ACT, WHICH READS AS UNDER: - PROVIDED ALSO THAT WHERE AN ASSET REFERRED TO IN CLAUSE (IIA) OR THE FIRST PROVISO TO CLAUSE (IIA), AS THE CASE MAY BE, IS ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND IS PUT TO USE FOR THE PURPOSES OF BUSINESS FOR A PERIOD OF LESS THAN ONE HUNDRED AND EIGHTY DAYS IN THAT PREVIOUS YEAR, AND THE DEDUCTION UNDER THIS SUB SECTION IN RESPECT OF SUCH ASSET IS RESTRICTED TO FIFTY PER CENT OF THE AMOUNT CALCUL ATED AT THE PERCENTAGE PRESCRIBED FOR AN ASSET UNDER CLAUSE (IIA) FOR THAT PREVIOUS YEAR, THEN, THE DEDUCTION FOR THE BALANCE FIFTY PER CENT OF THE AMOUNT CALCULATED AT THE PERCENTAGE PRESCRIBED FOR SUCH ASSET UNDER CLAUSE (IIA) SHALL BE ALLOWED UNDER THIS SUB SECTION IN THE IMMEDIATELY SUCCEEDING PREVIOUS YEAR IN RESPECT OF SUCH ASSET. 8 . THE THIRD PROVISO, THUS, NOW RECOGNIZES THE RIGHT OF AN ASSESSEE TO CLAIM THE REMAINING 50% DEPRECIATION IN SUBSEQUENT YEAR IN C ASE ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 18 WHERE MACHINERY AND PLANT BEING AC QUIRED AND PUT TO USE FOR LESS THAN 180 DAYS IN THE PREVIOUS YEAR, THE DEPRECIATION WAS RESTRICTED TO 50%. SUCH A SITUATION AS IN THE PRESENT CASE, WAS CONSIDERED BY THE DIVISON BENCH OF THE MADRAS HIGH COURT IN COMMISSIONER OF INCOME TAX V/S. SHRI T.P. TE XTILES PVT. LTD., 394 ITR 483, THE COURT REFERRED TO THE JUDGMENT OF THE KARNATAKA HIGH COURT IN RITTAL INDIA PVT. LTD., (SUPRA) AS WELL AS THE ADDITION OF THIRD PROVISO TO CLAUSE (II) OF SUB SECTION 1 OF SECTION 32 OF THE ACT AND OBSERVED AS UNDER: 10.1. THE PLAIN LANGUAGE OF SECTION 32(1)(IIA) READ ALONG WITH RELEVANT PROVISO WOULD HAVE US COME TO THE CONCLUSION THAT, THERE IS NO LIMITATION IN THE ASSESSEE CLAIMING THE BALANCE 10 PER CENT OF ADDITIONAL DEPRECIATION IN THE SUCCEEDING ASSESSMENT YEAR. 10 .2 . AS A MATTER OF FACT, WITH EFFECT FROM APRIL 1, 20916, THE AMBIGUITY, IF ANY, IN THIS REGARD, IN THE MIND OF THE ASSESSING OFFICER, STANDS REMOVED BY VIRTUE OF THE LEGISLATURE, INCORPORATING IN THE STATUTE, THE NECESSARY CLARIFICATORY AMENDMENT. 10.3 . . . . . . . 11 . WE MAY ONLY INDICATE THAT DURING THE COURSE OF THE ARGUMENTS, OUR ATTENTION WAS DRAWN TO THE MEMORANDUM EXPLAINING THE PROVISIONS IN FINANCE BILL, 2015 WHEREBY, THE AFOREMENTIONED AMENDMENT WAS BROUGHT ABOUT. 11.1 . THE RELEVA NT PART OF THE MEMORANDUM IS EXTRACTED HEREAFTER: . TO REMOVE THE DISCRIMINATION IN THE MATTER OF ALLOWING ADDITIONAL DEPRECIATION ON PLANT OR MACHINERY USED FOR LESS THAN 180 DAYS AND USED FOR 180 DAYS OR MORE, IT IS PROPOSED TO PROVIDE THAT THE BALA NCE 50 PER CENT OF THE ADDITIONAL DEPRECIATION ON NEW PLANT OR MACHINERY ACQUIRED AND USED FOR LESS THAN 180 DAYS WHICH HAS NOT BEEN ALLOWED IN THE YEAR OF ACQUISITION AND INSTALLATION OF SUCH PLANT OR MACHINERY, SHALL BE ALLOWED IN THE IMMEDIATELY SUCCEED ING PREVIOUS YEAR. THIS AMENDMENT WILL TAKE EFFECT FROM 1ST APRIL, 2016 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 201 6 - 17 AND SUBSEQUENT ASSESSMENT YEARS. ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 19 11.2 . A PERUSAL OF THE EXTRACT OF THE MEMORANDUM RELIED UPON WOULD SHOW T HAT THE LEGISLATURE RECOGNIZED THE FACT THAT THE MANNER IN WHICH THE REVENUE CHOSE TO INTERPRET THE PROVISION, AS IT STOOD PRIOR TO ITS AMENDMENT WOULD LEAD TO DISCRIMINATION, IN RESPECT OF PLANT AND MACHINERY, WHICH WAS USED FOR LESS THAN 180 DAYS, AS AGA INST THAT, WHICH WAS USED FOR 180 DAYS OR MORE. 11.3 . IN OUR OPINION, AS INDICATED ABOVE, THE AMENDMENT IS CLARIFICATORY IN NATURE AND NOT PROSPECTIVE, AS IS SOUGHT TO BE CONTENDED BY THE REVENUE. THE MEMORANDUM CANNOT BE READ IN THE MANNER, IN WHICH, TH E REVENUE HAS SOUGHT TO READ IT, WHICH IS, THAT THE AMENDMENT BROUGHT IN WOULD APPLY ONLY PROSPECTIVELY. 11.4. WE ARE, CLEARLY, OF THE VIEW THAT THE MEMORANDUM, WHICH IS SOUGHT TO BE RELIED UPON BY THE REVENUE, ONLY CLARIFIES AS TO HOW THE UNAMENDED PROVI SION HAD TO BE READ ALL ALONG. 11.5 . IN ANY EVENT, IN SO FAR AS THE COURT IS CONCERNED, IT HAS TO GO BY THE PLAIN LANGUAGE OF THE UNAMENDED PROVISION, AND THEN, COME TO A CONCLUSION IN THE MATTER. AS ALLUDED TO ABOVE, OUR VIEW, IS THAT, UPON A PLAIN REA DING OF THE UNAMENDED PROVISION, IT COULD NOT BE SAID THAT THE ASSESSEE COULD NOT CLAIM BALANCE DEPRECIATION IN THE ASSESSMENT YEAR, WHICH FOLLOWS THE ASSESSMENT YEAR, IN WHICH, THE MACHINERY HAD BEEN BOUGHT AND USED, ALBEIT, FOR LESS THAN 180 DAYS. 9 . IT COULD BE THUS, TO SEEN THAT THE KARNATAKA HIGH COURT IN RITTAL INDIA PVT., LTD.,(SUPRA) EVEN WITHOUT THE AID OF THE STATUTORY AMENDMENT HELD THAT REMAINING 50% UNCLAIMED DEPRECIATION WOULD BE AVAILABLE TO THE ASSESSEE IN THE SUCCEEDING ASSESSMENT YEAR. NOW THE LEGISLATION HAS AMENDED THE PROVISION BY ADDING A PROVISO WHICH,S PECIFICALLY RECOGNIZES THE SAID RIGHT. THE MADRAS HIGH COURT IN SHRI T . P.T EXTILES PVT. LTD., (SUPRA) RULED THAT SUCH PROVISO BEING CLARIFICATORY IN NATURE, WOULD APPLY TO PENDING CAS ES, COVERING PAST PERIOD ALSO. 10 . WE HAVE NO REASON TO TAKE VIEW DIFFERENT FROM TWO HIGH COURTS, EXAMINING THE SITUATION AT CONSIDERABLE LENGTH. IN THE RESULT, NO QUESTION OF LAW ARISES. 11 ACCORDINGLY, APPEAL IS DISMISSED . ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 20 6.1. RESPECTFULLY FOLLOW ING THE SAME, THE GROUND NO.5 RAISED BY THE ASSESSEE IS ALLOWED. TREATMENT OF EXPENDITURE INCURRED TOWARDS CORPORATE ADVERTISEMENT AS CAPITAL IN NATURE AND ALLOWING DEPRECIATION THEREON RS.32,80,747/ - GROUND NO.6 OF ORIGINAL GROUNDS OF APPEAL. 7. WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT THERE IS NO DISPUTE THAT ASSESSEE COMPANY HAD INCURRED AN EXPENDITURE O N CORPORATE ADVERTISEMENTS TO MAINTAIN ITS CORPORATE IMAGE WHICH IN TURN RESULTED IN INCREASED SALE OF PRODUCTS OF THE ASSESSEE. THE ASSESSEE CLAI MED THE SAME AS REVENUE EXPENDITURE WHERE AS THE LD. AO TREATED THE SAME AS BRAND BUILDING EXPENDITURE AND ACCORDINGLY CONSIDERED IT AS CAPITAL IN NATURE AND GRANTED DEPRECIATION. THIS ACTION WAS UPHELD BY THE LD. CIT(A). WE FIND THAT THE RELIANCE PLACED B Y THE LD. AR ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ASIAN P A INTS INDIA LTD., REPORTED IN 243 TAXMAN 348 (BOM) ON THE IMPUGNED ISSUE S QUARELY ADDRESSES THE DISPUTE IN FAVOUR OF THE ASSESSEE. THE QUESTION RAISED BEFORE THE HONBLE JURISDICTIONAL HIGH COURT IS AS UNDER: - (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE TRIBUNAL WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON EXPENDITURE ON CORPORATE BRAND BUILDING, T REATING SUCH EXPENDITURE AS REVENUE IN NATURE? ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 21 7.1. THE HONBLE JURISDICTIONAL HIGH COURT HELD AS UNDER: - 5. RE. QUESTION NO.(B) : (A) THE RESPONDENT ASSESSEE INCURRED EXPENDITURE ON ADVERTISEMENT ON TELEVISION AGGREGATING TO RS.29.99 CRORES. THIS EXPEND ITURE RELATED TO ADVERTISEMENTS PUBLISHED ON TELEVISION RELATING NOT O NLY TO INDIVIDUAL PRODUCTS MANUFACTURED BY IT BUT ALSO TOWARDS CORPORATE ADVERTISEMENT TO THE EXTENT OF RS.5.47 CRORES. (B) THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE CLAIMED TO WARDS CORPORATE ADVERTISEMENT AMOUNTING TO RS.5.47 CRORES ON THE GROUND THAT THE SAME IS ON CAPITAL ACCOUNT AS CORPORATE ADVERTISEMENT HELPS IN BUILDING THE COMPANY'S BRAND VALUE. THE BENEFIT OF SUCH BUILD UP OF BRAND VALUE WOULD ENDURE OVER A PERIOD OF YE ARS AND THEREFORE FALL IN THE CAPITAL FIELD. THIS VIEW WAS TAKEN BY THE ASSESSING OFFICER IN HIS FINAL ORDER AFTER HIS DRAFT ASSESSMENT ORDER TAKING AN IDENTICAL VIEW WAS UPHELD BY THE D.R.P. (C) ON APPEAL TO THE TRIBUNAL, THE IMPUGNED ORDER ALLOWED THE RE SPONDENT ASSESSEE'S APPEAL BY INTER ALIA HOLDING THAT THE EXPENDITURE IS REVENUE IN NATURE, EVEN IF THE SAME IS INCURRED FOR PROMOTION OF A CORPORATE BRAND, AS IT FACILITATES THE BUSINESS OF THE ASSESSEE AND RESULTS IN INCREASED SALES AND PROFITABILITY. TH E IMPUGNED ORDER FURTHER HOLDS THAT THE ENDURING BENEFIT, IF ANY, ON ACCOUNT OF BRAND BUILDING WOULD NOT BE IN THE CAPITAL FIELD. (D) MR. MALHOTRA, LEARNED COUNSEL FOR THE REVENUE, URGES THAT AN EXPENDITURE INCURRED TO CREATE/IMPROVE A BRAND WOULD BE ON CAPITAL ACCOUNT. THIS IS IN VIEW OF THE ENDURING BENEFIT AVAILABLE TO THE RESPONDENT ASSESSEE IN RELATION TO ITS BRAND. IT IS PARTICULARLY SUBMITTED THAT AMOUNTS RECEIVED ON SALE OF BRAND IS ON CAPITAL ACCOUNT AND NOT TAXED AS REVENUE RECEIPTS. AS ALSO, AM OUNT PAID TO PURCHASE A BRAND IS REGARDED ON CAPITAL ACCOUNT. THEREFORE, THE EXPENDITURE INCURRED ON BRAND ADVERTISEMENT CANNOT BE ALLOWED AS REVENUE EXPENDITURE. (E) WE FIND THAT AN IDENTICAL ISSUE HAD ARISEN BEFORE THIS COURT IN CASE OF CIT VS. JEOFFREY MANNERS & CO. LTD. 315 ITR 134, WHEREIN THE COURT WAS CONSIDERING A QUESTION WHETHER THE EXPENSES INCURRED BY THE RESPONDENT ASSESSEE THEREIN FOR MAKING ADVERTISEMENT FILMS IS TO BE TREATED AS A CAPITAL OR REVENUE EXPENDITURE. THIS COURT OPINE D THAT THE CORRECT TEST TO BE APPLIED IN RESPECT OF EXPENDITURE INCURRED FOR MAKING ADVERTISEMENT FILMS WAS THAT WHEN THE SAME WAS INCURRED IN RESPECT OF AN ONGOING BUSINESS OF THE ASSESSEE, IT IS REVENUE. ON THE OTHER HAND, WHEN THE EXPENDITURE IS INCURRE D IN RESPECT OF A BRAND WHICH IS TO BE USED IN A BUSINESS WHICH IS YET TO BE COMMENCED, IT IS CAPITAL ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 22 EXPENDITURE. IN THIS CASE ALSO, THE EXPENDITURE ON CORPORATE ADVERTISEMENT FILMS IS IN RESPECT OF ONGOING BUSINESS. THE EXPENDITURE FOR ADVERTISEMENT OF A BRAND OR CORPORATE NAME OF AN EXISTING ONGOING BUSINESS IS IN THE NATURE OF MAINTAINING THE BRAND AND/OR CORPORATE IMAGE AND IT IS NOT FOR CREATION OF A BRAND. FURTHER, THE TEST OF ENDURING BENEFIT URGED BY THE REVENUE WAS CONSIDERED BY THE APEX COURT IN EMPIRE JUTE CO. LTD. VS. CIT 124 ITR 1 TO HOLD THAT IT IS NOT A CONCLUSIVE TEST IN ALL CASES SO THAT SUCH EXPENDITURE IS ALWAYS ON CAPITAL ACCOUNT. THE COURT OBSERVED THAT WHAT IS TO BE EXAMINED IS THE NATURE OF ADVANTAGE OBTAINED IN THE COMMERCIAL SENSE B Y INCURRING THE EXPENDITURE. IF THE EXPENDITURE CONSISTS OF MERELY FACILITATING THE ASSESSEE TO CARRY ON BUSINESS MORE PROFITABLY LEAVING THE FIXED CAPITAL UNTOUCHED, IT WOULD BE ON REVENUE ACCOUNT. THE ENTIRE EXPENDITURE, THE COURT OBSERVED, HAS TO BE LOO KED AT FROM A BUSINESSMAN'S POINT OF VIEW. IN THE PRESENT FACTS, THE EXPENDITURE ON ACCOUNT OF CORPORATE ADVERTISEMENT IS TO ESSENTIALLY MAINTAIN THE CORPORATE IMAGE AND NOT CREATE A CORPORATE IMAGE. FURTHER, THE IMPUGNED ORDER HOLDS ON FACTS THAT THE CORP ORATE ADVERTISEMENT EXPENDITURE FACILITATES THE BUSINESS HAVING A DIRECT IMPACT ON SALES AND PROFITABILITY OF THE RESPONDENT - ASSESSEE. (F) IN THE ABOVE CIRCUMSTANCES, THE VIEW TAKEN BY THE IMPUGNED ORDER THAT CORPORATE ADVERTISEMENT ENHANCES THE BUSI NESS OF THE ASSESSEE RESULTING IN INCREASED SALES OF ITS PRODUCT IN REVENUE FIELD, IS A POSSIBLE VIEW, ON THE PRESENT FACTS. CONSEQUENTLY, THE QUESTION AS RAISED DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS, NOT ENTERTAINED. 7.1. RESPECTFU LLY FOLLOWING THE AFORESAID DECISION, THE GROUND NO.6 RAISED BY THE ASSESSEE IS ALLOWED. DISALLOWANCE OF ESOP EXPENSES RS.1,28,70,639/ - GROUND NO.7 OF ORIGINAL GROUNDS OF APPEAL 8. WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT THE ASSESSEE HAD CLAIMED A N EXP ENDITURE OF RS.1,28,70,639/ - , BEING THE INTRIN SIC VALUE OF 3 29373 STOCK OPTIONS GRANTED BY THE COMPANY TO ITS EMPLOYEES . THE ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 23 RIGHT TO EXERCISE OF OPTIONS BY THE EMPLOYEES WAS TO ACCRUE TO THE EMPLOYEES ONLY AFTER CERTAIN NUMBER OF YEARS. WE FIND THAT THE LOWER AUTHORITIES HAD OBSERVED THAT THIS EXPENDITURE WAS IN RELATION TO RAISING OF THE CAPITAL AT CERTAIN RATE S WHICH WOULD BENEFIT THE EMPLOYEE OF EXERCISING THE OPTION BY THE EMPLOYEE AND THEREBY THE EXPENDITURE WOULD GO TO EXPAND THE CAPITAL BASE OF THE COMPANY. ACCORDINGLY, THE LOWER AUTHORITIES HAD TREATED THE SAID EXPENDITURE AS CAPITAL IN NATURE. WE FIND THAT THIS ISSUE IS ALREADY COVERED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE BY THE ORDER OF THIS TRIBUNAL IN ITA NO.3033/MUM/2012 DATED 09/12/2 015 FOR A.Y.2008 - 09 WHEREIN THIS TRIBUNAL FOLLOWED THE SPECIAL BENCH DECISION OF BANGALORE TRIBUNAL IN THE CASE OF BIOCON LTD. REPORTED IN 144 ITD 21. RESPECTFULLY FOLLOWING THE SAID DECISION, THE GROUND NO.7 RAISED BY THE ASSESSEE IS ALLOWED. 9. THE GROU ND NO.8 RAISED BY THE ASSESSEE IS O N WITHOUT PREJUDICE BASIS OF CLAIMING DEPRECIATION ON THE EXPENDITURE INCURRED TOWARDS CATALYSTS TO THE TUNE OF RS.6,69,18,635/ - . AT THE TIME OF HEARING, THE LD. AR STATED THAT THIS GROUND HAS BECOME INFRUCTUOUS IN VIEW O F THE RELIEF ALREADY GRANTED TO THE ASSESSEE IN A.Y.2008 - 09. WE FIND THAT THIS TRIBUNAL IN ASSESSEES OWN CASE IN A.Y.2008 - 09 IN ITA NO.3178/MUM/2012 DATED 09/12/2015 HAD ALREADY HELD THAT ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 24 EXPENDITURE INCURRED TOWARDS CATALYSTS TO THE TUNE OF RS.6.69 CROR ES SHOULD BE ALLOWED AS REVENUE EXPENDITURE. ACCORDINGLY, THERE CANNOT BE ANY CLAIM OF DEPRECIATION ON THIS VERY SAME EXPENDITURE DURING THE YEAR UNDER CONSIDERATION. HENCE, THE GROUND NO.8. RAISED BY THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. 10. THE GROU ND NO.9 RAISED BY THE ASSESSEE IS WITH REGARD TO CHARGEABILITY OF INTEREST U/S.234D OF THE ACT WHICH IS CONSEQUENTIAL IN NATURE. 1 1 . THE GROUND NO.10 RAISED BY THE ASSESSEE IS WITH REGARD TO INITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT, WHI CH WOULD BE PREMATURE FOR ADJUDICATION AT THIS STAGE. ADDITIONAL GROUND 1 2 . WE FIND THAT THE ASSESSEE HAS RAISED ADDITIONAL GROUND NO.3 FOR A.Y.2009 - 10 CHALLENGING THE ACTION OF THE LD. AO IN TREATING THE INTEREST SUBSIDY RECEIVED UNDER T ECHNOLOGY U PGRADA TION F UND S CHEME (TUFS) AS REVENUE RECEIPT AMOUNTING TO RS.8,34,26,992/ - . WE FIND THAT SIMILAR ISSUE HAD AROSE IN ASSESSEES OWN CASE IN EARLIER YEARS AND NON - R A ISING OF A SPECIFIC GROUND IN THIS REGARD IN THE ORIGINAL GROUND OF ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 25 APPEAL IS A GENUINE OMISSIO N ON THE PART OF THE ASSESSEE AND SINCE THIS ISSUE IS ONLY A LEGAL ISSUE AND DOES NOT INVOLVE ANY VERIFICATION OF FACTS AND IN VIEW OF THE FACT THAT IT GOES TO THE ROOT OF THE MATTER, WE DEEM IT FIT AND APPROPRIATE TO ADMIT THIS ADDITIONAL GROUND AND TAKE IT UP FOR ADJUDICATION. 1 2 .1. WE FIND THAT BOTH THE PARTIES BEFORE US AGREED THAT THIS ISSUE HAD BEEN REMANDED BACK TO THE FILE OF THE LD. AO IN EARLIER YEAR FOR DENOVO ADJUDICATION. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DEEM IT FIT TO REMAND THIS ISSUE TO THE FILE OF THE LD. AO FOR DENOVO ADJUDICATION IN ACCORDANCE WITH LAW. ACCORDINGLY, THE ADDITIONAL GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 1 3 . THE ADDITIONAL GROUND NO.4 RAISED BY THE ASSESSEE IS WITH REGARD TO CL AIM OF DEDUCTION TOWARDS THE EDUCATION CESS AND SECONDARY AND HIGHER EDUCATION CESS. 1 3 .1. WE FIND THAT THIS ISSUE IS A LEGAL ISSUE AND IT GOES TO THE ROOT OF THE MATTER AND DOES NOT INVOLVE ANY VERIFICATION OF FACTS. HENCE, THE SAID ADDITIONAL GROUND IS ADMITTED AND TAKEN UP FOR ADJUDICATION. WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 26 RAJASTHAN HIGH COURT IN THE CASE OF CHAMBAL FERTILIZERS AND CHEMICALS LTD. VS. JCIT IN INCOME TAX APPEAL NO.52 & 68 OF 2018 DATED 31/07/2018 . WE NOTE THAT HONBLE RAJASTHAN HIGH COURT HAD TAKEN INTO ACCOUNT THE CBDT CIRCULAR DATED 18/05/1967 FOR HOLDING SUCH EDUCATION CESS, SECONDARY AND HIGHER EDUCATION CESS TO BE ALLOWABLE AS DEDUCTION. THEIR LORDSHIPS HAD HELD THAT SECTION 40A(II) OF THE A CT APPLIES ONLY ON TAXES OTHER THAN CESS. WE FIND THAT ASSESSEE HAD PAID THE FOLLOWING EDUCATIONAL CESS AS TABULATED BELOW. EDUCATION CESS IN INCOME - TAX PARTICULARS AMOUNT EDUCATION CESS AND SECONDARY HIGHER EDUCATION CESS ON INCOME TAX EDUCATION CESS AND SECONDARY HIGHER EDUCATION CESS ON DIVIDEND DISTRIBUTION TAX TOTAL CLAIM OF EDUCATION CESS 224,12,621 27,04,167 251,16,788 1 3 .2. RESPECTFULLY FOLLOWING THE SAID DECISION, THE ADDITIONAL GROUND NO.4 RAISED BY THE ASSESSEE IS ALLOWED. 1 4 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.2963/MUM/2014 (REVENUE APPEAL) ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 27 1 5 . THE GROUND NO.2 RAISED BY THE REVENUE IS WITH REGARD TO DELETION OF DEPRECIATION ON GOODWILL AMOUNTING TO RS.1,11,98,382/ - . WE FIND THAT THIS ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE BY THE ORDER OF THIS TRIBUNAL IN ITA NO.3033/MUM/2012 DATED 09/12/2015 WHEREIN IT WAS HELD AS UNDER: - 11.GROUND NO.9 DEALS WITH DISALLOWANCE OF DEPRECIATION ON GOODWILL ON AC QUISITION OF MADURA GARMENTS DIVISION. AS AGREED BY THE AR AND THE DR, THE ISSUE HAS BEEN DEALT WITH BY THE TRIBUNAL, WHILE DECIDING THE APPEAL FOR THE AY.2006 - 07(SUPRA).PARAGRAPH 6 OF THE SAID ORDER READS AS UNDER: '6.NEXT GROUND IS ABOUT DISALLOWANCE OF DEPRECIATION ON GOODWILL ON ACQUISITION OF MADURA GARMENTS DIVISION ONGOING CONCERN BASIS. WE FIND THAT IN THE EARLIER IDENTICAL ISSUE HAD BEEN DECIDED IN FAVOUR OF THE ASSESSEE AS FOLLOWING: 3.1.WE FIND THAT SUM OF RS. 3.33 CRORES,RS.2.50 CRORES AND RS.1 .87 CRORES WAS FOUND TO BE INCURRED BY THE ASSESSEE FOR THE AY.S.2003 - 04.2004 - 05 AND 2005 - 06 RESPECTIVELY ON ACCOUNT OF MARKETING AND KNOWHOW INCURRED ON ACQUISITION OF MADURA GARMENTS DIVISION.WE FIND THAT THE IDENTICAL ISSUE WAS DELIBERATED UPON BY THE T RIBUNAL WHILE DECIDING THE APPEAL FOR EARLIER AY. WE ARE REPRODUCING THE RELEVANT PARAGRAPH OF THAT ORDER AND SAME READS AS UNDER: 18.GROUND NO. 8 READS AS UNDER: 'THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO HAS ERR ED IN DISALLOWING DEPRECIATION OF RS. 3,33,86,719 CLAIMED BY THE APPELLANT ON GOODWILL OF RS.20.35 CRORES ACQUIRED ON ACQUISITION OF 'MADURA GARMENTS' DIVISION FROM MADURA COASTS LTD. ON A GOING CONCERN BASIS AND LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED AO. THE LEARNED AO BE DIRECTED TO ALLOW THE DEPRECIATION ON GOODWILL AND TO REDUCE THE TOTAL INCOME ACCORDINGLY.' 18.1.WE FIND THAT THIS ISSUE HAS ALREADY BEEN ALLOWED IN ASSESSEE'S OWN CASE IN ITA NO.5421/ M/05 FOR A.Y.2000 - 01.RESPE CTFULLY FOLLOWING THE DECISION OF THE CO ORDINATE BENCH, WE DIRECT THE AO TO ALLOW THE CLAIM OF DEPRECIATION ON GOODWILL. GROUND NO. 8 IS ACCORDINGLY ALLOWED.' ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 28 FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL FOR EARLIER YEARS,GROUND NO.5,9,AND 3 FOR THE AY.2003 - 04,2004 - 05,2005 - 06 ARE DECIDED IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE ABOVE,GROUND NO.6 IS DECIDED IN FAVOUR OF THE ASSESSEE.' CONSIDERING THE ABOVE, WE ARE DECIDING GROUND NO.9 IN FAVOUR OF THE ASSESSEE. 1 5 .1. RESPECTFULLY FOLLOWING THE SAID DECISIO N, WE DO NOT FIND ANY INFIRMITY IN THE ACTION OF THE LD. CIT(A) GRANTING RELIEF TO THE ASSESSEE. ACCORDINGLY, THE GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 1 6 . THE GROUND NO.3 RAISED BY THE REVENUE IS WITH REGARD TO CHALLENGING THE ACTION OF THE LD. CIT(A) IN TREATING THE RECEIPT ON ACCOUNT OF SALE OF CERTIFIED EMISSION AS CAPITAL RECEIPT (CARBON CREDIT RECEIPTS) . WE FIND THAT THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. MY HOME POWER LTD. REPORTED IN 365 ITR 82; HONBLE KARNATAKA HIG H COURT IN THE CASE OF CIT VS. SUBHASH KABINI POWER CORPORATION LTD REPORTED IN 385 ITR 592; HONBLE ALLAHABAD HIGH COURT IN THE CASE OF PCIT VS L.H. SUGAR FACTORY PVT. LTD. REPORTED IN 392 ITR 568 HAD HELD THAT CARBON CREDIT RECEIPTS ARE TO BE CONSTRUED A S CAPITAL RECEIPTS. WHEN THIS WAS PUT TO THE LD. DR, THE LD. DR FAIRLY CONCEDED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS HIGH COURTS, BUT HE HOWEVER, PRAYED FOR VERIFICATION OF THESE FIGURES BY THE LD. AO. THE LD. AR ALSO FAIRLY AGR EED THAT VERIFICATION OF THE FIGURES BY ITA NO.2525/MUM/2014 & 2963/MUM/2014 M/S. GRASIM INDUSTRIES LTD., (SUCCESSOR TO THE BUSINESS OF M/S. ADITYA BIRLA NUVO LTD.,) 29 THE LD. AO BE MADE . ACCORDINGLY, WE DEEM IT FIT AND APPROPRIATE , TO SET ASIDE THIS ISSUE TO THE FILE OF THE LD. AO , TO VERIFY THE ACTUAL FIGURES OF CARBON CREDIT RECEIPTS AND DECIDE THE TAXABILITY OF THE SAME IN THE LIGHT OF THE AFORESAID DECISIONS OF THE HONBLE HIGH COURTS. ACCORDINGLY, THE GROUND NO.3 RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 1 7 . IN THE RESULT, APPEAL OF THE ASSESSEE AND REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 / 12 /201 9 SD/ - ( MAHAVIR SINGH ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 20 / 12 / 2019 KARUNA , SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//
