The DCITBharuch Circle, Bharuch V. Bharuch Enviro Infrastructure Ltd., Bharuch

ITA 2882/AHD/2010

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9924 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-11-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 14-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N SOPARKAR
• Keywords: Capital asset; Business income; Depreciation; Search and seizure
• Section: 115JB; 32; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NOS: 733, 1424, 4389 & 4408/AHD/2007 (ASSESSMENT YEARS: 2002-03 TO 2004-05) BHARUCH ENVIRO INFRASTRUCTURE LIMITED, 117-118, GIDC ESTATE, ANKLESHWAR, GUJARAT - 393002 DEPUTY COMMISSIONER OF INCOME TAX, BHARUCH CIRCLE, BHARUCH V/S V/S DEPUTY COMMISSIONER OF INCOME TAX, BHARUCH CIRCLE, BHARUCH BHARUCH ENVIRO INFRASTRUCTURE LIMITED, 117-118, GIDC ESTATE, ANKLESHWAR, GUJARAT - 393002 (APPELLANT) (RESPONDENT) ITA. NO: 29/AHD/2009 (ASSESSMENT YEARS: 2005-06) BHARUCH ENVIRO INFRASTRUCTURE LIMITED, 117-118, GIDC ESTATE, ANKLESHWAR, GUJARAT - 3930302 V/S DEPUTY COMMISSIONER OF INCOME TAX, BHARUCH CIRCLE, BHARUCH (APPELLANT) (RESPONDENT) ITA NOS. 773 & 14 24/AHD/2007 AND OTHERS . A.Y. 2002-03 TO 2 006-07 2 ITA. NOS: 123, 2882 & 119/AHD/2010 (ASSESSMENT YEARS: 2004-05 TO 2006-07) BHARUCH ENVIRO INFRASTRUCTURE LIMITED, 117-118, GIDC ESTATE, ANKLESHWAR, GUJARAT - 393002 DEPUTY COMMISSIONER OF INCOME TAX, BHARUCH CIRCLE, BHARUCH V/S V/S DEPUTY COMMISSIONER OF INCOME TAX, BHARUCH CIRCLE, BHARUCH BHARUCH ENVIRO INFRASTRUCTURE LIMITED, 117-118, GIDC ESTATE, ANKLESHWAR, GUJARAT - 393002 (APPELLANT) (RESPONDENT) PAN: AAACB8075F APPELLANT BY : SHRI S. N. SOPARKAR, AR RESPONDENT BY : SHRI JAMESH KURIAN, SR. D.R. ( )/ ORDER DATE OF HEARING : 23 -11-20 16 DATE OF PRONOUNCEMENT : 28 -11-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. ITA NOS. 1242/AHD/2007, 733/AHD/2007, 4389/AHD/2007 , 29/AHD/2007, 29/AHD/2009 AND 123/AHD/2010 ARE APPEA LS BY THE ASSESSEE PREFERRED AGAINST SEPARATE ORDERS OF THE L D. CIT(A) PERTAINING TO A.Y. 2002-03, 2003-04, 2004-05, 2005-06 AND 2006 -07 RESPECTIVELY. ITA NOS. 773 & 14 24/AHD/2007 AND OTHERS . A.Y. 2002-03 TO 2 006-07 3 ITA NO. 4408/AHD/2007 IS THE CROSS APPEAL OF THE RE VENUE FOR A.Y. 2004-05. 2. SINCE COMMON ISSUES ARE INVOLVED IN ALL THESE IMPUG NED APPEALS, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. COMMON ISSUES RAISED BY THE ASSESSEE IN THESE APPEA LS CAN BE CATEGORIZED AS UNDER:- (1) EXCLUSION OF SUBSIDY RECEIVED TOWARDS THE CONSU MPTION OF PIT AND LAND EXPENSES FROM THE DEDUCTION CLAIMED U/S. 80IA. (2) EXCLUSION OF OTHER INCOME AND MISCELLANEOUS INC OME FROM THE DEDUCTION CLAIMED U/S. 80IA. (3) DISALLOWANCE OF PROVISION FOR PIT COVERING EXPE NSES. (4) DISALLOWANCE OF POST CLOSURE EXPENSES. (5) LEVY OF INTEREST U/S. 234D OF THE ACT 4. IN ADDITION TO THE AFORE-STATED COMMON ISSUES, THER E ARE ADDITIONAL ISSUES RAISED WHICH WILL BE CONSIDERED HEREINAFTER. 5. AT THE VERY OUTSET, REPRESENTATIVES OF BOTH SIDES AGREED THAT FACTS IN ITA NO. 733/AHD/2007 MAY BE TAKEN AS THE BASIS FOR THE DISPOSAL OF COMMON ISSUES. ITA NOS. 773 & 14 24/AHD/2007 AND OTHERS . A.Y. 2002-03 TO 2 006-07 4 6. REPRESENTATIVES OF BOTH SIDES WERE HEARD AT LENGTH AND WITH THE ASSISTANCE OF THE LD. SENIOR COUNSEL, WE HAVE GONE THROUGH THE RELEVANT DOCUMENTARY EVIDENCES IN THE LIGHT OF RULE 18(6) OF THE APPELLATE TRIBUNAL RULES. WE HAVE CAREFULLY PERUSED THE ORDER S OF THE AUTHORITIES BELOW. 7. COMMON GRIEVANCE NO. 1- EXCLUSION OF SUBSIDY FROM THE DEDUCTION CLAIMED U/S. 80IA. 8. THE ASSESSEE HAS RECEIVED SUBSIDY FROM THE STATE GO VERNMENT IN RESPECT OF THE CAPITAL ASSETS ACQUIRED ON OR BEFORE 31.03.2003. PURSUANCE TO THE APPLICATION OF THE ASSESSEE FOR TH E GRANT OF SUBSIDY VIDE LETTER DATED 21.03.2000 THE STATE GOVERNMENT I NITIALLY SANCTIONED THE CAPITAL SUBSIDY AMOUNTING TO RS. 15 LACS ON THE ELIGIBLE PROJECT COST AMOUNTING TO RS. 60.03 LACS OF PHASE-I AND RS. 291. 82 LACS ON THE ELIGIBLE PROJECT COST OF RS. 1167.30 LACS OF PHASE- II. THE APPELLANT COMPANY ENTERED INTO AGREEMENT FOR THE GOVERNMENT S UBSIDY WITH THE DISTRICT INDUSTRIES CENTRE, BHARUCH VIDE AGREEMENT DATED 30.03.2002 AND 19.02.2003. 9. THE VERY PURPOSE OF SANCTION OF CAPITAL SUBSIDY WAS TO MEET THE PROJECT COST TO SET UP SOLID WASTE DISPOSAL PROJECT AND COM PLETE THE PROJECT. ACCORDINGLY, THE STATE GOVERNMENT SANCTIONED THE CA PITAL SUBSIDY FOR THE SOLID WASTE DISPOSAL PROJECT SET UP BY THE APPE LLANT COMPANY. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2003-04, THE ITA NOS. 773 & 14 24/AHD/2007 AND OTHERS . A.Y. 2002-03 TO 2 006-07 5 APPELLANT COMPANY RECEIVED CAPITAL SUBSIDY AMOUNTIN G TO RS. 44,15,978/-. 10. IN THE LINE OF EXPLANATION 10 TO SECTION 43(1) OF T HE ACT, THE SUBSIDY AMOUNT WAS ALLOCATED AS UNDER:- (I) BUILDING RS. 10,046/- (II) PLANT AND MACHINERY RS. 70,390/- (III) CONSUMPTION COST OF PIT CONSTRUCTION RS. 43,35,542/- 11. THE SUBSIDY AMOUNT ALLOCATED TOWARDS BUILDING AND P LANT AND MACHINERY HAVE BEEN REDUCED FROM OPENING WDV OF THE RESPECT BLOCKS AND ACCORDINGLY DEPRECIATION WAS CLAIMED U/S. 32 OF THE ACT. HOWEVER, THE SUBSIDY RECEIVED TOWARDS THE CONSUMPTION COST O F PIT CONSTRUCTION HAS BEEN OFFERED TO TAX AND INCLUDED IN COMPUTING T HE PROFIT AND GAINS ELIGIBLE FOR DEDUCTION U/S. 80IA OF THE ACT. 12. THE LOWER AUTHORITIES DENIED THIS CLAIM OF DEDUCTIO N ON THE GROUND THAT THE SUBSIDY AMOUNT HAS BEEN GRANTED SPECIFICAL LY FOR LAND/BUILDING AND PLANT & MACHINERY. 13. IT IS SAY OF THE LD. COUNSEL THAT THE ASSESSEE HAS CHARGED THE COST TO ITS PROFIT AND LOSS ACCOUNT. THEREFORE, THE SUBSIDY REC EIVED FROM THE STATE GOVERNMENT IS NOTHING BUT THE RECOUPMENT OF THE COS T AND, THEREFORE, A DIRECT NEXUS HAS BEEN ESTABLISHED WHICH ENTITLES THE ASSESSEE FOR THE CLAIM OF DEDUCTION U/S. 80IA OF THE ACT. THE HONBL E SUPREME COURT IN ITA NOS. 773 & 14 24/AHD/2007 AND OTHERS . A.Y. 2002-03 TO 2 006-07 6 THE CASE OF MEGHALAYA STEELS LTD. 383 ITR 217 HAS H ELD THAT WHETHER THE ASSESSEE HAS RECEIVED SUBSIDY WHICH WAS REIMBUR SEMENTS OF MANUFACTURING COST INCURRED BY ASSESSEE, DEDUCTION OF SAID SUBSIDIES WAS ALLOWED U/S. 80-IB AND 80IC OF THE ACT . THE RELEVANT FINDINGS OF THE HONBLE SUPREME COURT NEED A SPECIAL MENTION HERE A ND THE SAME READS AS UNDER:- 18. THE JUDGMENT IN STERLING FOODS EASE (SUPRA) LAY S DOWN A VERY IMPORTANT TEST IN ORDER TO DETERMINE WHETHER PROFITS AND GAINS ARE DE RIVED FROM BUSINESS OR AN INDUSTRIAL UNDERTAKING. THIS COURT HAS STATED THAT THERE SHOULD BE A DIRECT NEXUS BETWEEN SUCH PROFITS AND GAINS AND THE INDUSTRIAL U NDERTAKING OR BUSINESS. SUCH NEXUS CANNOT BE ONLY INCIDENTAL. IT THEREFORE FOUND , ON THE FACTS BEFORE IT, THAT BY REASON OF AN EXPORT PROMOTION SCHEME, AN ASSESSEE W AS ENTITLED TO IMPORT ENTITLEMENTS WHICH IT COULD THEREAFTER SELL. OBVIOU SLY, THE SALE CONSIDERATION THEREFROM COULD NOT BE SAID TO BE DIRECTLY FROM PRO FITS AND GAINS BY THE INDUSTRIAL UNDERTAKING BUT ONLY ATTRIBUTABLE TO SUCH INDUSTRIA L UNDERTAKING INASMUCH AS SUCH IMPORT ENTITLEMENTS DID NOT RELATE TO MANUFACTURE O R SALE OF THE PRODUCTS OF THE UNDERTAKING, BUT RELATED ONLY TO AN EVENT WHICH WAS POST-MANUFACTURE NAMELY, EXPORT. ON AN APPLICATION OF THE AFORESAID TEST TO THE FACTS OF THE PRESENT CASE, IT CAN BE SAID THAT AS ALL THE FOUR SUBSIDIES IN THE PRESE NT CASE ARE REVENUE RECEIPTS WHICH ARE REIMBURSED TO THE ASSESSEE FOR ELEMENTS OF COST RELATING TO MANUFACTURE OR SALE OF THEIR PRODUCTS THERE CAN CERTAINLY BE SAID TO BE A DIRECT NEXUS BETWEEN PROFITS AND GAINS OF THE INDUSTRIAL UNDERTAKING OR BUSINESS, AN D REIMBURSEMENT OF SUCH SUBSIDIES. HOWEVER, SHRI RADHAKRISHNAN STRESSED THE FACT THAT THE IMMEDIATE SOURCE OF THE SUBSIDIES WAS THE FACT THAT THE GOVERNMENT GAVE THE M AND THAT, THEREFORE, THE IMMEDIATE SOURCE NOT BEING FROM THE BUSINESS OF THE ASSESSEE, THE ELEMENT OF DIRECTNESS IS MISSING. WE ARE AFRAID WE CANNOT AGRE E. 14. THE HONBLE SUPREME COURT IN THIS JUDGMENT DISTINGU ISHED THE DECISIONS GIVEN BY THE HONBLE APEX COURT IN THE CA SE OF PANDIAN CHEMICALS LTD. 262 ITR 278. AND LIBERTY INDIA 183 TAXMANN.COM 349. IN ITA NOS. 773 & 14 24/AHD/2007 AND OTHERS . A.Y. 2002-03 TO 2 006-07 7 THE LIGHT OF THE AFOREMENTIONED RATIO LAID DOWN BY THE HONBLE SUPREME COURT, WE HAVE NO HESITATION TO HOLD THAT T HE SUBSIDY RECEIVED FROM THE STATE GOVERNMENT IS NOTHING BUT T HE RECOUPMENT OF THE COST AND HENCE ELIGIBLE FOR THE DEDUCTION U/S. 80IA OF THE ACT. COMMON GRIEVANCE NO. 1 IS ACCORDINGLY ALLOWED. 15. COMMON GRIEVANCE NO. 2 EXCLUSION OF INTEREST INCO ME FROM THE DEDUCTION CLAIMED U/S. 80IA OF THE ACT. 16. A PERUSAL OF THE FINANCIAL STATEMENT OF THE ASSESSE E SHOWS THAT UNDER THE HEAD INCOME OTHER INCOME OF RS. 21,77,848/- . THE ASSESSEE HAS SHOWN INTEREST INCOME GROSS AT RS. 21,66,454/- AND MISCELLANEOUS INCOME AT RS. 11,394/- AND CLAMED DEDUCTION U/S. 80 IA ON THE SAME WHICH WAS DENIED BY THE REVENUE AUTHORITIES ON THE GROUND THAT THIS CANNOT BE REGARDED AS PROFIT OR GAINS DERIVED FROM ELIGIBLE BUSINESS. 17. A PERUSAL OF THE FINANCIAL STATEMENTS VIS--VIS THE COMPUTATION OF INCOME SHOWS THAT THE ONLY HEAD OF INCOME SHOWN IN THE RETURN IS PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE A.O. HAS ALSO PROCEEDED BY COMPUTING THE ASSESSED INCOME TAKING T HE FIGURE FROM PROFITS AND GAINS OF BUSINESS OR PROFESSION. THIS MEANS THAT THE A.O. HAS ADMITTEDLY ACCEPTED THE MISCELLANEOUS INCOME UN DER HEAD PROFITS AND GAINS OF BUSINESS. ITA NOS. 773 & 14 24/AHD/2007 AND OTHERS . A.Y. 2002-03 TO 2 006-07 8 18. IT WAS EXPLAINED THAT THE APPELLANT-COMPANY HAD SET ASIDE THE AMOUNT FOR EXPENDITURES TO BE INCURRED FOR INHERENT COST R ELATING TO THE MAINTENANCE OF THE PITS. THEREFORE, THE INTEREST IN COME HAS A DIRECT NEXUS WITH THE BUSINESS ACTIVITY OF THE ASSESSEE, T HEREFORE ELIGIBLE FOR DEDUCTION U/S. 80IA. 19. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F EMPIRE PUMPS PVT. LTD.229 TAXMANN.COM 379. HAS HELD THAT WHETHER ASSESSEE WAS COMPELLED TO PARK A PART OF ITS FUNDS IN FIXED DEPO SITS UNDER INSISTENCE OF FINANCIAL INSTITUTIONS, INTEREST INCOME RECEIVED ON SAID DEPOSITS WAS TO BE REGARDED AS BUSINESS INCOME FOR THE PURPOSE OF COMP UTING AMOUNT OF DEDUCTION U/S. 80-I OF THE ACT. THE HONBLE JURISDICTIONAL HIGH COURT HAD FOLLOWED ITS OWN DECISION GIVEN IN THE CASE OF NIRM A INDUSTRIES LTD. 387 ITR 402. THE RELEVANT FINDINGS IN THE SAID DECISION READS AS UNDER:- WHEN ONE READS THE OPENING PORTION OF SECTION 801 OF THE ACT IT IS CLEAR THAT WORDS USED ARE : GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING. ONCE THIS IS THE POSITION THEN, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUC TION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO THE PRESCRIBED PERCENTA GE IS TO BE ALLOWED. THAT, IN FACT THE GROSS TOTAL INCOME OF THE ASSESSEE INCLUDE D PROFITS AND GAINS FROM SUCH BUSINESS, AND THIS IS APPARENT ON A PLAIN GLANCE AT THE COMPUTATION IN THE ASSESSMENT ORDER. BOTH IN RELATION TO VATVA UNIT AN D MANDALI UNIT THE COMPUTATION COMMENCES BY TAKING PROFIT AS PER STATE MENT OF INCOME FILED ALONGWITH RETURN OF INCOME. THEREFORE, THE SAME ITE M OF RECEIPT CANNOT BE TREATED DIFFERENTLY: ONCE WHILE COMPUTING THE GROSS TOTAL I NCOME, AND SECONDLY, AT THE TIME OF COMPUTING DEDUCTION UNDER SECTION 80I OF TH E ACT. ITA NOS. 773 & 14 24/AHD/2007 AND OTHERS . A.Y. 2002-03 TO 2 006-07 9 20. CONSIDERING THE FACTS IN TOTALITY, IN THE LIGHT OF THE AFOREMENTIONED DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, INTEREST INCOME OF RS. 21,66,454/- IS HELD TO BE ELIGIBLE FOR DEDUCTION U/ S. 80IA OF THE ACT. SINCE NO DETAILS HAVE BEEN GIVEN FOR THE MISCELLANE OUS INCOME OF RS. 11,394/-, THE SAME IS DIRECTED TO BE EXCLUDED FOR C OMPUTING THE DEDUCTION U/S. 80IA OF THE ACT. COMMON GRIEVANCE NO . 2 IS PARTLY ALLOWED. 21. COMMON GRIEVANCE NO. 3 DISALLOWANCE OF PROVISION FOR PIT COVERING EXPENSES. 22. THE A.O. FOUND THAT THE ASSESSEE HAS DEBITED EXPENS ES OF RS. 84,72,597/- UNDER THE HEAD PIT COVERING EXPENSES. ON FURTHER VERIFICATION, THE A.O. NOTICED THAT THE ASSESSEE HA S INCURRED ACTUAL EXPENDITURE FOR PIT COVERING AT RS. 66,92,900/- AS AGAINST THE PROVISION OF RS. 84,72,597/-. THE ASSESSEE WAS ASKED TO EXPL AIN WHY THE EXPENSES OF RS. 17,79,697/- SHOULD NOT BE DISALLO WED. THE ASSESSEE EXPLAINED THAT THE LIABILITY TO INCUR EXPENDITURE O N PIT COVERING ARISES AS SOON AS THE PITS WERE DUG AND THE PITS ARE REQUIRED TO BE COVERED AFTER EACH PIT IS COMPLETELY FILLED AS PER GUIDELINES ISS UED BY GPCB. THE A.O. DENIED THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT THE PIT IS CLOSED IMMEDIATELY AND, THEREFORE, THE DIFFERENCE B ETWEEN THE PROVISION AND THE AMOUNT ACTUALLY SPENT COULD NOT B E EXPLAINED PROPERLY. THE A.O. FURTHER ADDED THE EXCESS PROVISI ON TO THE BOOK PROFIT TREATING THE SAME AS UNASCERTAINED LIABILITY FOR THE COMPUTATION ITA NOS. 773 & 14 24/AHD/2007 AND OTHERS . A.Y. 2002-03 TO 2 006-07 10 OF BOOK PROFIT U/S. 115JB OF THE ACT. THE HONBLE R AJASTHAN HIGH COURT IN THE CASE OF UDAIPUR MINERAL DEVELOPMENT SYNDICAT E PVT. LTD. 261 ITR 706 HAD HELD THAT AS SOON AS THE ASSESSEE DIG THE PITS ITS LIABILITY TO REFILL THEM AROSE AND IT WAS ENTITLED TO DEDUCTION OF THE EXPENSES INCURRED FOR FILLING THOSE PITS, AS THE ASSESSEE WAS FOLLOWING M ERCANTILE SYSTEM OF ACCOUNTING . SIMILAR VIEW WAS TAKEN BY THE CO-ORDINATE BENCH O F HYDERABAD IN THE CASE OF NMDC LTD. 56 TAXMANN.COM 3 96. THE CO- ORDINATE BENCH AT AHMEDABAD IN THE CASE OF ENVIRO T ECHNOLOGY LTD. IN ITA NO. 426, 734 TO 736/AHD/2007 FOLLOWING THE ORDE R OF THE HONBLE RAJASTHAN HIGH COURT (SUPRA) ALLOWED THE CLAIM OF T HE ASSESSEE. 23. IN THE LIGHT OF THE AFOREMENTIONED JUDICIAL DECISIO NS, WE DIRECT THE A.O. TO ALLOW THE PROVISION FOR PIT COVERING EXPENSES IN TOTALITY. INSOFAR AS THE APPLICABILITY OF SECTION 115JB OF THE ACT IS CO NCERNED, THE HONBLE SUPREME COURT IN THE CASE OF APPOLLO TYRES LTD. 255 ITR 273 HAS HELD THAT WHILE DETERMINING THE BOOK PROFITS U/S.115J, THE ASSESSING OFFICER COULD NOT RECOMPUTE THE PROFITS IN THE PROFIT AND L OSS ACCOUNT BY EXCLUDING PROVISIONS MADE FOR ARREARS OF DEPRECIATION . THE HONBLE APEX COURT HAS FURTHER OBSERVED THAT THE ASSESSING OFFICER HAS TO ACCEPT THE AUTHENTICITY OF THE ACCOUNTS WITH REFERENCE TO THE PROVISIONS OF THE COMPANIES ACT, WHICH OBLIGATE THE COMPANY TO MAINTA IN ITS ACCOUNT IN A MANNER PROVIDED BY THAT ACT AND THE SAME TO BE SC RUTINIZED AND CERTIFIED BY STATUTORY AUDITORS AND APPROVED BY THE COMPANY IN GENERAL MEETING AND THEREAFTER TO BE FILED BEFORE THE REGIS TRAR OF COMPANIES WHO HAS A STATUTORY OBLIGATION ALSO TO EXAMINE AND BE SATISFIED THAT THE ITA NOS. 773 & 14 24/AHD/2007 AND OTHERS . A.Y. 2002-03 TO 2 006-07 11 ACCOUNTS OF THE COMPANY ARE MAINTAINED IN ACCORDANC E WITH THE RECRUITMENTS OF THE COMPANIES ACT. SUB-SECTION (1A) OF SECTION 115J DOES NOT EMPOWER THE ASSESSING OFFICER TO EMBARK UP ON A FRESH ENQUIRY IN REGARD TO THE ENTRIES MADE IN THE BOOKS OF ACCOUNT OF THE COMPANY. 24. COMMON GRIEVANCE NO. 3 IS ACCORDINGLY ALLOWED. 25. COMMON GRIEVANCE NO. 4 DISALLOWANCE OF POST CLOSU RE EXPENSES. 26. THE ASSESSEE HAS MADE A PROVISION FOR POST-CLOSURE CARE EXPENDITURE FOR THE FOLLOWING MAJOR EXPENSES:- A) AIR (GAS) MONITORING EXPENSES; B) LEACHATE TREATMENT EXPENSES; C) INSURANCE EXPENSES IN RESPECT OF PUBLIC HEALTH LIAB ILITY; D) REPAIRS AND MAINTENANCE EXPENSES IN RESPECT OF ELEC TRIC WATER PUMPS INSTALLED IN THE BORE WELLS; E) SECURITY EXPENSES; F) GARDENING EXPENSES; G) LABORATORY EXPENSES; H) ELECTRICITY EXPENSES; I) OFFICE AND ADMINISTRATION EXPENSES. 27. IT IS WORTH TO MENTION HERE THAT THE CHARGES COLLEC TED FROM THE MEMBERS TOWARDS TREATMENT OF SOLID WASTE INCLUDES C HARGES TOWARDS POST CLOSURE CARE EXPENSES AND THE SAME HAVE BEEN O FFERED TO TAX AS PER THE DIRECTIONS OF THE GUJARAT POLLUTION CONTROL BOARD. AFTER CLOSURE ITA NOS. 773 & 14 24/AHD/2007 AND OTHERS . A.Y. 2002-03 TO 2 006-07 12 OF LAND FILL AT LEAST FOR 30 YEARS THE ASSESSEE HAS TO TAKE MEASURE FOR COLLECTION OF LEACHATE AND GAS EMISSION GENERATED I F ANY. THEREFORE, THE PROVISION MADE IN THE BOOKS OF ACCOUNTS TOWARDS POS T CLOSURE CARE EXPENDITURE IS AN ASCERTAINED LIABILITY TO MEET AT FUTURE DATE AGAINST WHICH INCOME EARNED DURING THE YEAR IS OFFERED TO T AX. WE FIND THAT THE GUJARAT POLLUTION CONTROL BOARD IN ITS AMENDMENT OF AUTHORIZATION DATED 17.04.2001, INTERALIA, STATED IT SHALL PREP ARE DETAILED FINANCIAL ESTIMATE FOR THE COST TO CONDUCT POST CLOSURE CARE FOR 30 YEARS, AFTER CLOSURE OF THE PORTION/FULL PART OF THE LAND FILL. PURSUANT TO THIS STIPULATION , THE ASSESSEE HAD SCIENTIFICALLY COMPU TED THE PROVISION AS UNDER:- BHARUCH E NVIRO INFRASTRUCTURE LIMITED ASS ESSMENT YEAR 2003-04 WORKING SHOWING COMPUTATION OF PROV. FOR POST-CLOSU RE CARE EXPENSES MADE DURING THE YEAR. TOTAL SLUDGE RECEIVED DURING THE YEAR (QTY. IN M.T. ) 61,484,737 POST CLOSURE CARE FUND @ RS. 50/- PER M.T. 3,07 4,237 (WORKING AS PER LAST YEAR NOTES ENCLOSED HEREWITH A T ANNEXURE A) OPENING BALANCE 7,700,000 INTEREST @ 7.15% ON OPENING BALANCE REQUIRED TO BE RECOVERED 550,550 3,624,787 SAY RS. 3,625,000 28. CONSIDERING THE TOTALITY OF THE FACTS, IN THE LIGHT OF THE STIPULATION OF GUJARAT POLLUTION CONTROL BOARD (SUPRA) AND THE SCI ENTIFIC WORKING ITA NOS. 773 & 14 24/AHD/2007 AND OTHERS . A.Y. 2002-03 TO 2 006-07 13 (SUPRA), WE DIRECT THE A.O. TO ALLOW THE POST CLOSU RE EXPENSES. COMMON GRIEVANCE NO. 4 IS ALLOWED. 29. COMMON GRIEVANCE NO. 5 RELATES TO THE LEVY OF INTER EST U/S. 234D OF THE ACT. LEVY OF INTEREST IS MANDATORY U/S. 234D OF THE ACT, THOUGH CONSEQUENTIAL. WE ACCORDINGLY DIRECT THE A.O. TO CHARGE INTEREST U/S. 234D OF THE ACT IN THE LIGHT OF THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN 358 ITR 370. NOW WE WILL TAKE UP ADDITIONAL ISSUES TAKEN BY THE ASSESSEE IN ITA NO. 1424/AHD/2007 . 30. GROUND NO. 1- DISALLOWANCE OF DEDUCTION U/S. 80IA O F RS. 87,02,208/- ON ACCOUNT OF LAND AND PIT CONSTRUCTION EXPENSES. 31. IN ITS PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED ON 31.03.2002, THE ASSESSEE HAS WRITTEN BACK AN AMOUNT OF RS. 87,02,20 8 BEING WRITE BACK IN RESPECT OF CONSUMPTION OF LAND AND PIT CONSTRUCT ION. IT WAS EXPLAINED THAT DURING THE YEAR THE COMPANY REVISED THE CAPACITY OF PHASE-I BASED ON THE ESTIMATED CAPACITY OF THE ENTI RE PROJECT. CONSEQUENTLY, THE CAPACITIES OF LAND AND PITS OF PH ASE-I WERE REVISED UPWARDS TO 505041 M.T. AND 2,36,00 M.T. RESPECTIVEL Y. AS A RESULT THE EXCESS STOCK OF LAND AND EXPENDITURE ON PIT CONSTRU CTION WRITTEN OFF IN EARLIER YEARS AGGREGATING TO RS. 22,513/- AND RS. 8 ,679,695/- RESPECTIVELY HAVE BEEN WRITTEN BACK TO THE PROFIT A ND LOSS ACCOUNT. ITA NOS. 773 & 14 24/AHD/2007 AND OTHERS . A.Y. 2002-03 TO 2 006-07 14 32. AS THE COMPANY IS IN THE NEW LINE OF BUSINESS, THER E IS NO ESTABLISHED PRACTICE OF DETERMINING EXACT EXPENSES INCURRED ON THE PROCESS OF TREATMENT OF SOLID WASTE. ACCORDINGLY, IN THE BEGIN NING YEAR, THE COMPANY HAS ESTIMATED EXPENSES IN RELATION TO THE T REATMENT OF SOLID WASTE MANAGEMENT BY APPLYING AVAILABLE BEST PARAMET ERS AND ACCORDINGLY CHARGED OF THE EXPENSES TO PROFIT AND L OSS ACCOUNT OF THE RESPECTIVE YEARS. GRADUALLY, THE COMPANY DEVELOPED SCIENTIFIC METHOD OF ESTIMATION OF EXPENSES AND ACCORDINGLY THE COMPA NY HAS REVISED ITS WORKING TO ARRIVE WITH THE EXACT EXPENSES. THE REVI SED COMPUTATION IS AS UNDER:- BHARUCH ENVIRO INFR ASTRUCTURE LIMITED ST ATEMENT NO. 05 CALCULATION OF REVISED CAPACITY OF PHASE 1 (1 TO 4) (A) AREA OF ENTIRE PROJECT = 36,36 0 SQ.MTR. (B) TOTAL CAPACITY OF ENTIRE PROJECT = 5,04, 041 MT (C) TOTAL AREA OF PHASE 1 = 202 MTR X 84.3 M TR. = 17,028.60 SQ. MTR. (D) AREA OF PHASE (PIT 1 TO 4) = 17028.60 X 100 36,360 (E) TOTAL CAPACITY OF PHASE 1 (PIT TO 4) = 46.80% OF 6 ,04,041 = 2,35 ,878 MT SAY = 2,36,000 MT BHARUCH ENVIRO IN FRASTRUCTURE LIMITED S TATEMENT NO. 05 PROVISION TO BE MADE FOR CLOSURE OF PIT (DURING 2001-2002) ITA NOS. 773 & 14 24/AHD/2007 AND OTHERS . A.Y. 2002-03 TO 2 006-07 15 (A) TOTAL SLUDGE SOLID WASTE RECEIVED UP TO 31.03.2002 = RS. 1,54,589.649MT (B) COST OF TOP LINER (CLOSURE PIT) = 137.80 PER MT (C) TOTAL COST OF CLOSURE UP TO 31.03.2002 = 2,13,02,4 53 LESS ALREADY DEBITED A/CS UP TO 31.03.2002 = 60,97 ,451 PROVISION TO BE MADE FROM CLOSURE OF PIT = 1,49 ,05,002 COST OF LAND TO BE WRITTEN BACK (A) ORIGINALLY TOTAL CAPACITY OF PROJECT ESTIMATED WAS = 5,00,000 MT (OLD RATE) = 25.45 PER MT (B) REVISED CAPACITY OF PROJECT IS = 5,04,0 41 MT (C) TOTAL SOLID WASTE RECEIVED UP TO 31.03.2002 = 1,5 4,589.649 MT (D) TOTAL COST OF LAND WRITTEN ON OLD RATE = 1,54,589 .649 X 25.45= 39,34,306 (E) TOTAL COST OF LAND ON REVISED RATE = 1,5 4,589.649X25.25=39,03,389 (F) COST OF LAND TO BE WRITTEN BACK = RS.3 0,918 BHARUCH ENVIRO IN FRASTRUCTURE LIMITED STATEMENT NO. 05 CALCULATION FOR PITS EXPE NSES UNDER REVISED CAPACITY (A) COST TO BE WRITTEN BACK: (A) TOTAL COST OF 4 PITS = RS. 3,09,63,013 (B) REVISED CAPACITY = RS. 2,36,000 MT (C) COST OF PIT (REVISED) = RS.3,09,63,013 = RS.2,36,000 (D) ACTUAL COST OF PIT = RS. 131.20 PER MT (REVISED ) WRITTEN OFF UP TO 31.03.2001 = RS. 2,22,17,295 (E) COST TO BE WRITTEN OFF AS PER REVISED RATE = RS. 1,35,37,600 (F) EXCESS COST PIT TO BE ITA NOS. 773 & 14 24/AHD/2007 AND OTHERS . A.Y. 2002-03 TO 2 006-07 16 WRITTEN BACK IN 2001-2001 = RS. 2,21,17,295- RS. 1, 35,37,600 = RS. 86,79,695 (B) COST OF PIT FOR SOLID WASTE RECEIVED IN 2001-2002 (A) TOTAL SOLID WASTE RECEIVED = RS.51,406.715 MT (B) COST OF PIT TO BE WRITTEN OFF = 51406.715 X 131.20 = RS. 67,44,561 33. A PERUSAL OF THE ABOVE SHOWS THAT THE REVISED COMP UTATION IS SCIENTIFIC. WE FURTHER FIND THAT THE EXPENDITURES C LAIMED IN THE EARLIER YEARS WERE ALLOWED BY THE REVENUE. THEREFORE, WRITE BACK OF THE SAME HAS A DIRECT NEXUS WITH THE BUSINESS ACTIVITY OF TH E ASSESSEE. HENCE, THE ASSESSEE IS ELIGIBLE FOR THE DEDUCTION U/S. 80IA OF THE ACT. GROUND NO. 1 IS ACCORDINGLY ALLOWED. ITA NO.4398/AHD/2007 FOR A.Y. 2004-05 34. GROUND NO. 3 IS NOT PRESSED AND IS DISMISSED ACCORD INGLY. 35. GROUND NO. 6 RELATES TO THE NON-ADJUDICATION OF GRO UND NO. 5 RELATING TO THE COMPUTATION OF ACCUMULATED PROFITS. WE FIND THA T THE FIRST APPELLATE AUTHORITY HAS NOT ADJUDICATED THIS GRIEVA NCE OF THE ASSESSEE. THEREFORE, WE RESTORE THIS ISSUE TO THE FILES OF TH E LD. CIT(A). THE LD. CIT(A) IS DIRECTED TO DECIDE THE GRIEVANCE RAISED V IDE GROUND NO. 5. AFTER GIVING A REASONABLE AND SUFFICIENT OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE. GROUND NO. 6 & 7 ARE ALLOWED FOR ST ATISTICAL PURPOSE. ITA NOS. 773 & 14 24/AHD/2007 AND OTHERS . A.Y. 2002-03 TO 2 006-07 17 ITA NO. 29/AHD/2009 FOR A.Y. 200 5-06 36. GROUND NO. 6 - THE LD. CIT(A) HAS NOT ADJUDICATED T HE GROUND RELATING COMPUTATION OF ACCUMULATED PROFITS. WE, THEREFORE R ESTORE THIS ISSUE TO THE FILES OF THE LD. CIT(A). THE LD.CIT (A) IS DIRE CTED TO DECIDE THE GRIEVANCE OF THE ASSESSEE RELATING TO THE COMPUTATI ON OF ACCUMULATED PROFITS. GROUND NO. 6 IS TREATED AS ALLOWED FOR STA TISTICAL PURPOSE. ITA NO. 123/AHD/2010 FOR A.Y. 2006-07 37. GROUND NO. 2 IS NOT PRESSED AND THE SAME IS DISMISS ED ACCORDINGLY. ITA NO. 4408/AHD/2007 FOR A.Y. 2004-05. 38. THE REVENUE IS AGGRIEVED BY THE DELETION OF THE SUB SIDY OF RS. 83,84,418/- FROM BOOK PROFIT FOR THE COMPUTATION OF U/S. 115JB OF THE ACT. AN IDENTICAL ISSUE HAS BEEN DECIDED BY US VIDE COMMON GRIEVANCE NO. 3 FOR A.Y. 2003-04. FOR OUR DETAILED DISCUSSION THEREIN, WE DECLINE TO INTERFERE. APPEAL FILED BY THE REVENUE IS DISMIS SED. 39. ITA NOS. 119/AHD/2010 & 2882/AHD/2010 ARE APPEALS BY THE REVENUE PREFERRED AGAINST TWO SEPARATE ORDERS OF THE LD. CI T(A)-I, BARODA FOR A.Y. 2004-05 & 2005-06. ITA NOS. 773 & 14 24/AHD/2007 AND OTHERS . A.Y. 2002-03 TO 2 006-07 18 40. IN THE IMPUGNED APPEALS, THE ONLY GRIEVANCE OF THE REVENUE RELATES TO THE DELETION OF THE PENALTY LEVIED U/S. 271(1)(C) O F THE ACT. THE QUANTUM ADDITIONS HAVE BEEN DELETED BY US IN ITA NO S. 4389/AHD/2007 & 29/AHD/2009. 41. SUBLATO FUNDAMENTO CADIT OPUS WHICH MEANS IN CASE THE FOUNDATION IS REMOVED, SUPER STRUCTURE FALLS. 42. BOTH THESE APPEALS OF THE REVENUE ARE ACCORDINGLY D ISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 28 - 11- 2016 . SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD