M/s NHPC Ltd., Faridabad V. Addl. CIT, New Delhi

ITA 297/DEL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7356 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 21-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Earning of tax free income; Rule 8D; Set aside
• Section: 14A; 115JB; 195; 80IA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.466/DEL./2016 (ASSESSMENT YEAR : 2011-12) ADDL.CIT, RANGE II, VS. M/S. N.H.P.C. LTD., FARIDABAD. NHPC COMPLEX, SECTOR 33, FARIDABAD. (PAN : AAACN0149C) ITA NO.297/DEL./2016 (ASSESSMENT YEAR : 2011-12) M/S. N.H.P.C. LTD., VS. ADDL.CIT, RANGE II, NHPC COMPLEX, SECTOR 33, FARIDABAD. FARIDABAD. (PAN : AAACN0149C) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN, ADVOCATE SHRI HIMANSHU AGGARWAL, CA SHRI AKSHIT GOEL, CA REVENUE BY : MS. NIDHI SRIVASTAVA, CIT DR MS. ASHIMA NEB, SENIOR DR DATE OF HEARING : 16.07.2019 DATE OF ORDER : 26.07.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : PRESENT CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE ARISEN OUT OF IMPUGNED ORDER PASSED BY THE LD. CIT (A) ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 2 ARE BEING DISPOSED OFF BY WAY OF COMPOSITE ORDER TO AVOID REPETITION OF DISCUSSION. 2. APPELLANT, ADDL. CIT, RANGE II, FARIDABAD (HEREI NAFTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 16.11.2015 PASSE D BY THE COMMISSIONER OF INCOME-TAX (APPEALS), FARIDABAD QUA THE ASSESSMENT YEAR 2011-12 ON THE GROUNDS INTER ALIA T HAT :- 1. WHETHER, ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS RIGHT IN LAW IN DELET ING ADDITION OF RS.41,34,68,339/-WHICH WAS MADE BY THE ASSESSING OF FICER UNDER SECTION 14A OF THE ACT BY APPLYING RULE 8D? 2. WHETHER, ON THE FACTS AND IN CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD.CIT(A) WAS RIGHT IN LAW IN DELET ING DISALLOWANCE OF RS.158,19,47,693/- MADE BY THE AO I N COMPUTING THE BOOK PROFIT U/S 115JB ON ACCOUNT OF PROVISIONS MADE FOR GRATUITY, LEAVE ENCASHMENT, POST-RETIREMENT MEDICAL BENEFITS, LTC, BAGGAGE ALLOWANCE AND MATCHING CONTRIBUTION ON LEAVE ENCASHMENT EVEN THOUGH THE ASSESSEE HAS FAILED TO E STABLISH THESE PROVISIONS TO BE OF ASCERTAINED IN NATURE? 3. WHETHER, ON THE FACTS AND IN CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD.CIT(A) WAS RIGHT IN LAW IN DELET ING DISALLOWANCE OF RS.2,84,51,640/- MADE BY THE ASSESS ING OFFICER IN COMPUTING THE BOOK-PROFIT U/S 115JB IN RESPECT O F DEPRECIATION CLAIMED ON LAND AFTER AMORTIZATION OF LAND BY THE ASSESSEE EVEN THOUGH THERE IS NO DEPRECIATION ALLOW ABLE ON LAND UNDER COMPANIES ACT AND NO RATE OF DEPRECIATION IS PROVIDED IN SCHEDULE XIV OF COMPANIES ACT? 2. APPELLANT, M/S. NHPC LIMITED (HEREINAFTER REFERR ED TO AS THE ASSESSEE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 16.11.2015 PASSED BY THE COMMI SSIONER OF INCOME-TAX (APPEALS), FARIDABAD QUA THE ASSESSMENT YEAR 2011-12 ON THE GROUNDS INTER ALIA THAT :- ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 3 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)[CIT(A)] IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING THE ACTION OF THE AO IN NOT CONSIDERING THE OTHER INCOM E OF RS.2,99,54,875/- FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80LA OF THE ACT. (II) THAT THE ABOVE SAID DISALLOWANCE HAS BEEN CON FIRMED DESPITE THE FACT THAT THE SAID INCOME REPRESENTS RE COVERIES OF VARIOUS EXPENSES INCURRED AND AS SUCH HAS DIRECT NE XUS TO THE BUSINESS ACTIVITIES OF THE ASSESSEE. (III) WITHOUT PREJUDICE TO THE ABOVE AND IN THE AL TERNATIVE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N REJECTING THE CONTENTION OF THE ASSESSEE THAT IN CASE SAID IN COMES ARE HELD NOT TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80-I A, CORRESPONDING RELIEF ON ACCOUNT OF EXPENSES RELATED TO SAID INCOMES HAD TO BE GIVEN WHILE COMPUTING INCOME ELIG IBLE FOR DEDUCTION. 3.(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIR MING THE ADDITION OF AN AMOUNT OF RS.1,50,50,111/- MADE BY A O ON ACCOUNT OF 'INCOME TAX ON PERQUISITE BORNE BY THE A SSESSEE IN RESPECT OF ACCOMMODATION PROVIDED TO ITS EMPLOYEES WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE AC T. (II) THAT THE ABOVE ADDITION TO THE BOOK PROFIT HA S BEEN CONFIRMED IGNORING THE EXPLANATION AND SUBMISSIONS MADE BY THE ASSESSEE IN THIS REGARD. 3. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE ISSUES AT HAND IN BOTH THE APPEALS ARE : ASSESSEE C OMPANY, A PUBLIC SECTOR UNDERTAKING IS INTO THE BUSINESS OF CONSTRUC TION OF HYDRO POWER PROJECTS, GENERATION AND DISTRIBUTION OF ELEC TRICITY AND CONSULTANCY SERVICES. FOR THE YEAR UNDER ASSESSMEN T, ASSESSEE FILED A RETURN DECLARING INCOME OF RS.17,41,90,77,503/- U NDER NORMAL PROVISIONS AND THE SAME WAS ASSESSED AT THE INCOME OF ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 4 RS.17,86,25,00,797/-. ASSESSEE HAS DECLARED BOOK P ROFIT UNDER SECTION 115JB OF THE INCOME-TAX ACT, 1961 (FOR SHOR T THE ACT) AT RS.27,39,42,60,300/- IN THE ORIGINAL AS WELL AS REV ISED RETURN, WHICH WAS ASSESSED AT RS.29,43,31,78,083/- U/S 143 (3) OF THE ACT. ASSESSING OFFICER (AO) NOTICED THAT THE ASSESSEE CO MPANY HAS CLAIMED DEDUCTION U/S 80IA IN CASE OF FOUR POWER ST ATION PROJECTS I.E. URI POWER STATION STAGE-I, CHAMERA POWER STATI ON STAGE II, RANGIT POWER STATION & DHULIGANGA POWER STATION. T HE DEDUCTION CLAIMED FROM PROPERTIES U/S 80IA INCLUDES OTHER INC OME. AO DECLINED TO INCLUDE OTHER INCOME OF RS.2,99,54,875/ - FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80IA ON THE GROUND THAT NO OTHER INCOME EXCEPT THE INCOME FROM GENERATION A ND DISTRIBUTION OF POWER IS ALLOWABLE DEDUCTION U/S 80 IA AND THEREBY DISALLOWED THE SAME AND MADE ADDITION THEREOF. AO ALSO MADE ADDITION OF RS.1,50,50,111/- ON ACCOUNT OF INCOME-T AX ON PERQUISITES BORNE BY THE ASSESSEE IN RESPECT OF ACC OMMODATION PROVIDED TO ITS EMPLOYEES WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT. 4. FROM THE BALANCE SHEET, AO NOTICED THE INVESTMEN T MADE BY THE ASSESSEE COMPANY IN THE SHARES AND BONDS AND EA RNED EXEMPT INCOME OF DIVIDEND AND INTEREST ON TAX FREE BONDS T O THE TUNE OF RS.1,49,74,96,650/- WHICH INCLUDES INVESTMENT BEARI NG INTEREST ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 5 AMOUNTING TO RS.137,35,63,910/- AND INVESTMENT BEAR ING DIVIDENDS AMOUNTING TO RS.12,39,32,740/-. AO, INVOKING THE P ROVISIONS CONTAINED U/S 14A READ WITH RULE 8D, DISALLOWED AN AMOUNT OF RS.41,34,68,399/- BEING THE AMOUNT OF EXPENDITURE I NCURRED TO EARN THE DIVIDEND INCOME AND MADE ADDITION THEREOF TO TH E TOTAL INCOME OF THE ASSESSEE. 5. AO NOTICED FROM THE COMPUTATION OF BOOK PROFIT T HAT THE ASSESSEE HAS NOT CONSIDERED FOR ADDITION FOR PROVIS ION FOR GRATUITY, LEAVE ENCASHMENT, EPF MATCHING CONTRIBUTION ON LEAV E ENCASHMENT, FOR RETIRED EMPLOYEES HEALTH SCHEME, FO R LEAVE TRAVEL CONCESSION, FOR BAGGAGE ALLOWANCE ON SUPERANNUATION AND FOR LTC CREATED AND REMAINING UNPAID DURING THE YEAR WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT. DECLINING THE CO NTENTIONS RAISED BY THE ASSESSEE, AO MADE ADDITION OF RS.1,58,19,47, 693/- ON THE GROUND THAT CONCERNED PROVISIONS IS NOT ASCERTAINED PROVISION AND AS SUCH ADDED TO THE BOOK PROFIT U/S 115JB OF THE A CT. AO ALSO NOTICED THAT AMOUNT OF RS.2,84,51,640/- HAS BEEN DE BITED IN THE BOOKS OF ACCOUNT. AO ADDED BACK THE AMOUNT OF RS.2 ,84,51,640/- BY DISALLOWING THE SAME HAVING BEEN DEBITED TO THE PROFIT & LOSS ACCOUNT AS PER THE COMPANIES ACT IN COMPUTING THE B OOK PROFIT U/S 115JB IN RESPECT OF DEPRECIATION CLAIMED OF AMOUNT AFTER AMORTIZATION OF LAND BY THE ASSESSEE ON THE GROUND THAT NO ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 6 DEPRECIATION IS ALLOWABLE ON THE LAND UNDER THE COM PANIES ACT AND NO RATE OF DEPRECIATION IS PROVIDED IN SCHEDULE XIV OF THE COMPANIES ACT. 6. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS PARTLY ALLOWED THE APPEAL. FEE LING AGGRIEVED, THE ASSESSEE AS WELL AS THE REVENUE HAVE COME UP BE FORE THE TRIBUNAL BY WAY OF FILING THE PRESENT CROSS APPEALS . 7. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. ASSESSEES APPEAL (ITA NO.297/DEL/2016) GROUND NO.1 8. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT RE QUIRE ANY SPECIFIC ADJUDICATION. GROUND NO.2 9. AO DISALLOWED AN AMOUNT OF RS.2,99,54,875/- BY N OT CONSIDERING THE SAME FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80IA OF THE ACT ON THE GROUND THAT ONLY PROFIT OBTAINED FROM ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 7 GENERATION AND DISTRIBUTION OF POWER AND NOT FROM O THER INCOME IS ELIGIBLE FOR DEDUCTION U/S 80IA. 10. LD. CIT (A) BY FOLLOWING HIS OWN ORDER RENDERED IN AY 2010-11 UPHELD THE ORDER PASSED THE AO THAT INCOME DERIVED FROM SOURCES OTHER THAN GENERATION AND DISTRIBUTION OF P OWER IS NOT ELIGIBLE FOR DEDUCTION U/S 80IA AND DISMISSED THE G ROUND RAISED BY THE ASSESSEE. 11. HOWEVER, THE LD. AR FOR THE ASSESSEE CONTENDED THAT THE SAID ORDER PASSED BY THE LD. CIT (A) FOR AY 2010-11 HAS BEEN SET ASIDE BY THE COORDINATE BENCH OF THE TRIBUNAL VIDE ORDER DATED 08.05.2019 IN ITA NO.3650/DEL/2015 & 3738/DEL2015 F OR AY 2010-11 AND NOW THE ISSUE IN CONTROVERSY IS FULLY COVERED. 12. ON THE OTHER HAND, LD. DR FOR THE REVENUE IN OR DER TO REPEL THE ARGUMENTS ADDRESSED BY THE LD. AR FOR THE ASSES SEE CONTENDED THAT INCOME DIRECTLY DERIVED FROM INDUSTRIAL UNDERT AKING IS LIABLE U/S 80IA AND RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN CONVENTIONAL FASTNERS VS. CIT, DEHRADUN (2018) 2 56 TAXMAN 61 (SC), HONBLE UTTARANCHAL HIGH COURT IN CONVENTI ONAL FASTNERS VS. CIT, DEHRADUN 88 TAXMANN.COM 163 AND C OORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF CONVENTIONAL F ASTNERS VS. ITO IN ITA NO.6016/DEL/2017 ORDER DATED 18.05.2018 . ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 8 13. UNDISPUTEDLY, ASSESSEE HAS CLAIMED DEDUCTION U/ S 80IA QUA URI-I, CHAMBERA-II, DHAULIGANGA AND RANGIT PROJECTS AND GIVEN THE PROJECT-WISE INCOME DETAIL OF SUCH OTHER INCOME AS UNDER :- S. NO. PARTICULARS URI-I CHAMERA-II DHAULI- GANGA RANGIT TOTAL 1 RENT / HIRE CHARGES FROM CONTRACTORS - - 3,545 16,500 20,045 2 RENT / HIRE CHARGES EMPLOYEES - - - 340 340 3 RENT / HIRE CHARGES OTHERS 1,477,599 64,212 - 149,378 1,691,189 4 OTHER INCOME (BALANCES, EXPENSES, LIABILITIES NO LONGER REQUIRED WRITTEN BACK 13,689,631 1,191,081 3,917,023 1,657,727 20,455,462 5 TOWNSHIP RECOVERIES 368,347 1,205,197 963,426 836,301 3,373,271 6 EXCESS ON PHYSICAL VERIFICATION OF STORES-O&M- WRITTEN BACK - 3,959 - - 3,959 7 LEASE RECOVERY 425,227 174,301 606,806 177,603 1, 383,937 8 ELECTRICITY RECOVERY 315,877 555,341 601,893 499,518 1,972,629 9 TELEPHONE RECOVERY - - 41,803 5,157 46,960 10 CABLE CHARGES 88,500 127,840 87,800 113,700 417, 840 11 GUEST HOUSE RECOVERY 22,912 126,019 335,464 104,848 589,243 TOTAL 16,388,093 3,447,950 6,557,760 3,561,072 29 ,954,875 14. THE LD. AR FOR THE ASSESSEE RELIED UPON THE DEC ISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. BHARAT SANCHAR NIGAM LTD. 388 ITR 371 WHEREIN MEANING OF WORD DERIVED FROM WHILE COMPUTING DEDUCTION U/S 80IA O F THE ACT HAS BEEN EXPLAINED. ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 9 15. COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2010-11 (SUPRA) DECIDED THE IDENTICAL ISSUE IN FAVOUR OF T HE ASSESSEE BY RETURNING FOLLOWING FINDINGS :- 47. WE FIND THAT THE AAR IN THE CASE OF NATIONAL FERTILIZERS LIMITED 193 CTR 498(AAR) HELD THAT THE EXPENSES INC URRED TO EARN THESE OTHER INCOMES SHOULD BE EXCLUDED FROM TH E DEBIT SIDE OF THE PROFIT AND LOSS ACCOUNT FOR COMPUTING THE DE DUCTION U/S 80-I OF THE ACT. THE RELEVANT EXTRACT OF THE JUDGME NT IS AS BELOW: (2)QUESTION NO. 2 IN AAR/532/2001 THAT THE EXPENSE S OF RS.2,76,03,364 AND RS.12,12,74,426 (IT IS STATED TH AT THE CORRECT FIGURE IS RS.11,02,56,561) ALLOCATED BY MARKETING O FFICE AND CORPORATE OFFICE AND INTEREST EXPENDITURE OF RS.71, 65,99,045 ALLOCATED BY THE CORPORATE OFFICE AND ON QUESTION N O. 2 IN AAR/533/2001 THAT EXPENSES OF RS.2,56,44,186 AND OF RS.12,94,59,292 ALLOCATED BY CORPORATE OFFICE AND M ARKETING OFFICE AND INTEREST EXPENDITURE OF RS.8,49,30,952 A LLOCATED BY CORPORATE OFFICE SHOULD BE EXCLUDED FROM THE DEBIT SIDE OF THE PROFIT AND LOSS ACCOUNT OF THE INDUSTRIAL UNDERTAKI NG FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80-I OF THE INCO ME-TAX ACT, 1961; THE FACT THAT THE ALLOCATED INTEREST INCOME F ROM CORPORATE OFFICE RS.5,22,94,939 AND RS.3,97,44,811 CREDITED T O PROFIT AND LOSS ACCOUNT OF VIJAIPUR UNIT IN THE ASSESSMENT YEA RS 1995-96 AND 1996-97 IS OF NO CONSEQUENCE AS BOTH INTEREST I NCOME AND INTEREST EXPENDITURE ARE LIABLE TO BE EXCLUDED FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80-I OF THE ACT. 48. FURTHER, THE HONBLE DELHI HIGH COURT IN THE C ASE OF PR. CIT VS. BHARAT SANCHAR NIGAM LIMITED REPORTED IN 38 8 ITR 371 EXPLAINING THE MEANING DERIVED FROM WHILE COMPUTING THE DEDUCTION U/S 80-IA OF THE ACT, HAS HELD AS UNDER: 8. THE QUESTION AROSE IN THE CONTEXT OF THE ASSESS EE BEING ASKED TO EXPLAIN WHY CERTAIN SPECIFIC ITEMS CATEGORIZED A S 'OTHER INCOME' AND 'EXTRAORDINARY ITEM' IN THE PROFIT AND LOSS ACCOUNT IN ASSESSMENT YEAR 2004-05 SHOULD NOT BE EXCLUDED F ROM THE PROFIT AND GAINS OF THE ASSESSEE. ACCORDING TO THE REVENUE, THESE ITEMS COULD NOT BE CONSIDERED AS PROFITS AND GAINS 'DERIVED FROM' THE ELIGIBLE BUSINESS FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80 IA. THE SAID SIX ITEMS WERE: (I) EXTRA ORDINARY ITEMS (II) REFUND FROM UNIVERSAL SERVICE FUND (III) INTEREST FROM OTHERS (IV) LIQUIDATED DAMAGES (V) EXCESS PROVISION WRITTEN BACK ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 10 (VI) OTHERS INCLUDING SALE OF DIRECTORIES, PUBLICAT IONS, FORM, WASTER PAPER, ETC. 9. THE AO HELD THAT THE SIX ITEMS OF INCOME COULD N OT BE SAID TO BE DERIVED FROM THE BUSINESS OF THE ASSESSEE AND AD DED THE INCOME THEREFROM TO THE RETURNED INCOME OF THE ASSE SSEE. IN THE APPEAL BY THE ASSESSEE, THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT (A)] AGREED WITH THE AO THAT THREE OF THE ABOVE ITEMS, VIZ. EXTRAORDINARY ITEMS, REFUND FROM UNIVER SAL SERVICE FUND AND INTEREST FROM OTHERS, DID NOT FORM PART OF THE PROFIT DERIVED FROM ELIGIBLE BUSINESS. HOWEVER, THE ASSESS EES PLEA REGARDING THE OTHER THREE ITEMS AS BEING DERIVED FR OM THE BUSINESS WAS ACCEPTED BY THE CIT (A). 10. THE ASSESSEE FILED APPEALS AND THE REVENUE FILE D CROSS- APPEALS BEFORE THE ITAT. THE ITAT IN THE IMPUGNED O RDERS CONCLUDED THAT WITH SUB-SECTION (2A) BEGINNING WITH A NON- OBSTANTE CLAUSE, THE LEGISLATIVE INTENTION OF MAKIN G AVAILABLE TO AN UNDERTAKING, PROVIDING TELECOMMUNICATION SERVICE S, THE BENEFIT OF DEDUCTION OF 100% OF THE PROFITS AND GAI NS OF THE ELIGIBLE BUSINESS WAS EXPLICIT. INDEED, THE LEGISL ATURE APPEARS TO HAVE MADE A CONSCIOUS DEPARTURE IN ADOPTING FOR SUB -SECTION (2A) A WORDING DIFFERENT FROM THAT APPEARING IN SUB SECTION (1). UNDER SECTION 801A (1), WHAT IS AVAILABLE FOR DEDUC TION ARE PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (4) W HEREAS IN SECTION 80-IA (2A) WHAT IS AVAILABLE FOR DEDUCTION IS HUNDRED PERCENT OF THE PROFITS AND GAINS OF THE ELIGIBLE BU SINESS. THE FOLLOWING CONCLUSION REACHED BY THE ITAT IN PARA 13 .11 OF THE IMPUGNED ORDER CORRECTLY ENCAPSULATES THE LEGAL POS ITION AS FAR AS THE INTERPRETATION OF SECTION 801A (2A) IS CONCE RNED. 13.11 THUS, WE FIND THAT THE LEGISLATURE BEING ALI VE TO PROVIDING TAX DEDUCTIONS TO BUSINESS ENTERPRISES AND UNDERTAK INGS, IT WANTED TO CURTAIL THE TIME LINE DURING WHICH DEDUCT ION CAN BE CLAIMED AND ALSO ADDRESSING THE EXTENT UPTO WHICH I T CAN BE CLAIMED HAS CONSCIOUSLY CARVED OUT AN EXCEPTION TO SPECIFIED UNDERTAKINGS/ENTERPRISES WHOSE NEEDS AND PRIORITIES DIFFER HAS TAKEN CARE TO EXPAND THE TIME LINE FOR CLAIMING DED UCTIONS. IT HAS CONSCIOUSLY ENABLED THOSE UNDERTAKINGS/ENTERPRISE ' WHO FALL UNDER SUBSECTION (2A) TO CLAIM 100% DEDUCTION OF PR OFITS AND GAINS OF ELIGIBLE BUSINESS FOR THE FIRST FIVE YEARS AND UPTO 30% FOR THE REMAINING FIVE YEARS IN THE TEN CONSECUTIVE ASS ESSMENT YEARS OUT OF THE FIFTEEN YEARS STARTING FROM THE TIME THE ENTERPRISE STARTED ITS OPERATION. THE LEGISLATURE HAVING OUSTE D APPLICABILITY OF SUB-SECTION (1) AND (2) IN THE OPENING SENTENCE BROUGHT IN FOR THE PURPOSES OF TIME LINE SUB-SECTION (2) INTO PLAY BUT MADE NO EFFORTS WHATSOEVER TO PUT THE ASSESSEE UNDER SUB-SE CTION (2A) TO MEET THE STRINGENT REQUIREMENTS THAT THE PROFITS SO CONTEMPLATED WERE TO BE DERIVED FROM. THE REQUIREMENTS OF THE FIRST DEGREE ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 11 NEXUS OF THE PROFITS FROM THE ELIGIBLE BUSINESS HAS NOT BEEN BROUGHT INTO PLAY. 11. AS A RESULT, THE ORDERS OF BOTH THE AO AND THE CIT (A) TO THE EXTENT THEY DENY THE ASSESSEE, WHICH IN THIS CASE I S IN THE BUSINESS OF PROVIDING TELECOMMUNICATION SERVICES, D EDUCTION IN RESPECT OF THE ABOVE ITEMS IN TERMS OF SECTION 80IA (2A) ARE UNSUSTAINABLE IN LAW AND HAVE RIGHTLY BEEN REVERSED BY THE IT AT. 49. FURTHER, THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NIRMA INDUSTRIES LTD. VS DCIT (2006) 283 ITR 402 HA S HELD AS UNDER: '27. INSOFAR AS QUESTION NO. 2 IS CONCERNED, ACCORD ING TO THE TRIBUNAL S. 80-I OF THE ACT USES THE PHRASE 'DERIVE D FROM AND HENCE THE INTEREST RECEIVED BY THE ASSESSEE FROM IT S TRADE DEBTORS CANNOT BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF COMPUTING PROFITS DERIVED FROM AN INDUSTRIAL UNDERTAKING. THE TRIBUNAL HAS FAILED TO APPRECIATE THAT IT IS NOT THE CASE OF THE AO THAT THE INTEREST INCOME IS NOT ASSESSABLE UNDER THE HEAD 'P ROFITS AND GAINS OF BUSINESS. IT IS ONLY WHILE COMPUTING RELI EF UNDER S. 80-I OF THE ACT THAT THE REVENUE CHANGES ITS STAND. WHEN ONE READS THE OPENING PORTION OF S. 80-I OF THE ACT IT IS CLE AR THAT WORDS USED ARE: 'GROSS TOTAL INCOME OF AN ASSESSEE INCLUD ES ANY PROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING'. ONCE THIS IS THE POSITION THEN, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO THE PRESCRIBED PERCENTAGE IS TO BE ALLOWED. THAT, IN FA CT, THE GROSS TOTAL INCOME OF THE ASSESSEE INCLUDED PROFITS AND G AINS FROM SUCH BUSINESS, AND THIS IS APPARENT ON A PLAIN GLANCE AT THE COMPUTATION IN THE ASSESSMENT ORDER. BOTH IN RELATI ON TO VATVA UNIT AND MANDALI UNIT THE COMPUTATION COMMENCES BY TAKING PROFIT AS PER STATEMENT OF INCOME FILED ALONG WITH RETURN OF INCOME. THEREFORE, THE SAME ITEM OF RECEIPT CANNOT BE TREATED DIFFERENTLY: ONCE WHILE COMPUTING THE GROSS TOTAL I NCOME, AND SECONDLY AT THE TIME OF COMPUTING DEDUCTION UNDER S . 80-I OF THE ACT. THEREFORE, ON THIS LIMITED COUNT ALONE, THE OR DER OF THE TRIBUNAL SUFFERS FROM A BASIC FALLACY RESULTING IN AN ERROR IN LAW AND ON FACTS. THE TRIBUNAL INSTEAD OF RECORDING FIN DINGS ON FACTS PROCEEDED TO DISCUSS LAW. THIS LITIGATION COULD HAV E BEEN AVOIDED IF THE PARTIES HAD INVITED ATTENTION TO BASIC FACTS . 28. NEITHER THE APPROACH NOR THE REASONS ADVANCED B Y THE TRIBUNAL DESERVE ACCEPTANCE. IT IS AN INCORRECT PRO POSITION TO STATE THAT INTEREST PAID BY THE DEBTORS FOR LATE PA YMENT OF THE SALE PROCEEDS WOULD NOT FORM PART OF THE ELIGIBLE INCOME FOR THE PURPOSE OF COMPUTING RELIEF UNDER S. 80-I OF THE AC T. THE RELIANCE ON THE GENERAL MEANING OF THE TERM INTEREST AS WELL AS DRAWING DISTINCTION BETWEEN THE SOURCE OF SALE PROCEEDS AND THE SOURCE OF ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 12 INTEREST IS ERRONEOUS IN LAW IN THE CASE OF CIT VS. GOVINDA CHOUDHURY & SONS (SUPRA) THE APEX COURT WAS CALLED UPON TO DECIDE AS TO THE NATURE OF INTEREST RECEIVED BY THE ASSESSEE THEREIN. IN THE CASE BEFORE THE APEX COURT THE ASSE SSEE WHO WAS EXECUTING GOVERNMENT CONTRACTS FOUND ITSELF INVOLVE D IN DISPUTES WITH THE STATE GOVERNMENT WITH REGARD TO THE PAYMEN TS DUE UNDER THE CONTRACTS AND UPON REFERENCE TO ARBITRATO RS, THE AWARD INCLUDED THE PRINCIPAL SUM AS WELL AS THE INTEREST FOR DELAY IN PAYMENT OF THE PRINCIPAL SUM. THE ASSESSEE CLAIMED THAT THE INTEREST WAS OF THE SAME NATURE AS OTHER TRADING RE CEIPTS, BUT IT WAS HELD BY THE TRIBUNAL THAT THE SAME WAS 'INCOME FROM OTHER SOURCES. THE APEX COURT LAID DOWN: 'THE ASSESSEE IS A CONTRACTOR. HIS BUSINESS IS TO E NTER INTO CONTRACTS. IN THE COURSE OF THE EXECUTION OF THESE CONTRACTS, HE HAS ALSO TO FACE DISPUTES WITH THE STATE GOVERNMENT AND HE HAS ALSO TO RECKON WITH DELAYS IN PAYMENT OF AMOUNTS TH AT ARE DUE TO HIM. IF THE AMOUNTS ARE NOT PAID AT THE PROPER TIME AND INTEREST IS AWARDED OR PAID FOR SUCH DELAY, SUCH INTEREST IS ON LY AN ACCRETION TO THE ASSESSEES RECEIPTS FROM THE CONTRACTS. IT I S OBVIOUSLY ATTRIBUTABLE AND INCIDENTAL TO THE BUSINESS CARRIED ON BY HIM. IT WOULD NOT BE CORRECT, AS THE TRIBUNAL HAS HELD, TO SAY THAT THIS INTEREST IS TOTALLY DE HORS THE CONTRACT BUSINESS C ARRIED ON BY THE ASSESSEE. IT IS WELL SETTLED THAT INTEREST CAN BE A SSESSED UNDER THE HEAD 'INCOME FROM OTHER SOURCES ONLY IF IT CANNOT BE BROUGHT WITHIN ONE OR THE OTHER OF THE SPECIFIC HEADS OF CH ARGE. WE FIND IT DIFFICULT TO COMPREHEND HOW THE INTEREST RECEIPTS B Y THE ASSESSEE CAN BE TREATED AS RECEIPTS WHICH FLOW TO HIM DE HOR S THE BUSINESS WHICH IS CARRIED ON BY HIM. IN OUR VIEW, THE INTERE ST PAYABLE TO HIM CERTAINLY PARTAKES OF THE SAME CHARACTER AS THE RECEIPTS FOR THE PAYMENT OF WHICH HE WAS OTHERWISE ENTITLED UNDE R THE CONTRACT AND WHICH PAYMENT HAS BEEN DELAYED AS A RE SULT OF CERTAIN DISPUTES BETWEEN THE PARTIES. IT CANNOT BE SEPARATED FROM THE OTHER AMOUNTS GRANTED TO THE ASSESSEE UNDER THE AWARDS AND TREATED AS 'INCOME FROM OTHER SOURCES'. 50. IN VIEW OF THE ABOVE QUOTED DECISIONS, WE ARE OF THE CONSIDERED VIEW THAT THE DISALLOWANCE MADE OF RS.4, 46,54,883/- WHILE COMPUTING THE DEDUCTION ALLOWABLE U/S 80-IA O F THE ACT IS NOT JUSTIFIED. HENCE, WE SET ASIDE THE ORDERS OF TH E LOWER AUTHORITIES AND DIRECT THE ASSESSING OFFICER TO REC OMPUTE THE DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80-IA OF TH E ACT WITHOUT EXCLUDING RS.4,46,54,883/-. THUS, THIS GROUND OF AP PEAL OF THE ASSESSEE IS ALLOWED. 16. FOLLOWING THE DECISION RENDERED BY THE COORDINA TE BENCH OF THE TRIBUNAL ON THE ISSUE IN CONTROVERSY DISCUSSED ABOVE, THE ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 13 ARGUMENTS ADDRESSED BY THE LD. DR AND THE CASE LAWS RELIED UPON ARE NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES O F THE CASE, THUS WE ARE OF THE CONSIDERED VIEW THAT MAKING DISALLOWA NCE BY THE AO AND CONFIRMED BY THE LD. CIT (A) TO THE TUNE OF RS. 2,99,54,875/- WHILE COMPUTING THE DEDUCTION ALLOWABLE U/S 80IA IS NOT SUSTAINABLE AND ALL THE ITEMS OF INCOME QUA WHICH D EDUCTION HAS BEEN SOUGHT BY THE ASSESSEE U/S 80IA ARE ALLOWABLE DEDUCTION AND ORDER PASSED BY THE AO AND LD. CIT (A) IS NOT SUSTA INABLE. SO, THE ORDER PASSED BY THE LOWER AUTHORITIES IS SET SIDE D IRECTING THE AO TO RECOMPUTE THE DEDUCTION ALLOWABLE TO THE ASSESSEE U /S 80IA WITHOUT EXCLUDING AMOUNT OF RS.2,99,54,875/- DISALL OWED BY THE AO. CONSEQUENTLY, GROUND NO.2 IS DETERMINED IN FAV OUR OF THE ASSESSEE. GROUND NO.3 17. AO NOTICED THAT THE ASSESSEE HAS ADDED BACK THE INCOME-TAX OF PERQUISITES OF ACCOMMODATION OF RS.1,50,50111/- IN NORMAL PROVISIONS, HOWEVER INCOME-TAX ON PERQUISITES ON AC COMMODATION IS NOT ADDED IN COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT. LD. CIT (A) AGAIN BY FOLLOWING HIS OWN ORDER PASSED FOR AY 2010- 11 CONFIRMED THE ADDITION. 18. LD. AR FOR THE ASSESSEE CONTENDED THAT THIS ISS UE IS ALSO COVERED IN ASSESSEES OWN CASE PASSED BY THE TRIBUNAL IN AY ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 14 2010-11 (SUPRA), WHICH FACT HAS NOT BEEN CONTROVERTED BY T HE LD. DR FOR THE REVENUE. 19. COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2010-11 (SUPRA) HAS DECIDED THE ISSUE BY RETURNING FOLLOWI NG FINDINGS :- 60. WE FIND THAT THE TRIBUNAL IN THE CASE OF RASH TRIYA CHEMICALS & FERTILIZERS LTD. VS CIT (SUPRA) HAS HEL D AS UNDER: PARA 8WE FURTHER FIND THAT TAXES BORNE BY THE A SSESSEE ON NON-MONETARY PERQUISITES PROVIDED TO EMPLOYEES F ORMS PART OF EMPLOYEE BENEFIT COST AND AKIN TO FRINGE BENEFIT TA X SINCE THEY ARE CERTAINLY NOT BELOW THE LINE ITEMS SINCE THE SA ME ARE EXPRESSIVELY DISALLOWED U/S 40(A)(V) AND THE SAME D O NOT CONSTITUTE INCOME TAX FOR THE ASSESSEE IN TERMS OF EXPLANATION- 2. THIS VIEW OF OURS IS DULY FORTIFIED BY THE JUDGM ENT OF TRIBUNAL RENDERED IN ITO V VINTAGE DISTILLERS LTD. [2010] 13 0 TTJ 79 (DELHI) WHERE THE TRIBUNAL HAS TAKEN THE VIEW THAT THE TERM 'TAX' WAS MUCH WIDER TERM THAN THE TERM 'INCOME TAX' SINC E THE FORMER, AS PER AMENDED DEFINITION OF 'TAX' AS PROVI DED IN SECTION 2(43) INCLUDED NOT ONLY INCOME TAX BUT ALSO SUPER TAX & FRINGE BENEFIT TAX. THEREFORE, WITHOUT THERE BEING ANY CORRESPONDING AMENDMENT IN THE DEFINITION OF INCOME TAX AS PROVIDED IN EXPLANATION-2 TO SECTION 115JB, FRINGE BENEFIT TAX WAS NOT REQUIRED TO BE ADDED BACK WHILE ARRIVING AT BOOK PROFITS U/S. 115JB. SIMILAR VIEW HAS BEEN EXPRESSED IN ANOT HER JUDGMENT OF TRIBUNAL TITLED AS RELIANCE INDUSTRIES LTD. V. A CIT [IT APPEAL NO. 5769 (M) OF 2013, DATED 16-9-2015] WHERE THE TR IBUNAL TOOK A VIEW THAT WEALTH TAX' DID NOT FORM PART OF INCOME TAX AND THEREFORE, COULD NOT BE ADDED BACK TO ARRIVE AT BOO K PROFITS SINCE THE ADJUSTMENT THEREOF WAS NOT ENVISAGED BY THE STA TUTORY PROVISIONS. THEREFORE, WE ARE OF THE OPINION THAT T HE ADJUSTMENT OF IMPUGNED ITEM AS SUGGESTED BY LD. CIT WAS NOT LE GALLY TENABLE IN LAW WHICH LEADS US TO INEVITABLE CONCLUSION THAT THE OMISSION TO CARRY OUT THE SAID ADJUSTMENT DID NOT RESULT INT O ANY LOSS OF REVENUE' 61. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE QUOTED DECISION OF THE TRIBUN AL. NO CONTRARY DECISION WAS CITED BEFORE US BY THE LD. DE PARTMENTAL REPRESENTATIVE DURING THE COURSE OF HEARING. WE, TH EREFORE, RESPECTFULLY FOLLOWING THE ABOVE QUOTED DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL DELETE THE ADDITION OF RS.95, 02,478/- AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 15 20. SO, FOLLOWING THE DECISION RENDERED BY THE COOR DINATE BENCH OF THE TRIBUNAL, WE ARE OF THE CONSIDERED VIEW THAT INCOME-TAX PAID OR PAYABLE OR PROVISION THEREOF COULD NOT BE ADDED BACK TO ARRIVE AT THE PEAK PROFIT AS THE ADJUSTMENT THEREOF WAS NOT S UPPORTED BY THE STATUTORY PROVISIONS. IN VIEW OF THE MATTER, ADDIT ION MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A) IS NOT SUSTAINA BLE IN THE EYES OF LAW, HENCE ORDERED TO BE DELETED. GROUND NO.3 I S DETERMINED IN FAVOUR OF THE ASSESSEE. REVENUES APPEAL 21. AO BY INVOKING THE PROVISIONS CONTAINED U/S 14A READ WITH RULE 8D MADE ADDITION OF RS.41,34,68,339/- ON ACCOU NT OF DISALLOWANCE OF AMOUNT OF EXPENDITURE TO EARN THE D IVIDEND INCOME. THE LD. CIT (A) HAS DELETED THE ADDITION. THE REVENUE HAS COME UP BEFORE THE TRIBUNAL CHALLENGING THE ADD ITION MADE BY THE AO U/S 14A OF THE ACT. 22. UNDISPUTEDLY, THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.12.40 CRORES FROM THE INVESTMENT IN SHARES AND C LAIMED THE SAME AS EXEMPT INCOME. THE DETAILS OF INVESTMENT I N SHARES IS AS UNDER :- ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 16 1 NHDC RS.1002.42 CRORES 2 LOKTAK DOWNSTREAM HYDRO CORPN. LTD. RS.44.40 CRORES 3 POWER TRADING CORPORATION RS.12.00 CRORES 4 INDIAN OVERSEAS BANK RS.0.36 CRORES 5 NATIONAL POWER EXCHANGE LTD. RS.2.19 CRORES 6 NATIONAL HIGH POWER TESTING LABORATORY RS.2.62 CRORES RS.1063.99 CRORES 23. LD. CIT (A) EXAMINED THE ISSUE AT LENGTH AND DE LETED THE ADDITION BY RETURNING FOLLOWING FINDINGS :- 10. PERUSAL OF THE SUBMISSIONS MADE BY THE APPELL ANT SHOW THAT THE NHDC IS A SUBSIDIARY COMPANY OF THE ASSES SEE IN WHICH INVESTMENT HAS BEEN MADE AS PER THE SANCTION ORDER OF GOVT. OF INDIA, MINISTRY OF POWER, VIDE DO NO. 22/3/2000 / 2 8.3.2002 AND ORDER NO. 34/1/2003/DO/NHPC DATED 29.5.2003, OUT OF BUDGETARY SUPPORT AND EQUITY CAPITAL INVESTED BY TH E GOVT. TO THE EXTENT OF RS.772.42 CRORES. THE BALANCE INVESTMENT OF RS. 312.42 CRORES HAS BEEN MADE IN THE SHARES OF SUBSIDIARY CO MPANY OUT OF FUNDS RAISED FROM THE ISSUE OF '0' SERIES BONDS. TH E INVESTMENT IN LOKTAK DOWNSTREAM HYDRO CORPN LTD., NATIONAL HIGH P OWER TESTING LABORATORY, PTC, INDIAN OVERSEAS BANK AND N ATIONAL POWER EXCHANGE HAS BEEN STATED TO BE OUT OF INTERNA L ACCRUALS. THE NECESSARY DETAILS AND SUBMISSIONS IN THIS REGAR D WERE FILED BY THE ASSESSEE BUT THE AO DID NOT CONSIDER THE SAM E. THE AO THEREFORE, APPLIED RULE 80 AND WORKED OUT THE DISAL LOWANCE, UNDER CLAUSE (I), (II) AND (III) OF SUB-RULE (2), O F RULE 8D, RESPECTIVELY. THE FACT THAT THE INVESTMENT OF RS.77 2.42 CRORES MADE BY THE APPELLANT IN THE SHARES OF SUBSIDIARY C OMPANY NHDC WAS OUT OF BUDGETARY SUPPORT AND EQUITY CONTRI BUTION BY THE GOVT. OF INDIA HAS NOT BEEN DISPUTED BY THE AO. THE ADMITTED FACT THEREFORE, REMAINS THAT THE INVESTMENT OF RS. 772.42 CRORES WAS DIRECTLY FROM INTEREST FREE FUNDS CONTRIBUTED B Y THE GOVT. OF INDIA. IF THAT BEING SO, THIS AMOUNT CANNOT GO INTO THE WORKING OF DISALLOWANCE OF INTEREST EVEN IF RULE 8D IS APPLIED . CLAUSE (II) OF SUB-RULE (2) OF RULE 8D PROVIDES FOR WORKING OF DIS ALLOWABLE INTEREST IN A CASE WHERE THE ASSESSEE HAS INCURRED EXPENDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS N OT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT. T HUS, THERE IS NO DIRECT INTEREST EXPENDITURE FOR THE INVESTMENT OF R S. 772.42 CRORES AND ALSO NO DIRECT INTEREST EXPENDITURE PERTAINING TO INVESTMENT OF RS.281.80 CRORES INVOLVED AS SUCH AMOUNT REPRESE NT REDEMPTION PROCEEDS OF SEB POWER BONDS/LOAN TERM AD VANCES (TAX FREE). THE HON'BLE ITAT, BENCH 'F DELHI IN THE CASE OF PRIYA EXHIBITORS PVT. VS. ACIT (27 TAXRNANN.COM 88) HAS HELD THAT THE DISALLOWANCE UNDER SECTION 14A REQUIRES A CLEAR FINDING ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 17 OF INCURRING OF EXPENDITURE AND IN ABSENCE OF SAME, NO DISALLWOACNE COULD BE MADE. SIMILARLY, THE HONBLE ITAT, BENCH G' DELHI IN THE CASE OF ACIT VS. SIL INVESTM ENT LTD. (26 TAXMANN.COM 78) HAS HELD THAT WHERE ASSESSING OFFIC ER DID NOT BRING ANY EVIDENCE ON RECORD TO ESTABLISH THAT ANY EXPENDITURE HAD BEEN INCURRED BY ASSESSEE FOR EARNING EXEMPT IN COME, IT WAS WRONG ON PART OF ASSESSING OFFICER TO PROCEED TO CO MPUTE DISALLOWANCE OF EXPENSES UNDER SECTION 14A BY MEREL Y APPLYING RULE 8D(2){III). THE LEGAL IMPLICATIONS OF SUB-SEC TION (2) AND (3) OF SECTION 14A HAVE BEEN EXAMINED BY THE HON'BLE DE LHI HIGH COURT IN MAXCOPP INVESTMENT LTD. VS. CIT (347 ITR 2 72) AND IT HAS BEEN HELD THAT THE AO HAS TO RECORD COGENT REAS ONS TO REJECT THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE HAS B EEN INCURRED BY HIM FOR EARNING THE EXEMPT INCOME. 11. IT IS HOWEVER, OBSERVED FROM THE ASSESSMENT OR DER THAT THE AO HAS NOT ASSIGNED ANY REASON WHILE FINDING THE SU BMISSIONS OF THE APPELLANT AS UNSATISFACTORY. THE IDENTICAL ISSU E WAS ALSO INVOLVED IN THE CASE OF APPELLANT FOR A.Y. 2008-09 AND AY 2010- 11 AND AS PER THE DETAILED DISCUSSION VIDE PARA 6.4 OF ORDER DATED 2.1.2012 IN APPEAL NO. 276/2010-1 AFTER CONSIDERING THE PROVISIONS OF LAW AND LEGAL POSITION EMERGING FROM RELIED UPON JUDICIAL RULINGS, THIS ISSUE HAS BEEN DECIDED IN FA VOUR OF THE APPELLANT BY CIT(APPEALS)., FOLLOWING THE ORDER OF MY PREDECESSOR IN A.Y. 2009-10 AND MY OWN ORDER FOR AY 2010-11 WHICH IS SQUARELY APPLICABLE THIS YEAR ALSO THE ADD ITION OF RS.41,34,68,339/- MADE BY THE AO BY INVOKING SECTIO N 14A OF THE ACT IS DIRECTED TO BE DELETED. THE GROUND NO.3 OF A PPEAL IS ALLOWED. 24. THE LD. AR FOR THE ASSESSEE CHALLENGING THE IMP UGNED ORDER CONTENDED THAT THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE COORDINATE BENCH OF THE TRIBUNAL IN AYS 2009-10 & 2010-11 IN ITA NOS.424/DEL./2013 AND 3650/DEL/2015 & 3738/DEL/ 2015 RESPECTIVELY IN ASSESSEES OWN CASE AND FURTHER CON TENDED INTER ALIA THAT THE AO HAS INVOKED THE PROVISIONS OF SECTION 1 4A WITHOUT RECORDING HIS DISSATISFACTION QUA THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED TO EARN THE DIVIDEND INCOME; THAT THE ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 18 ENTIRE INVESTMENT HAS BEEN MADE BY THE ASSESSEE OUT OF ITS OWN FUNDS AND AS SUCH, NO DISALLOWANCE IS SUSTAINABLE. HOWEVER, ON THE OTHER HAND, TO REPEL THE ARGUMENTS ADDRESSED BY THE LD. AR FOR THE ASSESSEE, LD. DR FOR THE REVENUE RELIED UPON TH E ORDER PASSED BY THE AO. 25. IDENTICAL ISSUE HAS COME UP FOR CONSIDERATION B EFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN AY 2009-10 (SUPRA) AND HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY RETURNING FOLLOWING FINDINGS :- 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. WE FIND THAT THE ASSESSEE HAS EARNED EXEMPT INCOME TO THE TUNE OF RS.51,75,50,800/- AND HAS SUO MOTU DISALLOWED RS .13.78 CRORES UNDER SECTION 14A OF THE ACT. WE FIND THAT THE AO HAS INVOKED RULE 8D WITHOUT SPELLING OUT THE REASON FOR NOT BEING SATISFIED WITH THE COMPUTATION MADE BY THE ASSESSEE IN RESPECT TO EXPENDITURE INCURRED FOR EARNING THE EXEMPT INCOME. WITHOUT RECORDING THE OBJECTIVE SATISFACTION AS REQUIRED UN DER SUB-SECTION (2) TO SECTION 14A THAT HE IS NOT SATISFIED WITH TH E CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE IN RESPECT TO EXEMPT INCOME, THE AO CANNOT INVOKE RULE 8D TO COMP UTE THE DISALLOWANCE UNDER THE SAID RULE. THE HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF CIT VS. TAIKISHA ENGINEER ING INDIA LIMITED REPORTED IN 370 ITR 338 (DEL.) HAS HELD AS UNDER :- SECTION 14A OF THE ACT POSTULATES AND STATES THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITUR E INCURRED BY AN ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. UN DER SUB SECTION (2) TO SECTION 14A OF THE ACT, THE ASSE SSING OFFICER IS REQUIRED TO EXAMINE THE ACCOUNTS OF THE ASSESSEE AND ONLY WHEN HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE IN RELATION TO EXEMPT INCOME, THE ASSES SING OFFICER CAN DETERMINE THE AMOUNT OF EXPENDITURE WHI CH SHOULD BE DISALLOWED IN ACCORDANCE WITH SUCH METHOD AS PRESCRIBED, I.E. RULE 8D OF THE RULES (QUOTED AND ELUCIDATED BELOW). THEREFORE, THE ASSESSING OFFICER AT THE FIRST INSTANCE MUST EXAMINE THE DISALLOWANCE MADE B Y THE ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 19 ASSESSEE OR THE CLAIM OF THE ASSESSEE THAT NO EXPEN DITURE WAS INCURRED TO EARN THE EXEMPT INCOME. IF AND ONLY IF THE ASSESSING OFFICER IS NOT SATISFIED ON THIS COUNT AF TER MAKING REFERENCE TO THE ACCOUNTS, THAT HE IS ENTITL ED TO ADOPT THE METHOD AS PRESCRIBED I.E. RULE 8D OF THE RULES. THUS, RULE 8D IS NOT ATTRACTED AND APPLICABLE TO AL L ASSESSEE WHO HAVE EXEMPT INCOME AND IT IS NOT COMPULSORY AND NECESSARY THAT AN ASSESSEE MUST VOLUNTARILY COMPUTE DISALLOWANCE AS PER RULE 8D OF THE RULES. WHERE THE DISALLOWANCE OR NIL DISALLOWANCE MADE BY THE ASSESSEE IS FOUND TO BE UNSATISFACTORY ON EXAMINATION OF ACCOUNTS, THE ASSESSING OFFICER IS E NTITLED AND AUTHORISED TO COMPUTE THE DEDUCTION UNDER RULE 8D OF THE RULES. THIS PRE-CONDITION AND STIPULATION AS NOTICED BELOW IS ALSO MANDATED IN SUB RULE (1) TO RULE 8D O F THE RULES. AFTER GOING THROUGH THE OTHER CASES ALSO, RELIED UP ON BY THE LD. AR, WE FIND THAT THE AO HAS NOT RECORDED THE SATIS FACTION ENVISAGED BY THE STATUTE BEFORE INVOKING THE COMPUT ATION PROVIDED FOR UNDER RULE 8D, WHICH VITIATES THE IMPU GNED ORDER. WE ALSO FIND THAT IN ASSESSEES OWN CASE FOR THE PR EVIOUS YEAR ALSO, THE TRIBUNAL HAS DELETED THE ADDITION MADE BY THE AO ON THIS ACCOUNT. THEREFORE, WE UPHOLD THE ORDER OF TH E CIT (A) ON THIS ISSUE. THIS GROUND OF REVENUES APPEAL IS DIS MISSED. 26. SO, FOLLOWING THE DECISION RENDERED BY THE COOR DINATE BENCH OF THE TRIBUNAL IN IDENTICAL SET OF FACTS, WE ARE O F THE CONSIDERED VIEW THAT WHEN ASSESSEE HAS NOT MADE INVESTMENT OUT OF THE INTEREST BEARING FUNDS RATHER MADE ENTIRE INVESTMEN T OUT OF ITS OWN FUNDS AND OUT OF INTEREST FREE FUNDS PROVIDED BY TH E GOVERNMENT OF INDIA AND HAS SUO MOTU DISALLOWED A SUM OF RS.41,34 ,68,339/- U/S 14A OF THE ACT, AO WITHOUT RECORDING ANY VALID SATI SFACTION AS TO HOW THE WORKING MADE BY THE ASSESSEE IS NOT CORRECT INVOKED THE PROVISIONS CONTAINED U/S 14A MECHANICALLY, NO FURTH ER DISALLOWANCE CAN BE MADE IN MECHANICAL MANNER. SO, WE ARE OF THE ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 20 CONSIDERED VIEW THAT LD. CIT (A) HAS RIGHTLY DELETE D THE ADDITION AND THERE IS NO SCOPE FOR INTERFERENCE INTO THE SAM E. CONSEQUENTLY, GROUND NO.1 IS DETERMINED AGAINST THE REVENUE. GROUND NO.2 27. LD. CIT (A) DELETED THE DISALLOWANCE OF RS.1,58 ,19,47,693/- MADE BY THE AO WHILE COMPUTING BOOK PROFIT U/S 115J B ON ACCOUNT OF PROVISIONS MADE FOR GRATUITY, LEAVE ENCA SHMENT, POST- RETIREMENT MEDICAL BENEFITS, LTC, BAGGAGE ALLOWANCE AND MATCHING CONTRIBUTION ON LEAVE ENCASHMENT. 28. LD. DR FOR THE REVENUE CHALLENGING THE IMPUGNED ORDER CONTENDED THAT LD. CIT (A) ERRED IN DELETING THE AD DITION DESPITE THE FACT THAT THE ASSESSEE HAS FAILED TO ESTABLISH THAT THESE PROVISIONS ARE ASCERTAINED IN NATURE AND RELIED UPON THE ORDER PASSED BY THE AO. 29. HOWEVER, ON THE OTHER HAND, LD. AR FOR THE ASSE SSEE TO REPEL THE ARGUMENTS ADDRESSED BY THE LD. DR FOR THE REVEN UE CONTENDED THAT THE ISSUE IN CONTROVERSY RAISED VIDE THIS GROU ND IS COVERED BY THE ORDER OF HONBLE PUNJAB & HARYANA HIGH COURT IN ASSESSEES OWN CASE FOR AY 2002-03 IN ITA NO.385 OF 2009 ORDER DATED 06.07.2010 , COPY OF ORDER IS AVAILABLE AT PAGES 190 TO 193 OF THE PAPER BOOK. FOR THE SUBSEQUENT YEARS, THIS ISSUE H AS BEEN DECIDED ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 21 IN FAVOUR OF THE ASSESSEE BY THE COORDINATE BENCH O F THE TRIBUNAL VIDE ORDER AVAILABLE AT PAGES 195 TO 251 OF THE PAP ER BOOK. 30. HONBLE PUNJAB & HARYANA HIGH COURT IN ASSESSEES OWN CASE FOR AY 2002-03 (SUPRA) DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE BY RETURNING FOLLOWING FINDINGS :- 6. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE SUBMISSION OF THE LEARNED COUNSEL FOR THE APPELLANT AND DO NOT FIND ANY MERIT IN THE SAME. 7. SECTION 115 JB OF THE ACT WAS INSERTED BY THE F INANCE ACT, 2000 WITH EFFECT FROM IST APRIL, 2001. UNDER T HE PROVISIONS OF THIS SECTION, WHERE AN ASSESSEE IS A COMPANY, IT IS REQUIRED TO PAY AT LEAST 7% OF ITS BOOK PROFITS AS INCOME TAX. HOWEVER, WHERE THE TAX LIABILITY OF THE COMPANY UNDER REGULA R PROVISIONS IS MORE THAN THIS AMOUNT, THE COMPANY SHALL PAY INCOME TAX ACCORDING TO THE REGULAR SCHEME. BOOK PROFITS HAS BEEN DEFINED BY THE EXPLANATION ADDED TO THIS SECTION WH EREUNDER IT PROVIDES THAT NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED IN ACCORDAN CE WITH THE PROVISIONS OF PART II AND III OF SCHEDULE VI TO THE COMPANIES ACT, 1956 SHALL BE INCREASED BY AMOUNTS SPECIFIED I N CLAUSES (A) TO (G), IF ANY AMOUNT REFERRED THEREIN IS DEBITED T O THE PROFIT AND LOSS ACCOUNT AND REDUCED BY THE AMOUNT MENTIONED IN CLAUSES (I) TO (VIII) THEREIN. 8. CLAUSE (C) OF THE EXPLANATION READS THUS:- THE AMOUNT OR AMOUNTS SET ASIDE TO PROVISIONS MADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILI TIES. 9. ACCORDING TO THE ASSESSEE, IT HAD MADE PROVISIO NS FOR GRATUITY, LEAVE ENCASHMENT AND POST RETIREMENT MEDI CAL BENEFIT ON ACTUARIAL VALUATION. IT IS NOT DISPUTED THAT THE ASSESSEE- RESPONDENT IS FOLLOWING MERCANTILE SYSTEM OF ACCOUN TING. THE CLAIM OF THE ASSESSEE IS THAT THESE PROVISIONS HAVE BEEN MADE ON ACTUARIAL VALUATION AND CANNOT BE ADDED FOR DETERMI NING BOOK PROFITS UNDER SECTION 115 JB OF THE ACT AS IT IS BU SINESS LIABILITY IN PRAESENTI WHICH HAS ARISEN DURING THE ACCOUNTING YEAR AND IT IS ONLY THE QUANTIFICATION AND DISCHARGE OF WHICH I S TO TAKE PLACE AT A FUTURE DATE. ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 22 10. THE APEX COURT IN BHARAT EARTH MOVER'S CASE (S UPRA) WHILE PRONOUNCING PRINCIPLES REGARDING DIFFERENCE B ETWEEN ACCRUED AND CONTINGENT LIABILITIES, ENUNCIATED AS U NDER:- IF A BUSINESS LIABILITY HAS DEFINITELY ARISEN IN T HE ACCOUNTING YEAR, THE DEDUCTION SHOULD BE ALLOWED ALTHOUGH THE LIABILITY MAY HAVE TO BE QUANTIFIED AN D DISCHARGED AT A FUTURE DATE. WHAT SHOULD BE CERTAIN IS THE INCURRING OF THE LIABILITY. IT SHOULD ALSO BE CAPAB LE OF BEING ESTIMATED WITH REASONABLE CERTAINTY THOUGH TH E ACTUAL QUANTIFICATION MAY NOT BE POSSIBLE. IF THESE REQUIREMENTS ARE SATISFIED THE LIABILITY IS NOT A C ONTINGENT ONE. THE LIABILITY IS IN PRAESENTI THOUGH IT WILL B E DISCHARGED AT A FUTURE DATE. IT DOES NOT MAKE ANY DIFFERENCE IF THE FUTURE DATE ON WHICH THE LIABILIT Y SHALL HAVE TO BE DISCHARGED IS NOT CERTAIN. 11. THE BOMBAY HIGH COURT IN ECHJAY FORGING P. LTD 'S CASE (SUPRA) WHERE THE ASSESSEE HAD MADE A PROVISION FOR GRATUITY ON THE BASIS OF ACTUARIAL VALUATION, HAD HELD IT TO BE ASCERTAINED LIABILITY. DELHI HIGH COURT IN VINITEC CORP. P. LTD 'S CASE (SUPRA) WHILE ANALYZING WHETHER PROVISION FOR FUTURE LIABIL ITY UNDER WARRANTY WAS A CONTINGENT OR ASCERTAINED LIABILITY, HAD OBSERVED AS FOLLOWS:- THE RATIO DECIDENDI OF THE ABOVE CASES IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. IT IS NOT DISPUTED THAT THE WARRANTY CLAUSE IS PART OF THE SA LE DOCUMENT AND IMPOSES A LIABILITY UPON THE ASSESSEE TO DISCHARGE ITS OBLIGATIONS UNDER THAT CLAUSE FOR THE PERIOD OF WARRANTY. IT IS A LIABILITY WHICH IS CAPABLE OF BEING CONSTRUED IN DEFINITE TERMS WHICH HAS ARISEN IN THE ACCOUNTING YEAR. MAY BE ITS ACTUAL QUANTIFICATION A ND DISCHARGE IS DEFERRED TO A FUTURE DATE. ONCE AN ASS ESSEE IS MAINTAINING HIS ACCOUNTS ON THE MERCANTILE SYSTEM, A LIABILITY ACCRUED, THOUGH TO BE DISCHARGED AT A FUT URE DATE, WOULD BE A PROPER DEDUCTION WHILE WORKING OUT THE P ROFITS AND GAINS OF HIS BUSINESS, REGARD BEING HAD TO THE ACCEPTED PRINCIPLES OF COMMERCIAL PRACTICE AND ACCOUNTANCY. 12. THE TRIBUNAL WHILE CONSIDERING THE ISSUE IN HA ND HAD SPECIFICALLY RECORDED THAT THE PROVISION FOR GRATUI TY, LEAVE ENCASHMENT AND POST RETIREMENT MEDICAL BENEFIT HAD BEEN ESTIMATED ON ACTUARIAL BASIS AND WAS A LIABILITY WH ICH WAS CREATED IN PRAESENTI THOUGH IT WAS TO BE DISCHARGED AT A FUTURE DATE. IT WAS FURTHER RECORDED THAT THE PROVISIONS W HICH WERE CREATED IN RESPECT OF GRATUITY, LEAVE ENCASHMENT AN D POST RETIREMENT MEDICAL BENEFIT ON ACTUARIAL BASIS HAD B EEN ESTIMATED WITH REASONABLE CERTAINTY AND, THEREFORE, SUCH AN E STIMATE CANNOT ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 23 BE TREATED TO BE CONTINGENT ONE. IT WAS ALSO OBSERV ED THAT THE PROVISION MADE BY THE ASSESSEE IN RESPECT OF GRATUI TY, LEAVE ENCASHMENT AND POST RETIREMENT MEDICAL BENEFIT ON A CTUARIAL BASIS CANNOT BE SAID TO BE PROVISIONS OF UNASCERTAI NED LIABILITIES SO AS TO FALL UNDER CLAUSE (C) OF THE EXPLANATION T O SECTION 115JB (2) OF THE ACT. 31. FOLLOWING THE DECISION RENDERED BY HONBLE PUNJ AB & HARYANA HIGH COURT IN ASSESSEES OWN CASE FOR AY 2002-03 (SUPRA) AND SUBSEQUENT DECISIONS RENDERED BY THE TR IBUNAL FOR AYS 2004-05 TO 2010-11, WE ARE OF THE CONSIDERED VIEW T HAT THE LD. CIT (A) HAS RIGHTLY HELD THAT PROVISION FOR GRATUITY, L EAVE ENCASHMENT, POST-RETIREMENT MEDICAL BENEFITS, LTC, BAGGAGE ALLO WANCE AND MATCHING CONTRIBUTION ON LEAVE ENCASHMENT HAD BEEN ESTIMATED ON ACTUARIAL BASIS AND WAS LIABILITY WHICH WAS CREDITE D IN PRESENT THOUGH IT IS TO BE DISCHARGED ON FUTURE DATE, SO IT CANNOT BE HELD TO BE A PROVISION FOR UNASCERTAINED LIABILITY SO AS TO FALL UNDER CLAUSE (C) OF EXPLANATION 115JB (2) OF THE ACT. WE FIND N O SCOPE TO INTERFERE INTO THE FINDINGS RETURNED BY THE LD. CIT (A), THUS GROUND NO.2 IS DETERMINED AGAINST THE REVENUE. GROUND NO.3 32. THE REVENUE HAS CHALLENGED THE DELETION MADE BY THE LD. CIT (A) QUA DISALLOWANCE OF RS.2,84,51,640/- MADE B Y THE AO IN COMPUTING THE BOOK PROFIT U/S 115JB IN RESPECT OF D EPRECIATION ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 24 CLAIMED ON LAND AFTER AMORTIZATION OF LAND BY THE A SSESSEE ON THE GROUND THAT NO DEPRECIATION IS ALLOWABLE UNDER COMP ANIES ACT AND NOR ANY RATE OF DEPRECIATION IS PROVIDED UNDER SCHE DULE XIV OF THE COMPANIES ACT. 33. LD. DR FOR THE REVENUE CHALLENGING THE IMPUGNED ORDER CONTENDED THAT WHEN THERE IS NO PROVISION TO ALLOW SUCH DEPRECIATION UNDER THE COMPANIES ACT NOR ANY DEPREC IATION RATE IS PROVIDED UNDER SCHEDULE XIV OF THE COMPANIES ACT, D ELETION MADE BY THE LD. CIT (A) IS NOT SUSTAINABLE AND RELI ED ON THE ORDER OF THE AO. 34. HOWEVER, LD. AR FOR THE ASSESSEE IN ORDER TO RE PEL THE ARGUMENTS ADDRESSED BY THE LD. DR FOR THE REVENUE C ONTENDED THAT THE ISSUE IN CONTROVERSY RAISED BY GROUND NO.3 IS C OVERED IN VIEW OF THE ORDER PASSED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2004-05 , AVAILABLE AT PAGES 194 TO 202 OF THE PAPER BOOK, WHICH ORDER HAS FURTHER BEEN FOL LOWED BY THE TRIBUNAL IN AYS 2005-06 TO 2010-11. 35. PERUSAL OF ORDER PASSED BY THE COORDINATE BENCH OF THE TRIBUNAL FOR AY 2004-05 (SUPRA) SHOWS THAT THE ISSUE IN CONTROVERSY HAS BEEN DECIDED IN FAVOUR OF THE ASSES SEE BY RETURNING FOLLOWING FINDINGS :- ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 25 7. WE HAVE HEARD BOTH THE PARTIES. FROM THE FACTS WE NOTICE, AS POINTED OUT BY THE LD. AR THAT THIS LAND IS NOT A LAND WHICH IS OWNED BY THE ASSESSEE COMPANY. THIS IS A LAND TAKE N FOR USE FROM THE STATE GOVERNMENT WITHOUT TRANSFERRING THE TITLE FOR RELIEF AND REHABILITATION FOR LAND EVACUEES BECAUSE OF SUB MERGES AND WHERE CONSTRUCTION OF SUCH ALTERNATIVE FACILITY IS A CONDITION FOR SETTING UP A PROJECT. THE COST SO INCURRED BY THE ASSESSEE COMPANY IS AMORTIZED OVER USEFUL LIFE OF THE PROJEC T. THE ABOVE POLICIES HAVE BEEN APPROVED BY THE AUDITORS OF THE COMPANY AS WELL AS THE C&AG. THE ACCOUNTS OF THE ASSESSEE COM PANY ARE SUBJECT TO AUDIT NOT ONLY BY THE STATUTORY AUDITORS BUT ALSO BY THE C&AG ALSO. FURTHER THE ACCOUNTS SO PREPARED HAS BE EN APPROVED AND ADOPTED BY THE COMPANY IN THE ANNUAL G ENERAL MEETING AND FILED WITH THE REGISTRAR OF COMPANIES. 8. THE SUPREME COURT IN THE CASE OF APOLLO TYRES LT D. (SUPRA) HAS HELD THAT THE AO UNDER THE INCOME-TAX A CT HAS TO ACCEPT THE AUTHENTICITY OF THE ACCOUNTS WITH REFERE NCE TO THE PROVISIONS OF THE COMPANIES ACT WHICH OBLIGATES THE COMPANY TO MAINTAIN ITS ACCOUNT IN A MANNER PROVIDED BY THE CO MPANIES ACT AND THE SAME TO BE SCRUTINISED AND CERTIFIED BY THE STATUTORY AUDITORS AND WILL HAVE TO BE APPROVED BY THE COMPAN Y IN ITS GENERAL MEETING AND THEREAFTER TO BE FILED BEFORE T HE REGISTRAR OF COMPANIES WHO HAS A STATUTORY OBLIGATION ALSO TO EX AMINE AND SATISFY THAT THE ACCOUNTS OF THE COMPANY ARE MAINTA INED IN ACCORDANCE WITH THE REQUIREMENTS OF THE COMPANIES A CT. THE SUPREME COURT HAS FURTHER HELD THAT THE AO WHILE CO MPUTING THE INCOME UNDER SECTION 115J HAS ONLY THE POWER OF EXA MINING WHETHER THE BOOKS OF ACCOUNT ARE CERTIFIED BY THE A UTHORITIES UNDER THE COMPANIES ACT AS HAVING BEEN PROPERLY MAI NTAINED IN ACCORDANCE WITH THE COMPANIES ACT. THE ASSESSING OF FICER THEREAFTER HAS THE LIMITED POWER OF MAKING INCREASE S AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO TH E SAID SECTION (115J). THE SUPREME COURT HAS FURTHER WENT ON TO HO LD TO PUT IT DIFFERENTLY, THE ASSESSING OFFICER DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION TO SECTION 115J. 9. IT IS NOT THE CASE OF THE REVENUE HERE THAT THE ADJUSTMENT MADE BY THE AO IS UNDER EXPLANATION TO SECTION 115J . THE CONTENTION OF THE REVENUE HERE IS THAT LAND IS NOT A DEPRECIABLE ASSET AND DEPRECIATION CHARGED IN THE PROFIT AND LO SS ACCOUNT WHICH IS NOT IN ACCORDANCE WITH THE PROVISIONS OF T HE COMPANIES ACT READ WITH ACCOUNTING STANDARD 6. AS STATED HER EINABOVE, THE CONTENTION OF THE REVENUE THAT THE LAND IN QUESTION OF THE ASSESSEE COMPANY IS NOT A DEPRECIABLE ASSET IS FACT UALLY INCORRECT AND FURTHER AS HELD BY THE SUPREME COURT NO ADJUSTM ENT CAN BE MADE TO NET PROFIT AS CERTIFIED BY THE STATUTORY AU DITORS. ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 26 10. ACCORDINGLY WE UPHOLD THE ORDER OF CIT(A) DELET ING THIS ADDITION AND THIS GROUND OF APPEAL OF THE REVENUE I S REJECTED. 36. SO, FOLLOWING THE DECISION RENDERED BY THE COOR DINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2004- 05, WE ARE OF THE CONSIDERED VIEW THAT IN VIEW OF THE LAW LAID DO WN BY HONBLE SUPREME COURT IN APOLLO TYRES LTD. VS. CIT 255 ITR 273 (SC) FOLLOWED BY COORDINATE BENCH OF THE TRIBUNAL FOR AY 2004-05, AO HAS NO JURISDICTION TO GO BEHIND THE NET PROFIT SHO WN IN THE P&L ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN EXPLANATIO N TO SECTION 115J. SO, THE CONTENTION RAISED BY THE REVENUE THA T THE AMOUNT IS NOT A DEPRECIABLE ASSET IS NOT TENABLE AND THE LD. CIT (A) HAS RIGHTLY DELETED THE ADDITION. SO, WE FIND NO SCOPE TO INTERFERE IN THE FINDINGS RETURNED BY THE LD. CIT (A), HENCE GROUND NO.3 IS DETERMINED AGAINST THE REVENUE. 37. RESULTANTLY, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 26 TH DAY OF JULY, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 26 TH DAY OF JULY, 2019 TS ITA NO.297/DEL./2016 ITA NO.466/DEL./2016 27 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), FARIDABAD. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.