UNMESH M JOSHI, MUMBAI V. ITO 6(3)(2), MUMBAI

ITA 4287/MUM/2010

• Counselvise Citation: 428719914 RSA 2010
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 14-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 26-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANTAM BOSE
• Keywords: Source of fund; Capital receipt; Revised return
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER I.T.A. NO. 4287/MUM/2010 ASSESSMENT YEAR : 2006-07 SHRI UMESH M. JOSHI, THE INCOME-TAX OFFICER, KOHINOOR BHAVAN A, VS . 6(3)(2), SENAPATI BAPAT MARG, MUMBAI. DADAR (WEST), MUMBAI 400 028. PAN ACJPJ 9493M APPELLANT. RESPONDENT APPELLANT BY : SHRI JAYESH DADIA. RESPONDENT BY: SHRI SH ANTAM BOSE. DATE OF HEARING : 14-11-2011. DATE OF PRONOUNCEMENT : 23-12-2011. O R D E R. PER P.M. JAGTAP, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED CIT(APPEALS)-12, MUMBAI DATED 27-03-2010 AND THE SO LITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) ON ACCOUNT OF ASSESSEES CLAIM FOR DED UCTION U/S 80IA IN RESPECT OF SALES-TAX BENEFIT OF RS.74,75,000/-. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L WHO IS ENGAGED INTER ALIA, IN THE BUSINESS OF POWER GENERATION WITH THE HELP OF W IND POWER CONVERTOR IN THE NAME AND STYLE OF HIS PROPRIETARY CONCERN M/S KOHIN OOR POWER COMPANY. IN THE 2 ITA NO.4287/MUM/2010 ASSESSMENT YEAR:2006-07. RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERA TION, DEDUCTION U/S 80IA(4) WAS CLAIMED BY THE ASSESSEE TO THE EXTENT OF RS.41,83,8 11/- IN RESPECT OF ELIGIBLE PROFIT OF THE SAID UNDERTAKING. DURING THE COURSE OF ASSES SMENT PROCEEDINGS, THE CLAIM OF THE ASSESSEE FOR THE SAID DEDUCTION WAS EXAMINED BY THE AO AND ON SUCH EXAMINATION, HE FOUND THAT THE ASSESSEE HAD INCLUDE D SALES TAX BENEFIT OF RS.74,75,000/- RECEIVED DURING THE YEAR UNDER CONSI DERATION IN THE PROFITS ELIGIBLE FOR DEDUCTION U/S 80IA. THE ASSESSEE, THEREFORE, W AS CALLED UPON BY THE AO TO EXPLAIN AS TO HOW THE SAID AMOUNT OF SALES-TAX BENE FIT WAS PROFIT DERIVED FROM THE ELIGIBLE UNDERTAKING SO AS TO ALLOW DEDUCTION U/S 8 0IA(4) THEREON. IN REPLY, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE SAID S ALES-TAX BENEFIT HAD BEEN RECEIVED BY HIM FOR ITS WIND POWER PROJECT UNDER THE 1998 PO WER GENERATION POLICY OF THE STATE GOVERNMENT AND THE SAME WAS SOLD TO M/S LIBER TY OIL MILLS AFTER OBTAINING THE NECESSARY APPROVAL FROM THE CONCERNED SALES TAX AUTHORITY. IT WAS SUBMITTED THAT THE SALES-TAX BENEFIT SO RECEIVED WAS DEPENDEN T UPON THE POWER GENERATION ACHIEVED BY HIS PLANT AND IF THERE WAS NO GENERATIO N OF POWER, THE ASSESSEE WOULD NOT HAVE GOT THE SALES-TAX BENEFIT. IT WAS CONTENDE D THAT THE SALES-TAX INCENTIVE GIVEN BY THE STATE GOVERNMENT FOR ENCOURAGING INST ALLATION OF WIND ENERGY GENERATION UNIT IN MAHARASHTRA THUS HAD A DIRECT NE XUS WITH THE ELIGIBLE UNDERTAKING OF THE ASSESSEE AND THE SAME BEING IN T HE NATURE OF PROFIT DERIVED FROM THE SAID UNDERTAKING WAS ENTITLED FOR DEDUCTION U/S 80IA(4). THIS CONTENTION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE AO. ACCORD ING TO HIM, THE PROFITS AND GAINS DERIVED FROM THE BUSINESS OF AN INDUSTRIAL UN DERTAKING ELIGIBLE FOR DEDUCTION U/S 80IA CONNOTES INCOME DIRECTLY FROM THE ELIGIBLE UNDERTAKING ITSELF AND NOT FROM ANY OTHER SOURCE. HE HELD THAT UNLESS SOURCE OF THE PROFIT WAS THE INDUSTRIAL UNDERTAKING ITSELF, THE ASSESSEE WAS NOT ENTITLED T O CLAIM DEDUCTION U/S 80IA(4) ON SUCH PROFIT. HE HELD THAT THE BUSINESS OF THE ELIGI BLE UNDERTAKING OF THE ASSESSEE 3 ITA NO.4287/MUM/2010 ASSESSMENT YEAR:2006-07. WAS GENERATION OF POWER FROM WIND MILLS AND ALTHOU GH SALES-TAX BENEFIT MIGHT BE ATTRIBUTABLE TO THE SAID UNDERTAKING, THE SAME COUL D NOT BE TREATED AS INCOME DERIVED BY THE ASSESSEE FROM THE ELIGIBLE UNDERTAKI NG. HE HELD THAT THE SOURCE OF SALES-TAX INCENTIVE WAS THE SCHEME OF THE GOVERNMEN T AND NOT THE ELIGIBLE UNDERTAKING OF THE ASSESSEE. ACCORDINGLY RELYING IN TER ALIA, ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF STERLING FOOD VS. CIT 237 ITR 579 AND THAT OF HONBLE MADRAS HIGH COURT IN THE CASE OF PANDIAN CHEMICALS 233 ITR 497, THE AO HELD THAT THE SALES-TAX INCENTIVE RECEIVED BY TH E ASSESSEE COULD NOT BE CONSIDERED AS THE PROFIT DERIVED FROM THE ELIGIBLE UNDERTAKING OF THE ASSESSEE AND THE AMOUNT OF SALES-TAX INCENTIVE WAS EXCLUDED BY H IM FROM THE ELIGIBLE PROFIT OF THE SAID UNDERTAKING ENTITLED FOR DEDUCTION U/S 80I A(4). THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IA(4) THUS WAS RESTRICTED BY HI M TO RS.3,11,604/- IN THE ASSESSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 24-12-2008. 3. AGAINST THE ORDER PASSED BY THE AO U/S 143(3), A N APPEAL WAS PREFERRED BY THE ASSESSEE TO THE LEARNED CIT(APPEALS) AND THE EL ABORATE SUBMISSIONS WERE MADE ON HIS BEHALF BEFORE THE LEARNED CIT(APPEALS) IN SU PPORT OF ITS CLAIM THAT THE SALES-TAX INCENTIVE BEING IN THE NATURE OF PROFIT D ERIVED FROM THE ELIGIBLE UNDERTAKING, WAS ELIGIBLE FOR DEDUCTION U/S 80IA(4) . IT WAS ALSO CONTENDED ON BEHALF OF THE ASSESSEE AS AN ALTERNATIVE THAT IF AT ALL THE SALES TAX INCENTIVE WAS TO BE EXCLUDED FROM THE PROFITS OF THE INDUSTRIAL UNDERTA KING ELIGIBLE FOR DEDUCTION U/S 80IA, THE SAME SHOULD BE EXCLUDED ONLY TO THE EXTEN T OF NET INCOME AFTER EXCLUDING THE CORRESPONDING EXPENDITURE. THE LEARNED CIT(APPE ALS) DID NOT FIND MERIT IN THE MAIN SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE ON THIS ISSUE. HE, HOWEVER, FOUND SOME MERIT IN THE ALTERNATIVE CONTENTION RAIS ED ON BEHALF OF THE ASSESSEE AND ACCEPTING THE SAME TO THAT EXTENT, HE DIRECTED THE AO TO REDUCE THE NET AMOUNT OF SALES-TAX INCENTIVE TO THE EXTENT OF RS.70,20,084/- FROM THE PROFITS OF THE INDUSTRIAL 4 ITA NO.4287/MUM/2010 ASSESSMENT YEAR:2006-07. UNDERTAKING OF THE ASSESSEE ELIGIBLE FOR DEDUCTION U/S 80IA(4) FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NOS. 9 TO 12 OF HIS IMPU GNED ORDER : 9. I HAVE CONSIDERED THE SUBMISSIONS. THE DECISION OF THE A.O. IS COVERED BY THE SUPREME COURT DECISION IN THE CASE O F STERLING FOODS VS. CIT 237 ITR 597. THE APPELLANTS SUBMISSION THAT SA LES TAX INCENTIVE IS NOTHING BUT ADDITIONAL SALES CONSIDERATION HAS NO F ORCE. THE SALES TAX BENEFIT IS GRANTED TO THE APPELLANT AS AN INCENTIVE TO REDU CE THE COST OF CAPITAL EMPLOYED. THE INCOME EARNED BY WAY OF SALE OF THE E NTITLEMENT TO THE THIRD PARTY CANNOT BE SAID TO BE DERIVED FROM AN INDUSTRI AL UNDERTAKING. IN VIEW OF THE ABOVE SUPREME COURT DECISION, DERIVED HAS A M UCH NARROWER CONNOTATION THAN ATTRIBUTABLE ACCORDING TO THE SUPR EME COURT. IT HAS ALSO BEEN HELD IN A NUMBER OF DECISIONS THAT OTHER INCO ME IN THE NATURE OF INTEREST ON FIXED DEPOSITS, CANNOT BE TREATED AS IN COME DERIVED FROM THE UNDERTAKING OR THE BUSINESS. 10. THE APPELLANT HAS ALSO CONTENDED THAT THE SALES TAX SUBSIDY IS A CAPITAL RECEIPT. THIS HAS NO RELEVANCE TO THE ISSUE AT HAND SINCE IT IS, IN ANY CASE, BEING KEPT OUT OF THE INCOME OF THE UNDERTAKING. TH E APPELLANT HAS TREATED THE RECEIPT AS INCOME IN ITS P & L A/C AND ITS RETU RN. THE CLAIM CAN BE MADE ONLY BY WAY OF A REVISED RETURN, WHICH IS NOT THE C ASE. THE APEX COURT IN GOETZE INDIA LTD. 284 ITR 323 HAS UPHELD THIS VIEW. 11. THE APPELLANT MADE AN ALTERNATE ARGUMENT THAT S ALES TAX INCENTIVE IS A PART OF THE PROFIT OF THE INDUSTRIAL UNDERTAKING. T HEREFORE, IF IT IS EXCLUDED FROM THE COMPUTATION OF PROFIT FOR THE PURPOSE OF 8 0IA, PROPORTIONATE EXPENDITURE SHOULD ALSO BE REDUCED. IN OTHER WORDS, ONLY THE INCOME BY WAY OF SALES TAX INCENTIVE SHOULD BE REDUCED AND NOT TH E GROSS RECEIPTS. THIS CONTENTION IS ALSO NOT ACCEPTABLE SINCE THERE CANNO T BE SAID TO BE AN EXPENDITURE EXCEPT MAY BE A SMALL PORTION OF ADMINI STRATIVE EXPENDITURE WHICH MAY BE SAID TO HAVE BEEN INCURRED IN EARNING PROFITS FROM SALE OF SALES TAX ENTITLEMENT. THE APPELLANTS P&L A/C. SHOWS THA T THE EXPENDITURE INCURRED IS A UNDER : BANK INTEREST 53,35,148/- OPERATION & MAINTENANCE CHARGES 31,27,950/- ADMINISTRATIVE EXPENSES 10,57,945/- 5 ITA NO.4287/MUM/2010 ASSESSMENT YEAR:2006-07. THIS ADMINISTRATIVE EXPENSES CAN AT BEST BE TREATED AS INCURRED ALSO FOR OTHER SOURCES OF INCOME BY WAY OF SALE OF SALES TAX BENEF ITS. THE EXPENDITURE IS APPORTIONED IN THE RATIO OF INCOME FROM SALES TAX B ENEFITS TO THE TOTAL INCOME FROM THE WINDMILL DIVISION WHICH IS 43%. THE TOTAL AMOUNT WORKS OUT TO RS.4,54,916/-. 12. IN VIEW OF THE ABOVE DISCUSSION IT IS HELD THAT THE AMOUNT BE REDUCED ON ACCOUNT OF INCOME FROM SALES TAX BENEFIT SHOULD BE 74,75,000/- REDUCED BY RS.4,54,916/- WHICH WORKS OUT TO RS.70,20,084/-. THE A.O. IS DIRECTED ACCORDINGLY. STILL AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APP EALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT FOR THE PURPOSE OF CLAIMING SALES-TAX INCENTIVE UNDER THE RELEVANT SCH EME, THE CARRYING ON OF MANUFACTURING ACTIVITY WAS A CONDITION PRECEDENT. H E CONTENDED THAT THERE WAS THUS A DIRECT NEXUS BETWEEN THE SALES-TAX BENEFIT R ECEIVED BY THE ASSESSEE AND ITS INDUSTRIAL UNDERTAKING. HE SUBMITTED THAT THE ASSES SEE HAD TAKEN INTO ACCOUNT THE SALES-TAX BENEFIT WHILE ASCERTAINING THE FEASIBILIT Y OF HIS WINDMILL BUSINESS WHICH AGAIN SHOWS THAT THERE WAS A DIRECT NEXUS BETWEEN T HE INDUSTRIAL UNDERTAKING OF THE ASSESSEE AND THE SALES-TAX INCENTIVE RECEIVED BY HI M. HE CONTENDED THAT THE ULTIMATE SOURCE OF SALES-TAX INCENTIVE IS UNDISPUT EDLY THE WINDMILL OF THE ASSESSEE AND THE SAID INCENTIVE, THEREFORE, HAS TO BE REGARD ED AS THE INCOME DERIVED FROM THE WINDMILL. HE CONTENDED THAT EVEN THE TARIFF OF THE OF THE ELECTRICITY GENERATED IN WINDMILL IS DEPENDENT INTER ALIA, ON THE SALES-TAX INCENTIVE RECEIVED BY THE ASSESSEE AND THIS BENEFIT, THEREFORE, CAN BE CONSIDERED AS P ART OF THE SALES PRICE. IN SUPPORT OF HIS CONTENTION, THE LEARNED COUNSEL FOR THE ASSE SSEE HAS RELIED ON THE DECISION OF MUMBAI SPECIAL BENCH OF ITAT IN THE CASE OF MIRC EL ECTRONICS LTD. REPORTED IN 319 ITR (AT) 130 AS WELL AS THE DECISION OF COORDIN ATE BENCH OF THIS TRIBUNAL IN THE CASE OF ADDL. CIT VS. THE TOTAL PACKAGING SERV ICES RENDERED VIDE AN ORDER 6 ITA NO.4287/MUM/2010 ASSESSMENT YEAR:2006-07. DATED 4 TH NOV., 2011 IN ITA NO. 5364/MUM/2009. HE SUBMITTED THAT THE DECISION OF THE DIVISION BENCH OF THE TRIBUNAL IN THE CASE O F THE TOTAL PACKAGING SERVICES (SUPRA) HAS BEEN RENDERED AFTER TAKING INTO CONSIDE RATION THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT 317 ITR 218. 5. THE LEARNED DR, ON THE OTHER HAND, STRONGLY RELI ED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) IN SUPPORT OF THE REVENUES CASE THAT THE SALES-TAX BENEFIT HAVING BE EN RECEIVED BY THE ASSESSEE AS PER THE SCHEME OF THE STATE GOVERNMENT, THE IMMEDIA TE SOURCE OF THE SAID BENEFIT IS THE SAID SCHEME AND NOT THE INDUSTRIAL UNDERTAKI NG OF THE ASSESSEE. HE CONTENDED THAT THE SAID BENEFIT, THEREFORE, CANNOT BE CONSIDE RED AS INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE ELIGIBLE FOR DEDUCTION U/S 80IA(4) AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY IN DIA (SUPRA). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL ON RECORD. IN THE CASE OF LIBERTY INDIA (S UPRA), THE HONBLE SUPREME COURT HELD THAT SECTIONS 80IA AND 80IB ARE A CODE BY THEM SELVES AND THEY PROVIDE FOR ALLOWING OF DEDUCTION IN RESPECT OF PROFITS AND GAI NS DERIVED FROM THE ELIGIBLE BUSINESS. IT WAS HELD THAT THE CONNOTATION OF THE W ORDS DERIVED FROM IS NARROWER AS COMPARED TO THAT OF THE WORDS ATTRIBUTABLE TO AND BY USING THE EXPRESSION DERIVED FROM THE PARLIAMENT INTENDED TO COVER THE SOURCES NOT BEYOND THE FIST DEGREE. IT WAS HELD THAT DEPB/DUTY DRAW BACK ARE I NCENTIVES WHICH FLOW FROM THE RELEVANT SCHEMES FRAMED BY THE CENTRAL GOVT. AND TH EY ARE NOT PROFITS DERIVED FROM ELIGIBLE BUSINESS BUT BELONG TO THE CATEGORY OF AN CILLARY PROFITS OF SUCH UNDERTAKING. IT WAS HELD THAT THE INCENTIVE RECEIVE D AS PER THE SCHEME OF THE CENTRAL GOVT., THEREFORE, HAD NO FIRST DEGREE CONNE CTION WITH THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE AND THE IMMEDIATE SOURC E OF THE SAME BEING THE 7 ITA NO.4287/MUM/2010 ASSESSMENT YEAR:2006-07. RELEVANT SCHEME OF THE CENTRAL GOVT., IT COULD NOT BE CONSIDERED AS PROFIT ELIGIBLE FOR DEDUCTION U/S 80IA/80IB. 7. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED ON THE DECISION OF MUMBAI SPECIAL BENCH OF ITAT IN THE CASE OF MIRC EL ECTRONICS LTD. (SUPRA) IN SUPPORT OF THE ASSESSEES CASE. IT IS, HOWEVER, OBS ERVED THAT THE SAID DECISION WAS RENDERED BY THE TRIBUNAL ON 22 ND AUGUST, 2008 BEFORE THE JUDGMENT IN THE CASE OF LIBERTY INDIA (SUPRA) CAME TO BE DELIVERED BY THE H ONBLE SUPREME COURT ON 31 ST AUGUST, 2009. THE BENEFIT OF THE DECISION OF THE HO NBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA, THEREFORE, WAS NOT AVAILABLE TO THE SPECIAL BENCH OF ITAT WHILE DECIDING THE CASE OF MIRC ELECTRONICS LTD. (S UPRA). THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO RELIED ON THE DECISION OF COO RDINATE BENCH OF THE TRIBUNAL IN THE CASE OF THE TOTAL PACKAGING SERVICES (SUPRA). H E HAS CONTENDED THAT THE TRIBUNAL IN THE SAID DECISION HAS RELIED ON THE DEC ISION OF HONBLE GAUHATI HIGH COURT IN THE CASE OF MEGHALAYA STEELS LTD. 332 ITR 91 WHEREIN THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) WAS CONSIDERED BY THE HONBLE GAUHATI HIGH COURT. WE HAVE CAREFULLY PERU SED THE DECISION OF HONBLE GAUHATI HIGH COURT IN THE CASE OF MEGHALAYA STEELS LTD. (SUPRA). IN THE SAID CASE, THE FOLLOWING TWO SUBSTANTIAL QUESTIONS OF LAW HAD ARISEN FOR THE CONSIDERATION OF THE HONBLE GAUHATI HIGH COURT : (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE INCOME-TAX APPELLATE TRIBUNAL WAS JUSTIFIED AND CORRECT IN LAW IN HOLDING THAT THE ASSESSEE IS ENTITLED TO A DEDUCTION UNDER SECTION 8 0-IB OF THE INCOME-TAX ACT, 1961 ON THE TRANSPORT SUBSIDY AND INTEREST SUB SIDY RECEIVED BY IT? (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME- TAX APPELLATE TRIBUNAL WAS JUSTIFIED AND CORRECT IN LAW IN HOLDING THAT THE ASSESSEE IS ENTITLED TO A DEDUCTION UNDER SECTION 8 0-IB OF THE INCOME-TAX ACT, 1961 ON THE CENTRAL EXCISE DUTY REFUND RECEIVE D BY IT? 8 ITA NO.4287/MUM/2010 ASSESSMENT YEAR:2006-07. QUESTION NO. 2 WAS ANSWERED BY THE HONBLE GAUHATI HIGH COURT IN FAVOUR OF THE ASSESSEE WHEREIN THE ISSUE INVOLVED WAS WHETHER CEN TRAL EXCISE REFUND RECEIVED BY THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE INCOME-TAX ACT OR NOT. THE SAID ISSUE THUS WAS ALTOGETHER DIFFERENT FROM THE I SSUE INVOLVED IN THE PRESENT CASE RELATING TO SALES-TAX BENEFIT OR INCENTIVE RECEIVED BY THE ASSESSEE. IN THE CASE OF THE TOTAL PACKAGING SERVICES (SUPRA), THE ISSUE INV OLVED WAS RECOVERY OF EXCISE DUTY PAID BY THE ASSESSEE IN THE EARLIER YEARS ON T HE PURCHASES AGAINST THE EXCISE DUTY PAYABLE ON SALES MADE DURING THE SUBSEQUENT YE AR AND THE SAME BEING SIMILAR TO THE ONE INVOLVED IN QUESTION NO.2 BEFORE THE HON BLE GAUHATI HIGH COURT IN THE CASE OF MEGHALAYA STEEL LTD. (SUPRA), THE COORDINAT E BENCH OF THIS TRIBUNAL FOLLOWED THE SAID DECISION OF HONBLE GAUHATI HIGH COURT AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. IN THE PRESENT CASE, THE IS SUE INVOLVED RELATING TO SALES-TAX BENEFIT OR INCENTIVE UNDER THE RELEVANT SCHEME OF T HE GOVT,. ON THE OTHER HAND, IS SIMILAR TO THE ONE INVOLVED IN QUESTION NO.1 RAISED BEFORE THE HONBLE GAUHATI HIGH COURT IN THE CASE OF MEGHALAYA STEEL LTD. (SUP RA) RELATING TO ELIGIBILITY OF TRANSPORT SUBSIDY AND INTEREST SUBSIDY FOR DEDUCTIO N U/S 80IB WHICH HAS BEEN DECIDED BY THE HONBLE GAUHATI HIGH COURT AGAINST T HE ASSESSEE RELYING INTER ALIA, ON THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF LIBERTY INDIA (SUPRA). THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F MEGHALAYA STEEL LTD. THUS IS ALSO AGAINST THE ASSESSEE IN SO FAR AS THE ISSUE IN VOLVED IN THE PRESENT CASE IS CONCERNED AND RESPECTFULLY FOLLOWING THE SAME AS WE LL AS THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA), WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) CONFIRMING THE ACTION O F THE AO IN DISALLOWING THE ASSESSEES CLAIM FOR DEDUCTION U/S 80IA(4) IN RESPE CT OF SALES-TAX BENEFIT, THE IMMEDIATE SOURCE OF WHICH IS THE RELEVANT SCHEME OF STATE GOVT. AND NOT THE 9 ITA NO.4287/MUM/2010 ASSESSMENT YEAR:2006-07. ELIGIBLE BUSINESS OF THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE. GROUND NO.1 OF THE ASSESSEES APPEAL IS ACCORDINGLY DISMISSED. 8. THE ISSUE RAISED IN GROUND NO. 2 IS RELATING TO ASSESSEES ALTERNATIVE CLAIM THAT WHILE COMPUTING THE DEDUCTION U/S 80IA(4), THE NET AMOUNT OF SALES-TAX BENEFIT SHOULD BE REDUCED AFTER ALLOWING THE EXPENSES, SUCH AS, INTEREST ETC. WHICH ARE ATTRIBUTABLE TO THE EARNING OF SALES-TAX BENEFIT. I N THIS REGARD, IT IS OBSERVED THAT THE LEARNED CIT(APPEALS) HAS ALREADY ALLOWED DEDUCTION ON ACCOUNT OF OFFICE AND ADMINISTRATIVE EXPENSES ON PRO-RATA BASIS FROM THE AMOUNT OF SALES-TAX BENEFIT RECEIVED BY THE ASSESSEE WHICH IS LIABLE TO BE EXCL UDED FROM THE PROFITS ELIGIBLE FOR DEDUCTION U/S 80IA(4). AS REGARDS THE INTEREST AND OTHER EXPENSES, THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT BEEN ABLE TO RAISE ANY ARGUMENTS TO CONVINCE US THAT THE SAID EXPENDITURE WAS DIRECTLY OR INDIRECTL Y ATTRIBUTABLE TO THE EARNING OF SALES-TAX BENEFIT. HE HAS NOT BEEN ABLE TO EXPLAIN AS TO WHAT COULD BE THE EXPENDITURE INVOLVED UNDER THE SAID HEADS WHICH CAN BE SAID TO HAVE BEEN INCURRED FOR THE PURPOSE OF EARNING SALES-TAX BENEFIT WHICH HAS BEEN RECEIVED BY THE ASSESSEE UNDER THE SCHEME OF THE STATE GOVT. WE, TH EREFORE, FIND NO MERIT IN GROUND NO.2 RAISED BY THE ASSESSEE AND DISMISS THE SAME. 9. IN GROUND NO. 3, THE ASSESSEE HAS RAISED ANOTHER ALTERNATIVE CLAIM THAT THE SALES-TAX BENEFIT BEING IN THE NATURE OF INCENTIVE RECEIVED ON CAPITAL ACCOUNT, THE SAME SHOULD BE TREATED AS CAPITAL RECEIPT. BEFORE U S, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THIS ALTERNATIVE CLAIM OF THE ASSESSEE HAS NOT BEEN EXAMINED EITHER BY THE AO OR BY THE LEARNED CIT(APP EALS) AND, THEREFORE, THE MATTER MAY BE SENT BACK TO THE AO FOR SUCH ESAMINAT ION. A PERUSAL OF THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS), HOWEVER , SHOWS THAT THIS ASPECT OF THE MATTER WAS FOUND TO BE IRRELEVANT BY HIM TO THE ISSUE OF ELIGIBILITY OF SALES-TAX BENEFIT FOR DEDUCTION U/S 80IA(4) WHICH WAS RAISED BY THE ASSESSEE IN THE APPEAL 10 ITA NO.4287/MUM/2010 ASSESSMENT YEAR:2006-07. FILED BEFORE HIM. IT WAS ALSO NOTED BY THE LEARNED CIT(APPEALS) THAT THIS CLAIM WAS NOT MADE BY THE ASSESSEE BEFORE THE AO DURING THE C OURSE OF ASSESSMENT PROCEEDINGS BY WAY OF A REVISED RETURN. WE HAVE AL SO NOTED FROM THE GROUNDS RAISED BY THE ASSESSEE IN AN APPEAL FILED BEFORE TH E LEARNED CIT(APPEALS) THAT THIS ISSUE WAS NOT RAISED THEREIN. THERE IS ALSO NOTHING ON RECORD TO SHOW THAT THIS ISSUE WAS RAISED BY THE ASSESSEE BY WAY OF AN ADDITIONAL GROUND FILED BEFORE THE LEARNED CIT(APPEALS). HAVING REGARD TO ALL THESE FACTS OF T HE CASE, WE ARE OF THE VIEW THAT THIS ISSUE IS NOT ARISING FROM THE IMPUGNED ORDER O F THE LEARNED CIT(APPEALS) AND THE SAME CANNOT BE ENTERTAINED AT THIS STAGE AND RE STORED TO THE FILE OF THE AO FOR CONSIDERATION AS SOUGHT BY THE LEARNED COUNSEL FOR THE ASSESSEE. WE, THEREFORE, DISMISS GROUND NO. 3 OF THE ASSESSEES APPEAL. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF DEC.,2011. SD/- SD/- (R.S. PADVEKAR) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED : 23 RD DEC., 2011. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, G-BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI. WAKODE