Appeal Details
Counselvise Citation
[2022] 105 COUNSELVISE.COM (IT) 2989 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
4 year(s) 9 month(s) 25 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
04-05-2022
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
G
Assessment Year
2010-2011
Appeal Filed On
09-07-2017
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL, ‘G‘ BENCH MUMBAI BEFORE: SHRI M.BALAGANESH, ACCOUNTANT MEMBER & MS. KAVITHA RAJAGOPAL, JUDICIAL MEMBER ITA No.4835/Mum/2017 (Asse ssment Year :2010-11) & ITA No.5318/Mum/ 2017 (Asse ssment Year :2011-12) Deputy Commissioner of Income Tax, Central Circle-1(4) Room No.902, Pratishtha Bhavan, 9 th Floor Old CGO Building Annexe Mumbai – 400 020 Vs. M/s. Ultratech Cement Limited Aditya Birla Centre A-Wing, 2 nd Floor S.K.Ahire Marg Worli, Mumbai – 400 030 PAN/GIR No.AANCS3843F (Appellant) .. (Respondent) Revenue by Shri Jasbir Chauhan Assessee by Shri Madhur Agrawal Date of Hearing 21/02/2022 Date of Pronouncement 05/05/2022 आदेश / O R D E R PER M. BALAGANESH (A.M): These appeals in ITA No.4835/Mum/2017 & 5318/Mum/2017 for A.Yrs.2010-11 & 2011-12 respectively arise out of the order by the ld. Commissioner of Income Tax (Appeals)-12, Mumbai in appeal No.CIT(A)- 12/ACIT-6(1)(1)/293/15-16 & CIT(A)-12/DCIT-6(1)(1)/139/13-14 respectively dated 21/04/2017 & 19/05/2017 respectively (ld. CIT(A) in ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 2 short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 26/03/2013 & 10/03/2014 respectively by the ld. Dy. Commissioner of Income Tax 6(3), Mumbai (hereinafter referred to as ld. AO). 1.1. Identical issues are involved in both the appeals and hence, they are taken up together and disposed of by this common order for the sake of convenience. ITA No.4835/Mum/2017 – A.Y.2010-11 (Revenue Appeal) 2. The ground No.1 raised by the Revenue is challenging the deletion of disallowance of Rs.2,72,31,613/- u/s.43B of the Act. 2.1. We have heard rival submissions and perused the materials available on record. At the outset, we find that the ld. CIT(A) had deleted this disallowance made u/s.43B of the Act by placing reliance on the decision of Tribunal for A.Y.1993-94 in assessee’s own case and that the Revenue had not accepted that Tribunal decision and hence, in order to keep the issue alive, this ground is raised by the revenue. This fact is very much evident from the ground raised by the Revenue. As stated supra, we find that this issue is no longer res integra in view of the Co-ordinate Bench decision of this Tribunal in assessee’s own case for A.Y.2001-02 in ITA No.4083/Mum/2003 and 7027/Mum/2003 dated 22/10/2014 wherein this issue was adjudicated as under:- “31. Ground No. 1 in Revenue’s appeal relates to the disallowance u/s 43B of the Act which has been dealt with by the A.O. at para No. 9-9.5 of his order. The ld. CIT(A) dealt with this issue at page No. 2, para 5 of his order and deleted the disallowance by following the order of the Tribunal in earlier years. From the record, we found that the Tribunal ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 3 has been consistently allowed the issue in favour of the assessee in assessment years 1990-91, 1993-94, 1994-95, 1996-97, 1997-98 & 1998-99. We further found that against the order of the Tribunal, the Department has not filed any appeal before the Hon’ble High Court in assessment years 1996-97, 1997-98, 1995-96 & 1994-95. As the matter has been settled and the ld. CIT(A) deleted the disallowance by following the order of the Tribunal, we do not find any reason to interfere with the order of the ld. CIT(A) deleting the disallowance made by the A.O. u/s 43-B of the Act.” 2.2. We find that the issue involved in dispute is with regard to applicability of provisions of Section 43B(f) of the Act. The case of the assessee is leave encashment payable for non-retiring employees will not fall in section 43B(f) of the Act as it is not payable at the end of the year but services were already rendered by the assessee during the year and hence, the provision is required to be made by the assessee company that the same is payable only at the time of retirement of employees. We are in agreement with this argument advanced by the ld. AR and hold that leave encashment payable for employees who had retired during the year alone would fall within the ambit of Section 43B(f) of the Act and if the same is not paid within the due date of filing of return of income u/s.139(1) of the Act, the said expenditure shall not be allowed as deduction. However, in respect of provision made as stated supra for leave encashment in respect of non-retiring employees, the same does not become payable at all to those employees. In other words, the provision is made for expenses accrued but not due for payment during the year. Hence, the provisions of Section 43B(f) of the Act could not be put into operation in respect of the said provision. In any case, we find that the issue in dispute is already addressed by the Co-ordinate Bench of the Tribunal and also by the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs. Hindustan Construction Company Ltd., reported in 374 ITR 101. The relevant portion of the said judgment is reproduced hereunder:- ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 4 “8. In relation to question 6.2, the Tribunal found that there was no question of section 43B being invoked and at the stage when the interest was not payable. The loan itself was availed of on December 26, 2002, and for one year. It was payable with interest. However, the interest had not become payable and, hence, the question of relying on section 43B to disallow the claim does not arise. By the plain language of this provision and given the factual and admitted position, we do not think that the Tribunal erred in the view that it has taken and, hence, even with regard to this question, we do not agree that the Tribunal's conclusion as reached in paragraph 9.2 of the impugned order raises any substantial question of law. The view taken is neither perverse nor vitiated by any error of law apparent on the face of the record.” 2.3. In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, the ground No.1 raised by the Revenue is dismissed. 3. The ground No.2 raised by the Revenue is challenging the deletion of disallowance of expenditure of Rs.2,47,430/- on account of contribution to local organisations. 3.1. We have heard rival submissions and perused the materials available on record. We find that this issue has been addressed by the ld. AO in page 5 of his order. The assessee had made contributions to various local organisations located in and around the areas where plant offices of the assessee company are situated. This was sought to be disallowed by the ld. AO on the ground that the expenditure was not wholly and exclusively incurred for the purpose of business. We find that this issue is no longer res integra in view of the Co-ordinate Bench decision of this Tribunal in ITA No.4083/Mum/2003 and 7027/Mum/2003 dated 22/10/2014 wherein it was held as under:- 32. With regard to the contribution to the local organization, the issue has been dealt with by the A.O. at page 6 -7, para 10 of his order. The ld. CIT(A) deleted the addition/disallowance by dealing the issue at ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 5 page 3, para 7 of his order wherein he has followed the order of the Tribunal in earlier years. 33. We have considered the rival contentions and we found that the issue has been decided by the Tribunal consistently in favour of the assessee in the assessment years 1986-87 to 1989-90, 1994-95 & 1995- 96 to 1997-98. In an appeal further filed by the Revenue before the Hon’ble High Court in assessment years 1988-89, 1994-95, 1995-96, the same has been decided in favour of the assessee. The order of the Tribunal for 2000-01 was not challenged by the Department before the Hon’ble High Court on this issue. Respectfully following the order of the Tribunal and Hon’ble High Court in assessee’s own case, we do not find any reason to interfere with the order of the ld. CIT(A). 3.2. We further find that the Hon’ble Jurisdictional High Court in assessee’s own case for A.Yrs. 1994-95 and 1995-96 in Income Tax Appeal No.417 of 2010 dated 05/09/2011 had also addressed the very same issue in favour of the assessee. Respectfully following the same, the ground No.2 raised by the Revenue is dismissed. 4. The ground No.3 raised by the Revenue is challenging the deletion of disallowance of Rs.1,33,54,176/- incurred towards rural development activities by the assessee company. The details of the said expenditure are addressed by the ld. AO in page 6 & 7 of his order vide para 6. We find that assessee company had incurred rural development expenditure of Rs.1,33,54,176/- and the said expenditure was incurred towards bringing water supply, women empowerment programme, medical camps, eye camps, blood camps, agriculture and plantation, pharmacy training camps, distribution of scholarships, contribution for construction of room at Panchayat, pulse polio camp, family planning camps, infrastructure development in villages, pond deepening, school development, social and economic impact stated by CARD etc., The assessee pleaded that these expenses were incurred wholly and exclusively for the purpose of business and the beneficiaries of these ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 6 expenses included people residing nearby plant area and other people directly or indirectly connected with the business of the assessee. We find that this issue is no longer res integra in view of the issue in view of the Co-ordinate Bench decision of this Tribunal in ITA No.4083/Mum/2003 and 7027/Mum/2003 dated 22/10/2014 wherein it was held as under:- “38. Ground No. 6 of Revenue’s appeal relates to the disallowance of rural development expenses. The A.O. has dealt with this issue at page 9, para 15 and the ld. CIT(A) has dealt with this issue at page 4-5, para 11 of his order. We found that the issue has been decided by the Tribunal in assessee’s own case in its favour in assessment years 1998-99, 1999-00 & 2000-01. We further found that the Department on this ground is not in appeal before the Hon’ble High Court in these years. Respectfully following the order of the Tribunal, we do not find any reason to interfere with the order of the ld. CIT(A) for deleting the rural development expenses amounting to Rs.66,08,937/-.” 4.1. The ld. AR also submitted that this issue was not contested by the department in Hon’ble High Court in earlier years. Respectfully, following the aforesaid judicial precedent, the ground No.3 raised by the Revenue is dismissed. 5. The ground No.4 raised by the Revenue is challenging the action of the ld. CIT(A) directing the ld. AO to treat the production cost of advertisement film of Rs.47,37,761/- as revenue expenditure. 5.1. We have heard rival submissions and perused the materials available on record. We find that assessee has debited Rs.47,37,761/- towards cost of production of advertisement films under the head ‘advertisement expenses’. The assessee was asked to furnish the details of the same during the course of assessment proceedings which was furnished. The ld. AO sought to treat the said expenditure incurred on production of films for advertisement as capital in nature. We find that ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 7 assessee is not in the business of production of feature films rather the films have been used for advertisement. It was pleaded that the air time of T.V. or radio is allowed as expenditure in the year in which such advertisement is telecasted / broadcasted. The ld. AO observed that advertisement film produced could be used again and again and therefore, the assessee derives enduring benefit out of the same. We find that this issue is no longer res-integra in view of the decision of the Co- ordinate Bench of this Tribunal in assessee’s own case in ITA No.4083/Mum/2003 and 7027/Mum/2003 dated 22/10/2014 wherein it was held as under:- “47. The issue in ground No. 13 with regard to deleting the disallowance of expenses incurred for making advertisement films has been dealt with by the A.O. at page 15-16, para 26. The ld. CIT(A) deleted the same after having observed at page 12-13, para 21 of his order. We found that the issue has already been settled by the Tribunal in assessee’s own case in A.Y. 1976-77 and no ground was taken by the Department before the Hon’ble High Court. Similar issue has been decided by the Hon’ble Supreme Court in the case of Empire Jute Co. Ltd., 124 ITR 1 (SC). Accordingly, we do not find any infirmity in the order of the ld. CIT(A) deleting the disallowance by observing that advertisement film was made only for advertisement and its useful life is very short and such films do not add to the capital structure of the company.” 5.2. Respectfully following the aforesaid judicial precedent, the ground No. 4 raised by the Revenue is dismissed. 6. The ground No.5 raised by the Revenue is challenging the deletion of disallowance of Rs.16,60,120/- towards ESOP by placing reliance on the decision of Special Bench of Bangalore Tribunal in the case of Biocon Ltd. 6.1. We have heard rival submissions and perused the materials available on record. We find that assessee had incurred an expenditure of Rs.16,60,120/- on account of employee compensation cost under ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 8 Employee Stock Options Scheme (ESOS). The entire scheme together with the object and vesting period are addressed in detail by the ld. AO from pages 10-14 of the order. The discount cost incurred on ESOP scheme was written off by the assessee over the vesting period. This issue is squarely covered by the decision of the Special Bench of Bangalore Tribunal in the case of Biocon Ltd., which has been subsequently approved by the Hon’ble Karnataka High Court in 430 ITR 151. The relevant operative portion of the decision of the Hon’ble Karnataka High Court is reproduced hereunder:- “6. We have considered the submissions made by learned counsel for the parties and have perused the record. The singular issue, which arises for consideration in this appeal is whether the tribunal is correct in holding that discount on the issue of ESOPs i.e., difference between the grant price and the market price on the shares as on the date of grant of options is allowable as a deduction under section 37 of the Act. Before proceeding further, it is apposite to take note of section 37(1) of the Act, which reads as under: “Section 37(1) says that any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head, "Profits and Gains of Business or Profession". 7. Thus, from perusal of section 37(1) of the Act, it is evident that the aforesaid provision permits deduction for the expenditure laid out or expended and does not contain a requirement that there has to be a pay out. If an expenditure has been incurred, provision of section 37(1) of the Act would be attracted. It is also pertinent to note that section 37 does not envisage incurrence of expenditure in cash. 8. Section 2(15A) of the Companies Act, 1956 defines 'employees stock option' to mean option given to the whole time directors, officers or the employees of the company, which gives such directors, officers or employees, the benefit or right to purchase or subscribe at a future rate the securities offered by a company at a free determined price. In an ESOP a company undertakes to issue shares to its employees at a future date at a price lower than the current market price. The employees are given stock options at discount and the same amount of discount represents the difference between market price of shares at the time of grant of option and the offer price. In order to be eligible for acquiring shares under the scheme, the employees are under an obligation to render their services to the company during the ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 9 vesting period as provided in the scheme. On completion of the vesting period in the service of the company, the option vest with the employees. 9. In the instant case, the ESOPs vest in an employee over a period of four years i.e., at the rate of 25%, which means at the end of first year, the employee has a definite right to 25% of the shares and the assessee is bound to allow the vesting of 25% of the options. It is well settled in law that if a business liability has arisen in the accounting year, the same is permissible as deduction, even though, liability may have to quantify and discharged at a future date. On exercise of option by an employee, the actual amount of benefit has to be determined is only a quantification of liability, which takes place at a future date. The tribunal has therefore, rightly placed reliance on decisions of the Supreme Court in Bharat Movers supra and Rotork Controls India P. Ltd., supra and has recorded a finding that discount on issue of ESOPs is not a contingent liability but is an ascertained liability. 10. From perusal of section 37(1), which has been referred to supra, it is evident that an assessee is entitled to claim deduction under the aforesaid provision if the expenditure has been incurred. The expression 'expenditure' will also include a loss and therefore, issuance of shares at a discount where the assessee absorbs the difference between the price at which it is issued and the market value of the shares would also be expenditure incurred for the purposes of section 37(1) of the Act. The primary object of the aforesaid exercise is not to waste capital but to earn profits by securing consistent services of the employees and therefore, the same cannot be construed as short receipt of capital. The tribunal therefore, in paragraphs 9.2.7 and 9.2.8 has rightly held that incurring of the expenditure by the assessee entitles him for deduction under section 37(1) of the Act subject to fulfilment of the condition. 11. The deduction of discount on ESOP over the vesting period is in accordance with the accounting in the books of account, which has been prepared in accordance with Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. 12. So far as reliance place by the revenue in the case of Infosys Technologies Ltd.(supra) is concerned, it is noteworthy that in the aforesaid decision, the Supreme Court was dealing with a proceeding under section 201 of the Act for non-deduction of tax at source and it was held that there was no cash inflow to the employees. The aforesaid decision is of no assistance to decide the issue of allowability of expenses in the hands of the employer. It is also pertinent to mention here that in the decision rendered by the Supreme Court in the aforesaid case, the Assessment Years in question was 1997-98 to 1999-2000 and at that time, the Act did not contain any specific provisions to tax the benefits on ESOPs. Section 17(2)(iiia) was inserted by Finance Act, 1999 with effect from 1-4-2000. Therefore, it is evident that law recognizes a real benefit in the hands of the employees. For the aforementioned reasons, the decision rendered in the case of Infosys Technologies is of no assistance to the revenue. The decisions relied upon by ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 10 the revenue in A. Gajapathy Naidu,Morvi Industries Ltd. and Keshav Mills Ltd.(supra) support the case of assessee as the assessee has incurred a definite legal liability and on following the mercantile system of accounting, the discount on ESOPs has rightly been debited as expenditure in the books of account. We are in respectful agreement with the view taken in PVP Ventures Ltd. And Lemon Tree Hotels Ltd.'case (supra). 13. It is also pertinent to mention here that for Assessment Year 2009-10 onwards the Assessing Officer has permitted the deduction of ESOP expenses and in view of law laid down by Supreme Court in Radhasoami Satsang v. CIT, [1992] 60 Taxman 248/193 ITR 321, the revenue cannot be permitted to take a different stand with regard to the Assessment Year in question.” 6.2. Respectfully following the same, the ground No.5 raised by the Revenue is dismissed. 7. The ground No.7 raised by the Revenue is challenging the action of the ld. CIT(A) in granting deduction u/s.80IA of the Act in respect of Rail system at Raipur of Rs.15,36,71,837/- and Rs.12,62,47,956/- at Hotgi. 7.1. We have heard rival submissions and perused the materials available on record. In the opinion of the Revenue, the rail system was not an infrastructure facility within the meaning of Explanation to Section 80IA(4)(i) of the Act and hence, assessee is not entitled for deduction thereon. We find that the ld. AO had rejected the claim of the assessee u/s.80IA of the Act by placing reliance on the order passed by the ld. AO for A.Y.2003-04 and A.Y.2004-05. But we find that the ld. CIT(A) had granted deduction to the assessee by placing reliance on the orders passed by his predecessor in assessee’s own case for A.Yrs. 2003-04 to 2008-09 on the very same issue. According to the ld. AO, the concerned Raipur unit and Hotgi unit are not eligible units and they are only cost centres and not having any profit generation activity. We find that this issue is already covered in successor company’s case i.e. Ultratech Cements Ltd., by the decision of this Tribunal in ITA No.5065/Mum/2014 ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 11 and 5107/Mum/2014 for A.Y.2009-10 and ITA No.7614/Mum/2014 & 7631/Mum/2014 for A.Y.2010-11 dated 05/04/2017. In the said Tribunal order dated 05/04/2017, the ground No.1 raised by the Revenue is exactly identical with the ground raised in the impugned appeal before us. This Tribunal had elaborately dealt with the entire issue commencing from para 8 onwards as under:- 8. Rival contentions have been heard and record perused. Facts in brief are that in the assessment year 2009-10, assessee, Ultratech Cement Ltd.,(in short UTCL) filed its return on 29.09.2009. AO made addition on account of sales tax exemption, deduction claimed u/s 801A and expenses claimed u/s.14A. 9. During the course of assessment AO disallowed assessee's claim of deduction u/s.80IA in respect of profit of rail systems. The assessee made this claim on the ground that it had earned profit by operating its rail systems at Hirmi [Chattisgarh],· Tadipatri [AP],· Arakkonam [Tamilnadu] and Durgapur [West Bengal]. In the context, during the assessment proceedings it was explained that the assessee had inherited those rail systems [along with cement plants-Hirmi Cement Works, A P Cement Works, Arakkonam Cement Works & West Bengal Cement Works] out of demerger from L&T Ltd at all those locations; that the rail systems were set-up by L &T Ltd [and that way by the assessee company as it had inherited the cement plants from L&T Ltd by way of demerger] to enable the transportation of raw material [coal etc] and finished goods [i.e. cements] at their cement plants through railway wagons, at all the said; four locations. It was explained that prior to putting up those rail systems, the assessee used to transfer the material from the cement plants [at all the four locations] to the nearest railway station and vice-versa on road through trucks. Before the AO the claim of deduction was justified by assessee by taking the plea that the various conditions as prescribed u/s 80IA(4) was met with in as much as it had entered into an agreement with the government through department of Railways for developing, maintaining and operating the rail system [infrastructure facility]; and that in pursuance thereof it had developed the integrated rail system in between the plant and the nearest railway track [of Indian Railways] and running it [in between] for movement of the inward and outward material so as to enable it to transport the materials from its plants straightaway to the various destinations and vice-versa at all those four locations; and that by way of such operation of rail systems, it has been able to save the expenses for loading [at those plants] into the trucks, road freight and expenses for unloading and loading the same at the site of nearest Indian railways and that resulted into the. profit of such rail systems. 10. However, the AO noted that those agreements were for laying out private sidings and not for any rail system [as referred to in explanation (a) to the clause (t) of sub-section (4) section 80IA in reference to the infrastructure facility] as claimed by the assessee that railway had laid down those [sidings] ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 12 partly on the land belonging to the railways and partly belonging to the assessee company so as to facilitate the transportation of raw materials/cement bags through railway wagons [from / to their plant sites]. The AO also noted that the assessee [rather l & T ltd] had primarily requested the' railway department to extend the sidings [railway tracks] to the site of cement plants of the company so as to enable it to transport its goods [raw material & cement] from/to their plant sites itself [so that it could avoid transportation through the roads till the nearest railway station and loading and unloading etc]; that on such request the railway authorities conducted survey and laid down sidings and charged the assessee for laying out the railway track and other related infrastructure. The AO also noted that the wagons were actually run on those sidings by the railway authority and not by the assessee company. The AO also took note that railway authorities had posted its staff for weighing raw material/ cement bags loaded/unloaded by the assessee; and that all activities were directly or indirectly being carried out by the railway authorities and the assessee only reimbursed the expenses or charges levied by the railways in r/o siding maintenance etc as per the agreement. The AO inferred that the so called "rail system" [of the assessee company] is not a self reliant, independent unit; and that it is providing services to the cement plants of the assessee company only. The AO also stated that railway department do not allow operation of the railways by any private enterprise and for that reason it [railway department] had formulated a Build-own-lease-transfer (BOLT) scheme whereby the private enterprises could set-up the necessary and crucial components of a railway system and provide that on lease to Indian Railways for maintenance and operation; and in the context referred to the CBDT circular no 733 dated 03.01.1996 whereby the benefit of Sec. 80IA was also extended to such rail system constructed / developed by the private enterprises as per the said BOLT scheme. By that circular, the Board had also clarified that such concession would be available only to an infrastructure facility meant for development of rail systems and not to any other infrastructural facility including rolling stocks. The AO also observed that the assessee, had not given the said railway system or the crucial component thereof on lease to the railway department [had it been so, the profit by way of lease rent from such rail. system would have qualified for deduction u/s 80lA as per the concession given by the aforesaid circular]. Finally, the AO held that assessee was not eligible to claim the deduction u/s 80lA in r/o such rail systems and disallowed the claim accordingly. 11. In its appellate order CIT(A) noted that the issue has come up first in A.Y. 2004·05. In that year, the assessee had claimed deduction of Rs 15.63 crores in r/o rail system at Hirmi, Raipur District, Chattisgarh. In A.Y. 2005- 06 & 2006- 07, the assessee claimed deduction of Rs.16.30 crs & Rs 20.95 crs respectively in r/o that rail system at Hirmi. In A.Y. 2007- 08, the claim was made in r/o two more rail systems [one at Tadipatri in Andhra Pradesh & the other at Arakkonam in Tamil Nadu]. The total claim for that year amounted to Rs 52.38 crs [Rs 21.09 crs -Hirmi; Rs 25.56 crs -Tadipatri & Rs 5.73 crs -Arakkonam]. In A.Y. 2008-09, the claim extended to one more rail system at Durgapur [West Bengal] and the total claim amounted to Rs 61.56 crs. This claim for AY 2009-10 i.e. for the year under consideration had risen to 73.13 crs. ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 13 12. The rail systems at all these four locations viz. Hirmi, Tadipatri, Arakkonam & Durgapur are said to have commenced the operations in AY 2000-01, AY 1999-00, AY 2001-02 ft AY 2002-03 respectively [ refer assessee's reply dated 06.01.2014] It was further observed by CIT(A) that the L&T Ltd, on whose request the private sidings were set up at all these four locations, never claimed any such deduction u/s 80IA(4). The deductions are being claimed by the assessee company since AY 2004-05, after the various cements plants were transferred to the assessee company [in the year 2003-04] as per demerger scheme. In AY 2004-05, claim was made [for the first time] in respect of such Rail System at Hirmi. Then in AY 2007-08, it started claiming deduction in respect of rails systems at Tadipatri and Arakkonam and then in AY 2008-09 for Durgapur also. From AY 2009- 10 and onwards the claim pertains to all the four units. 13. The CIT(A) further noted that in AY 2004-05 &2005-06, the Hon'ble ITAT vide its order dated 20.08.2009 in ITA No 7735 & 7736/Mum/2007 had decided this issue in the favour of assessee. Later that decision of the tribunal was followed by the ITAT in its [assessee] case in AY 2006-07 [ ITA No 2604/M/09 order dated 31.5.2010] and in AY 2007-08 & 2008-09 [ITA nos 8143/mum/2010 and 1813/Mum12012, order dated 28.02.2014]. The relevant part of the Tribunal's decision in AY 2004-05 is reproduced hereunder: "13. Regarding the issue in r/o deduction u/s 80lA on profit of Rail system at Hirmi, the AO rejected the claim on the ground that the rail system is not a profit centre but it is a cost centre and that the rail system is not an independent unit but it is 100% depending on the cement unit. Detailed submissions filed by the assessee which are reproduced in the assessment order was not found satisfactorily to the AO. Detailed submissions were again filed before the CIT(A). It was explained that the company had established a cement plant in Hirmi, The nearest available railway siding was at a distance of around 15 km from the plant. To facilitate inward and outward movement of goods, the assessee developed infrastructure facility of rail system which was made operating in 1999. The assessee company duly entered into an agreement with the railways, which is a part of Government of India. It was submitted that there was option available u/s 80lA with the assessee to claim deduction for any of 10 consecutive years as its own choice. The assessee has opted for claiming the deduction from A. Y. 2004- 05 on wards. It was submitted that the income offered for tax by the assessee includes income from rail system and that certificate of M/s Sharp & Tannan, CA in Form No 10CCB certifying the correctness of the aforesaid claim was duly submitted to the AO. 13.1. It was further submitted that the rail system is a profit centre. The rail system is engaged in business of providing transportation facility to the cement plant, profit of which is embedded in the profit of the assessee company as a whole. It was submitted that by developing this infrastructure facility, there has been saving in transportation cost and overall profits of the company have increased due to such savings. It was such that the mere fact that it does not raise an invoice from its railway unit to its cement unit cannot govern the tax implication of the profits delivered by the rail system. In support of its contention that treatment of a transaction in books of accounts cannot govern the tax statement reliance was placed on the ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 14 decision of the Supreme Court in the case of Kadernath Jute Manufacturing Company Ltd 82 ITR 362; in the case of Tutcorin Alali Chemicals Ltd in 227 ITR 172; in the case of Godhra Electricity Company in 91 Taxman 91; in the case of Bokaro Steel Ltd in 263 ITR 315 and in the case of Sutlet Cotton Mills Ltd in 116 ITR 1 and submitted that it would be totally incorrect to say that an assessee who raises internal invoices would be entitled to benefit of Sec 80IA and an assessee who does not raise internal invoices would not be entitled to such benefit. 13.2. The assessee further submitted that Sec. 80IA(8) itself contemplates a situation where goods or services are transferred by an eligible undertaking to non eligible undertaking and vice versa. In such cases, deduction is to be allowed based on the market value of such goods or services. It was further submitted that the section itself envisages situation of captive consumption. Reliance was placed on the decision reported in 59 ITR 514 (Guj) and 254 ITR 17 (Bom). 13.3. Further reliance was also placed on the decision of the Supreme Court in the case of Tata Iron & Steel Company Ltd in 48 ITR 123 and stated that in that case, the assessee was engaged in the business of extraction of iron ore and manufacturing of iron and steel therefrom. The final product sold by the company was the finished iron and steel. Under some statute, a cess was leviable on the annual net profits derived from the mines. It was contended that since no iron ore extracted is sold to an outsider, no profits could be said to have been derived from the extracting activities. This argument was advanced based on the principle that a person cannot make profits out of himself, The Supreme Court negative this argument and held that despite captive consumption of iron ore certain profits can be regarded as having derived from the extraction activities. The Supreme Court ruled in favour of bifurcating the total profits into two activities viz. the extraction activity and the manufacturing activity. It was therefore submitted that in view of the above, it is not correct to say that the assessee does not earn any profits from its rail system merely because the rail system is used for the captive purposes of the cement plant. 13.4. It was further submitted that the Board Circular No 733 dated 03.01.1996 states that deduction u/s 80lA is applicable to an infrastructure facility meant for development of rail system. It was contended that the AO has categorically stated in para 5.2.3 of his order that rail system was developed by L&T and was inherited by the assessee out of demerger. It was further submitted that in a demerger all the property of the undertaking is necessarily transferred by the demerged company to the resulting company, therefore it is immaterial whether the rail system was developed by L&T Ltd or by the resulting company i.e. the assessee. Further it was submitted that the facility of rail system consists of all that is required to carry on the railway activity in an organized and systematic manner. The activity of rail system is real and substantial and it is carried on with said purpose viz transportation of goods from one place to another and thereby augmenting profits of the company as a whole by saving transportation cost which it would have otherwise incurred. It was further submitted that the profits derived from the rail systems are clearly arising out of the business of developing operating and maintaining the rail system. 13.5. It was further submitted that substantial investment has been made in developing the railway system. There is an agreement with the railways for operating and maintaining the rail system. It employs required personnel directly or through the railway authorities and it bearing the salary cost relating ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 15 thereto. It was submitted that the rail system is developed on the basis of entirely different technology and employs different equipment and machinery from those applied by the cement unit for cement production. It is was further submitted that the rail system is not formed by splitting up or reconstruction of a business already in existence or by the transfer to a new business of machinery previously used for any purpose. It was therefore argued that the rail system is not a part of the cement unit but is an, independent unit. It was further submitted' that the conditions specified in Sec 8OIA(4)(i) in r/o an infrastructure facility are fully satisfied in the present case. The rail system is owned by the assessee company which is a company registered in India. The assessee has entered into an agreement with the Railways for operating and maintaining the new infrastructure facility. It has started operating and maintenance the infrastructure facility after 01.04.1995. 14. After considering the submission and perusing the material on record, the CIT(A) was satisfied with the explanation of the assessee and taking into consideration the various case laws held that the assessee is eligible for deduction us BOIA in rlo profits from rail system. Accordingly, the AO was directed to allow deduction u/s 80IA. Now the department is in appeal here before the Tribunal. 15. The Id DR on the other hand placed reliance on the order of the AO and on the other hand the Id counsel of the assessee placed reliance on the order of the CIT(A). Attention of the Bench was drawn on para 5.2 of the order of the AO and then on the provision of Sec 8OIA clause 2 and sub clause 3&4. It was further explained that the assessee can avail benefit of deduction u/s 80IA in 10 years of his choice out of 15 years period. The provisions are very clear. Attention of the Bench was also drawn on the copy of the agreement placed at page .93 of the paper book. It was further submitted that all the conditions of Sec 80IA have been fulfilled. Reliance was placed on the decision reported in 40 ITR 123. It was submitted that the ClT(A) has discussed the issue extensively and the findings of the ld CIT(A) remained uncontroverted. Therefore the order of the CIT(A) is liable to be confirmed in this regard. 16.We have heard the rival submission and considered them carefully: We have also perused the various material placed on record on which our attention was drawn. After taking into consideration we find that the CIT(A) has dealt with the aspect in detail. Contention raised before the ClT(A) on behalf of the assessee were not found incorrect or false. Conditions of Sec 80IA have been fulfilled by the assessee. Thereafter, the ClT(A) came to the conclusion that the assessee is eligible for deduction u/s 80IA. The findings of the Id CIT(A) are given in para 3.10 are as under :- 3.10 After perusal of the facts of the case, findings given by the AO and submissions made by the appellant, I find that the only issues in this case is whether the appellant is eligible for deduction u/s 80IA in r/o profits derived from the rail system. There is no dispute that the appellant (i) is a company (if) has developed the rail system and (iii) it" has entered into an agreement for operation and maintenance of the rail system with the railways i.e the Government. Thus all the 3 conditions required to be fulfilled as per Sec 80IA(4)(i) have been satisfied by the appellant. Moreover rail system is defined in ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 16 explanation to sec 80IA(4)(i) as an infrastructure facility. Further separate books of accounts are being maintained by the appellant. The mere fact that internal invoices are not raised does not mean that the rail system is not a profit centre. It is also found that all the doubts raised by the AO in the assessment order have been fully explained by the appellant t. e the AO has himself stated in the assessment order that the rail system was developed by L&T Ltd which has been inherited by the appellant as a result of the demerger and Circular No 733 dated 03.01.1996 categorically stated that benefit of sec 80IA is applicable to development of rail system and there is no gain saying that fact that the appellant has developed the rail system and is operating and maintaining the same. After perusal of the facts as well as the judicial pronouncements quoted above it is therefore held that the appellant is eligible for deduction u/s 80IA in r/o profits from rail system. In view of the same, the AO is directed to allow deduction u/s 80IA of Rs 15,64,33,576/- 17. As stated above neither the findings of the Id CIT(A) could 'be controverted by the Id DR nor any other material was brought on record to establish otherwise. Therefore in view of the uncontroverted reasoning given by the Id CIT(A) we confirm his order on this issue also." 14. After having all the above observation, the CIT(A) noted that the issue of the allowability of the assessee's claim u/s 80IA(4) in respect of ' Rail Systems' as referred to by the assessee has been examined by him afresh from the point of view of the relevant provisions of the Act and the facts as to whether the 'Rail System' as referred to by the assessee could indeed be treated as the infrastructure facility for which deduction u/s 80lA is intended to by the legislature; and whether the assessee operated that rail system. 15. Replies and justification filed by assessee was not accepted by CIT(A) and he held that the rail system of the assessee do not fall within the definition of the infrastructure facility, as the same could not be treated as a facility of public utility. For this reason the assessee company was held to be not entitled for the deduction u/s.80IA in r/o the profit, from the operation of rail system. Reasons for the same was as under:- 16. The CIT(A) observed that the agreements under reference were not at all any agreements for developing, maintaining and operating any infrastructure facility to which benefit of exemption is intended to be given in Section 80IA. For this reason also the assessee company was held to be not entitled for deduction u/s.80IA in r/o the profit from the operation of rail system. 17.The CIT(A) also observed that L & T Ltd., who have developed the said rail system was also not eligible u/s.80IA on operations of those rail systems under the provisions that existed at the relevant time i.e., prior to 01/04/2002 when such infrastructure facility was said to have become operational. 18. The CIT(A) observed that the L & T Ltd., did not claim exemption on operation of those rail systems. Rather the assessee company has started ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 17 claiming exemption from AY 2004-05 after the ownership over the cement plants together with such rail systems were transferred to it following the demerger scheme in FY 2003-04. 19. The CIT(A) further observed that the provision of railway track, signals, level crossings etc are the essential components of a rail system but that in itself would not give rise to any profit. For that movement of traffic [ie. material] is to be made over those railway tracks. The profit would arise by charging the freight thereon. 20. The CIT(A) further observed that as per' the agreement, the railway track, signals, level crossings etc were laid out on the cost of L&T Ltd. The cost of maintenance was also to be borne by L&T Ltd [and now by the assessee]. On that only expenses are incurred and there would be no profit element. Then the issue arises of running the wagons onto those tracks. As per the agreement, the assessee was not permitted to run the wagon onto those tracks. 21. As per CIT(A), it is not a case of running of railways [goods train] by L&T Ltd or the assessee company on those private sidings and as such the assessee did not run any rail system onto those private sidings. Therefore, it cannot be said that the assessee company had operated any rail systems at all. Therefore the deduction u/s 80lA would not be available to it onto the profit, if any, from such rail systems. 22. The CIT(A) also observed that there is very limited profit on operation of such rail system and the claim made by assessee u/s.80IA is exorbitant. 23. In view of the above discussion, the CIT(A) concluded that assessee's claim of deduction u/s.80IA is not allowable. However, by observing that the Tribunal has allowed the claim of assessee in the AY 2004-05, 2006-07 to 2008-09, to follow the judicial discipline, he followed the order of Tribunal and allowed assessee's claim in the A.Y.2009-10. However, by stating that new facts have been brought on record in the A.Y.2010-11, he declined claim of deduction u/s. 80IB(4). 24. With regard to the disallowance, deduction u/s. 80IA(4), Revenue is in appeal before us in the A.Y.2009-10, whereas assessee is in appeal for the A.Y.2010-11. 25. It was vehemently argued by learned AR that Revenue authorities have not considered the eligibility requirement u/s.80IA as brought by the Finance Act 2001 wherein Finance Act 2001 has deleted the requirement of the assessee to transfer the infrastructure facility to the concern Government authorities within prescribed time. He contended that CIT(A) has wrongly applied the provisions of law as applicable prior to 01/04/2002 while considering the assessee's claim for deduction for the A.Y.2009-10 and 2010-11 under consideration. Learned A.R threadbare taken us to the objections raised by the CIT(A) and the reply filed by the assessee controverting each and every objection of the CIT(A). Our attention was invited to the amended provisions of Section 80IA(4) which does not require infrastructure facility to be a public ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 18 facility for allowing deduction u/s. 80IA. Our attention was also invited to the terms and conditions of the agreement entered between the assessee company and the railway department which contained conditions for construction of railway sidings, development of sidings, laying of tracks, signaling system and all the essential components of rail system. The terms of the agreement also provided for its operation and maintenance. He vehemently argued that the rail systems were developed in accordance with the agreements entered with the Indian Railways, wherein assessee was allowed to operate and maintain these sidings under supervision and as per the guidelines of Indian Railway. Our attention was invited to the various clauses particularly Class 2, 6, 7(a), 17 and 8(b) which stipulate for construction of railway sidings at the cost of the assessee. Construction work was awarded either to railway or third party contractors based on their expertise and the work was undertaken under the supervision of the Railways. Clause 6 is specifically provided for payment in advance to the railway administration, the total estimated cost of the work done by the party and thus by the railway administration. Clause 7(a) stipulate that assessee will provide and deliver at site the permanent way and other materials in accordance with the railway administration standard and specifications. Clause 17 stipulate that assessee shall provide labour for and bear the cost of all Operations on the siding. Clause 9(b) provides for maintenance and other charges for the operation of the sidings at assessee's cost and expense to the satisfaction of railway administration.' 26. Learned AR also argued that all the conditions of Section 80IA(4) was complied with for claiming deductions. Learned AR also invited our attention to the observation of CIT(A) with respect to the freight rate in so far as CIT(A) has wrongly considered the rate for quintals as against per Metric Ton adopted by assessee while computing eligible amount of deduction u/s.80IA (4). It was also contended by learned AR that assessee has started claiming deduction for rail system u/s.80IA only from A.Y.2004-05 since it has satisfied all the conditions as prescribed u/s.80IA (4). 27. With regard to disallowance u/s.14A on account of interest, our attention was invited to the profit earned by the undertaking during the year as well as interest free funds available with the assessee for making investment in tax free securities and it was contended that since investment was out of assessee's own interest free funds, in terms of decision of Jurisdictional High Court in case of Reliance Utilities and Power Ltd., 313 ITR 340 and HDFC Bank Ltd., 366 ITR 505, no disallowance of interest is warranted. With regard to the disallowance made under Rule 8D(2)(iii) he contended that assessee itself has offered the amount attributable for earning the exempt income, therefore, further disallowance made by Revenue authorities was not justified. 28. Learned AR also invited our attention to the order of the Tribunal in assessee's own case for A.Y.2004-05 to 2008-09, wherein Tribunal have after considering in detail allowed the assessee's claim u/s.80IA with regard to rail system. Sales Tax exemption as capital receipt was also decided by Tribunal in assessee's own case for the A.Y.2004-05 to 2008-09, relevant decision of the Tribunal was also filed before us. ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 19 29. Learned AR relied on following judicial pronouncements in support of the proposition that benefit allowed in earlier year cannot be denied in subsequent years. 1. RadhaSoami Satsang v. Commissioner of Income Tax [1992]193 ITR 321 (SC)/[1991] 100 CTR 267 (SC) 2 CIT v. Western Outdoor Interactive (P) Ltd. [349 ITR 309] [BOMBAY] 3 CIT v. Paul Brothers. [216 ITR 548] [BOMBAY] 4. Commissioner of Income Tax v. Macbrout Engineering (P.) Ltd. [2014] 52 taxmann.com 219 (Bombay)/[2015] 232 Taxman 406 (Bombay) 5. CIT v. Modi Industries Ltd. [327 ITR 570] [DELHI] 6. Commissioner of Income Tax v. Delhi Press Patra Prakashan Ltd. [2013]355 ITR 14 (Delhi)/[2013] 260 CTR 253 (Delhi) 7. Saurashtra Cement & Chemical Industries Ltd. v. CIT [11 CTR 139] [GUJARAT] 8.Ace Multi Axes System Ltd. V. Deputy Commissioner of Income Tax [2014]367 ITR 266 (Karnataka) 9 ITO vs. Smt. Urmila Bhandari [ITA Nos.766, 2593/Del/2013] 10 Deputy Commissioner of Incme Tax v. Selvel Advertising (P.) Ltd. [2015]37 ITR(T) 611 (Kolkata Trib.) 11. Century Enka Limited vs. Deputy Commissioner of Income Tax [ITA No. 560/Kol/2010] 12.Janak Dehydration (P.) Ltd. v. Assistant Commissioner of Income-Tax [2011] 44 SOT 93 (Ahmedabad)(URO)/[201 0]134 TT J 1 (Ahmedabad)(UO) 13. U.P. State Bridge Corporation Ltd. V. Deputy Commissioner of Income- Tax [2015] 70 SOT 517 (Lucknow Trib.)/[2015] 171 TT J 353 (Lucknow Trib.) 14. Asst. Commissioner of Income - Tax vs. M/s. Apex Packing Products (P) Ltd. (ITA Nos. 145 to 150/PNJ/2013) 30. On the other hand, it was vehemently argued by learned DR that rail system of the assessee company was simply the profit siding and not any infrastructure facility of public utility, therefore, revenue authorities have correctly declined claim of deduction u/s.80IA(4). She further contended that the agreement entered between assessee company and railway department contained the terms and conditions for construction of private siding which cannot be treated as any agreement for development operation and maintenance of any rail system. She further vehemently argued that assessee has not complied with various conditions given in Section 80IA to arrive at eligibility for deduction. She further invited our attention to the observation made by CIT(A) to the effect that the actual operation of rail system on to the private sidings between the serving railway station and plant premises was being done by the Indian Railways and not by the assessee Company, therefore, assessee was not entitled for 80 IA(4). She further alleged that profit computed by assessee for the rail system was very ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 20 exorbitant and method adopted for computation was also not correct. Our attention was invited to the computation of profit as per table 'F'of CIT(A)'s order. She further contended that when L & T Ltd., itself was not eligible for deduction u/s.80IA, how assessee company became eligible for the same after demerger and inherited the cement business i.e., cement plants together with the rail systems of the L & T Ltd., She placed reliance on the Circular No.733 dated 03/01/1996 which provided that BOLT scheme of Indian Railway shall be eligible for the benefit u/s.80IA. 31. With regard to sales tax exemption benefit being treated as capital receipt, she relied on the decision of Jammu and Kashmir High Court in the case of Shree Balaji Alloys 198 Taxman 122, Bombay High Court in case of Chaphallkar Brothers 33 Taxman.com 431. 32. With regard to disallowance made u/s.14, she relied on the findings recorded by lower authorities. 33. We have considered rival contentions, carefully gone through the orders of the authorities below and materials placed before us. We had also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as cited by learned AR and DR during the course of hearing before us in the context of factual matrix of the case. 34. Grievance of both the assessee and revenue revolves around assessee's eligibility for claim of deduction u/s.80IA (4) of the Income Tax Act. From the record we found that assessee UltraTech Cement Ltd ('UTCL') has acquired the cement business of Larsen & Toubro Limited (L&T') along with the Rail systems at Hirmi, Tadipatri, Arrokonam and Durgapur in the FY 2003-04. These Railway systems were developed on or after 01/04/1995 by the L&T. year wise details of the aforesaid rail systems are as follows: Unit Rail system Undertakings Year of Commence ment of operations (A.Y.) Initial year of claim (A.Y.) Rail system at Himmi in the state of Chhattisgarh 2000-01 2004-05 . Rail system at Tadipatri in the state of Andhra Pradesh 1999-00 2007-08 Rail System at Arakkonam in the state of Tamil Nadu 2001-02 2007-08 Rail System at Durgapur in the state of West Bengal 2002-03 2008-09 ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 21 35. M/s. L&T had entered into agreements with the Railway authorities to develop, operate and Maintain the Rail systems which infact the company has done from initial day. This agreement with the Railway Authorities was not under the BOLT Scheme but infact the assessee was permitted to setup and even operate and maintain the rail system so developed in accordance with terms and conditions of the agreements under the supervision and as per guidelines of Indian Railways. Prior to putting up the rail systems, the assessee used to transfer the material from its plant to the nearest Indian Railways station and vice versa through Road and used to incur road freight and loading & unloading charges at multiple stages. To save these costs and other incidental costs, the assessee decided to develop the rail infrastructure from its manufacturing setup till the nearest Indian Railway station. It is Indian Railways who either have the power to develop any railways in India or it can enter into any arrangement with any person for developing and for operating rail systems subject to prior approvals and conditions. Therefore, the assessee accordingly entered into agreement with the Rail authorities to develop, operate and maintain its rail systems. The agreement lays down various conditions to be complied with, before and during the development, maintaining and operating the rail systems. Such rail system can also be made available to any third party with the permission of the Indian Railway. For this purpose, the assessee approached to the Indian Railways for development of Rail systems which Indian railways has agreed to provide permission for laying down the railway sidings (including the rail line upto the nearest rail head) and accordingly the assessee had awarded the contract to the private parties for construction and to the Indian Railway approved agency for supervision and consultancy of the Rail system and had borne the entire cost of development including for incidental expenses paid to all the agencies. The clause in the agreement saying that railway administration is willing to lay the said sidings / construct the siding is meant for Railway administration's permission for allowing the assessee for developing the Rail system as per the norms and supervision of Indian Railways. The revenue authorities alleged that the Railway system have been developed to facilitate the transportation of goods for the assessee from and upto the factory premises, and therefore the Agreements entered into by the assessee with the Indian Railways cannot be regarded as required agreements between the Govt and the assessee. In this respect the assessee submitted as under before the lower authorities. a) as per section 80- IA( 4 )(i)(b) the agreement has to be entered with the Central Govt or a State Govt or a Local Authority or any other statutory body for (i) developing or (ii) Operating and Maintaining or (iii) Developing, Operating and Maintaining the infrastructure facility. Indian Railways is the statutory body under the Indian Railways Act. b) The provision of Sec.80-IA (8) contemplates a situation where goods or services are transferred by an eligible undertaking and vice versa. Undoubtedly therefore, the section itself envisages situations of captive consumption. ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 22 c) Further as mentioned in clause 15 of the agreement, the rail systems developed by the appellant can be made available to any third party with the prior approval of the Indian Railways. 36. It was therefore contended that the agreements as entered into by the assessee with Indian Railways are as envisaged u/s 80- IA( 4 )(i) and in no case it can be inferred that they are not the required agreements under section 80-IA. 37. The Govt can also enter into any arrangement with any person for developing and for operating rail systems subject to prior approvals and conditions of the Indian Railways. M/s L& T has accordingly entered into agreement with the appropriate rail authorities to Develop, Operate and Maintain its rail systems. M/s. L& T had awarded contract to the private parties for construction of rail sidings (including upto the nearest rail head) under the supervision of Indian Railways approved agency, and the entire cost for construction / development paid to the aforesaid agency and supervision charges paid to Indian Railways approved agency have been borne by the assessee, apart from all costs incurred for all the materials and incidental expenses. It was further explained in terms of clause 14, Wagons are hauled by the Railway Administration from the point marked 'X' or such other points as may be fixed upon by mutual consent of the applicants and railway administration in such manner as shall be determined in each case by the Railway administration. The assessee undertakes to shunt the wagons from such point to his premises and back with his own labour. However", no siding charges are charged by Indian Railways, since it is a private siding. The Clause 16 reads to mean that, charges such as Siding Charges are to be paid 'wherever leviable'. In assessee's case siding charges are not leviable. 38. The rail systems were developed by assessee under the agreements entered into with Indian Railways and assessee operates and maintains the same in accordance with terms and conditions of the Agreements, under the supervision and as per guidelines of Indian Railways. Relevant clauses of the agreements substantiating the same are as under:- a) Clause No. 2, Agreement to Construct Siding - Wherein it is mentioned that "the Railway administration will at the cost and the expenses of the applicant, in all respect, construct the railway sidings " Further kindly be informed that, for construction of the siding under the supervision of the Railways, the contract for construction and supervision has been awarded by the applicant and the entire cost has been borne by the applicant. b) Clause no. 6 - Payment by Applicant against the total estimated cost - wherein it is mentioned that, "The applicant will pay in advance to the railway administration the total estimated cost of the work consisting of the estimated costs of work done by the party and those by the railway administration .... " c) Clause no. 7(a) - Permanent way materials - "The applicant will provide and deliver at site the permanent way and other materials (which includes Girders, Rails, Sleepers, fastenings, points, crossings, fencings, signals and overhead structures and any other things connected therewith for electric ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 23 tractions and other machinery and equipments necessary for working of the sidings) in accordance with the Railway administration's standards and specifications. All charges incurred in laying and fitting the permanent way materials and all other equipments which may be provided shall entirely be borne by the applicant." d) Clause No. 17 - Working of the Siding - wherein it is mentioned that " ... the applicant shall provide labour for and bear the cost of all Operations on the siding. The applicant shall be responsible for the strict compliance by himself and his employees and agents of all rules, regulations and standing orders made by the railway administration from time to time for the working of sidings and for all accidents, loss or damage that may be ensured or be caused by reasons of negligence or non-observance of such rules, regulations and orders . e) Clause No. 8(b) - Wherein it is mentioned that, \\ Maintenance and other Charges for the portion of the sidings - The applicant will at their own cost and expenses in all things and to the satisfaction of the railway administration and if required by the railway administration under its supervision maintains in good order and repair the said portion of the siding. Such charges as may be fixed by the railway for the supervision rendered shall be paid by the applicant. 39. These are other various clauses wherein it is evident that the Development, Operation and Maintenance is done by the assessee and the entire cost for the same is borne by the assessee. 40. From the record we also found that the assessee has duly submitted for all the rail systems, Form 10CCB, duly certified and audited by M/s. G.P Kapadia & Co., Chartered Accountants along with Balance Sheet, P&L account, Schedules forming part of Balance sheet and P&L Account. 41. However, the AO did not agree with assessee's contention and held that Rail systems developed by assessee is not eligible for claim of deduction u/s.80IA (4). Now, we deal precisely with the observation made by CIT(A) for declining Assessee's claim of deduction u/s.80IA. 42. With regard to CIT(A)'s observation as to whether rail systems developed by M/s. L& T were in accordance with the Build-Own-Lease-& Transfer (BOLT) scheme of the Indian Railways, we observe that L& T had entered into agreements with the railway authorities to develop, operate & maintain the rail systems, which in fact the company has done from the initial day. The assessee was permitted to setup and even operate & maintain the rail systems so developed. Further, regarding' Circular No. 733 dated 03-01- 1996, we found that the Circular clarifies that tax holiday benefit u/s. 80-IA of the Act was also available to private enterprises which only built and leased out the rail system to the Indian Railways. In spite the absence of activities- 'operate and maintain' the rail systems, such 'infrastructure facilities' were also declared as eligible to claim deduction under the said section. Further, the circular also states that rail systems developed other than under the BOLT scheme were also eligible for benefit u/s 80-IA. In case of the assessee, the clarification of benefits u/s. 80-IA being available to those rail systems who do not 'operate and maintain' the ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 24 systems clearly establishes that, enterprises who in fact operate and maintain the rail systems were certainly eligible for tax holiday benefits. As the assessee has entered into agreements with the railway authorities to develop, operate & maintain the rail systems, which in fact the company has done from the initial day. There was indeed an 'infrastructure' facility eligible for deduction u/s 80lA. We also found that the Hon'ble ITAT in assessee's own case for AY 2006-07, has categorically allowed the deduction u/s. 80-IA for its rail system after dealing with the Circular No. 733 dtd 3.1.1996. 43. The Rail systems of assessee at Hirmi, Tadipatri, Arakkonam and at Durgapur were developed under the Agreements entered into with Indian Railways and the assessee is allowed to Operate and Maintain in accordance with terms and conditions of the Agreements, under the supervision and as per guidelines of Indian Railways only. The copies of agreements between M/s L& T and Indian Railways for other rail systems i.e. at Tadipatri, Arakkonam and Durgapur are placed on record and we have carefully perused the relevant terms and conditions. The Indian Railways plays role in operations and maintenance of the Rail systems, traffic Management, etc. as mentioned under the various clauses of the Agreements entered into, and the entire cost of such operation and maintenance is borne by the assessee including for the Railway staff being deputed for the purpose. 44. From the record we found that M/s. L&T had entered into agreements with the Railway authorities to develop, Operate and Maintain the Rail systems which infact the company has done from initial day. This agreement with the Railway Authorities was not under the BOLT Scheme but infact the assessee was permitted to setup and even operate and maintain the rail system so developed in accordance with terms and conditions of the agreements under the supervision and as per guidelines of Indian Railways. As per the relevant provisions of law during relevant period there is no requirement for Rail Infrastructure to be In BOLT scheme, to be eligible for claiming deduction under Section SO-lA (4 )(i). Section 80-lA (4 )(i) provides the following conditions to be complied with for claiming deductions; (i) ..... (a) it is owned by a company registered in India ..... (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i)developing or (ii)operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995: 45. With regard to objection of revenue authorities on applicability of CBDT circular No.733 on BOLT schemes, systems developed under BOLT scheme are also eligible for 80-IA benefit, and in no way restricts the deduction u/s.80-IA to other rail systems. We found that the Hon'ble ITAT in assessee's own case for AY 2006-07, has categorically allowed the deduction u/s. 80-IA for its rail system after dealing with the Circular No. 733 dtd 3.1.1996. ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 25 46. Therefore the agreements as entered into by the assessee with Indian Railways are as envisaged u/s 80- IA( 4 )(i) and in no case it can be inferred that they are not the required agreements under section 80-IA. 47. We also found that no siding charges are levied by Indian Railways for the rail systems developed by the assessee. The assessee has developed, operates and maintains the rail systems. The systems are being operated by the assessee as permitted under the agreements entered into with Indian Railways and under the rules and regulations of Indian Railways from time to time. The entire cost was borne by the assessee and is appearing in the balance sheet of the assessee as placed on record. We have also verified the same and found it correct. 48. Contention of revenue authorities that Railways had constructed the rail system is not factually correct. In fact, M/s L& T had entered into agreement with the appropriate rail authorities to Develop its rail systems. M/s. L&T had constructed the rail system by awarding contract to the private parties for construction of rail sidings (including upto the nearest rail head) under the supervision of Indian Railways approved agency, and the entire cost for construction/ development paid to the aforesaid agency and supervision charges paid to Indian Railways approved agency have been borne by the assessee, apart from all costs incurred for all the materials and incidental expenses. 49. From the record we found that the rail systems were developed under the agreements entered into with Indian Railways and assessee operates and maintains the same in accordance with terms and conditions of the Agreements, under the supervision and as per guidelines of Indian Railways. We have carefully gone through the relevant clauses of the agreements substantiating the same which reads as under: a) Clause No. 2, Agreement to Construct Siding - Wherein it is mentioned that "the Railway administration will at the cost and the expenses of the applicant, in all respect, construct the railway sidings " Further kindly be informed that, for construction of the siding under the supervision of the Railways, the contract for construction and supervision has been awarded by the applicant and the entire cost has been borne by the applicant. b) Clause no. 6 - Payment by Applicant against the total estimated cost - wherein it is mentioned that, "The applicant will pay in advance to the railway administration the total estimated cost of the work consisting of the estimated costs of work done by the party and those by the railway administration .... " c) Clause no. 7(a) - Permanent way materials - "The applicant will provide and deliver at site the permanent way and other materials (which includes Girders, Rails, Sleepers, fastenings, points, crossings, fencings, signals and overhead structures and any other things connected therewith for electric tractions and other machinery and ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 26 equipments necessary for working of the sidings) in accordance with the Railway administration's standards and specifications. All charges incurred in laying and fitting the permanent way materials and all other equipments which may be provided shall entirely be borne by the applicant." d) Clause No. 17 - Working of the Siding - wherein it is mentioned that " ... the applicant shall provide labour for and bear the cost of all Operations on the siding. The applicant shall be responsible for the strict compliance by himself and his employees and agents of all rules, regulations and standing orders made by the railway administration from time to time for the working of sidings and for all accidents, loss or damage that may be ensured or be caused by reasons of negligence or non-observance of such rules, regulations and orders .... " Further, the appellant carries out all the operations for smooth movement of its goods, viz. Shunting of the Wagons, placing of the wagons at appropriate locations, Loading / Unloading of Wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, Weighing of Wagons on Motion Weigh Bridges, Maintaining signa ling systems, Wagons, Couplings, Rake formation for dispatch, hauling of Wagons through its own locomotives, etc. Further, in Clause No. 14 - Traffic on Siding - it is mentioned that " .... applicant undertakes to shunt the wagons from such point to his premises and back with his own labour and the railway administration would not be responsible for any delay, loss and damages caused in consequence of the failure of the applicant to arrange for such shunting." Thus, the rail system is being operated by the appellant and the cost of above operations is borne by appellant. e) Clause No. 8(b) - Wherein it is mentioned that, Maintenance and other Charges for the portion of the sidings - The applicant will at their own cost and expenses in all things and to the satisfaction of the railway administration and if required by the railway administration under its supervision maintains in good order and repair the said portion of the siding. Such charges as may be fixed by the railway for the supervision rendered shall be paid by the applicant. There are other various clauses wherein it is evident that the Development, Operation and Maintenance is done by the appellant and the entire cost for the same is borne by the appellant. 50. The question of allowability of the deduction u/s. 80IA in respect of rail systems has been settled in earlier years by the Hon'ble ITAT in assessee's own case. The facts and the agreements were also placed before authorities in those years. Therefore, the claim based on same facts needs to be allowed following the principle of Consistency in assessment proceedings. Even though the ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 27 'principles of res judicata' do not apply to income tax proceedings and each assessment year being a separate unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be appropriate to allow the position to be changed in a subsequent year. The above principles have been accepted in the undernoted case: • Shah & Co (HA) v. CIT (1956) (30 ITR 618) (Bom) • Amalgamated Coalfields vs. Janapada Sabha AIR 1964 SC 1013 • South India Trust Association vs. Telugu Church Council (1996) 2 SCC • Radhasoami Satsang vs. CIT (1992) 193 ITR 321 (SC) 51. From the record we also found that the overall profits of the company have increased due to such commercial benefits and the same should have been treated as the revenue of the rail systems, which is the Fair Market Value of the services provided by the undertaking as per the provisions of Sec. 80IA(8) and the assessee is entitled for benefit u/s 80IA accordingly. However, the basis adopted for calculating the revenue from rail system by the assessee has been conservatively considered as lower of the freight chargeable through Rail and Road freight saved. The rail freight being lower is considered after further discounting it by 50% based on the circular of Indian Railways for the freight chargeable upto the nearest railway station. 52. We also found that assessee has furnished all the information with regard to No. of Railway Engines / Locomotives and Railway Wagons owned by the assessee before the lower authorities which are as under:- Rail Systems at No. of Engines / Locomotives No. Wagons Hirmi 2 49 Tadipatri 2 76 Arakkonam 1 30 Durgapur 2 30 53. Unitwise details of amount of claim of deduction u/s.80-IA on the profits of Rail System for AY 04-05 to AY 09-10 is as under:- Rail Stems at AY 04-05 AY 05-06 AY 06-07 AY 07-08 AY 08-09 AY 09-10 Hirmi 15.63 16.13 20.95 21.09 24.33 28.26 Tadipatri - - - 25.56 25.22 31.03 Arakkonam - - - 5.73 6.30 7.11 Durgapur - - - - 5.71 6.72 ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 28 54. We have also verified the calculation of revenue from rail system, filed before the lower authorities and found that the basis adopted for calculating the revenue from rail system is, lower of the Freight chargeable through Road and Rail. The Rail Freight being lower is considered after discounting it further by 50% based on the Circular of Indian railways for the freight chargeable upto the nearest railway station. Freight Rates are considered as per the Freight Rate chart & Freight Circulars issued from time to time by Indian Railways, based on the classification of the goods transported. The Railway freight rates are uniformly charged to everyone by Indian Railways. The copies of Form 10CCB including the Profit and loss account, Balance sheet along with Schedules, giving- therein the basis for calculation of revenue has been submitted before the lower authorities and had been duly examined by us and found to be correct. 55. We also found that the loading and unloading of goods is being done by the integrated Rail system set up by the assessee and expenses which were incurred earlier for loading and unloading of materials at the plant as well as the nearest Indian Railway station have been avoided and saved and are considered as income of the rail system arising due to setting up of such integrated rail system. The assessee has already submitted for all the Rail Systems form 10CCB duly certified and audited by M/s. GP Kapadia & Co. Chartered Accountants, alongwith Balance Sheet, P&L Account, Schedules forming part of Balance sheet and P&L Account. We have also checked the amount eligible for deduction as furnished in form 10 CCB and found the same as correct. 56. With regard to CIT(A)'s observation in the A.Y.2010-11 at page 42 to the effect that the so called 'Rail System' of the assessee company are simply a private siding and not any infrastructure facility of Public Utility therefore the infrastructure of such private sidings should be treated as "Private Facility", we observe that Section 801A(4) of the Income Tax Act, 1961 does not require the infrastructure facility to be a public facility for allowing deduction under section 801A. The explanation to section 801A(4) defines the term 'infrastructure facility' to mean a road including toll road, a bridge or a rail system without anything further. We observe that the CIT(A) has been referring to the pre- amended definition of the term 'infrastructure facility' which was applicable till AY 2001-02. The assessee company began its claim of deduction from AY 2004- 05 when the definition was simplified with no indication about 'public facility'. Thus CIT(A) was not correct while declining claim of deduction u/s.80IA(4) on this reasoning. 57. As per our considered view, even assuming that the requirement of public facility is to be fulfilled, it is worth noting that a section of public is also considered to be public. This principle has been laid down by the Hon'ble Supreme Court in the context of a Chamber of Commerce [CIT vs. Andhra Chamber of Commerce (1965)] (55 ITR 722) wherein it was ruled that even though the Andhra Chamber of Commerce was established only to serve the traders and businessmen in the State of Andhra Pradesh, such traders and businessmen constituted a section of public and therefore the Chamber existed for a public charitable purpose. In the ultimate analysis of the facts in the case of assessee Company, the benefits of such siding does ensure to the public in general - to the consumers of cement. Any benefit to the business even though it ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 29 is first enjoyed by the particular trade or establishment eventually is for the general public good. It has to be noted that several industries may come up on both the sides of sidings from the interchange point till factory gate, if anyone of them wants to make use of railway sidings, it is permissible for the Railway Administration to entertain such request and by making use of the exiting siding, can extend or branch off and lay railway tracks to the industry which makes the request and lay siding accordingly. Thus, the railway siding from the point of interchange till factory gate of the assessee has immense potential, with enabling powers to the Railway Administration (which itself is a public department), to be developed into a facility that will ensure to the public at large. The railway sidings are always constructed for captive consumption. Thus, the provisions of section 80IA(4) cannot be read in the manner to make it redundant, when the legislature in all its wisdom intended to give benefit of tax holiday for construction of infrastructure facility in the form of railway which is meant for captive consumption. 58. We have carefully gone through the terms and conditions of the agreement entered by the assessee with the railway authority, a perusal of clause 19 of the Railway Siding agreement entered into by the assessee with the Railway authorities, clarifies that construction and operation of the railway siding was not merely for the purpose of the business of the assessee, but was with a long term perspective to create an infrastructure facility which could, at a future point of time and in case a need arise, potentially confer benefit to the public at large. The agreement with the Railway authorities, provided that the facility so created could be made available to others with the discretion and prior permission of the railway authorities thereby rendering the facility open for general public at large. Hence, such a facility is in fact a public utility. 59. With regard to CIT(A)s conclusion for the A.Y 2010-11 at page 42, to the effect that the agreements entered between the assessee Company & Railway Department, contained the terms & conditions for construction of Private Sidings and that cannot be treated as any agreement for development, operation & maintenance of any Rail system, we observe that as per section 80-IA(4)(i)(b), an assessee has to enter into an agreement with the Central Government or a State Government or a Local Authority or any other statutory body for (i) developing or (ii) Operating and Maintaining or (iii) Developing, Operating and Maintaining the infrastructure facility. The Indian Railways, with whom the assessee has entered into an agreement, is the statutory body designated under the Indian Railways with whom the assessee has entered into an agreement, is the statutory body designated under the Indian Railways Act. We found that the agreement does not merely contain the terms and conditions of the construction of railway siding i.e. development of siding (laying of tracks, signal system and all the essential components of Rail Systems) but it also contains the terms and conditions relating to its operation and maintenance as well. 60. Our attention was also invited to letter No. 99/TC(FM)26/1/Pt-II (Sub Liberalisation of siding 'Rules) of the Railway Boar clarifying that the capital cost of new siding, maintenance cost, cost of Railway staff etc. will be borne by the enterprise only, which also supports our view. ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 30 61. As far as operations is concerned, we found that the assessee carries out all the following operations for smooth movement of its goods, viz. shunting of the wagons, placing of the wagons at appropriate locations, loading/unloading of wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, weighing of wagons on Motion Weigh Bridges, wagon couplings and de-couplings, rake formation for dispatch, hauling of wagons through its own locomotives within the factory premises, etc. Thus, the rail system is being operated by the assessee and the cost of above operations is borne by assessee. 62. With regard to CIT(A)'s conclusion at page 42 of A.Y. 2010-11 to the effect that various conditions given in Section were not met with, we observe as under:- a. Section 80-IA (4)(i) provides the following conditions to be complied with for claiming deductions; (i) any enterprise carrying on the business of (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating any infrastructure facility which fulfils all the following conditions, namely :- (a) it is owned by a company registered in India ..... (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995: 63. As per materials placed on record, all the railway systems are established and owned by the assessee which is a Company as defined under the Income tax Act. This is an undisputed fact and there is no adverse remark by the AO or CIT(A) in this regard. 64. As per clause (b)of Section 80IA (4)(i) an agreement has to be entered with the Central Government or a State Government or a Local Authority or any other statutory body for (i) developing or (ii) Operating and maintaining or (iii) Developing, Operating and Maintaining the infrastructure facility. The Indian Railways, with whom the assessee has entered into an agreement, is the statutory body designated under the Indian Railways Act. 65. We also observe that the agreements entered into by the assessee are for the development, operation and maintenance of the Railway siding. Thus this fulfills the requirement in clause (b). 66. The last requirement as per clause (c) is regarding commencement of operation and maintenance of facility on or after 1st April 1995. All the railway sidings were developed after April 1995 as can be verified from the date of ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 31 agreements entered into by the assessee with the Railway authorities; which are as under:- Location Authority with which Date of agreement Agreement is entered Hirmi South Eastern Railway March 2000 Tadipatri South central Railway 03-05-1999 Arakkonam Southern Railway 08-01-2001 Durqapur Eastern Railway 18-10-2002 67. This also is an undisputed fact and there is no adverse remark by the AO or CIT(A) in this regard. In view of above all the conditions specified in section 80IA(4) has been complied with by the assessee entitling it to claim the tax holiday. 68. With regard to CIT(A)'s observation that the actual operation of Rail System [i.e. running of goods train] onto the private sidings between the serving railway station and plant premises [upto interchange point! exchange yard], was being done by the Indian Railways and not by the assessee Company. 69. We found that the CIT(A) has equated "running of goods train" with the "operation of Rail System". This is the sole basis on which he has arrived at his conclusion that since the assessee is not running the goods train it is not operation of Rail System and hence not eligible for claiming deduction under section 80IA(4). 70. As per our considered view, the operation of Rail System is not simply running of goods train. Operation of Railway Systems comprises of various activities viz. shunting of the wagons, placing of the wagons at appropriate locations, loading/unloading of wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, weighing of wagons on Motion Weigh Bridges, wagon couplings and de-couplings, rake formation for dispatch, hauling of wagons through its own locomotives within the factory premises, etc. Thus, the rail system is being operated by the assessee and the cost of above operations is borne by assessee. 71. With regard to allegation of the CIT(A) that the assessee has never claimed that it is hauling the wagons on the entire siding, we found that hauling of wagons is only one of the activity in the entire operation of the rail system. Under the Railways Act, 1989 nobody other than railway administration is allowed to haul wagons of the railway tracks. As per materials placed on record, all the activities relating to the operation of rail system except hauling of wagons till the interchange point, is done by the assessee and the entire cost for the same is borne by it. ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 32 72. From the record we also found that even the maintenance of the Rail system such as alignment of track & gauge maintenance, patching of ballast, maintenance of railway track sleepers, signalling points and railway gate crossing from private siding to connecting point of nearest railway station is done by the assessee. 73. Thus the operation of rail is not merely hauling of wagons but comprises of various activities all of which is carried on by the assessee Company. 74. With regard to CIT(A)'s observation that all the four cement plants [having private sidings] were notified as independent booking station and the freight was charged by the railway department for the entire distance including the portion of private sidings [upto interchange point / exchange yard], we observe that this is a fact which is undisputed by the assessee and nothing turns out of it. 75. CIT(A) also alleged that the notional profit computed for so called rail system has been very exorbitant and the method is also not correct. It need to be computed in the manner as explained in para 3.2.14 [with reference to table F] above. If that is done, there would hardly be any profit to those rail systems. 76. In this regard, we found that prior to setting up of railway siding, the assessee used to transport its goods through road to the nearest railway station. Only the few components of the cost of road transportation, which the cement division of the assessee was hitherto incurring for transportation of materials to and from the factory premises, is adopted as the basis of calculating the revenue of the railway undertaking. The revenue is, however, computed for the actual services rendered by the railway undertaking to the cement division. 77. After verifying the computation of income eligible for deduction u/s.80IA, as filed by assessee, we found that the CIT(A) has misunderstood the working of the revenue calculation and alleged that such working is ill- conceived as the actual transportation of materials on the siding is carried out by the railway authorities. Based on such misunderstanding, he further alleged that assessee has claimed deduction for notional profits whereas section 80lA allows deduction for profits derived from actual operations. 78. In this regard, we observe that the railway systems of the assessee has been rendering following services to the cement division: • shunting of the wagons, • placing of the wagons at appropriate locations, • loading/unloading of wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, • weighing of wagons on Motion Weigh Bridges, • wagon couplings and de-couplings, • rake formation for dispatch, • hauling of wagons through its own locomotives within the factory premises 79. All the aforesaid services are carried out by the railway system inside the factory premises. Further even the maintenance of the Rail system such as alignment of track & gauge maintenance, patching of ballast, maintenance of railway track sleepers, signaling points and railway gate crossing from private siding to connecting point of nearest railway station is done by the railway ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 33 system. Thus, the revenue of the railway undertaking is the sum aggregate of the above services rendered by it to the cement division. For the purpose of computation, the railway undertaking has adopted the minimum freight rate (further discounted at 50%) which the Indian railways charges for the transportation of these materials. Since this is the easiest available comparable, it has been adopted by assessee for calculating one of the component of its "revenue". 80. We further found that an amount towards loading and unloading charges is added to the above revenue for inward and outward movement of goods which is also carried out by the rail undertaking. The basis, for computing this component of revenue is the loading and unloading cost which the cement division was hitherto incurring during transportation through roadways. The question of reducing the freight payments to the Railways does not arise since this cost is incurred by the cement division and not by the railway undertaking. 81. In view of the above discussion, the explanation given by the CIT(A) and the tabular representation of the computation of revenue of rail system in Table F, has no relevance since it is merely based on his incorrect assumption. 82. Further, we found that observation of CIT(A) with respect to the freight rate is also not correct in so far as for comparison, he has considered the rate per quintal as against per Metric Ton adopted by the assessee which can be observed from the calculation submitted by assessee before the lower authorities. Without any evidence in hands, the CIT(A) has merely stated that crucial facts were not disclosed by the assessee without referring to any specific facts which were not disclosed. Perhaps he is indicating about the operations of railway siding being carried out by the railways and not by the assessee. However, as aforesaid, he is comparing the operation of railway siding with merely hauling of wagons. The operations of railway siding involves various activities other than the hauling of wagons. Mere haulage of wagons cannot be equated with operations of railway siding. We found that assessee has filed reports in Form 10CCB from M/s G.P.Kapadia & Co., Chartered Accountant. The CIT(A) himself has allowed the deduction in AY 2009-10 based on the similar facts available on records but changed his decision merely based on the replies to questionnaire from various Railway Department. 83. The CIT(A) has also raised a query as to whether the L& T Ltd, which had developed said rail system was eligible for deduction u/s 80lA in respect of profit, if any, otherwise on operation & maintaining that system under the provisions that existed at the relevant time [prior to 01.04.2002] when such infrastructure facility is said to have become operational. As per our considered view one of condition for claiming deduction under the pre- amended section 80IA(4) (i.e. prior to AY 2002-03) stipulated that the assessee should enter into an agreement with the Government (Central or State) or other authorities mentioned therein for (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating a new infrastructure facility. Further, the agreement should also provide for transfer of such infrastructure facility to such authorities within the period stipulated in the agreement. The Central Government realizing the need to encourage investment particularly in the area ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 34 of surface transport, water supply, water treatment system, irrigation project, sanitation and sewerage system or solid waste management systems made certain amendments to the conditions for eligibility of claim u/s. 80lA through Finance Act, 2001. Amongst others amendments, the Central Govt. removed the abovementioned condition and accordingly, the amended section 80IA(4) clause (b) stood as under from AY 2002-03 onwards: "(b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility;" 84. Thus, the Finance Act, 2001 amongst other conditions, particularly deleted the requirement for an assessee to transfer the infrastructure facility to the concerned government authorities with prescribed time. 85. In this regard reliance can be placed on the decision of Gujarat High Court in case of Katira Construction Limited v. UOI (352 ITR 513), wherein Court held as under:- "32. It is true that with effect from 1-4-2002 some significant changes were made in the said provisions. Three of these changes which are material were: (i) that sub-section (4) of section 80-IA now required the enterprise to carry on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility. This was in contrast to the previous requirement of all three conditions being cumulatively satisfied; (ii) that the explanation of the term 'infrastructure facility' was changed to besides others, a road including toll road instead of hitherto existing expression 'road', and (iii) that the requirement of transferring the infrastructural facilities developed by the enterprise to the Central or the State Government or the local authority within the time stipulated in the agreement was done away with. 33. These changes, however, would not alter the situation vis-a-vis the impugned amendment. These legislative changes did enlarge the scope of the deduction and in a sense, made it available to certain assessees who would not have been, but for the changes eligible for such deduction " 86. In terms of the above averments, after acquiring the cement business from L&T, the assessee started claiming deduction for Rail system u/s. 80-IA from Assessment year 2004-05 onwards since it satisfied all the conditions as prescribed u/s 80IA(4) as it stood during AY 2004-05, viz: a) It is owned by a company registered in India. b) It has entered into an agreement with the Government for developing / operating / maintaining the infrastructure facility, and c) It has started operating and maintaining the infrastructure facility on or after April,1995. ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 35 87. Thus, under the amended conditions of the section 80-IA(4) i.e. post AY 2002-03, L&T as well as UTCL were eligible for claiming deduction u/s 801A. As per section 80IA(2), the deduction is available at the option of the assessee, for any ten consecutive assessment years out of twenty years beginning from the year in which the undertaking or enterprise develop and operate any infrastructure facility. The assessee has started claiming deduction post AY 2004-05 and is within the period of available twenty years. Under section 80IB, u/s 80lC, 80ID and 80lE, the first year in which the production is started is taken as initial previous year whereas, after the amendment in provisions of section 80lA w.e.f. 01.04.2000 the initial assessment year is at the option of the assessee to avail the benefit. 88. In view of the amended provisions of Section 80-IA, the year in which the claim is first made i.e. initial assessment year, must apply for determination of eligibility of the claim. In respect of AY 2004-05 onwards including assessment year 2009-10 and 2010-11, since the condition relating to transfer of such facility to Central Govt. was no longer a pre-requisite for eligibility of claim u/s 80-IA(4)(b), the assessee has correctly made the claim. 89. In view of the above, we can safely conclude that even if an assessee does not fulfill all the requisite conditions for availing the tax holiday benefit in the year in which the new infrastructure facility is set up or has commenced operation, but in a subsequent year, all the requisite conditions for availing such benefit are fulfilled, the assessee would be entitled to avail the tax holiday benefit in respect of such subsequent assessment year(s). For this purpose reliance is placed on the decision of the Hon'ble ITAT of Jaipur in the case of ACIT v. Shiv Agrevo Limited (34 SOT 1). In this case, the assessee- company, whose main object was extraction of seeds for obtaining edible oils and refining thereof, set up a new industrial undertaking for the extraction and refining of edible oil. It claimed to have temporarily commenced the activity on and from 1-1-1997 on a trial run; however, the systematic activity of refining commenced only in the previous year relating to the assessment year 1998-99. After the final completion of the project, the assessee-company applied directly for a permanent registration certificate of its status as a small scale industry (SSI) under section 11-B of the Industrial Development Regulation Act, 1951 (IRDA) to the prescribed authority, who granted the certificate dated 30-3-1998, which was a conclusive and final proof of such a status under the provisions of IRDA. The return of income filed earlier by the assessee for the assessment year 1999-2000 as subsequently revised, wherein a claim of deduction under section 80-IA was made. The Assessing Officer disallowed the claim of the assessee, on the ground that the assessee started production from the assessment year 1997-98 itself, the year in which the assessee was not a small scale industry, and, therefore, the assessee did not fulfill the condition of section 80-IA in the initial year. On appeal, the Commissioner (Appeals), allowed the assessee's claim under section 80-1A. On Revenues appeal, the ITAT held that for claiming deduction under section 80-IA, it has to be determined at end of relevant previous year that as to whether assessee is registered as SSI and there is no condition in Act that an industrial undertaking should fulfill all conditions as laid down under section 80-IA in very initial year itself and not thereafter. ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 36 90. Even as per fiction created by section 80IA(5), the eligible business is the only source of income and the deduction would be allowed from the initial assessment year or any subsequent assessment year. It nowhere defines as to what is the "initial assessment year". Prior to 1-4-2000, section 80IA(12) defined the "initial assessment year" for various types of eligible assessees. However, after the amendment by the Finance Act, 1999, the definition of "initial assessment year" has been specifically taken away. Now, when the assessee exercises the option of choosing the initial assessment year as culled out in section 80IA(2) from which it chooses its' 10 years of deduction out of 20 years, then only deduction u/s 80lA can be determined. 91. ITAT Chennai Bench have dealt with similar issue in case of Mohan Breweries 116 ITTD 241 which pertains to AY 2004-05 (i.e., after the amendment of S. 80-IA by the Finance Act 1999), the Chennai Tribunal has held that the initial assessment year is the first year of claim and S. 80-IA itself becomes applicable only when the assessee makes the claim for the first time and not before that. Hon'ble Madras High Court has upheld the judgment of Chennai Tribunal and concurred with the view that Section does not mandate that first year of 10 consecutive assessment years should be always first year of set-up of enterprise. The High Court has held that as initial year is not defined in Section 80lA as compared to Section 80IB where it is specifically provided that the year of commencement of business will be the initial year for the purpose of claiming the deduction, the year of option has to be treated as initial assessment year for the purpose of Section 80IA. 92. It is pertinent to mention here that once the deduction for the very first is allowed then in subsequent year the deduction cannot be disallowed on the same ground. Hon'ble High Court decision in the case of Saurashtra Cement & Chemical Industries Ltd. v. CIT [1980] 123 ITR 669 (Guj), has pointed out that once deduction is allowed in the first year, revenue has no power to deny the deduction in subsequent assessment years as provided under the Act. 93. Even the Supreme Court in case of Bajaj Tempo's case (196 ITR 188) held that a provision in the taxing statute for promoting growth and development is to be construed liberally and hence, even the restriction contained in such a provision has to be construed so as to advance the objective of the provision and not to frustrate it. 94. The CIT(A) has also raised an objection to the effect that since L & T was not eligible for deduction u/s.80IA on operation of those rail system, then whether the assessee company, which inherited the cement business [i.e. cement plants together with said rail system] of the L& T Ltd in the FY 2003-04 on account of demerger, could be treated as eligible to the deduction under the aforesaid section in respect of profit, if any, of those rail system for the later years. In this regard we observe that assessee has inherited the cement business from L&T Ltd., in FY 2003-04 on account of merger. Post merger it started claiming deduction for Rail system u/s. 80-IA from Assessment year 2004-05 onwards as it satisfied all the conditions as prescribed u/s 80IA(4). Section 80IA(12) provided that in the scheme of amalgamation or merger, the deduction ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 37 is available to the amalgamated / resulting company. The relevant provision of sec. 80IA(12) reproduced hereunder:- "Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger. (a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and (b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place. 95. Section 80IA(2) further provides that the deduction is available at the option of the assessee for any ten consecutive assessment years out of twenty years beginning from the year in which the undertaking or enterprise develop and operate any infrastructure facility. UTCL has started to claim deduction within the prescribed period of twenty years. The claim is thus legitimately made by assessee complying the requirements mentioned under section 801A. 96. In view of the above discussion and respectfully following the order of the Tribunal in assessee's own case for the A.Y.2004-05 to 2008-09, we do not find any merit in the action of the Revenue authorities declining the claim of deduction u/s.80IA(4). Accordingly AO is directed to allow the deduction as claimed by the assessee with respect to its rail system. We direct accordingly. 7.2. In fact, even in the recent order passed by this Tribunal in the case of Ultratech Cement Ltd., vs. DCIT for A.Y.2011-12, 2012-13, 2013-14 and 2014-15 dated 14/12/2021, this issue has been decided in favour of that assessee. In view of the aforesaid judicial precedents, we do not find any infirmity in the order of ld. CIT(A) granting deduction u/s.80IA of the Act in respect of Raipur and Hotgi Unit. 8. The ground No.6 raised by the Revenue is challenging the action of the ld. CIT(A) directing the ld AO not to reduce the claim of deduction of Rs.10,25,627/- u/s.80IA of the Act towards apportionment of head office expenses. The ld. AO in pages 16 & 17 of his order in respect of apportionment of head office expenses observed as under:- ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 38 The assessee has claimed deduction u/s.80IA in respect of its seven units, viz., Rail System, Raipur (Rs.15,36,71,837/-, AC Thermal Power (Rs.18,66,57,139/-), Grasim Cement Thermal Power (Rs.7,21,02,501), Rail System, Hotgi (Rs.12,62,47,956), Rajashree Cement Power-III (Rs.12,17,15,646/-), Grasim South Terhmal Power (Rs.6,14,19,461/-) and Birla White Power (Rs.2,20,44,674/-). Since, Head Office is a controlling unit, which manages affairs of all the units, proportionate expenses of Head Office should be deducted from the eligible profits of respective units. Accordingly, proportionate of Head Office expenses is worked out in the ratio of turnover total expenses of Head Office. Total turnover of the company is Rs.4,745.70 Crores and total expense of Head Office is Rs.3.46 Crores. Hence, the ratio is 0.07%. The eligible deduction will be reduced by 0.07% of the turnover of the respective units, while computing deduction u/s.80IA. Further profits of the units eligible for deduction u/s.80IA for the year is also decreased by Rs.10,25,627/- towards proportionate Head Office expenses are as under:- Unit Proportionate Head Office Expenses 1. AC Thermal Power 3,22,999 2. GS Thermal Power 1,41,109 3. R C Power Plant III 2,34,821 4. GC Thermal Power 2,43,137 5. Birla White TPP 83,560 Total 10,25,627 8.1. We find that this issue is no longer res integra in view of the decision of this Tribunal in assessee’s own case in 4083/Mum/2003 and ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 39 7027/Mum/2003 dated 22/10/2014, wherein this Tribunal had placed reliance on the order passed in assessee’s own case for A.Yrs.1994-95 to 1998-99, which decisions were accepted by the department by not preferring further appeal to High Court on this issue. Since, the issue is already settled by the order of this Tribunal, we do not find any infirmity in ld. CIT(A) granting relief to the assessee. Accordingly, ground No.6 raised by the Revenue is dismissed. ITA No.5318/Mum/2017 – A.Y.2011-12 (Revenue Appeal) 9. Both the parties stated that the grounds raised by the Revenue in A.Y.2011-12 are identical to the grounds raised for A.Y.2010-11 and hence, the decision rendered for identical grounds in A.Y.2010-11 shall apply mutatis mutandis to A.Y.2011-12 also except with variance in figures. 10. In the result, both the appeals of the Revenue are dismissed. Order pronounced on 05/05/2022 by way of proper mentioning in the notice board. Sd/- (KAVITHA RAJAGOPAL) Sd/- (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 05/05/2022 KARUNA, sr.ps ITA No.4835/Mum/2017 & 5318/Mum/2017 M/s. Ultratech Cement Ltd., 40 Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy//
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Guide to Charitable Trusts: Formation, Benefits, and Compliance
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1:1 Consultation on Tax Litigation
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Memorandum Amendment Resolution
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