BHARAT PETROLEUM CORPORATION LTD, MUMBAI V. ADDL CIT RG 2(1), MUMBAI

ITA 5963/MUM/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0303 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-05-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 25-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N P SINGH
• Assessee Lawyers: JEHANGIR D J MISTRI
• Keywords: Capital asset; Depreciation; Opportunity of being heard; Additional depreciation; Earning of tax free income; Tangible material; Difference of opinion; Revised return; Reason to believe; Change of opinion; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3); 14A; 80IB; 32; 148; 6

Judgement Text

P A G E | 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN , AM AND SHRI RAVISH SOOD, JM ./ I.T.A (S) . NO.5963 & 5966 /MUM/2011 ( / ASSESSMENT YEAR: 2004 - 05 & 2005 - 06 ) BHARAT PETROLEUM CORPORATION LTD. TAXATION SECTION, 4 & 6 CURRIMBHOY ROAD, BALLARD ESTATE, MUMBAI - 400 001 / VS. ADDITIONAL COMMISSIONER OF INCOME TAX RANGE - 2(1), MUMBAI ./ ./ PAN/GIR NO. AAACB2902M ( / APPELLANT ) : ( / RESPONDENT ) ./ I.T.A. NO.2259/MUM/2011 ( / ASSESSMENT YEAR: 2004 - 05 ) BHARAT PETROLEUM CORPORATION LTD. TAXATION SECTION, 4 & 6 CURRIMBHOY ROAD, BALLARD ESTATE, MUMBAI - 400 001 / VS. ASSISTANT COMMISSIONER OF INCOME TAX (OSD) RANGE - 2(1), MUMBAI ./ ./ PAN/GIR NO. AAACB2902M ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI JEHANGIR D.J. MISTRI (SR. ADVOCATE) / RESPONDENT BY : SHRI N.P. SINGH (CIT - D.R. ) / DATE OF HEARING : 21/03 /2017 / DATE OF PRONOUNCEMENT : 14 /06 /2017 P A G E | 2 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT SET OF THREE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE RESPECTIVE ORDER S PASSED BY THE CIT(A) - 4, MUMBAI IN THE CASE OF THE ASSESSEE FOR A.Y. 2004 - 05 AND 2005 - 06, WHICH IN ITSELF ARE DIRECTED AGAINST THE RESPECTIVE ORDERS PASSED BY THE A.O. UNDER SEC. 143(3), DATED 27.12.2006 AND U/S. 143(3) R.W.S. 147 OF THE ACT 1961, DATED 24.01.2011, EACH PERTAINING TO 2 004 - 05, AND ORDER PASSED BY THE A.O U/S. 143(3), DATED 31.12.2007 FOR A.Y. 2005 - 06. THAT AS CERTAIN COMMON ISSUE S ARE INVOLVED IN THE AFOREMENTIONED APPEALS, THEREFORE THE SAME ARE BEING TAKEN UP TOGETHER AND DISPOSED OF BY WAY OF A CONSOLIDATE ORDER . WE S HALL FIRST TAKE UP THE APPEAL FILED BY THE ASSESSEE FOR A.Y. 2004 - 05 AGAINST THE ORDER PASSED BY THE A.O. UNDER SEC. 143(3) , MARKED AS ITA NO. 5963/MUM/2011 . THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAD RAISED THE FOLLOWING GROUNDS OF APPEAL BEFORE U S : - ITA NO. 5963/MUM/2011 (A.Y. 2004 - 05) 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) [CIT(A)], ERRED BY CONFIRMING THE DISALLOWANCE MADE BY A.O FOR DEDUCTION OF RS. 4,31,90,549/ - UNDER SECTION 80I B ON LPG PLANTS ON THE GROUND THAT, LPG PLANT IS NOT ENGAGED IN THE MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT FOLLOWING TH E DECISION OF THE HON'BLE BOMBAY HIGH COURT IN CIT V/S RELIANCE UTILITIES LTD. (313 ITR 340), THAT THE INVESTMENTS MADE BY THE CORPORATION, INCOME FROM P A G E | 3 WHICH IS EXEMPT FROM TAX, WERE MADE OUT OF THE CORPORATION'S OWN FUNDS. 3. LEARNED CIT(A), ERRED IN REMITTING BACK THE CASE TO ASSESSING OFFICER FOR STATISTICAL PURPOSE TO RECOMPUTE THE DISALLOWANCE U/S 14A AND REJECTING THE CLAIM OF THE APPELLANT THAT NO EXPENDITURE WAS INCURRED BY APPELLANT FOR EARNING EXEMPT INCOME U/S 14A OF THE ACT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING ASSESSING OFFICER TO DISALLOW THE DEPOSITS PLACED WITH GOVT./ LOCAL AGENCIES WHICH ARE PERENNIAL IN NATURE AND DEBITED BY APPELLANT TO PROFIT AND L OSS ACCOUNT INSTEAD OF ALLOWING THE SAME IN FULL. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED BY CONFIRMING THE DISALLOWANCE OF RS. 1,04,86,210 / - ON AMORTIZATION OF PREMIUM ON LEASEHOLD LAND. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER AND DELETE ANY OF THE ABOVE GROUNDS AND ADD ANY ADDITIONAL GROUND(S) EITHER BEFORE OR AT THE TIME OF HEARING. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE, VIZ. M/S BHARAT PETROLEUM CORPORATION LTD., WHICH IS A PUBLIC SECTOR UNDERTAKING ENGAGED IN THE BUSINESS OF REFINING AND EXPLORATION OF CRUDE OIL AND MARKETING OF P ETROLEUM/ P ETROCHEMICAL PRODUCTS / L UBRICANT S HAD FILED ITS RETURN OF INCOME FOR A.Y. 2004 - 05 DECLARING TOTAL INCOME OF RS.2251 , 4 4 ,68,498/ - ON 29 .10.2004, WHICH WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT ON 31.03.2006. THE CASE OF THE ASSESSEE WAS THEREAFTER TAKEN UP FOR SCRUTINY PROCEEDINGS AND A NOTICE UNDER SEC. 143(2) WAS ISSUED AND SERVED ON THE ASSESSEE. 3. THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O DELIBERATING ON THE FACTS OF THE CASE IN THE BACKDROP OF THE CONTENTION S RAISED BY THE ASSESSEE CORPORATION , THEREIN INTERALIA MADE THE FOLLOWING ADDITIONS /DISALLOWANCES : - P A G E | 4 SR. NO. PARTICULARS AMOUNT 1 DISALLOWANCE OF DEDUCTION CLAIMED BY THE ASSESSEE U/S. 80IB ON THE GROUND THAT LPG PLANT IS NOT ENGAGED IN THE MANUFACTURING OR PRODUCTION OF ANY AR TI CLE OR UNDER. RS. 4,31,90,549/ - 2 DISALLOWANCE U/S. 14A RS.11,77,93,232/ - 3 DISALLOWANCE OF DEPOSITS PLACED BY THE ASSESSEE WITH GOVERNMENT AGENC IES/ LOCAL AUTHORITIES , AND CLAIMED AS A REVENUE EXPENDITURE. RS. 10,00,00,000/ - 4 DISALLOWANCE OF AMORTIZATION OF PREMIUM O N LEASEHOLD LAND. RS.1,04,86,210/ - THE A.O THEREAFTER ASSESSED THE INCOME OF THE ASSESSEE CORPORATION AT RS.2280,80,65,440/ - . 4. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER PASSED BY THE A.O THEREIN CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) . W E HEREIN TAKE UP THE RESPECTIVE GROUNDS OF APPEAL RAISED BY THE ASSESSEE BEFORE US, IN THE BACKDROP OF THE FINDINGS OF THE LOWER AUTHORITIES AND THE CONTENTIONS RAISED BY THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES BEFORE US, AS UNDER: - ( A ) . GROUND OF APPEAL NO. 1 : DISA L LOWANCE OF DEDUCTION U/S. 80IB THE CIT(A) BEING OF THE CONSIDERED VIEW THAT THE FILLING OF THE LPG GAS IN CYLINDERS DOES NOT CONSTITUTE MANUFACTURING OF A NEW PRODUCT, THEREFORE SUBSCRIBED TO THE VIEW TAKEN BY HIS PREDECESSOR WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE FOR A.Y S . 2002 - 03 AND 2003 - 04 , AS UNDER: - I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE AUTHORIZED P A G E | 5 REPRESENTATIVE AND I FIND THAT THE A.O. IS JUSTIFIED IN DISALLOWING DEDUCTION U/S. 80IB. THE FILLING OF GAS IN CYLINDERS DOES NOT CONSTITUTE MANUFACTURING OF NEW PRODUCT. THERE IS LOT OF DIFFERENCE BETWEEN A PROCESS AND MANUFACTURE. FILLING OF GAS IN LPG CYLINDERS MAY BE A PROCESS BUT CERTAINLY IS NOT A PRODUCTION OR MANUFACTURE OF NEW ARTICLE OR THING. THE LPG REMAINS LPG ONLY EVEN AFTER BEING FILLED I N CYLINDERS. IT IS NO T CORRECT TO SAY THAT LPG FILLED IN CYLINDERS IS A RESIDUAL PRODUCT WHICH EMERGES AFTER BEING SUBJECTED TO VARIOUS PROCESSES AT THE LPG PLANT. THESE PROCESSES ARE UNDERTAKEN TO ENABLE THE LPG TO BE FILLED IN CYLINDERS. HENCE IN MY CONSIDERED OPINION THE A SSESSEE IS NOT ELIGIBLE FOR DEDUCTION U /S. 80HH, 80I OR 80IA. THE CASE LAW CITED BY THE AUTHORIZED REPRESENTATIVE ARE DISTINGUISHABLE ON FACTS. FOR E.G. THE CASE OF N.C. BUDHARAJA AND CO. AND ANOTHER MAY BE A MILESTONE FOR DEFINING THE WORDS LIKE MANUFACTU RE AND PRODUCTION BUT DOES NOT THROW ANY LIGHT ON THIS ISSUE WHETHER LPG PLANT IS A MANUFACTURING UNIT OR NOT. SINCE THE BASIC CONDITIONS ARE NOT BEING FULFILLED EVEN AFTER LIBERALLY INTERPRETING THE PROVISION OF SECTION 80IB NO DEDUCTION CAN BE GRANTED TO THE APPELLANT. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE DISALLOWANCE OF DEDUCTION U/S. 80IB IS CONFIRMED AND APPEAL ON THIS GROUND IS DISMISSED. , AND SUSTAIN ED THE DISALLOWANCE OF RS.4,31,90,549/ - CLAIMED BY THE ASSESSEE U/S. 80IB . 5. THE ASSESSEE BEING AGGRIEVED WITH THE UPHOLDING OF THE DISALLOWANCE OF DEDUCTION U/S. 80IB BY THE CIT(A) , HAD THEREIN ASSAILED THE SAME BEFORE US. THAT AT THE VERY OUTSET OF THE HEARING OF THE APPEAL IT WAS AVERRED BY THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R ) FOR THE ASSESSEE THAT THE ISSUE AS TO WHETHER THE ACTIVITY OF BOTTLING LPG GAS AMOUNTS TO PRODUCTION OR MANUFACTURING ACTIVITY , OR NOT, HAD BEEN ANSWERED IN AFFIRMATIV E BY THE HONBLE HIGH COURT OF BOMBAY, THOUGH IN CONTEXT OF THE DEDUCTION S U/S. 80HH, 80 I, AND 80IA OF THE ACT , IN THE ASSESSEE S OWN CASE, VIZ. BHARAT PETROLEUM CORPORATION LTD. VS. CIT(A), MUMBAI, (ITA NO. 612 AND 613 OF 2001, DATED 03.05.2013, ( PAGE 1 - 3 ) OF ASSESSES PAPER BOOK (APB) , WHEREIN IT WAS HELD AS UNDER: - THE IDENTICAL QUESTION CENTERS AROUND THE BASIC DISPUTE IS WHETHER P A G E | 6 ACTIVITY OF BOTTLING LPG GAS AMOUNTS TO PRODUCTION OR MANUFACTURING ACTIVITY FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80HH, 80I AND 80IA OF THE INCOME TAX ACT, 1961. THIS COURT GAVE FOLL OWING FINDING IN THE ABOVE JUDGMENT DATED 7 MARCH 2013: - SINCE THE TRIBUNAL IN THE IMPUGNED ORDER HAS RELIED UPON THE DECISION OF THIS COURT AND THE CONSEQUENT ORDER OF THE ELECTRICITY OMBUDSMAN TO HOLD THAT THE ACTIVITY OF BOTTLING LPG GAS IS A VERY SPE CIALIZED PROCESS AND THE SAME IS CONSIDERED TO BE AN ACTIVITY OF MANUFACTURE. THE TRIBUNAL IN THE IMPUGNED ORDER HAD OBSERVED TO THE EFFECT THAT THE WORD USED IN SECTION 80HH, 80I/80I OF THE ACT IS MANUFACTURING OR PRODUCTION. THE TERM PRODUCTION IS WIDER THAN THE WORD MANUFACTURE. THEREFORE, EVERY ACTIVITY WHICH BRING INTO EXISTENCE A NEW PRODUCT WOULD CONSTITUTE PRODUCTION. THE IMPUGNED ORDER RECORDS A FINDING OF FACT THAT THE PROCESS OF BOTTLING THE LPG GAS INTO CYLINDER MAKES THE SAME MARKETABLE ON EXE CUTION OF THE PROCESS. IT THEREFORE FOLLOWS THAT A NEW PRODUCT COMES INTO EXISTENCE . FOR GIVING THE ABOVE FINDING THIS COURT ALSO RELIED UPON THE DECISION OF THIS COURT IN WRIT PETITION NO. 9455 OF 2011 IN THE MATTER OF M/S. HINDUSTAN PETROLEUM CORPORATION LTD. VS. MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. AND ORS AND ALSO A DECISION DATED 6 MAY 2010 OF THE GUJRAT HIGH COURT IN BHARAT PETROLEUM CORPORATION LTD. VS. STATE OF GUJARAT & ORS. HOLDING THAT BOTTLING LPG GAS IS MANUFACTURING ACTIVITY . THAT STILL FURTHER THE LD. A.R. RELIED ON THE JUDGMENTS OF THE HONBLE HIGH COURT OF BOMBAY PASSED IN THE CASE OF THE ASSESSEE, AS UNDER: - (I) CIT - 2, MUMBAI VS. BHARAT PETROLEUM CORPORATION LTD. (ITA NO. 1152 AND 1145 OF 2014, DATED 23.08.2016) ( PAGE 4 - 6 OF APB). (II) CIT - 2, MUMBAI VS. BHARAT PETROLEUM CORPORATION LTD. (ITA NO. 320 AND 353 OF 2014, DATED 23.08.2016) . ( PAGE 7 - 9 OF APB) . (III) CIT - 2, MUMBAI VS. BHARAT PETROLEUM CORPORATION LTD. (ITA NO. 322 OF 2014, DATED 23.08.2016 ) ( PAGE 10 - 12 OF APB) . P A G E | 7 (IV) CIT - 2, MUMBAI VS. BHARAT PETROLEUM CORPORATION LTD. (ITA NO. 264 OF 2014, DATED 15.07.2016 ) ( PAGE 13 - 14 OF APB) IT WAS SUBMITTED BY THE LD. A.R THAT IN ALL THE AFOREMENTIONED CASES THE HONBLE HIGH COURT OF BOMBAY HAD HELD THAT THE ACTIVITY OF BOTTLING OF LPG GAS CARRIED OUT BY THE ASSESSEE CORPORATION IS A MANUFACTUR ING ACTIVITY . THE LD. A.R. FURTHER RELIED ON THE ORDER PASSED BY T HE ITAT A BENCH, MUMBAI IN THE CASE OF THE ASSESSEE, MARKED AS BHARAT PETROLEUM CORPORATION LTD. VS. CIT - RANGE - 2(1), MUMBAI (ITA NO. 4286/MUM/2005, A.Y. 2004 - 05, DATED 06 - 05.2016) ( PAGE 15 - 20 OF A PB) W HEREIN A COORDINATE BENCH OF THE TRIBUNAL WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2004 - 05, HAD FOLLOWED T HE JUDGMENT OF THE HONBLE HIGH COURT IN THE ASSESSES OWN CASE , VIZ. BHARAT PETROLEUM CORPORATION LTD. VS. CIT(4), MUMBAI (ITA NO. 612 OF 2001 ). THE LD. A.R. FURTHER DREW OUR ATTENTION TO ANOTHER ORDER OF THE ITAT B BENCH, MUMBAI IN THE ASSESEES OWN CASE, VIZ. BHARAT PETROLEUM CORPORATION LTD. VS. DCIT, MUMBAI (ITA NO. 2257 AND 2258/MUM/2011), FOR A.Y. 2002 - 03 AND 2003 - 04 , DATED 19.10.2016 ( PAGE 25 44 OF APB) , WHEREIN THE TRIBUNAL FOLLOWING THE ORDER PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y S . 2007 - 08 AND 2008 - 09, HAD THEREIN CONCLUDED THAT THE ASSESSEE CORPORATION WAS DULY ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80IB. THUS IN THE BACKDROP OF THE AFORESAID FACTS IT WAS SUBMITTED BY THE LD. A.R. THAT THE ISSUE WAS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE . PER CONTRA, THE LD. D.R. DID NOT CONTROVERT THE AFORESAID CONTENTIONS OF THE LD. A.R. 6. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVE S FOR BOTH THE PARTIES, PERUSED THE ORDER S OF THE LOWER AUTHORITIES AND THE MATERIAL PRODUCED BEFORE US. WE FIND OURSELVES TO BE PERSUADED TO SUBSCRIBE TO THE VIEW OF THE LD. A.R. THAT THE ISSUES AS TO WHETHER THE ACTIVITY OF P A G E | 8 BOTTLING LPG GAS IS A PRODUCTION OR MANU FACTURING ACTIVITY, OR NOT, HAD BEEN DECIDED IN FAVOR OF THE ASSESSEE BY THE HONBLE HIGH COURT OF BOMBAY IN THE AFOREMENTIONED APPEALS OF THE ASSESSEE , AND AS SUCH THE SAID MATTER IS NO MORE FOUND TO BE RES INTEGRA. WE FURTHER FIND THAT THE COORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSES OWN CASE, VIZ. BHARAT PETROLEUM CORPORATION LTD. VS. DCIT, MUMBAI, (ITA NO. 2257 OF 2011, A.Y. 2002 - 03 AND 2003 - 04, DATED 19.10.2016, THEREIN FOLLOWING ITS EARLIER ORDER PASSED IN TH E ASSESSES OWN CASE FOR A.YS. 2007 - 08 AND 2008 - 09, HAD THEREIN HELD THAT THE ASSESSEE STOOD ELIGIBLE TOWARDS CLAIM OF DEDUCTION U/S. 80IB . WE ARE OF THE CONSIDERED VIEW THAT AS THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE AFOREMENTI ONED JUDGMENTS OF THE HONBLE HIGH COURT OF BOMBAY ,AS WELL AS THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEE S OWN CASE , THUS FINDING NO REASON TO TAKE A DIFFERENT VIEW, THEREIN SET ASIDE THE ORDER OF THE CIT(A) . THE DISALLOWANCE OF ASS ESSES CLAIM OF DEDUCTION OF RS. 4,31,90,547/ - BY THE A.O WHICH THEREAFTER HAD BEEN UPHELD BY THE CIT(A), IS THUS DELETED. THE GROUND OF APPEAL NO. 1 IS THUS ALLOWED. (B). GROUND OF APPEAL NO. 2 & 3 : DISALLOWANCE U/S. 14A 7. THAT THE ASSESSEE CORPORATION HAD RECEIVED AN AMOUNT OF RS.117,79,32,321/ - ON ACCOUNT OF INTEREST ON TAX FREE SECURITIES AND BONDS AND DIVIDENDS FROM SHARES , WHICH WERE CLAIMED AS EXEMPT DURING THE YEAR UNDER CONSIDERATION. THE A.O OBSERVING THAT THE ASSESSEE HAD NOT ALLOCATED ANY DIS ALLOWANCE OF EXPENSE U/S. 14A RELATABLE TO THE SAID EXEMPT INCOME, THEREFORE ESTIMATED 10% OF THE EXEMPT INCOME AS EXPENSE RELATABLE TO EARNING OF SUCH INCOME AND DISALLOWED THE SAME. THE CIT(A) AFTER DELIBERATING ON THE CONTENTIONS OF THE ASSESSEE , FOLLOW ED THE VIEW TAKEN BY HIS PREDECESSOR IN THE P A G E | 9 ASSESSEES OWN CASE FOR A.Y. 2003 - 04, AND DIRECTED THE A.O TO RECOMPUTE THE DISALLOWANCE U/S. 14A BY ADOPTING A REASONABLE METHOD IN CONFORMITY WITH THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE O F GODREJ & BO Y CE MANUFACTURING COMPANY LTD. VS. CIT ( 2010) 328 ITR 81 (BOM). 8. THE ASSESSEE BEING AGGRIEVED WITH THE AFORESAID DIRECTIONS OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. THAT DURING THE COURSE OF THE HEARING OF THE APPEAL IT WAS SUBMITTED BY THE LD. A.R. THAT AS THE ASSESSEE COMPANY HAD UTILIZED ITS SELF OWNED FUNDS FOR THE PURPOSE OF INVESTING IN THE TAX FREE SECURITIES, THEREFORE, NO EXPENDITURE WAS LIABLE TO BE DISALL OWED IN VIEW OF THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. RELIANCE UTILITY POWERS LTD. (2009) 313 ITR 340) (BOM). THE LD. A.R FURTHER SUBMITTED THAT THE ASSESSEE COMPANY HAD NOT INCURRED ANY EXPENDITURE FOR EARNING OF THE EXE MPT INCOME, THEREFORE NO DISALLOWANCE U/S. 14A WAS CALLED FOR IN ITS HANDS. THE LD. A.R. SUBMITTED THAT A SIMILAR ADHOC DISALLOWANCE INVOLVING IDENTICAL FACTS HAD BEEN LOOKED INTO BY THE ITAT B BENCH, MUMBAI IN THE CASE OF THE ASSESSEE, VIZ. BHARAT PETROLEUM CORPORATION LTD. VS. DCIT, MUMBAI (ITA NO. 2257 AND 2258/MUM/2011 ) , FOR A.Y S . 2002 - 03 AND 2003 - 04, DATED 19.10.2016, WHEREIN THE TRIBUNAL HAD DELETED THE ADDITION BY OBSERVING AS UNDER: - 8.4 AFTER CONSIDERING THE FACTS OF THE AFORE MENTIONED DECIDED CASE AND THE JUDGMENTS PASSED BY THE HONBLE BOMBAY HIGH COURT WE ARE OF THE CONSIDERED VIEW THAT IF THERE IS INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE WHICH ARE SUFFICIENT TO MEET ITS INVEST MENT AND AT THE SAME TIME THE ASSESSEE HAD RAISED A LOAN, THEN IT CAN BE PRESUMED THAT THE INVESTMENTS WERE FROM INTEREST FREE FUNDS AVAILABLE. WE FIND SUPPORT FROM THE JUDGMENT RENDERED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF RELIANCE UTILITIES A ND POWER LTD.. AND ALSO WHILE THE RELYING UPON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF P A G E | 10 EAST INDIA (SUPRA) AND CONSIDERING THE DECISION OF CALCUTTA HIGH COURT IN SIMILAR ISSUE HAD ARISEN IT WAS RIGHTLY HELD THAT IF ASSESSEE IS HAVING INTER EST FREE FUND SUFFICIENT TO MEET THE INVESTMENTS THEN IT CAN BE SAFELY PRESUMED THAT THE INVESTMENTS WERE FROM THE INTEREST FREE FUND AVAILABLE. THEREFORE, AFTER CONSIDERING THE FACTS OF THE PRESENT CASE AND ALSO TAKING INTO CONSIDERATION THE FINDINGS RECO RDED BY THE REVENUE AUTHORITY, THIS PRESUMPTION IS ESTABLISHED. HENCE, IN THE NET RESULT, THIS GROUND OF APPEAL FILED BY THE ASSESSEE IS ALLOWED. IT WAS THUS AVERRED BY THE LD. A.R. THAT THE DISALLOWANCE MADE BY THE A.O U/S. 14A WHICH THEREAFTER HAD BEEN UPHELD BY THE CIT(A) , WAS LIABLE TO BE SET ASIDE. THE LD. A.R IN ORDER TO DRIVE HOME HIS CONTENTION THAT THE ASSESSEE CORPORATION HAD SUBSTANTIAL INTEREST FREE FUNDS DURING THE YEAR UNDER CONSIDERATION, AND THUS IT COULD SAFELY BE PRESUMED THAT THE INVESTMENTS MADE BY THE ASSESSEE CORPORATION IN THE TAX FREE INCOME YIELDING INVESTMENTS DURING THE YEAR WERE MADE OUT OF THE INTEREST FREE FUNDS, AND AS SUCH NO PART OF THE TAX FREE INCOME YIELDING INVESTMENTS COULD BE RELATED TO THE INTEREST BEARING FUNDS , THEREIN TOOK US THROUGH HIS PAPER BOOK FILED ON 09.03.2017. WE HAVE PERUSED THE FINAL ACCOUNTS OF THE ASSESSEE CORPORATION FOR THE YEAR UNDER CONSIDERATION, STATEMENT OF DIVIDEND INCOME/INTEREST INCOME EXEMPT FROM TAX , AS WELL AS ITS COMPUTATION OF INCOME , PLACED AT PAGE 1 - 35 OF THE APB . THE LD. A.R HAD DRAWN OUR ATTENTION TO A CHART MARKED AS INCREMENTAL CAS H FLOW OF OWN FUNDS FROM F.Y. 1986 - 87 TO F.Y. 2003 - 04 , PLACED AT PAGE 35 OF THE APB, IN ORDER TO FORTIFY HIS CONTENTION THAT THE ASSESSEE CORPORATION POSSESSED SUBSTANTIAL INTEREST - FREE FUNDS OF ITS OWN SINCE THE FINANCIAL YEAR 1986 - 87 TILL THE YEAR UN DER CONSIDERATION , FROM WHERE IT COULD SAFELY BE PRESUMED THAT THE INVESTMENTS IN THE TAX FREE INCOME YIELDING INVESTMENTS WERE THROUGHOUT MADE BY THE ASSESSEE OUT OF ITS INTEREST - FREE FUNDS , AND THUS NO PART OF THE INTEREST EXPENDITURE COULD BE RELATED TO SUCH TAX FREE INCOME YIELDING INVESTMENTS. IT WAS IN THE BACKDROP OF TH E P A G E | 11 AFORESAID FACTS THEREIN AVERRED BY THE LD. A.R THAT NO PART OF THE INTEREST EXPENDITURE COULD BE RELATED WITH THE TAX FREE INCOME YIELDING IN VESTMENTS, AND AS SUCH DISALLOWED U/S 14A OF THE ACT. THE LD. D.R. DID NOT CONTROVERT THE AFORESAID CONTENTIONS SO PLACED BEFORE US. 9. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE S FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL PRODUCED BEFORE US. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE CONTENTIONS OF THE LD. A.R AND PERUSED THE APB PLACED ON RECORD. WE HAVE PERUSED THE INCREMENTAL CAS H FLOW OF OWN FUNDS FROM F.Y. 1986 - 87 TO F.Y. 2003 - 04 , PLACED AT PAGE 35 OF THE APB , AND ARE PERSUADED TO OBSERVE THAT COL. 5 , COL. 6 AND COL. 7 OF THE CHART, ESTABLISH BEYOND ANY SCOPE OF DOUBT THAT THE INCREMENTAL TOTAL OWN FUNDS WITH THE ASSESSEE CORPORATION SINCE T HE F.Y. 1986 - 87 WERE SUBSTANTIALLY ENOUGH TO FUND THE INCREMENTAL INVESTMENT IN THE INVESTMENTS YIELDING TAX FREE INCOME, AND AS AVERRED BY THE LD. A.R, IT COULD SAFELY BE CONCLUDED THAT THE INVESTMENTS IN THE TAX FREE INCOME YIELDING INVESTMENTS , WERE THROUGHOUT MADE BY THE ASSESSEE CORPORATION OUT OF ITS INTEREST - FREE FUNDS, AND THUS NO PART OF THE INTEREST EXPENDITURE COULD BE RELATED TO SUCH TAX FREE INCOME YIELDING INVESTMENTS . WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE INVOLVED IN THE CASE OF THE PRESENT ASSESSEE, AS OBSERVED BY US HEREINABOVE IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y S . 2002 - 03 AND 2003 - 04 . WE THUS ARE OF THE CONSIDERED VIEW THAT IF THE ASSESSEE WAS HAVING SUBSTANTIAL INTEREST FREE FUNDS, THEN IRRESPECTIVE OF THE FACT THAT IT HAD ALSO BORROWED INTEREST BEARING FUNDS, IT CAN SAFELY BE PRESUMED THAT THE INVESTMENTS HAD BEEN MADE FROM THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. WE FIND THAT OUR AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF RELIANCE UTILITY AND POWER LTD. (SUPRA), WHICH THEREAFTER HAD BEEN FOLLOWED BY THE HONBLE HIGH P A G E | 12 COURT IN THE CASE OF CIT VS. HDFC BANK LTD. (2014) 366 ITR 505 (BOM) AND HDFC BANK LTD. VS. DCIT (2016) 383 ITR 529 (BOM) . WE THUS ARE OF THE CONSIDERED VIEW THAT THE FACTS OF THE PRESENT CASE ARE SQUARELY COVERED BY THE AFORESAID JUDGMENTS OF THE HON BLE JURISDICTIONAL HIGH COURT, AS W ELL AS THE ORDER PASSED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING YEARS, VIZ. A.Y S . 2002 - 03 AND 2003 - 04 . 10. ALTERNATIVELY, WE FIND THAT THE A.O AFTER REJECTING THE CLAIM OF THE ASSESSEE THAT NO DISALLOWANCE WAS CALLED FOR U/S. 14A , HAD TH E REIN ESTIMATED THE SAID DISALLOWANCE @10% OF THE EXEMPT INCOME, AND MADEA CONSEQUENTIAL ADDITION OF RS.11,77,93,232/ - . WE ARE UNABLE TO PERSUADE OURSELVES TO BE IN AGREEMENT WI TH THE WHIMSICAL ESTIMATION OF DISALLOWANCE BY THE A.O. WE ARE OF THE CONSIDERED VIEW THAT THE VERY PROCESS OF DETERMINATION OF THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME WOULD BE TRIGGERED, ONLY IF THE A.O. RETURNS A FINDING THAT HE I S NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. T HAT IT IS ONLY IF THE A.O. , HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE , AS PLACED BEFORE HIM, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE HAD BEEN INCURRED IN RELATION TO THE EXEMPT INCOME, THEREIN ONLY AFTER RECORDING COGENT REASONS AS REGARDS THE SAME, THAT THE A.O. CAN EMBARK UPON THE PROCESS OF DETERM INATION OF THE AMOUNT OF EXPENDITURE UNDER SECTION 14A . WE FIND THAT OUR AFORESAID VIEW STANDS FORTIFIED BY THE RECENT JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF : GODREJ & BOYCE MANUFACTURING COMPANY LIMITED (SUPRA), WHEREIN THE HONBLE APEX CO URT HAD HELD AS UNDER: - WHETHER SUCH DETERMINATION IS TO BE MADE ON APPLICATION OF THE FORMULA PRESCRIBED UNDER RULE 8D OR IN THE BEST JUDGMENT OF THE ASSESSING OFFICER, WHAT THE LAW POSTULATES IS THE REQUIREMENT OF A SATISFACTION IN THE ASSESSING OFFICE R THAT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, AS PLACED BEFORE HIM, IT IS NOT POSSIBLE TO P A G E | 13 GENERATE THE REQUISITE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. IT IS ONLY THEREAFTER THAT THE PROVISIONS OF SECTION 14A(2) A ND (3) READ WITH RULE 8D OF THE RULES OR A BEST JUDGMENT DETERMINATION, AS EARLIER PREVAILING, WOULD BECOME APPLICABLE. 11. WE THUS IN LIGHT OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT BOTH ON FACTS AND THE SETTLED POSITION OF LAW, THE ADH OC DISALLOWANCE MADE BY THE A.O U/S 14A CANNOT BE APPROVED . WE THUS SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DELETE THE DISALLOWANCE MADE IN THE HANDS OF THE ASSESSEE U/S 14A. THE GROUND OF APPEAL NO. 2 AND 3 RAISED BY THE ASSESSEE BEFORE US ARE THUS ALLOWED. (C) . GROUND OF APPEAL NO. 4 : DISALLOWANCE OF DEPOSITS WITH GOVER N MENT A GENCIES/ L OCAL A UTHORITIES. THE CIT(A) DELIBERATING ON THE CONTENTIONS OF THE ASSESSEE THAT DEPOSITS PLACED BY THE ASSESSEE CORPORATION WITH THE GOVERNMENT AGENCIES/LOCAL AUTHORITIES, VIZ. DEPOSITS WITH ELECTRICITY BOARDS, TELEPHONE COMPANIES ETC., BEING PERENNIAL IN NATURE , THUS WOULD NOT BE RECOVERED BACK AND REMAIN DEPOSITED WITH THE AUTHORITIES , THEREFORE THE SAME BEING IN THE NATURE OF REVENUE EXPENDITURE HAD RIGHTLY BEEN CHARGE D TO THE PROFIT AND LOSS ACCOUNT , HOWEVER DID NOT FIND FAVOUR WITH THE SAME. THE CIT(A) HOWEVER, BEING OF THE VIEW THAT THE A.O. HAD MADE THE DISALLOWANCE OF RS. 10 CRORES ONLY ON THE BASIS OF A PURE GUESS WORK, WHILE FOR IT WAS THE CONTENTION OF THE ASSESSEE THAT THE SAID EXPENDITURE WAS ONLY TO THE EXTENT OF RS. 28,67,365/ - , THEREFORE DIRECTED THE A.O TO VERIFY THE SAID FACTUAL POSITION FROM THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND RESTRICT THE DIS ALLOWANCE TO THE ACTUAL AMOUNT CHARGED BY THE ASSESSEE TO ITS PROFIT AND LOSS ACCOUNT. P A G E | 14 12. THE ASSESSEE BEING AGGRIEVED WITH THE AFORESAID ORDER OF THE CIT(A) HAD THEREIN ASSAILED THE SAME BEFORE US. THAT IT WAS SUBMITTED BY THE LD. A.R. THAT THE ISSUE AS REGARDS ALLOWABILITY OF THE PERENNIAL DEPOSITS AS A REVENUE EXPENDITURE , AND SUBJECTING THEM TO TAX IN THE YEAR IN WHICH THEY ARE REFUNDED , HAVE BEEN LOOKED INTO AND APPROVED B Y THE TRIBUNAL IN TH E AS SESSEES OWN CASE, VIZ. BHARAT PETROLEUM CORPORATION LTD. VS. DCIT, MUMBAI (ITA 2257/MUM/ 2011, A.Y. 2002 - 03), DATED 19.10.2016 ( PAGE 38 - 41 OF APB) . IT WAS THUS SUBMITTED BY THE LD. A.R. THAT THE ISSUE WAS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. THE LD. D.R. DID NOT REBUT THE AFORESAID CONTENTION SO RAI S ED BEFORE US. 13. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVE S FOR BOTH THE PARTIES, PERUSED THE ORDER S OF THE LOWER AUTHORITIES AND THE MATERIAL PRODUCED BEFORE US. WE ARE PERSUADED TO SUBSCRIBE TO T HE AFORESAID VIEW OF THE A.R. AND FIND THAT THE ISSUE INVOLVED IS SQUARELY COVERED BY THE ORDER PASSED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE, VIZ. BHARAT PETROLEUM CORPORATION LTD. (SUPRA), WHEREIN THE TRIBUNAL REFERRING TO THE CBDT CIRCULAR NO. 420 (F. NO. 204110183 IT (A - II), [DATED 04.06.1985] , HAD THEREIN HELD AS UNDER: - CONSIDERING AFOREMENTIONED CIRCULAR NO. 420 WE HOLD TH AT DEPOSITS WHICH ARE PERENNIAL IN NATURE ARE ALLOWED AS REVENUE EXPENDITURE AND TAX AS INCOME IN THE YEAR IN WHICH THEY ARE REFUNDABLE. THEREFORE APPLYING THE ABOVE PRINCIPLES TO THE FACTS OF THE PRESENT CASE THE DEPOSITS PLACED/LYING WITH GOVERNMENT AUTHORITIES ARE TO BE DEDUCTED AS R EVENUE EXPENDITURE AND WHENEVER THE SAID AMOUNT IS REFUNDED THEN ONLY THE SA M E WOULD BE TREATED AS INCOME OF THE ASSESSEE OF THE YEAR IN WHICH THE AMOUNT IS REFUNDED. ACCORDINGLY WE ALLOW THIS GROUND OF APPEAL. WE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS , ARE OF THE CONSIDERED VIEW THAT THE ISSUE AS REGARDS ALLOWABILITY OF THE DEPOSITS PLACED BY THE ASSESSEE WITH GOVERNMENT AGENCIES/LOCAL AUTHORITIES AS A REVENUE EXPENDITURE , IS SQUARELY COVERED BY THE AFORESAID ORDER OF P A G E | 15 THE TRIBUNAL PASSED IN THE ASSESSEES OWN CASE FOR A.Y. 2002 - 03. WE THUS FINDING NO REASON TO TAKE A DIFFERENT VIEW, THUS SET ASIDE THE DISALLOWANCE OF RS.28,67,365/ - (SUPRA) WHICH HAD BEEN SUSTAIN ED BY THE CIT(A). THE GROUND OF APPEAL NO. 4 IS THUS ALLOWED. (D). GROUND OF APPE AL NO. 5 : DISALLOWANCE OF AMORTIZATION OF PREMIUM ON LEASEHOLD LAND : 14. THE A.O HAD DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS DISALLOWED AN AMOUNT OF RS. 1,04,86,210/ - WHICH WAS CLAIMED BY THE ASSESSEE AS A REVENUE EXPENDITURE TOWARDS AMORTIZATION OF PREMIUM O N LEASEHOLD LAND . THE A.O HOLDING A CONVICTION THAT THE AMORTIZATION OF PREMIUM ON LEASEHOLD LAND WAS IN THE NATURE OF PREMIUM PAID FOR LONG TERM LEASE, AND THUS BEING CAPITAL IN NATURE , WAS NOT ALLOWABLE TO BE CHARGED TO THE PROF IT & LOSS A/C. THE ASSESSEE ASSAILED THE AFORESAID ADDITION/DISALLOWANCE BEFORE THE CIT(A) , WHO THEREIN BEING OF THE VIEW THAT THERE WAS NO PROVISION FOR AMORTIZATION OF THE CAPITAL EXPENDITURE INCURRED ON LEASE PREMIUM , THEREFORE HELD THAT THE SAME WAS NOT ALLOWABLE AS A REVENUE EXPENDITURE AS CLAIMED BY THE ASSESSEE. 15. THE ASSESSEE AGGRIEVED WITH UPHOLDING OF THE DISALLOWANCE OF AMORTIZATION OF PREMIUM OF LEASEHOLD LAND BY THE CIT(A), HAD THEREIN CARRIED THE MATTER IN APPEAL BEFORE US. THAT AT THE VE RY OUTSET IT WAS SUBMITTED BY THE LD. A .R. THAT IN THE LIGHT OF THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT - 3 VS. RELIANCE INDUSTRIAL INFRASTRUCTURE LTD. (ITA NO. 3611 OF 2010), THE CLAIM OF THE ASSESSEE IN RESPECT OF AN AMOUNT OF R S. 2,47,98,757/ - INCURRED TOWARDS REGISTRATION AND STAMP DUTY CHARGES, AS WAS RAISED BY WAY OF A REVISED RETURN OF INCOME FOR A.Y. 2014 - 15 , WAS ACCEPTED AND ALLOWED BY THE A.O VIDE HIS ORDER PASSED U/S. 143(3). THE LD. A.R. IN ORDER TO SUBSTANTIATE THE AFO RESAID FACTUAL POSIT ION , THEREIN DREW OUR ATTENTION P A G E | 16 TO THE COPY OF THE AFORESAID ASSESSMENT ORDER PLACED AT PAGE NO. 50 OF APB . PER CONTRA, THE LD. D.R. RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 14. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE S FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL PRODUCED BEFORE US. WE FIND THAT AS STAND S GATHERED FROM THE RECORDS , THE REVENUE IN THE ASSESSMENT FRAMED IN THE HANDS OF THE ASSESSEE CORPORATION FOR A.Y. 2014 - 15 HAD AL LOWED THE REGISTRATION AND STAMP DUTY CHARGES OF RS.2,47,98,757/ - AS A REVENUE EXPENDITURE , AS CLAIMED BY THE ASSESSEE CORPORATION IN ITS REVISED RETURN OF INCOME FOR A.Y . 2014 - 15 , BY RELYING ON THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT - 3 VS. RELIANCE INDUSTRIAL INFRASTRUCTURE LTD. (2015) 379 ITR 0340 (BOM) . THE HONBLE HIGH COURT IN ITS AFORESAID JUDGMENT HAD HELD AS UNDER: - IN FACT DURING THE HEARING BEFORE THE TRIBUNAL, THE ONLY ISSUE WHICH APPEARS TO HAVE BEEN IN DISPUTE WAS WHETHER THE AMOUNT OF RS.23.42 LACS PAID AS A STAMP DUTY TO TAKE LAND ON LEASE IS A CAPITAL EXPENDITURE OR REVENUE EXPENDITURE. ON THE AFORESAID FACTS, THE TRIBUNAL BY THE IMPUGNED ORDER PLACED RELIANCE UPON THE DECISIONS OF THIS COURT, PARTICU LARLY IN CINCITA PVT. LTD. WHEREIN IT HAS BEEN OBSERVED THAT THE PERIOD OF LEASE FOR WHICH THE PROPERTY HAS BEEN TAKEN, CANNOT BE REGARDED AS A DECISIVE TEST TO DETERMINE THE NATURE OF THE EXPENDITURE. IN ANY CASE, IT IS NOT DISPUTED BEFORE US THAT THE STA MP DUTY AMOUNT HAS BEEN PAID ON THE LEASE DEED FOR THE PURPOSES OF CARRYING ON ASSESSEE'S BUSINESS. ONCE THE AFORESAID POSITION IS ACCEPTED THEN THE AMOUNT OF STAMP DUTY PAID FOR HAS TO BE ALLOWED AS REVENUE NATURE . WE WOULD NOW TEST THE CLAIM OF THE ASSESSEE AS REGARDS THE ALLOWABILITY OF AMORTIZATION OF LEASEHOLD PREMIUM AS A REVENUE EXPENDITURE, IN T H E BACKDROP OF THE AFORESAID JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF RELIANCE INDUSTRIAL INFRAS TRUCTURE LTD. (SUPRA) . WE FIND THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH VARIOUS PARTIES FOR THE PURCHASE OF LEASEHOLD LAND S AT VARIOUS PLACES, P A G E | 17 WHICH WERE TO BE USED FOR ITS BUSINESS OPERATIONS, VIZ. FOR ESTABLISHING RETAIL OUTLETS, LPG BOTTLING PLANTS , REFINERIES ETC. THE PREMIUM PAID BY THE ASSESSEE CORPORATION WAS ONE OF THE MODE OF GIVING COMPENSATION TO THE LANDLORDS, BESIDES NOMINAL ANNUAL RENT PAID TO THEM. IT IS THUS THE CONTENTION OF THE ASSESSEE THAT THE PREMIUM PAID WAS IN THE NATURE OF RENT, AND AS SUCH THE AMORTIZATION OF PREMIUM SHOULD BE CONSIDERED A S A REVENUE EXPENDITURE. PER CONTRA, THE LD. D.R RELIED ON THE ORDERS OF THE LOWER AUTHORITIES, AND THEREIN AVERRED THAT AS THE SAID PAYMENT BY THE ASSESSEE CORPORATION WAS CLEARLY BY WAY OF A CAPITAL EXPENDITURE, THEREFORE THE SAME HAD RIGHTLY BEEN HELD A S NOT ALLOWABLE AS A REVENUE EXPENDITURE BY THE LOWER AUTHORITIES. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL PRODUCED BEFORE US. WE ARE OF THE CONSIDERED VIEW THAT AFTER APPRECIATING THE FACTS OF THE CASE IN TOTO , IT CAN SAFELY BE CONCLUDED THAT THE LEASEHOLD PREMIUM AMORTIZ ED BY THE ASSESSEE CORPORATION WAS IN THE NATURE OF COMPENSATION PAID TO THE LANDLORDS, IN ADDITION TO THE RENT . WE THUS ARE OF THE CONSIDERED VIEW THA T THE LEASEHOLD PREMIUM AMORTIZED BY THE ASSESSEE CORPORATION, BEING IN THE NATURE OF RENT, WAS THEREFORE ALLOWABLE AS A REVENUE EXPENDITURE IN THE HANDS OF THE ASSESSEE. WE ARE OF THE CONSIDERED VIEW THAT OUR AFORESAID VIEW STAND S FORTIFIED BY AN ANALOGY THAT CAN SAFELY BE DRAWN FROM THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF RELIANCE INDUSTRIAL INFRASTRUCTURE LTD. (SUPRA) , ON THE BASIS OF WHICH THE CLAIM OF THE ASSESSEE CORPORATION TOWARDS REGISTRATION AND STAMP DUTY CHARGES OF RS.2,47,98,757/ - , AS OBSERVED BY US HEREINABOVE, HAD BEEN ALLOWED AS A REVENUE EXPENDITURE IN THE ASSESSMENT FRAMED IN THE CASE OF THE ASSESSEE CORP ORATION FOR A.Y. 2014 - 15 . WE ARE FURTHER OF THE CONSIDERED VIEW THAT THE CLAIM OF THE ASSESSEE CORPORATION THAT THE LEASE PREMIUM PAID TO THE LANDLORDS IN ORDER TO FACILITATE PAYMENT OF P A G E | 18 NOMINAL RENT , CAN SAFELY BE CHARACTERIZED AS A REVENUE EXPENDITURE IN THE LIGHT OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF : COMMISSIONER OF INCOME TAX VS. MADRAS AUTO SERVICE (P) LTD. (1998) 233 ITR 468 (SC), WHEREIN IT WAS HELD AS UNDER: - 5. IN ORDER TO DECIDE WHETHER THIS EXPENDITURE IS REVENUE EXPEN DITURE OR CAPITAL EXPENDITURE, ONE HAS TO LOOK AT THE EXPENDITURE FROM A COMMERCIAL POINT OF VIEW. WHAT ADVANTAGE DID THE ASSESSEE GET BY CONSTRUCTING A BUILDING WHICH BELONGED TO SOMEBODY ELSE AND SPENDING MONEY FOR SUCH CONSTRUCTION? THE ASSESSEE GOT A L ONG LEASE OF A NEWLY CONSTRUCTED BUILDING SUITABLE TO ITS OWN BUSINESS AT A VERY CONCESSIONAL RENT. THE EXPENDITURE, THEREFORE, WAS MADE IN ORDER TO SECURE A LONG LEASE OF NEW AND MORE SUITABLE BUSINESS PREMISES AT A LOWER RENT. IN OTHER WORDS, THE ASSESSE E MADE SUBSTANTIAL SAVINGS IN MONTHLY RENT FOR A PERIOD OF 39 YEARS BY EXPENDING THESE AMOUNTS. THE SAVING IN EXPENDITURE WAS A SAVING IN REVENUE EXPENDITURE IN THE FORM OF RENT. WHATEVER SUBSTITUTES FOR REVENUE EXPENDITURE SHOULD NORMALLY BE CONSIDERED AS REVENUE EXPENDITURE. MOREOVER, ASSESSEE IN THE PRESENT CASE DID NOT GET ANY CAPITAL ASSET BY SPENDING THE SAID AMOUNTS. THE ASSESSEE, THEREFORE, COULD NOT HAVE CLAIMED ANY DEPRECIATION. LOOKING TO THE NATURE OF THE ADVANTAGE WHICH THE ASSESSEE OBTAINED IN A COMMERCIAL SENSE, THE EXPENDITURE APPEARS TO BE REVENUE EXPENDITURE. WE THUS ARE PERSUADED TO SUBSCRIBE TO THE VIEW OF THE LD. A.R THAT THE AMOUNT OF RS. 1,04,86,210/ - PERTAINING TO AMORTIZATION OF PREMIUM ON LEASEHOLD LAND WAS ALLOWABLE AS A REVENUE EXPENDITURE IN THE HANDS OF THE ASSESSEE CORPORATION. THE GROUND OF APPEAL NO. 5 RAISED BY THE ASSESSEE BEFORE US IS THUS ALLOWED. 15. THAT DURING THE COURSE OF HEARING OF THE APPEAL IT WAS SUBMITTED BY THE LD. A.R THAT THE INTEREST INCOME RECEIVED BY THE ASSESSEE CORPORATION ON OIL BONDS AND REFLECTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS IN ITS RETURN OF INCOME , WAS HOWEVER ASSESSED BY THE A.O UNDER THE HEAD INCOME FROM OTHER SOURCES. IT WAS SUBMITTED BY THE LD. A.R. THAT THE ISSUE AS TO WHETHER THE INTEREST RECEIVED FROM THE BONDS ISSUE D BY THE OIL C OORDINATION COMMITTEE (OCC) WERE LIABLE TO P A G E | 19 BE ASSESSED UNDER THE HEAD P ROFIT S AND GAINS OF BUSINESS , AS CLAIMED BY THE ASSESSEE, OR UNDER THE HEAD INCOME FROM OTHER SOURCES , AS HELD BY THE A.O , HAD BEEN LOOKED INTO AND DECIDED BY A COORDINATE BENCH OF THE TRIBUNAL , I.E. ITAT H , BENCH, MUMBAI , IN THE CASE OF MANG A LORE REFINERIES AND PETRO CHEMICALS LTD., MUMBAI, VS. DCIT - 3(2), MUMBAI (ITA NO. 77/MUM/2003, DATED 31.12.2003). THE LD. A.R. THEREIN DREW OUR ATTENTION TO THE AFORESAID ORDER OF THE TRIBUNAL IN THE CASE OF MANG A LORE REFINERIES AND PETRO CHEMICALS LTD. ( S UPRA) ( PAGE 67 - 90 OF APB) , WHEREIN THE TRIBUNAL A FTER DELIBERATING ON THE AFORESAID ISSUE UNDER CONSIDERATION HAD THEREIN CATEGORICALLY HELD THAT THE I NCOME TAX AUTHORITIES WERE NOT JUSTIFIED IN CONSIDERING THE INTEREST FROM THE AMOUNTS DUE IN THE OIL POOL ACCOUNT AND THE INTEREST ON THE O IL BONDS AS INCOME FROM OTHER SOURCES, AND HAD THUS ACCEPTED THE CLAIM OF THE ASSESSEE THAT THE SAID INTEREST INCOME WAS CHARGEABLE TO TAX AS P ROFIT AND GAINS OF THE BUSINESS. IT WAS FURTHER SUBMITTED BY THE LD. A.R. THAT THE APPEAL FILED BY THE REVENU E AGAINST THE AFORESAID ORDER OF THE TRIBUNAL HAD BEEN DISMISSED BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF COMMISSIONER OF INCOME TAX - 3 VS. MANG A LORE REFINERIES AND PETRO CHEMICALS LTD.(SUPRA) (ITA NO. 2440 OF 2013, DATED 06.09.2016) (BOM) , AND THEREIN DREW OUR ATTENTION TO THE COPY OF THE JUDGMENT OF THE HONBLE HIGH COURT PLACED AT PAGE NO. 91 - 92 OF APB . THE LD. A.R. THUS IN THE BACKDROP OF THE AFORESAID FACTUAL MATRIX AND THE SETTLED POSITION OF LAW , THEREIN SUBMITTED THAT AS THE ISSUE UNDE R CONSIDERATION WAS NO MORE RES INTEGRA, THEREFORE THE LOWER AUTHORITIES BE DIRECTED TO ASSESS THE INTEREST INCOME RECEIVED BY THE ASSESSEE FROM OIL BONDS , AS CLAIMED BY THE ASSESSEE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS . THE LD. D.R DID NOT OBJECT TO THE RAISING OF THE AFORESAID ADDITIONAL GROUND BY THE LD. A.R. IT WAS RATHER FAIRLY CONCEDED BY THE LD. D.R THAT AS THE ORDER OF THE TRIBUNAL DATED. P A G E | 20 21.12.2003 IN THE CASE OF MANG A LORE REFINERIES AND PETRO CHEMICALS LTD. ( S UPR A) WAS AVAILABLE ON THE DATE ON WHICH THE CIT(A) HA D PASSED THE ORDER IN THE CASE OF THE PRESENT ASSESSEE, I.E 01.06.2011 , HOWEVER THE SAME HAD REMAINED OMITTED TO BE CONSIDERED BY HIM , THEREFORE SUBMITTED THAT THE MATTER IN ALL FAIRNESS MAY BE RESTORED TO THE FILE OF THE CIT(A). 16. WE FIND THAT THE ISSUE AS REGARDS THE HEAD OF INCOME UNDER WHICH THE INTEREST RECEIVED BY THE ASSESSEE CORPORATION ON THE BONDS ISSUED BY OIL COORDINATION COMMITTEE (OCC) , IS LIABLE TO BE ASSESSED, HAD BEEN RAISED BEFORE US BY THE LD. A.R FOR THE FIRST TIME . WE HOWEVER FIND THAT RAISING OF THE SAID LEGAL ISSUE WHICH IS CLARELY BORNE FROM THE RECORDS, STANDS SETTLED BY THE HONBLE HIGH COURT IN THE CASE OF MANGALORE REFINERIES AND PETRO CHEMICALS LTD. (SUPRA) , AND IS NO MORE RES INTE GRA , HAD N OT BEEN OBJECTED TO BY THE LD. D.R. WE THUS IN LIGHT OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL PO W ER CO. LTD. VS. CIT (1998) 229 ITR 383 (SC) , BEING OF THE CONSIDERED VIEW THAT THE ADJUDICATION OF THE ISSUE RAISED BEFORE US , THOUGH FOR THE VERY FIRST TIME, IS NECESSARY IN ORDER TO CORRECTLY ASSESS THE TAX LIABILITY OF THE ASSESSEE , TH EREFORE , IN THE BACKDROP THE FACT THAT NO OBJECTION HAD BE EN RAISED BY THE LD. D.R AS REGARDS THE SAME, THUS ADMIT THE SAME. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVE S FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL PRODUCED BEFORE US. WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE AS TO THE HEAD OF INCOME UNDER WHICH THE INTEREST INCOME ON OIL BONDS IS LIABLE TO BE ASSESSED , IS NO MORE RES INTEGRA IN LIGHT OF THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF MANG A LORE REFINERIES AND PETRO CHEMICALS LTD.(SUPRA) . WE FIND THAT THE ORDER OF THE TRIBUNAL PASSED IN THE CASE OF MANG A LORE REFINERIES AND PETRO CHEMICALS LTD. VS. DCIT (ITA NO. 776/MUM/2004), DATED 31.01.2003 , ADJUDICATING THE AFORESAID P A G E | 21 LEGAL ISSUE HAD NOT BEEN CONSIDERED BY THE CIT(A) WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE BEFORE US , T HEREFORE IN ALL FAIRNESS REST ORE THE MATTER TO THE FILE OF THE CIT(A) WITH A DIRECTION TO ADJUDICATE THE SAME IN THE BACKDROP OF THE AFORESAID JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF MANGLORE REFINERIES AND PETRO CHEMICALS LTD.( S UPRA). NEEDLESS TO SAY , THE CIT(A) DURING THE COURSE OF READJUDICATING THE AFORESAID ISSUE WILL AFFORD REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ADDITIONAL GROUND OF APPEAL RAISED BY THE ASSESSEE IS THUS ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR AFORESAID OBSERVATIONS. 17. THE APPEAL OF THE ASSESSEE IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ITA NO.5966/MUM/2011 (A.Y. 2005 - 06) WE WOULD NOW ADVERT TO THE APPEAL OF THE ASSESSEE FOR A.Y. 200 5 - 0 6 . THE ASSESSEE CORPORATION ASSAILING THE ORDER OF THE CIT(A) HAD RAISED THE FOLLOWING GROUNDS OF APPEAL BEFORE: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED BY CONFIRMING THE DISALLOWANCE OF RS. 1,40,19,374 / - ON AM ORTIZATION OF PREMIUM ON LEASEHOLD LAND. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT FOLLOWING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN CIT V/S RELIANCE UTILITIES LTD. (313 ITR 340), THAT THE INVEST MENTS MADE BY THE CORPORATION, INCOME FROM WHICH IS EXEMPT FROM TAX, WERE MADE OUT OF THE CORPORATION'S OWN FUNDS. 3. LEARNED CIT(A), ERRED IN REMITTING BACK THE CASE TO ASSESSING OFFICER FOR STATISTICAL PURPOSE TO RECOMPUTE THE DISALLOWANCE U/S 14A AND REJEC TING THE CLAIM OF THE APPELLANT THAT NO EXPENDITURE WAS INCURRED BY APPELLANT FOR EARNING EXEMPT INCOME U/S 14A OF THE ACT. P A G E | 22 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) [CIT(A)], ERRED BY CONFIRMING THE DISALLOWANCE MADE BY AO FOR DEDUCTION OF RS. 1,21,13,625 / - UNDER SECTION 80I B ON LPG PLANTS ON THE GROUND THAT, LPG PLANT IS NOT ENGAGED IN THE MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER AND DELETE ANY OF THE ABOVE GROUNDS AND ADD ANY ADDITIONAL GROUND(S) EITHER BEFORE OR AT THE TIME OF HEARING. 18. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE CORPORATION WHICH IS ENGAGED IN THE REFINING AND EXPLORATION OF CRUDE OIL AND MARKETING OF PETROLEUM/P ETROCHEMICAL PRODUCT S / L UBRICANT S, HAD FILED ITS RETURN OF INCOME FOR A.Y. 2005 - 06 DECLARING TOTAL INCOME OF RS.764,10,42,020/ - ON 27.10.2005, WHICH WAS PROCESSED AS SUCH UNDER SECTION 143(1) OF THE ACT . THE CASE OF THE ASSESSEE WAS THEREAFTER TAKEN UP FOR SCRUTINY ASSESSMENT U/S. 143(2). 19. THE A.O. AFTER DELIBERATING ON THE CONTENTIONS OF THE ASSESSEE , THEREIN INTERALIA MADE THE FOLLOWING ADDITIONS/DISALLOWANCE IN THE HANDS OF THE ASSESSEE : - SR. NO. PARTICULAR AMOUNT 1 AMORTIZATION OF PREMIUM O N LEASEHOLD LAND RS. 1 , 40,19,374/ - 2 DISALLOWANCE U/S. 14A RS.81,89,69,936/ - 3 DISALLOWANCE U/S 80IB ON LPG PLANTS RS. 1,21,13,625/ - THE A.O. THEREAFTER PROCEEDED WITH AND ASSESS ED THE INCOME OF THE ASSESSEE CORPORATION AT RS.2051 , 91 , 21,961/ - . THE ASSESSEE ASSAILING THE ORDER OF THE A.O THEREIN CARRIED THE MATTER BEFORE THE CIT(A) , WHO THEREIN PARTLY ALLOWED THE APPEAL. P A G E | 23 20 . THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. WE HEREIN DEAL WITH THE CONTENTIONS RAISED BY THE ASSESSEE CORPORATION BEFORE US , AS UNDER: - (A) GROUND OF APPEAL NO. 1 DISALLOWANCE OF AMORTIZATION OF PREMIUM ON LEASEHOLD LAND : 21 . THAT THE ASSESSEE HAD ASSAILED THE UPHOLDING BY THE CIT(A) OF THE DISALLOWANCE OF RS.1,40,19,374/ - ON AMORTIZATION OF PREMIUM OF LEASEHOLD LAND. THAT AT THE VERY OUTSET OF THE HEARING OF THE APPEAL IT WAS SUBMITTED BY THE LD. A.R. THAT THE ISSUE INVOLVED I N THE GROUND OF APPEAL NO. 1 IN THE PRESENT APPEAL WAS IDENTICAL TO THE GROUND OF APPEAL NO. 5 RAISED BY THE ASSESSEE CORPORATION IN ITS APPEAL BEFORE US FOR A.Y. 2004 - 05, VIZ. BHARAT PETROLEUM CORPORATION LTD. VS. ADDITIONAL CIT - RANGE - 2(1), MUMBAI, MA RKED AS ITA 5963/MUM/2011. THE LD. D.R. HAD NOT DISPUTED THE AFORESAID FACTUAL POSITION. WE HAVE PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL PRODUCED BEFORE US. WE FIND THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS IDENTICAL TO THAT AS WAS RAISED BEFORE US BY THE ASSESSEE CORPORATION AS GROUND OF APPEAL NO. 5 IN ITS APPEAL FOR A.Y. 2004 - 05. THAT IN THE BACKDROP OF OUR OBSERVATIONS AND REASONING S ADOPTED WHILE ADJUDICATING THE GROUND OF APPEAL NO. 5 RAISED BY THE ASSESSEE BEFORE US IN ITS AFORESAID APPEAL FOR A.Y. 2004 - 05 , VIZ. BHARAT PETROLEUM CORPORATION LTD. VS. ADDITIONAL CIT - RANGE - 2(1), MUMBAI, MARKED AS ITA 5963/MUM/2011 , OUR DECISION PASSED IN THE CONTEXT OF THE ISSUE UNDER CONSIDERATION SHALL APPLY M UTATIS MUTANDIS IN THE PRESENT APPEAL ALSO. WE THUS GOING BY OUR OBSERVATION S AND REASONING S ADOPTED WHILE DISPOSING OF THE G ROUND OF APPEAL NO. 5 RAISED BEFORE US IN ASSESSES OWN APPEAL FOR A.Y. 2004 - 05, THEREIN ALLOW THE GROUND OF APPEAL NO. 1 RAISED BY THE ASSESSEE BEFORE US IN THE PRESENT APPEAL. P A G E | 24 (B) GROUND OF APPEAL NO. 2 AND 3 DISALLOWANCE U/S. 14A 22 . THAT IT WAS SUBMITTED BY THE LD. A.R. THAT THE ISSUE PERTAINING TO DISALLOWANCE U/S. 14A WHICH HAD BEEN ASSAILED BY THE ASSESSEE BY WAY OF GROUND OF APPEAL NO. 2 & 3 IN THE PRESENT APPEAL, IS IDENTICAL TO THAT INVOLVED IN G ROUND OF APPEAL 2 & 3 RAISED IN THE ASSESSES APPEAL FOR A.Y. 2004 - 05 BEFORE US, VIZ. BHARAT PETROLEUM CORPORATION LTD. VS. ADDITIONAL CIT - RANGE - 2(1), MUMBAI, MARKED AS ITA 5963/MUM/2011. THE LD. D.R. HAD NOT DISPUTED THE AFORESAID FACTUAL POSITION. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL PRODUCED BEFORE US. WE FIND THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS IDENTICAL TO THAT INVOLVED IN THE APPEAL BEFORE US IN THE ASSESSES OWN CASE FOR A.Y. 2004 - 05. THAT IN THE BACKDROP OF OUR OBSERVATIONS AND REASONING S ADOPTED WHILE ADJUDICATING THE GROUND OF APPEAL NO. 2 & 3 RAISED BY THE ASSESSEE BEFORE US IN ITS AFORESAID APPEAL FOR A.Y. 2004 - 05 , MARKED AS ITA NO. 5963/MUM/2011, OUR DECISION PASSED IN THE CONTEXT OF THE ISSUE UNDER CONSIDERATION SHALL APPLY MUTATIS MUTANDIS IN THE PRESENT APPEAL ALSO. WE THUS GOING BY OUR OBSERVAT ION S AND REASONING S ADOPTED WHILE DISPOSING OF THE G ROUND S OF APPEAL NO.2 & 3 RAISED BEFORE US IN THE ASSESSES OWN APPEAL FOR A.Y. 2004 - 05, VIZ. BHARAT PETROLEUM CORPORATION LTD VS. ADDITIONAL CIT - RANGE - 2(1), MUMBAI, MARKED AS (ITA NO. 5963/MUM/2011) , THEREIN ALLOW THE GROUND S OF APPEAL NO. 2 AND 3 RAISED BY THE ASSESSEE BEFORE US IN THE PRESENT APPEAL . (C) GROUND OF APPEAL NO. 4 : DISA L LOWANCE OF DEDUCTION U/S. 80IB P A G E | 25 23 . THAT THE ASSESSEE HAD ASSAILED BEFORE US T HE UPHOLDING OF THE DISALLOWANCE OF THE CLAIM OF DEDUCTION OF RS.1,21,13,625/ - OF THE ASSESSEE U/S. 80IB ON LPG PLANTS . THE ASSESSEE HAD IN ITS RETURN OF INCOME RAISED ITS CLAIM TOWARDS DEDUCTION U/S 80IB, WHICH HOWEVER WAS DISALLOWED BY THE A.O ON THE GROUND THAT THE LPG PLANT IS NOT ENGAGE D IN THE MANUFACTURING OR PRODUCTION OR ANY ARTICLE OR THING. THE SAID DISALLOWANCE OF THE ASSESSES CLAIM TOWARDS DEDUCTION U/S 80IB WAS THEREAFTER UPHELD BY THE CIT(A). THAT AT THE TIME OF THE HEARING OF THE APPEAL , IT WAS SUBMITTED BY THE LD. A.R. THAT T HE ISSUE INVOLVED IN THE PRESENT APPEAL IS IDENTICAL TO THAT INVOLVED IN THE GROUND OF APPEAL NO. 1 RAISED IN THE ASSESSES OWN APPEAL FOR A.Y. 2004 - 05, VIZ. BHARAT PETROLEUM CORPORATION LTD. VS. ADDITIONAL CIT - RANGE - 2(1), MUMBAI , MARKED AS ITA 5963/MUM/2011 . THE LD. D.R. HAD NOT DISPUTED THE AFORESAID FACTUAL POSITION. WE HAVE PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL PRODUCED BEFORE US. WE FIND THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE INVOLVED I N THE ASSESSES OWN APPEAL BEFORE US FOR A.Y. 2004 - 05 . THAT IN THE BACKDROP OF OUR OBSERVATIONS AND REASONING S ADOPTED WHILE ADJUDICATING THE GROUND OF APPEAL NO. 1 IN THE AFORESAID APPEAL, VIZ. BHARAT PETROLEUM CORPORATION LTD. VS. ADDITIONAL CIT - RANGE - 2 (1), MUMBAI , MARKED AS ITA 5963/MUM/201 1, OUR DECISION PASSED IN THE CONTEXT OF THE ISSUE UNDER CONSIDERATION SHALL APPLY MUTATIS MUTANDIS IN THE PRESENT APPEAL ALSO. WE THUS GOING BY OUR OBSERVATION S AND REASONING S ADOPTED WHILE DISPOSING OF THE G ROUND O F APPEAL NO. 1 RAISED BEFORE US IN ASSESSES OWN APPEAL FOR A.Y. 2004 - 05 , MARKED AS ITA NO. 5963/MUM/2011, THEREIN ALLOW THE GROUND OF APPEAL NO. 4 RAISED BY THE ASSESSEE CORPORATION BEFORE US IN THE PRESENT APPEAL . 24 . THAT THE LD. A.R HAD ASSAILED BEFORE US THE ASSESSING OF THE INTEREST INCOME ON OIL BONDS , WHICH THOUGH WAS SHOWN BY THE P A G E | 26 ASSESSEE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS, BUT HA D BEEN ASSESSED BY THE A.O. UNDER THE HEAD I NCOME FROM OTHER SOURCES. THAT IT WAS SUBMITTED BY THE LD. A.R THAT A SIMILAR CHANGE OF HEAD OF INCOME HAD ALSO BEEN CARRIED OUT BY THE A.O IN THE CASE OF THE ASSESSEE FOR THE A.Y. 2004 - 05. IT WAS FURTHER AVERRED BY THE LD. A.R THAT THE SAID CHANGE OF HEAD OF INCOME HAD ALSO BEEN ASSAIL ED BEFORE US IN THE APPEAL OF THE ASSESSEE FOR A.Y. 2004 - 05, VIZ. BHARAT PETROLEUM CORPORATION LTD. VS. ADDITIONAL CIT - RANGE - 2(1), MUMBAI , MARKED AS ITA 5963/MUM/2011 . WE FIND THAT THE IDENTICAL ISSUE RAISED BY THE ASSESSEE IN THE PRESENT APPEAL BEFORE US WAS ALSO RAISED IN ITS AFORESAID APPEAL FOR A.Y. 2004 - 05, MARKED AS ITA 5963/MUM/2011 , WHEREIN IN THE BACKDROP OF THE ORDER OF THE ITAT PASSED IN THE CASE OF MANG A LORE REFINERIES AND PETRO CHEMICALS LTD.(SUPRA) VS. DCIT (ITA NO. 776/MUM/2004), WHICH THEREA FTER HAD BEEN AFFIRMED BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF MANGLORE REFINERIES AND PETRO CHEMICALS LTD.(SUPRA) , WE HAD RESTORED THE MATTER TO THE FILE OF THE CIT (A) FOR RE - ADJUDICATION. WE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS AND ON THE SAME REASONING , THEREFORE IN ALL FAIRNESS RESTORE THE MATTER TO THE FILE OF THE CIT(A), WITH A DIRECTION TO READJUDICATE THE SAME IN THE BACKDROP OF THE AFORESAID JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF MANG A LORE REFINERIES AND PETRO CHEMICALS LTD.(SUPRA). NEEDLESS TO SAY, THE CIT(A) DURING THE COURSE OF READJUDICATING THE AFORESAID ISSUE SHALL AFFORD REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ADDITIONAL GROUND OF APPEAL RAISED BY THE ASSESSEE US IS THUS ALLOW ED IN TERMS OF OUR AFORESAID OBSERVATIONS. 25. THE APPEAL OF THE ASSESSEE IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ITA NO.2259/MUM/2011 A.Y . 2004 - 05 P A G E | 27 WE NOW TAKE UP THE APPEAL OF THE ASSESSEE WHICH IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 4, MUMBAI, DATED 24.01.2011, WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O. U/S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961, (FOR SHORT ACT), DATED 04.12.2008. THE ASSESSEE HAD ASSAILED THE ORDER OF THE CIT(A) B Y RAISING THE FOLLOWING GROUNDS OF APPEAL BEFORE US : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE A.O. HAD REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND CONSEQUENTLY HOLDING THAT THE REOPEN ING U/S 148 OF THE INCOME TAX ACT, 1961 (THE ACT) WAS JUSTIFIED. 2. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , IN THE ABSENCE OF ANY TANGIBLE MATERIAL BEFORE THE A.O., THE REASSESSMENT PROCEEDINGS INITIATED BY HIM WERE BASED ON A MERE CHANGE OF OPINION AND CONSEQUENTLY WERE INVALID IN LAW AND THE LEARNED CIT(A) ERRED IN UPHOLDING THE REASSESSMENT PROCEEDINGS. 3. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE REOPENING BEING BASED ON MERE CONJECTURE AND CHANGE OF OPINION AND CONSEQUENTLY THE REASSESSMENT NOTICE, REASSESSMENT PROCEEDINGS, AND REASSESSMENT ORDER BEING INVALID IN LAW AND WITHOUT ANY JURISDICTION, THE LEARNED CIT (A) ERRED IN UPHOLDING THE SAME. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE ASSESSEE IS ELIGIBLE FOR ADDITIONAL DEPRECIATION UNDER THE MAIN PROVISIONS OF SECTION 32(1)(IIA) OF THE ACT ITSELF AS IT IS ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING AND HAS ACQUIRED AND INSTALLED MACHINERY OR PLANT AFTER 31ST MARCH 2002 AT ITS LPG BOTTLING PLANT AND THE LEARNED CIT (A) ERRED IN HOLDING THAT IT IS NOT ENTITLED TO THE SAME. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSEE SUBMITS THAT THE PROVISIONS OF THE MAIN ENACTMENT TO SECTION 32(1 )(IIA) OF THE ACT ARE PLAIN AND UNAMBIGUOUS AND CONSEQUENTLY THE PROVISO CAN HAVE NO REPERCUSSION ON THE INTERPRETATION OF THE MAIN ENACTMENT AND HENCE THE ASSESSEE IS ENTITLED TO ADDITIONAL DEPRECIATION U/S 32(1)(IIA) OF THE ACT ON THE P A G E | 28 MACHINERY AND PLANT INSTALLED AT LPG BOT TLING PLANTS AND THE LEARNED CIT (A) ERRED IN DENYING THE SAME. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER AND DELETE ANY OF THE ABOVE GROUNDS AND ADD ANY ASSISTANT GROUND(S) EITHER BEFORE OR AT THE TIME OF HEARING. 26 . BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ORIGINAL ASSESSMENT WAS FRAMED IN THE HANDS OF THE ASSESSEE ON 27.12.2006 , ASSESSING THE LATTERS TOTAL INCOME AT RS. 2280,80,65,440/ - . THE ASSESSMENT IN THE CASE OF THE ASSESSEE WAS REOPENED U/S. 147 ON 26.03.2008 , FOR THE REASON THAT THE ASSESSEE HAD WRONGLY BEEN ALLOWED ADDITIONAL DEPRECIATION U/S. 32 (1) (IIA) OF THE ACT . THE REASONS TO BELIEVE ON THE BASIS OF WHICH IN THE CASE OF THE ASSESSEE WAS REOPENED , READ AS UNDER: - IN T HIS RESPECT WE WOULD LIKE TO BRING TO YOUR NOTICE THAT THE ASSE S SEE HAD CLAIMED ADDITIONAL DEPRECIATION U/S. 32(IIA) BASED ON THE FACT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND THE SUBJECT ASSETS ARE BEING USED FOR THE BOTTLING OF L PG SO AS TO MARKET THE PRODUCT MANUFACTURED. ACCORDING TO THE PROVISIONS OF THE SAID SECTION IN ORDER TO CLAIM ADDITIONAL DEPRECIATION THE ASSESSEE SHOULD BE ENGAGED IN THE BUSINESS OF MANUFACTURING OR PRODUCTION OF ANY ARTICLE OR THING. SECTION 32 NOWHERE DEMANDS THAT THE SUBJECT ASSETS ON WHICH ADDITIONAL DEPRECIATION IS TO BE CLAIMED MUST BE USED IN THE PROCESS OF MANUFACTURING. THE A.O THEREAFTER PROCEEDED WITH AND AFTER DISALLOWING THE ASSESSEES CLAIM TOWARDS ADDITIONAL DEPRECIATION U/S.32(1)(IIA) OF RS.4,00,07,977/ - , THEREIN ASSESSED THE LATTER S INCOME AT RS.2284,80,73,4200/ - . THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A), WHO HOWEVER DISMISSED THE SAME . 27 . THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAD THEREIN CARRIED THE MATTER IN APPEAL BEFORE US. THAT IT WAS SUBMITTED BY THE LD. A.R. THAT THE CIT(A) HAD WRONGLY UPHELD THE DISALLOWANCE OF ADDITIONAL P A G E | 29 DEPRECIATION CLAIMED BY THE ASSESSEE U/S. 32(1)(IIA). IT WAS SUBMITTED BY THE LD. A.R. THAT THE SOLE BASIS FOR DISALLOWING THE ASSES SEE S ENTITLEMENT TOWARDS CLAIM OF ADDITIONAL DEPRECIATION U/S. 32(1)(IIA) , AS HAD WEIGHED I N THE MIND OF THE LOWER AUTHORITIES WAS THAT THE ACTIVITY OF THE BOTTLING LPG GAS COULD NOT BE CONSTRUED AS A PRODUCTION OR MANUFACTURING ACTIVITY, AND AS SUCH IN T HE ABSENCE OF THE SATISFACTION OF THE SAID REQUISITE CONDITION OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING , AS CONTEMPLATED U/S. 32(1)(IIA) OF THE ACT, THE ASSESSEE STOOD DISENTITLED TOWARDS CLAIM OF THE AFORESAID ADDITIONAL DEPRECIATION. 28 . IT WAS SUBMITTED BY THE LD. A.R. THAT THE ISSUE AS TO WHETHER ACTIVITY OF BOTTLING LPG GAS AMOUNTS TO PRODUCTION OR MANUFACTURE ACTIVITY , OR NOT , HAD BEEN LOOKED INTO BY THE HONBLE HIGH COURT OF BOMBAY IN ASSESSEES OWN CASE, VIZ. BHARAT PETROLEUM CORPORA TION LTD. VS. CIT - MUMBAI (ITA NO. 612 AND 613 OF 2001, DATED 03.05.2013). IT WAS SUBMITTED BY THE LD. A.R. THAT THE HONBLE HIGH COURT ANSWERING THE AFORESAID ISSUE IN AFFIRMATIVE , HAD THEREIN FOLLOWED ITS EARLIER ORDER PASSED IN (ITA NO. 2131 OF 2012, DAT ED 07.03.2013, WHEREIN IT WAS HELD AS UNDER: - SINCE THE TRIBUNAL IN THE IMPUGNED ORDER HAS RELIED UPON THE DECISION OF THIS COURT AND THE CONSEQUENT ORDER OF THE ELECTRICITY OMBUDSMAN TO HOLD THAT THE ACTIVITY OF BOTTLING LPG GAS IS A VERY SPECIALIZED P ROCESS AND THE SAE IS CONSIDERED TO BE AN ACTIVITY OF MANUFACTURE. THE TRIBUNAL IN THE IMPUGNED ORDER HAD OBSERVED TO THE EFFECT THAT THE WORD USED IN SECTION 80HH, 80I/80IA OF THE ACT IS MANUFACTURING OR PRODUCTION. THE TERM PRODUCTION IS WIDER THAN THE W ORD MANUFACTURE. THEREFORE, EVERY ACTIVITY WHICH BRING INTO EXISTENCE A NEW PRODUCT WOULD CONSTITUTE PRODUCTION. THE IMPUGNED ORDER RECORDS A FINDING OF FACT THAT THE PROCESS OF BOTTLING THE LPG GAS INTO CYLINDER MAKES THE SAME MARKETABLE ON EXECUTION OF T HE PROCESS. IT THEREFORE FOLLOWS THAT A NEW PRODUCT COMES INTO EXISTENCE. P A G E | 30 THE LD. A.R. THUS SUBMITTED THAT THE HONBLE HIGH COURT FURTHER REFERRING TO ITS DECISION PASSED IN WRIT PETITION NO. 9455 OF 2011 IN THE CASE OF M/S HI N DUSTAN PETROLEUM CORPORATION LTD. VS. MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD. AND OTHERS , AS WELL AS A DECISION DATED 06.05.2010 OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF THE ASSESSEE, VIZ. BHARAT PETROLEUM CORPORATION LTD. VS. STATE OF GUJARAT AND O THERS , HAD THEREIN CONCLUDED THAT BOTTLING LPG GAS IS A MANUFACTURING ACTIVITY. 29 . THE LD. A.R. RELYING ON THE AFORESAID JUDICIAL PRONOUNCEMENTS SUBMITTED THAT THE ISSUE THAT THE ACTIVITY OF BOTTLING LPG GAS IS A MANUFACTURING ACTIVITY , IS NO MORE RES INTEGRA. IT WAS THUS SUBMITTED BY THE LD. A.R. THAT NOW WHEN THE ASSESSEE HAS BEEN HELD TO BE CARRYING ON MANUFACTURING ACTIVITY, THEREFORE THE VERY BASIS FOR DISALLOWANCE OF ITS CLAIM TOWARDS ADDITIONAL DEPRECIATION DID NOT SURVIVE. IT WAS THUS SUBMIT TED BY THE LD. A.R. THAT THE ORDERS OF THE LOWER AUTHORITIES MAY BE SET ASIDE AND DIRECTIONS BE ISSUED FOR ALLOWING THE CLAIM OF THE ASSESSEE TOWARDS ADDITIONAL DEPRECIATION. THE LD. D.R. DID NOT DISPUTE THE AFORESAID CO NTENTIONS SO RAISED BEFORE US. 30 . WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL PRODUCED BEFORE US. WE FIND THAT THE ISSUE AS TO WHETHER THE ACTIVITY OF BOTTLING LPG GAS AMOUNTS TO PRODUCTION OR MANUFACTURING, OR NOT, IS NO MORE RES INTEGRA IN LIGHT OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE BHARAT PETROLEUM CORPORATION LTD. VS. CIT - MUMBAI CITY (ITA NO. 612 AND 613 OF 2001), WHEREIN THE HONBLE HIGH COURT HAD IN UNEQUIVOCAL TERMS HELD THAT BOTTLING LPG GAS IS A MANUFACTURING ACTIVITY. WE THUS ARE OF THE CONSIDERED VIEW THAT NOW WHEN THE VERY PERCEPTION OF THE DEPARTMENT THAT THE ACTIVITY OF BOTTLING LPG GAS DOES NOT AMOUNT TO P A G E | 31 MANUFACTURING OR PRODUCTION ACTIVITY, DOES NO MORE SURVIVE, T HEREFORE THE DISALLOWANCE OF THE ASSESSES CLAIM TOWARDS ADDITIONAL DEPRECIATION BY HOLDING TO THE CONTRARY, THUS CANNOT BE SUSTAINED. WE THUS SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE A.O , WITH A DIRECTION TO ALLOW THE CLA IM OF THE ASSESSEE TOWARDS ADDITIONAL DIRECTIONS U/S. 32(1)(IIA). 31 . THE GROUND OF APPEAL NO. 4 AND 5 RAISED BY THE ASSESSEE BEFORE US IS ALLOWED. THAT THE LD. A.R SUBMITTED THAT IN CASE IF THE APPEAL OF THE ASSESSEE IS ALLOWED ON MERITS, THEN THE GROUND OF APPEAL NO. 1 TO 3 SO RAISED BEFORE US, WOULD THEREIN BE RENDERED AS INFRUCTUOUS. THAT AS WE HAVE ALLOWED THE APPEAL OF THE ASSESSEE ON MERITS, THEREFORE ON THE BASIS OF THE AFORESAID CONCESSION OF THE LD. A.R. , THE GROUND OF APPEAL NO. 1 TO 3 HAVING BEEN RENDERED AS ACADEMIC IN NATURE, ARE THUS DISMISSED AS NOT PRESSED. 32 . THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 14 .06.2017 SD/ - SD/ - ( B.R. BASKARAN ) (RAVISH SOOD) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 14 .06.2017 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED P A G E | 32 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI P A G E | 33