AMBUJA CEMENTS LTD, MUMBAI V. ADDL CIT LTU, MUMBAI

ITA 6375/MUM/2013

AI Insights

The case involves cross-appeals by Ambuja Cement Limited against the order of the CIT(A) concerning the assessment year 2007-08. The primary issues revolved around the classification of certain receipts and incentives as capital or revenue in nature, and the admissibility of various deductions under the Income Tax Act. The Tribunal examined the nature of subsidies and incentives received by the assessee under different state schemes, the treatment of community welfare and other business expenditures, and the application of section 14A and section 80-IA of the Act. The Tribunal's decision relied heavily on judicial precedents and the specific wording and purpose of the subsidy schemes.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129592 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: K
• Next Hearing Date: 29-05-2023
• Assessment Year: 2007-2008
• Appeal Filed On: 29-10-2013
• Other Referred Cases: PCIT Vs Welspun Steel Limited, CIT v. Chaphalkar Bro. [2017] 88 taxmann.com 178/[2018] 252 Taxman 360/400 ITR 279, CIT v. Ponni Sugars and Chemicals Ltd. [2008] 306 ITR 392/174 Taxman 87, Sahney Steel and Press Works Ltd. v. CIT [1997] 94 Taxman 368/228 ITR 253 (SC), CIT v. Grace Paper Industries (P.) Ltd. [1990] 183 ITR 591/52 Taxman 18, CIT v. Swastik Sanitary Works Ltd. [2006] 286 ITR 544, CIT v. P. J. Chemicals Ltd. [1994] 210 ITR 830, CIT v. Indian JuteMill Association in 134 ITR 68, CIT v. Birla VXL Ltd. [2013] 32 taxmann.com 330/215 Taxman 117/ 333 ITR 335, CIT v. Munjal Auto Industries Ltd. [2013] 37 taxmann.com 115/218 taxman 135, CIT v. Chapalkar Brothers [2018] 400 ITR 279
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Transfer pricing; Business expenditure; Additional depreciation; Earning of tax free income; Source of fund; Additional evidence; Question of law; Capital receipt; Revenue expenditure; Rule 8D
• Section: 32; 43B; 143(3); 14A; 115JB; 32(1)(iia); 80IA; 251; 43; 72; 13; 22

Judgement Text

ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 1 of 42 THE INCOME TAX APPELLATE TRIBUNAL MUMBAI K BENCH, MUMBAI [Coram: Pramod Kumar (Vice President), and Sandeep S Karhail (Judicial Member)] ITA No.6375/Mum/2013 Assessment year: 2007-08 Ambuja Cement Limited ...............................Appellant (formerly Known as Gujarat Ambuja Cements Ltd.) Elegant Business Park, MIDC Cross Road B, Andheri (E) Mumbai 400 059 [PAN: AAACG0569P] Vs. Additional Commissioner of Income Tax Large Tax Payer Unit, Mumbai ..............................Respondent CO No. 166/Mum/2015 In ITA No. 6375/Mum/2013 Assessment year: 2007-08 Assistant Commissioner of Income Tax Large Tax Payer Unit, Mumbai ........................Cross Objector Vs. Ambuja Cement Limited ..............................Respondent (formerly Known as Gujarat Ambuja Cements Ltd.) Elegant Business Park, MIDC, Cross Road B, Andheri (E) Mumbai 400 059 Mumbai 400 021 [PAN: AAACG0569P] ITA No. 6405/Mum/2013 Assessment year: 2007-08 Assistant Commissioner of Income Tax Large Tax Payer Unit, Mumbai ...............................Appellant Vs. Ambuja Cement Limited ..............................Respondent (formerly Known as Gujarat Ambuja Cements Ltd.) Elegant Business Park, MIDC, Cross Road B, Andheri (E) Mumbai 400 059 Mumbai 400 021 [PAN: AAACG0569P] Appearances by: Yogesh Thar along with Chitanya D. Joshi, for the appellant Jagdish Jangid, for the respondent ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 2 of 42 Date of concluding the hearing : 15/07/22 and 12/10/2022 Date of pronouncing the order : 07/11/2022 O R D ER Per Pramod Kumar VP 1. These cross-appeals and cross-objections pertain to the same assessee and are directed against the order dated 22 nd August 2013 passed by the learned CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2007-08. 2. We will first take up the appeal filed by the assessee. 3. In ground no. 1, the assessee has raised these two grievances: 1(a). That on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) [here-in-after referred to as Ld. CIT (Appeals)] was not justified and grossly erred in confirming the action of the A.O. in not excluding the payment of Net Present Value of deferred sales tax liability, granted under the incentive scheme of State Government of Himachal Pradesh, in respect of its Darlaghat Unit, amounting to Rs. 12,56,20,681/- being capital in nature. 1(b). That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) erred in not appreciating the fact that the gain of Rs. 12,56,20,681/- arising on pre-payment of deferred sales tax liability cannot be treated as revenue receipt liable to tax u/s28 (iv). 4. So far as this grievance is concerned, the assessee was allowed deferral of sales tax liability by the Himachal Pradesh Government General Sales Tax (Deferral Payment of Tax) Scheme 20005 under which payment of 75% of sales tax liability was allowed to be deferred for 5 years. Vide a subsequent notification dated 26.7.2005, an option was given to pay 65% of the sales tax liability for any tax period, and upon such payment, the assessee was to be deemed to have paid the entire sales tax dues for such period. In effect, thus, the NPV of the liability was taken as 65% of the sales tax liability. The assessee availed this option, and the 35% (being difference in sales tax liability and its NPV paid by the assessee) was credited to the profit and loss account. The claim of the assessee, which was made before the CIT(A), was rejected by the CIT(A) observing that “Regarding the sales tax incentive relating to Darlaghat Unit in Himachal Pradesh also the issue was decided by my learned predecessor in AY 2006-07 wherein the contentions of the assessee o treat it as capital was rejected and the same was held to be taxable under section 28(iv). As there is no change in the facts in this year also, the same is held to be revenue in nature and directed to be taxed accordingly”. The assessee is aggrieved and is in appeal before us. 5. Having heard the rival contention and having perused the material on record, we find that this issue is now covered in favour of the assessee by the decision of this Tribunal in assessee’s ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 3 of 42 own case for the assessment year 2006-07. As the material facts of the case are admittedly identical with the facts of the assessment year 2006-07, and the learned CIT(A) has categorically observed so, we have no reasons to take any other view of the matter than the view taken by the Tribunal for the assessment year 2006-07. Respectfully following the same, we hold that the impugned receipts of Rs 12,56,20,681. 6. Ground no. 1 is thus allowed. 7. In ground no. 2, the assessee has raised the following grievances: “That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the A.O. in denying the claim for exclusion of Special Capital Incentive availed in respect of unit situated in the state of Maharashtra amounting to Rs. 30,00,000/- being capital in nature, in computing the total income under the normal provisions of the Act.” 8. So far as this grievance of the assessee is concerned, it is sufficient to take note of the fact that during the relevant previous year, the assessee had received a sum of Rs 30,00,000 from SICOM Limited as a Special Capital Incentive for its Maratha Unit in Chandrapur District of Maharashtra. The assessee’s plea was that the nature of this subsidy is the same as the sales tax subsidy, and, consistent with the view that the Assessing Officer had taken for the taxability of sales tax subsidy, this amount is also required to be treated as revenue in nature. Aggrieved, the assessee carried the matter in appeal but without any success. The assessee is not satisfied and is in further appeal before us. 9. Having heard the rival contentions and having perused the material on record, we are of the considered view that the assessee deserves to succeed on this ground as well. Vide our orders on the appeals for the two immediately preceding assessment years, i.e. assessment years 2005- 06 and 2006-07, which were heard along with this set of cross-appeals, we have held that the sales tax subsidy is capital in nature. Going by the stand of the Assessing Officer, the nature of the sales tax subsidy is the same as this subsidy receipt. We thus have no reasons to take any other view of the matter than the view so taken by us for sales tax subsidy for the assessment years 2005-06 and 2006-07, we hold that the impugned receipt of Rs 30,00,000 is required to be treated as capital receipt and to be excluded from the total income of the assessee. The assessee gets the relief accordingly. 10. Ground no. 2 is thus allowed. 11. In ground no. 3, the assessee has raised the following grievance: “That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the A.O. in denying the claim for exclusion of Excise Duty Incentive availed by the appellant amounting to Rs. 53,23,56,012/-, being capital in nature, in computing the total income under the normal provisions of the Act.” ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 4 of 42 12. Learned representatives fairly agree that the issue in the appeal is exactly the same as in the immediately preceding assessment year, i.e. 2006-07, cross-appeals for which were heard along with this set of cross-appeals, and whatever we decide for the assessment year 2006-07 will apply mutatis mutandis for this assessment year as well. Vide our order dated 3 rd November, we have decided this issue in favour of the assessee, and observed as follows: 17. So far as this grievance of the assessee is concerned, the relevant material facts are like this. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has availed excise duty exemption, amounting to Rs 46,83,11,376, in respect of their Darlaghat Unit, HP, and it was claimed as a capital receipt in nature. It was also noted that in terms of general Exemption No, 51 (Notification No. 50/2003 dated 10 th June 2003) the assessee is entitled to 100% excise duty exemption for a period of ten years in respect of its cement manufacturing plant at Darlaaghat. The assessee’s submission was that this exemption was in response to the announcement made by the Hon’ble Prime Minister to the effect that tax and central excise concession are made to attract investments in the industrial sector for special category states, including Uttarakhand. The Assessing Officer noted that “though it is apparent from the excise notification that exemption is granted for only those units which are located in the backward areas and which have undertaken substantial expansion, however incentives are available only post production” and therefore he “finds no difference in sales tax and excise exemption claimed”. Following the stand taken for sales tax exemption etc, he held that the excise exemption receipts are also revenue in nature. Aggrieved, assessee carried the matter in appeal before the CIT(A). Learned CIT(A) also confirmed the stand of the Assessing Officer on the short ground that the exemption notification does not specifically state the object and purpose of the concession to be promotion of industry in the specified areas etc. The assessee is aggrieved, and is in appeal before us. 18. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 19. We have noted that the Assessing Officer himself states that he “finds no difference in sales tax and excise exemption claimed”, and in the immediately preceding paragraphs in this order, we have held that sales tax exemption receipt is a capital receipt in nature. There cannot be any good reasons to take a different view of the matter in respect to excise exemptions. For this short reason alone, the impugned additions must stand deleted as the related receipts are required to be treated as capital receipts in nature. The observations in the context of the first ground of appeal will apply mutatis mutandis here as well. That apart, once the Assessing Officer himself also accepts that the object and purpose of the excise exemption scheme are to promote the industry is set up, or being subjected to substantial expansion, in the backward areas, it cannot be open to the revenue even to suggest that the object and purpose of the scheme are to promote industries in backward areas. The Assessing Officer had declined the relief on a technical ground about at what stage the receipts materialize, whether post-production or pre- production. That test, as is the settled legal position now, is no longer a relevant test. What is material is as to what is the purpose of the scheme in question, and a call about the object and purpose of the scheme is to be taken in a holistic manner and on the basis of the scheme on an overall basis. The approach adopted by the learned CIT(A) was not only legally incorrect but wholly superficial. The following observations by Hon’ble jurisdictional High Court, in the case ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 5 of 42 of PCIT Vs Welspun Steel Limited [(2019) 103 taxmann.com 436 (Bom)] are relevant in this regard: 6. Having heard the learned Counsel for the parties on this question, we notice that, the Government of Gujarat Sales Tax Incentive Scheme was envisaged to promote large scale investments in the Kutch District since on account of devastating earth- quake, development of the district had suffered. The Scheme envisaged that, the same was confined only with the Kutch District. Similar, being the purpose and philosophy of the Government of India, while granting excise duty exemption, we may not separately take note of the back-ground thereof. In view of these facts, the question arises is - whether the Tribunal was justified in holding that Sales Tax and Excise duty exemption enjoyed by the assessee under the said subsidy scheme, was not taxable as revenue receipt. Such and similar issue has came up before different High Courts and Supreme Court on the numerous occasions. Reference to all those judgments would be un-necessary. However, the principle that has evolved is that, not the nomenclature of the subsidy or the fact that, the computation of the subsidy benefit is in terms of tax payable, would not be conclusive. What is to be examined in each case is the purpose for granting such subsidy. We may refer to the decision of the Supreme Court in case of CIT v. Chaphalkar Bro. [2017] 88 taxmann.com 178/[2018] 252 Taxman 360/400 ITR 279. It was a case arising out of judgment of this Court in which, the dispute between assessee and the Revenue was with respect to subsidy granted to the multiplex cinema operators in the form of entertainment tax waiver. The subsidy was granted in view of the fact that, industry was highly capital intensive. The Revenue argued that, the subsidy was revenue in nature. This Court after referring to several decisions of the Supreme Court including the case of CIT v. Ponni Sugars and Chemicals Ltd. [2008] 306 ITR 392/174 Taxman 87 and Sahney Steel and Press Works Ltd. v. CIT [1997] 94 Taxman 368/228 ITR 253 (SC) held that, subsidy had not been granted for construction but only after setting up of a new industry which was in the nature of assistance given for the purpose of carrying on business. 7. On further appeal by the Revenue, Supreme Court confirmed the decision of this Court. It was noted that, Maharashtra Government's subsidy was not in form of an exemption from payment of entertainment duty to multiplex theater complex. The scheme was introduced to start new cinema houses in the State. The Supreme Court observed that, in such circumstance, the purpose tests for grant of subsidy should be applied. It was concluded as under:— "Applying the aforesaid test contained in both Sahney Steel as well as Ponni Sugars, we are of the view that the object, as stated in the statement of objects and reasons, of the amendment ordinance was that since the average occupancy in cinema theatres has fallen considerably and hardly any new theatres have been started in the recent past, the concept of a complete family entertainment centre, more popularly known as multiplex theatre complex, has emerged. Those complexes offer various entertainment facilitate for the entire family as a whole. It was noticed that these complexes are highly capital intensive and their gestation period is quite long and therefore, they need Government support in the form of incentives qua entertainment duty. It was also added that Government with a view to commemorate the birth centenary of late Shri V. Shantaram decided to grant concession in entertainment duty to multiplex theatre complexes to promote construction of new cinema houses in the State. The aforesaid ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 6 of 42 object is clear and unequivocal. The object of the grant of the subsidy was in order that persons come forward to construct multiplex theatre complexes, the idea being that exemption from entertainment duty for a period of three years and partial remission for a period of two years should go towards helping the industry to set up such highly capital intensive entertainment centres. This being the case, it is difficult to accept Mr. Narasimha's argument that it is only the immediate object and not the larger object which must be kept in mind in that the subsidy scheme kicks in only post construction, that is when cinema tickets are actually sold. We hasten to add that the object of the scheme is only one - there is no larger or immediate object. That the object is carried out in a particular manner is irrelevant, as has been held in both Ponni Sugars and Sahney Steel." 8. In the present appeal also, as noted, the subsidy was granted under schemes framed by the State and the Central Government, to be given to the assesses who set up new industry in Kutch District. The scheme was envisaged to encourage investment which would in turn, provide fresh employment opportunity in the district which had suffered due to devastating earthquake. The computation of subsidy may be on the basis of sales tax or excise duty. Nevertheless, the purpose test would ensure that, the subsidy was capital in nature. 9. The second question raised by the Revenue is consequent of the first question, in which, the Revenue argues that, if the subsidy is treated as a capital in nature, the same must bring down assessee's costs of acquisition of plant and machinery. The assessee's claim of depreciation to that extent must shrink. Assessee argues that, the Tribunal correctly held that, the subsidy had not been given in relation to acquisition of plant or machinery and that, therefore, same cannot be adjusted towards cost of acquisition. 10. It is undoubted that, the subsidy had no relation to the assessee's acquisition of plant or machinery. It was to be granted to an industry which had set up the new industrial unit in the District of Kutch. In such back-ground, question - arises whether such subsidy would be adjustable towards assessee's costs of acquisition of capital assets. We may notice that, a similar question was considered by Division Bench of Gujarat High Court in case of CIT v. Grace Paper Industries (P.) Ltd. [1990] 183 ITR 591/52 Taxman 18. The Court noted that, the subsidy was granted by the Government for development of industries in back-ward areas. It was not part of the actual cost of plant or machinery. The Court, therefore, held that it could not have been deducted towards costs of acquisition. The Court held as under:— "We have carefully considered the provisions relating to the grant of cash subsidy under the schemes framed by the Central Government and the State Government. The Central Government as well as the State Government noticed that areas specified as backward areas and tribal areas were undeveloped or under-developed. Entrepreneurs were not willing to set up industries in such undeveloped or under-developed areas. The industries were concentrating only in urban areas. In other words, rapid urbanization was taking place. So far as the State of Gujarat is concerned, there was rapid industrial growth in cities like Baroda, Ahmedabad and Surat resulting in strain on municipal services. Urbanization created several problems such as pollution, growth of slums etc . It was also necessary to have balanced growth of industry in ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 7 of 42 different regions. However, as pointed out above, entrepreneurs were reluctant to set up industries in backward areas. These areas were identified as backward because there was un-development or underdevelopment of industries in these areas. It was, therefore, that the Government decided to give financial incentives to encourage and induce entrepreneurs to move to backward areas and establish industries there so that the region may develop and promote the welfare of the people living in that region. One of the incentives which the Government decided to grant was cash subsidy so that entrepreneurs could utilize such cash subsidy for any purpose connected with the establishment of industries in the backward areas. Once the decision to give cash subsidy was taken, the Government had to work out some method to determine the quantum of such subsidy. In other words, the question as to how the amount of cash subsidy should be determined had to be considered by the Government. The Government, in order to determine the amount of cash subsidy, decided to follow one of the recognized methods of working it out on the basis of the amount invested by an entrepreneurs in acquiring capital assets as cash subsidy. The scheme does not say as to in what manner the subsidy was granted is to be utilized. In other words, the entrepreneur to whom the subsidy was granted was free to utilize it in any manner he liked. It would, therefore, appear that quantification of subsidy on the basis of investment was a measure adopted by the Government for convenience to work out the subsidy. If subsidy could be utilized by the entrepreneur in any manner he liked, could it be said that it was granted for meeting the cost of the capital assets? In our opinion, taking an overall view of the various provisions of the scheme, it is difficult to hold that cash subsidy was granted to entrepreneur to meet the cost of the fixed assets or part thereof The cost of the fixed assets was merely adopted as a measure for working out subsidy. In fact, a careful examination of the scheme reveals that it is the value of the fixed assets and not its cost which is adopted as the basis for computing the amount of the subsidy. Emphasis on value and not the cost is evident from the fact that land and building already owned by an industrial unit, cost of tools, jigs, dies and moulds, transport charges, insurance premium, erection cost, value of second-hand machinery purchased by an industrial unit etc. were to be taken into account while computing the value of fixed assets for the purposes of subsidy. In other words, it was the value of the fixed assets which formed the basis for computation of subsidy to be granted under the scheme. Subsidy, in our opinion, did not meet the cost of the fixed assets directly or indirectly. Under the scheme of the Central Government or the scheme of the State Government, cash subsidy was quantified by determining the same at a specified percentage of the value/ cost of the fixed assets. Therefore, as observed above, the basis adopted for determining the cash subsidy with reference to the cost or value of fixed assets was only a measure for quantifying the subsidy and it could not be said that the subsidy was given for the specific purpose of meeting any portion of the cost of the fixed assets. The subsidy was granted to compensate the entrepreneur for the hardship and inconvenience which he might encounter while setting up industries in backward areas."‟ 11. Similar issue came up for consideration again before the Gujarat High Court in CIT v. Swastik Sanitary Works Ltd. [2006] 286 ITR 544. It was a case in which, the Government subsidy was intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries. In such a case, specified percentage of the fixed capital cost, which was the basis for determining the subsidy, would be granted. The Court held that, such basis for determining the subsidy was only a measure ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 8 of 42 adopted under the scheme to quantify the financial aid and it was not a payment, directly or indirectly to meet any portion of the actual cost of acquisition of capital asset. It was held and observed as under:— 'In so far as question No.2 is concerned, this court finds that the same is squarely covered by the decision of the Supreme Court in CIT v. P. J. Chemicals Ltd., [1994] 210 ITR 830. In the said case, after review of the law on the point, the Supreme Court has held as under (head note): "Where Government subsidy is intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, the specified percentage of the fixed capital cost, which is the basis for determining the subsidy, being only a measure adopted under the scheme to quantify the financial aid, is not a payment, directly or indirectly, to meet any portion of the 'actual cost The expression 'actual cost' in section 43(1) of the Income Tax Act,1961, needs to be interpreted liberally. Such a subsidy does not partake of the incidents which attract the conditions for its deductibility from 'actual cost'. The amount of subsidy is not to be deducted from the 'actual cost' under section 43(1) for the purpose of calculation of depreciation etc." 20. In view of these discussions, as also bearing in mind the entirety of the case, we uphold the plea of the assessee. The Assessing Office is, accordingly, directed to delete the impugned addition of Rs 46,83,11,376. The assessee gets the relief accordingly. 13. We see no reasons to take any other view of the matter than the view so taken by the Tribunal in assessee’s own case for the assessment year 2006-07. Respectfully following the same, we hold that the amount of Rs 53,23,56,012, being a capital receipt in nature, from the total income. The assessee gets the relief accordingly. 14. Ground no. 3 is thus allowed. 15. In grounds no. 4, the assessee has raised the following grievance: “That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified in confirming the disallowance of Employees Stock Option Expenses amounting to Rs.83,84,690 /-.” 16. Learned representatives fairly agree that the issue in the appeal is exactly the same as in the immediately preceding assessment year, i.e. 2006-07, cross-appeals for which were heard along with this set of cross-appeals, and whatever we decide for the assessment year 2006-07 will apply mutatis mutandis for this assessment year as well. Vide our order dated 3 rd November, we have decided this issue in favour of the assessee, and observed as follows: 27. So far as this grievance of the assessee is concerned, the relevant facts are like this. During the course of the assessment proceedings, the Assessing Officer noticed that the assessee had made a claim for a deduction of Rs 64,50,874 on account of the difference between the market price and the offer price. The Assessing officer, following the stand taken in the completed assessments for the assessment years 2000-1 and 2004-5, disallowed these expenses as „notional losses‟ and added that the ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 9 of 42 deductions would be admissible in the year in which the employees actually exercise the option and on the basis of law prevalent at that point of time. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. The assessee is not satisfied and is in further appeal before us. 28. Learned representatives fairly agree that the issue is now covered in favour of the assessee by decisions of the coordinate benches in assessee‟s own cases for the preceding assessment year, copies of which were also placed before us. We also find that in a rather recent order of the Tribunal, in the case of DCIT Vs Kotak Mahindra Bank Ltd [(2018) 168 ITD 529 (Mum)] and taking note of the special bench decision in the case of Biocon Ltd. v. Dy. CIT (LTU) [(2013) 144 ITD 21 (Bang)], has decided the said issue in favour of the assesee. We see no reasons to take any other view of the matter than the view so taken by the coordinate benches in assessee‟s own case. Respectfully following the same, we hold that the impugned addition of Rs 64,50,874 must stand deleted. Ordered, accordingly. 17. We see no reasons to take any other view of the matter than the view so taken by the Tribunal in assessee’s own case for the assessment year 2006-07. Respectfully following the same, we hold this disallowance of Rs 83,84,690 should be deleted. Ordered, accordingly. The assessee gets the relief accordingly. 18. Ground no. 4 is thus allowed. 19. In grounds no.5 , the assessee has raised two grievances: 5(a). That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in computing disallowance u/s 14A at Rs. 6,99,32,651/- without appreciating the fact that no expenditure has been incurred by the appellant for earning exempt income. 5(b). That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in computing disallowance u/s 14A at Rs. 6,99,32,651/- by applying a method akin to the method prescribed under Rule 8D without appreciating the fact that the same is not applicable to instant Assessment Year. 20. In ground no. 15, which is also a connected issue, the assessee has raised the following grievance: “That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the addition of expenditure incurred in relation to earning exempt income in computing Book Profit u/s 115JB without appreciating the fact that no such expenditure had been debited to the Profit & Loss A/c in the relevant assessment year.” 21. So far as these grievances of the assessee are concerned, it is sufficient to take note of the fact the period pertains to the period prior to the insertion of rule 8D, and that the issue in appeal is covered by decisions of the Tribunal in assessee’s own cases for the two immediately ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 10 of 42 preceding assessment years. The connected issue is whether the CIT(A)’s confirming the disallowance of such expenditure, for the purpose of computing the book profits under section 115JB, when no such expenditure was debuted to the profit and loss account. As for the first issue, we may refer to the decision of the Tribunal, in assessee’s own case for the assessment year 2006-07, wherein the Tribunal has, inter alia, observed as follows: 32. So far as these grievances of the assessee and the revenue are concerned, it is sufficient to take note of the fact that the assessee had earned tax exempt dividends aggregating to Rs 1,61,03,487, and did not offer any disallowance under section 14A in respect of expenses incurred to earn this tax-exempt income. The Assessing Officer computed the disallowance by invoking rule 8D and computed the same at Rs 30,61,20,000. Aggrieved, the assessee carried the matter in appeal before the CIT(A) but was only partly successful in the appeal. Learned CIT(A) upheld the action of the Assessing Officer in principle but made adjustments in quantum of disallowance by taking, for the purpose of computation under rule 8D (ii), interest costs not relatable to any particular income, as against the entire costs. The disallowance was thus scaled down to Rs 7,48,67,619. Both the parties are aggrieved. The assessee is in appeal of the disallowance of Rs 7,48,67,619 being confirmed and the rule 8D being invoked, and the Assessing Officer is aggrieved of the partial relief of Rs 23,21,52,381 having been granted to the assessee. 33. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 34. We have noted that as against the entire tax-exempt income of Rs 1,61,03,487, the disallowance under section is at Rs 30,61,20,000. Under no circumstances, the disallowance could have exceeded the tax- exempt income. In any event, this is pre- rule 8D period, and as is the settled legal position as of now, rule 8D cannot be invoked in respect of the pre- amendment period. We are of the considered view that disallowance @ 1% of tax-exempt income will meet the ends of justice for the reason that the period pertains to the pre- amendment law and rule 8D does not, therefore, has any application in the matter, and that, in accordance with a series of coordinate bench decisions, it has been consistently held so far as the pre-amendment period is concerned, a disallowance of 1% is reasonable- particularly when the assessee has made investments entirety out of his own funds and when there are no borrowings costs involved. It is an undisputed position, on the facts of this case, that the assessee has made the investments entirely out of his own funds. The disallowance is thus restricted to 1% of the tax-exempt income. The assessee gets the relief accordingly......... 22. We see no reasons to take any other view of the matter than the view so taken by the Tribunal in assessee’s own cases for the assessment years 2005-06 and 2006-07. Respectfully following the same, we restrict the disallowance under section 14A to 1% of tax-exempt income. Ordered, accordingly. The assessee gets the relief accordingly. As regards the question of adjustment of book profits under section 15JB for the 14A disallowance, we find that this aspect of the matter stands concluded, in favour of the assessee, by a special bench decision in the case of ACIT Vs Vireet Investments Pvt Ltd [(2017) 82 taxmann.com 415 (Del SB)]. The assessee gets relief on this point as well. 23. Ground nos. 5 and 15 are thus allowed. ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 11 of 42 24. In grounds no. 6, the assessee has raised the following grievance: “That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the A.O. in denying the claim of additional depreciation u/s 32 (1)(iia) amounting to Rs. 13,97,67,365/- on the eligible assets acquired during the Previous Year 2005-06 in computing total income under the normal provisions of the Act.” 25. So far as this grievance is concerned, the proposition canvassed before is that “looking to the intent of the Act, the machinery acquired after 1-4-2005 but installed in the previous relevant to the assessment year to the assessment year 2007-08 should qualify for claim of depreciation”. This aspect of the matter is no longer res integra. This issue is squarely covered by the judgment of the Hon’ble Gujarat High Court, in the case of PCIT Vs IDMS Ltd [(2017) 393 ITR 441 (Guj)]. The other aspect of the matter, and that is more relevant in the present context, is whether the additional depreciation is also to be granted in respect of the subsequent year. That aspect of the matter is covered by a coordinate bench decision in the case of DCIT Vs Gloster Jute Mills Limited [(2017) 88 taxmann.com 738 (Kol)], which has been subsequently followed by other benches- including Mumbai benches. The coordinate bench has inter alia observed as follows: 24. Ground No. 3 raised by the revenue reads as follows :- "3. That on the facts and in the circumstances of the case, Ld. CIT(A) has erred in law by allowing assessee's claim of additional depreciation of plant and machinery on original cost in the year subsequent to the year of acquisition and installation and thereby has erred in deleting the addition of Rs.54,21,617/- without appreciating the fact that such additional depreciation is allowable on plant and machinery only in the year of acquisition and installation." 25. This ground of appeal relates to the claim of the Assessee for additional depreciation u/s.32(1)(iia) of the Act. The undisputed facts are that the original cost of the new machinery purchased and installed by the Assessee after 31-3-2005 but before 1-4-2006 in the 100% EOU and DTA unit Rs.29,77,470 and Rs.2,41,30,615. The WDV of these machineries as on 1-4-2006 was Rs.24,51,920/- and Rs.1,81,50,266/- respectively. The Assessee availed of additional depreciation @ 20% on the original cost of the machinery at Rs.5,95,494/- and Rs.48,26,123/- respectively in AY 2006-07. In AY 2007-08 also the Assessee claimed additional depreciation at 20% of the original cost viz., Rs.5,95,494 and Rs.48,26,123 respectively in all depreciation totaling Rs.54,21,617/-. 26. According to the AO, the deduction u/s.32(1)(iia) of the Act is granted only to "new" plant and machinery and once depreciation is granted in the 1st year in which the machinery is installed or put to use, the machinery ceases to be a new machinery and therefore additional depreciation cannot be allowed. The plea of the ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 12 of 42 Assessee however was that Section 32(1)(iia) of the Act merely provides that further to the normal depreciation at the prescribed rates, an additional depreciation shall be allowed to the assessee at the rate of 20% on new plant and machinery acquired and installed after 31-03-2005. However, the period the period during which such additional depreciation shall be allowed is not specified in the Act. Thus, one may conclude that the allowance of additional depreciation shall not only be restricted to the initial year but continue to second and subsequent years. 27. The claim for additional depreciation was however rejected by the CIT(A) for the reason that additional depreciation is available only in respect of new plant and machinery acquired and installed after 31-03-2005. The word 'new' is not defined in the Act. According to the Shorter Oxford Dictionary the word 'new' means "not existing before; now made, or brought into existence, for the first time". The AO held that the assets on which additional depreciation was claimed by the assessee is neither "new" nor brought into existence in the hands of the assessee in the relevant previous year. It is already used in earlier years and is already depreciated and, therefore, old in the hands of the assessee in the previous year. He held that the qualification that the asset should be new was basic qualification for entitlement of additional depreciation as laid down in the provisions of Sec.32(1)(iia) of the Act and that conditions was not satisfied in the case of the Assessee. The AO accordingly disallowed the claim of the Assessee for additional depreciation. 28. Before we set out the conclusions of the CIT(A) on this issue, it would be worthwhile to examine the history of scheme of allowance by way of additional depreciation in the Act. 'Sec.32 Depreciation. (1) In respect of depreciation of— (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed— (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed; (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed: ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 13 of 42 Section 32(1)(iia) of the Act was originally introduced by the finance (no.2) Act, 1980 w.e.f. 1-4-1981 reads thus (the sub-section existed upto 31-3-1988 and was deleted thereafter): "(iia) in the case of any new machinery or plant (other than ships and aircraft) which has been installed after the 31st day of March, 1980 but before the 1st day of April, 1985, a further sum equal to one-half of the amount admissible under clause (ii) (exclusive of extra allowance for double or multiple shift working of the machinery or plant and the extra allowance in respect of machinery or plant installed in any premises used as a hotel) in respect of the previous year in which such machinery or plant is installed or, if the machinery or plant is first put to use in the immediately succeeding previous year, then in respect of that previous year :" Sec.32(1)(iia) of the Act as reinserted by finance (No.2) Act, 2002 w.e.f. 1-4-2003, reads thus: '(iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2002, by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to fifteen per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii): Provided that such further deduction of fifteen per cent shall be allowed to— (A) a new industrial undertaking during any previous year in which such undertaking begins to manufacture or produce any article or thing on or after the 1st day of April, 2002; or (B) any industrial undertaking existing before the 1st day of April, 2002, during any previous year in which it achieves the substantial expansion by way of increase in installed capacity by not less than *[ten per cent ]: "Subs. for "twenty-five per cent" by Finance (No. 2) Act, 2004, (w.e.f. 1-4-2005)." Sec.32(1)(iia) as substituted by Finance Act, 2005, (w.e.f. 1-4-2006) reads as follows: "(iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to twenty per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii):"' 29. It can be seen from the provisions of Sec.32(1)(iia) as it existed from 1-4-1981 to 31-3-1988 and reinserted subsequently from 1-4-2003 that the benefit for claiming additional depreciation was restricted only to the initial assessment year. However the provisions of Sec.32(1)(iia) as substituted by the finance Act, 2005 w.e.f. 1-4- 2006, the benefit for claiming additional depreciation was not so restricted to only to the intital assessment year. From AY 1981-82 to 87-88, the claim for additional ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 14 of 42 depreciation was restricted to previous year in which such machinery or plant is installed or, if the machinery or plant is first put to use in the immediately succeeding previous year. From AY 2003-04 till 2005-06, the claim for additional depreciation was restricted to previous year in which such undertaking begins to manufacture or produce any article or thing on or after the 1st day of April, 2002; or if any industrial undertaking existed before the 1st day of April, 2002, during any previous year in which it achieves the substantial expansion by way of increase in installed capacity by not less than ten per cent. From AY 2006-07, there is no restriction with regard to the year in which such additional depreciation should be allowed and also there is no restriction with regard to the additional depreciation being allowed only on the written down value and therefore the additional depreciation even in the second and subsequent years have to be allowed on the original cost of the Asset. These are evident from a plain reading and literal construction of the relevant statutory provisions. 30. The CIT(A) after considering the aforesaid scheme and history of the provisions of Sec.32(1)(iia) of the Act, deleted the addition made by AO observing as follows :— "I have considered the submissions of the Ld. A/R and find substance in the contention of the Appellant. On a conjoint reading of the provisions of section 32(1)(iia) inserted by Finance (No. 2) Act, 1980 and reinserted by Finance Act, 2002 it is evident that the said sections specifically restricted the allowability of additional depreciation in the year of installation of P&M. However, in the section 32(1)(iia) amended vide Finance Act, 2005 Legislature had omitted the proviso wherein it was provided that such depreciation could be claimed only in the initial assessment year. This being a specific omission it could be construed that the intent of the Legislature was not to restrict the allowance of additional depreciation to the year in which the assets are installed but also in the second and subsequent years provided that the aggregate depreciation does not exceed the cost of the asset. It is settled law that a fiscal statute has to be interpreted the basis of the language used therein and not interpreted out of context the same as held by Apex Court in the case of Orissa State Warehousing Corporation, Mohammad Ali Khan and Madurai Mills Co. Ltd. (Referred to by the Appellant.) Further, it is also imperative to state that Section 32(1)(iia) is a beneficial provision enacted with the view to provide benefit to the assessee. The same is also evident from the Explanatory Notes to the Finance Act, 2005 wherein it has been clarified that in order to encourage investment the provisions of sec. 32(1)(iia) have been amended. In so far as the language used in the provision in concerned one has to construe the language beneficially and in favour of the assessee as held by the Jurisdictional High Court in the case of Indian JuteMill Association in 134 ITR 68. ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 15 of 42 There is little merit in the contention of the AO that the asset is not new in the second year. In my view for claiming additional depreciation the assessee has to acquire and install the plant & machinery after 31-03-2005 and the same should be new in the year of installation. There is no requirement that the assets should be new in the year of claim of additional depreciation. For the reasons aforesaid I am of the view that in terms of provisions of Section 32(1)(iia), additional depreciation is available in AY 2006-07 and subsequent years in respect of all new plant & machinery acquired and installed after 31-03-2005 subject to overall criteria that total depreciation does not exceed the actual cost. Hence Ground No. 4 is decided in favour of the Appellant." 31. Aggrieved by the order of CIT(A) the revenue has raised ground no.3 before the Tribunal. The ld. DR placed reliance on the order of the AO. The ld. Counsel for the assessee submitted that fiscal statute shall be interpreted on the basis of the language used therein and not de hors the same. It was argued that Clause (iia) to Sec. 32(1) was first introduced vide Finance (No. 2) Act, 1980 w.e.f. 01-04-81 and was applicable till AY 1987-88. The clause was subsequently re-introduced vide Finance Act, 2002 w.e.f. 01-04-03. On perusal of clause (iia) to Sec. 32(1) as existed during the aforesaid period, it could be seen that the legislature conferred the benefit of additional depreciation only in the first AY when the asset was installed and first put to use. However vide Finance Act, 2005, clause (iia) to Sec. 32(1) was amended w.e.f. 01-04-06 wherein the condition of claiming additional depreciation only in the initial AY was deleted. It was submitted that since the specific condition for claim of additional depreciation in one year has been done away with, it should be construed as the intention of the legislature to allow additional depreciation in subsequent years as well. Reliance was placed on the following decisions wherein it has been held that a fiscal statute shall have to be interpreted on the basis of the language used therein and not de hors the same. Even if there is a casus omissus, the defect can be remedied only by legislation and not by judicial interpretation :— - Orissa State Warehousing Corpn. v. CIT [1999] 103 Taxman 623/237 ITR 589 (SC) - Prakash Nath Khanna v. CIT [2004] 135 Taxman 327/266 ITR 1 (SC) - Smt. Tarulata Shyam v. CIT [1977] 108 ITR 345 (SC) - Padmasundara Rao v. State of Tamil Nadu [2002] 255 ITR 147 (SC) Apart from the above, it was also pointed out that DTC Bill 2013 has proposed expressly that additional depreciation would be allowed in the FY in which the P&M is used for the first time and those provisions are not made with retrospective effect. It was argued that the legislature has consciously not restricted the allowance ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 16 of 42 of additional depreciation on the original cost for AY 2006-07 till AY 2013-14 to one year only and therefore the additional depreciation should be allowed on the original cost of the asset for the second and subsequent years as well. It was submitted that the condition imposed by the relevant provisions was that Plant and Machinery must be new at the time of installation to be eligible for additional depreciation u/ s 32(1)(iia) and not new in subsequent years. 32. We have given very careful consideration to the rival submissions and are of the view that the provision of section 32(1)(iia) as amended w.e.f. 01-04-2006 by the Finance Act 2005, there is no restriction that the additional depreciation will be allowed only in one year or that it would be allowed only on the written down value. The law as it prevailed prior to the said amendment imposed such a condition that additional depreciation will be allowed only in the year of installation of machinery or plant or the year in which it is first put to use or the year in which the concerned undertaking begins to manufacture or produce any article or thing or achieves substantial expansion by way of increase in installed capacity by 25%. The only objection of the AO is that the provisions refer to "new machinery or plant" and therefore the machinery will cease to be a new machinery after the end of the first year in which it is installed or put to use. In our view this stand taken by the revenue is not supported by the language of statutory provision. The condition imposed by the relevant provisions is that Plant and Machinery must be new at the time of installation to be eligible for additional depreciation u/ s 32(1)(iia) and not new in subsequent years. The expression "new machinery" is therefore to be construed as referring to the condition that at the time of acquisition or installation the machinery or plant should be new. Going by the legislative history of the relevant provision, we are of the view that the condition for allowing additional depreciation only in the initial assessment year ceased to exist as and from 01-04-2006. The plain language of the section warrants such an interpretation. We therefore uphold the order of CIT(A) and dismiss ground No.3 raised by the revenue. 26. In view of these binding judicial precedents, with which we are in considered agreement, we uphold the plea of the assessee on this point as well. The Assessing Officer, accordingly, is directed to grant the additional depreciation prayed for. 27. Ground no. 6 is thus allowed. 28. In grounds no. 7, the assessee has raised the following grievances: 7(a). That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming addition of unutilized CENVAT credit as on last day of accounting year being 31st March 2007 as adjustment under section 145A disregarding the fact that the appellant himself has already carried out ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 17 of 42 necessary adjustment u/s 145A which was duly certified by Tax Auditors and hence any further adjustment was not warranted. 7(b). That on the facts and in the circumstances of the case and without prejudice to ground no. 7(a) taken here in above, even if adjustment u/s 145A in respect of unutilized CENVAT credit is carried out, deduction for the same is available to the appellant under provisions of Section 43B since the appellant had paid excise duty payable on closing stock of cement as on last day of accounting year before filing of return of income for Assessment Year 2007-08 by adjusting unutilized CENVAT credit and necessary proofs for payment of excise duty are on the records of A.O. 29. Learned representatives fairly agree that the above issue is covered in favour of the assessee by decisions of the coordinate benches in assessee’s own cases from assessment years 1999-2000 to 2004-05. Copies of these decisions have been placed before us by the assessee. The same is the view of the Tribunal for the assessment years 2005-06 and 2006-07 as well. Learned Departmental Representative, however, relies upon the stand of the authorities below nevertheless. 30. We see no reasons to take any other view of the matter than the view so taken by the coordinate benches in assessee’s own case. Respectfully following the same, we uphold the plea of the assessee and direct the Assessing Officer to delete the impugned addition The assessee gets the relief accordingly. 31. Ground no. 7 is thus allowed. 32. In grounds no. 8, the assessee has raised the following grievances: 8(a). That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified in confirming the action of the A.O. in assessing Interest Income of Rs. 33,61,60,879 /- as income under the head "Income from Other Sources". 8(b). That on the facts and in the circumstances of the case and without prejudice to ground no. 8(a) taken here-in-above, necessary direction may please be given to the A.O. to allow deduction of expenditure incurred for earning the aforesaid income for the purpose of computing "Income from Other Sources" 33. Learned counsel, however, submits that the assessee does not wish to press this grievance, and these grounds of appeal, therefore, may be dismissed as not pressed. The prayer is accepted. The grounds of appeal are dismissed as not pressed. 34. Ground no. 8 is thus dismissed. 35. In grounds no. 9 and 10, the assessee has raised the following grievance: ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 18 of 42 9. “That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in confirming the denial of deduction u/s 80-IA on Infrastructure facility, being Rail Systems at Ropar, Maratha and Sankrail on the contention that prescribed certificates were not filed along with the return of income.” 10. “That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the denial of deduction u/s 80IA on Infrastructure facility, being Port at Muldwarka unit on the contention that prescribed certificates were not filed along with the return of income.” 36. Having heard the rival contentions and having perused the material on record, we find that, as noted by the authorities below, the form 10CCB is not filed in this case, and that is a mandatory requirement under section 80IA(7) for making a claim under section 80IA. While it has been contended before us that the form 10CCB was filed alongwith the revised return of income, the material before us does not evidence so. In the orders of the Assessing Officer as also the CIT(A), it is specifically submitted that the form 10CCB is not filed by the assessee. In this view of the matter, and the absence of clarity on this factual aspect, we deem it fit and proper to remit the matter to the file of the Assessing Office for fresh adjudication by way of a speaking order, in accordance with the law and after giving a fair and reasonable opportunity of hearing to the assessee. Ordered, accordingly. 37. Ground nos. 9 and 10 are thus allowed for statistical purposes in the terms indicated above. 38. In ground no. 11, the assessee has raised the following grievance: 11(a). That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in confirming the decision of the AO/TO that interest paid by the appellant under Bare Boat Charter cum Demise Arrangement entered with its Associated Enterprise, Ceylon Ambuja International Limited, Mauritius is not at arm's length. 11(b). That on the facts and in the circumstances of the case, Ld. CIT (Appeals) was not justified and grossly erred directing the AO/TPO to determine the arm's length rate of interest in respect of Bare Boat Charter cum Demise Arrangement at LIBOR plus 350 basis points based on the ceiling prescribed in respect of external commercial borrowings by Indian corporates for the purposes of capital account transactions under the RBI guidelines. 39. While dealing with this ground of appeal of the assessee, we also consider it appropriate to take up a connected ground of appeal of the Assessing Officer (i.e. ground no. 8) which is as follows: "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the TPO/AO to apply LIBOR Plus 350 point as a benchmark for ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 19 of 42 determining the ALP regarding payment of interest for purchase of ships under BBCD arrangement without appreciating the fact that LIBOR Plus 350 basis point is upper limit provided by the RBI circular for the purpose of ECB and assessee for the relevant year was having AA+ to AAA as credit rating." 40. Learned representatives fairly agree that whatever is decided on the above issue for the assessment years 2005-06 and 2006-07, the appeals for which were heard along with this set of cross-appalls will apply mutatis mutandis for this assessment year as well. Vide our order dated 31 st October 2022, and while dealing with the assessment year 2005-06, we have held as follows: So far as this grievance of the assessee is concerned, the relevant material facts are as follows. During the course of proceedings before the Transfer Pricing Officer, to whom the ascertainment of arm‟s length price of the international transactions entered into by the assessee with its AEs was referred, it was noticed that the assessee made payment of US$ 1,93,800 towards instalment payments for two ships under BBCD (Bare Boat cum Charter Demise) arrangements for two vessels, namely MV Ambuja Bhawani and MV Ambuja Lakshmi, from its AE- namely Cement Ambuja International Limited, Mauritius (CAIL). These two vessels were self loading bulk cement carriers, and the entire arrangement was routed through, and duly approved by, the RBI. It was noted that under the terms of arrangement, the assessee company was to pay to CAIL ten half-yearly instalments of US$ 7,69,500 for both of these vessels, and the implicit interest rate, under the arrangement, was 7.5% p.a. The TPO also noted that the CAIL had obtained loan of US $ 7 million from the Bank of America, Taipei office, to part finance the vessels, and that interest rate on this financing by the CAIL was LIBOR plus 1.5% for first three years, and +1.55% for the rest of the two years. The TPO was of the view that the interest differential between the interest charged to the assessee and interest paid by the CAIL to Bank of America was mutually beneficial to the assessee as also the CAIL and should have been equally shared between the two. The total interest paid by the assessee, during the relevant previous year, was US $ 1,93,800, whereas CAIL paid interest of US $ 1,06,980 to the Bank of America. The difference of US $ 86,820 was equally shared between the assessee and the CAIL, and, accordingly, an arm‟s length price adjustment of US $ 43,40, which was computed as equal to Rs 18,93,544 was made. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without complete success. Learned CIT(A) held that the interest transaction between the assessee and the CAIL needs to be benchmarked, and based on an average interest rate of LIBOR (six months average) plus 3.5% for borrowings of more than 5 years- as per RBI statistics, the CIT(A) adopted the ALP at six months LIBOR plus 3.5%. None of the parties is satisfied and both the parties are in appeal before us. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 20 of 42 As learned CIT(A) has rightly noted, what needs to be benchmarked is the transaction between the assessee and its AE, and that transaction, in our considered view, is to be considered in a broader context- rather than as a simplistic borrowing transaction, which it is not. The assessee has taken the vessels under a BBCD arrangement and, while entering into this arrangement, the AE essentially has to factor in the financing arrangement. The consideration for the BBCD instalments is based on the cost of finance, as also the cost of vessels, to the AE, and, as such, there is no occasion for sharing the difference between the interest rate implicit in the BBCD arrangement and the cost of borrowing to the AE. While examining the rate of interest under the BBCD also, one has to bear in mind the fact that it cannot be compared with a borrowing arrangement simpliciter as are the transactions on which LIBOR plus rates apply. Learned Departmental Representative has not been able to show any justification for LIBOR plus 300 bps either, and his challenge primarily is even to this approach of benchmarking. There is thus no material before us to support the findings of the CIT(A) in any case, and the findings of the AO, as noted above and in our considered view, are unsustainable in law anyway. In any event, interest is only one part of the working in the computation of instalments, and one cannot consider the same on a standalone basis in the transaction. The benchmarking is to be done for the entire transaction and not a small and isolated transaction segment. The interest rate of 7.5% implicit in the BBCD arrangement is a part of the pricing and cannot be considered separately In the case of Essar Shipping Limited Vs DCIT [(2009) 27 SOT 409 (Mum)], a coordinate bench of this Tribunal has taken note of the working showing interest rate @ 8%, which has remained unchallenged by the revenue. We have also noted that the payments under the BBCD arrangements were made with specific regulatory approval prescribed by the RBI, and there are coordinate bench decisions, such as in the case of ACIT Vs Dow Agrosciences India (P.) Ltd. [(2016) 76 taxmann.124 (Mum)], holding that when such regulatory approvals are duly obtained, that approval can also be viewed in support of the transaction price as an arm‟s length price. In any event, the total ALP adjustment is less than Rs 20 lakhs, and the relevant financial period is almost 20 years ago, it may not even be appropriate to even remit the matter for fresh consideration at the TPO stage. Keeping in all these factors, as also the entirety of the case, in mind, we deem it fit and proper to delete the impugned ALP adjustment of Rs 18,93,544. The assessee gets the relief accordingly. Ground no. 15 of the assessee is thus allowed, and ground no. 11 of the revenue is thus dismissed. 41. We see no reasons to take any other view of the matter than the view so taken for the immediately preceding assessment year. Respectfully following the same, we uphold the grievance of the assessee and delete the impugned ALP adjustment. The assessee gets the relief accordingly. Once the ALP adjustment is deleted, grievance against partial relief granted by the ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 21 of 42 CIT(A) becomes infructuous. The revenue’s grievance must stand dismissed for this short reason. 42. Ground no. 11 of the assessee is thus allowed, and ground no. 8 of the revenue is thus dismissed as infructuous. 43. In grounds no. 12, the assessee has raised the following grievance: “That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the disallowance of compensation paid to L&T amounting to Rs. 3,00,00,000/-, being revenue in nature.” 44. As far as this grievance is concerned, we have noted that the assessee has been given alternative relief by way of 15% depreciation on the capitalized amount as above, and, in any event, no specific arguments have been advanced before us. This ground of appeal is, accordingly, dismissed as not pressed in effect. 45. Ground no. 12 is thus dismissed. 46. In grounds no. 13, the assessee has raised the following grievance: “That on the facts and circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in not allowing deduction of leave encashment claimed on provision basis amounting to Rs. 6,81,07,284/-.” 47. Learned representatives fairly agree that whatever is decided on the above issue for the assessment year 2006-07, the cross-appeals for which were heard along with this set of cross- appalls will apply mutatis mutandis for this assessment year as well. While dealing with the assessment year 2006-07, we have held as follows: 44. Learned counsel for the assessee fairly submits that the issue now stands covered against the assessee, and deduction on a provision basis is indeed inadmissible. He, however, prays that a direction may be given that the Assessing Officer at least allows it on a payment basis as and when the payments are actually made. Learned Departmental Representative does not oppose this prayer, though he adds that the deduction can only be allowed when it is otherwise admissible, and that aspect of the matter will have to be examined by the Assessing Officer. That is indeed the correct approach. While we dismiss the grievance of the asseseee, we make it clear that the Assessing Officer will take a call, as and when the payment is actually made, on the admissibility of deduction in accordance with the law. 48. We have no reasons to take any other view of the matter than the view so taken by us in assessee’s own case. The grievance of the assessee is, in terms of and subject to the above observations which will apply mutatis mutandis in this assessment year as well, rejected. 49. Ground no. 13 is thus dismissed. ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 22 of 42 50. In grounds no. 14, the assessee has raised the following grievance: “That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in not allowing exclusion of Education Cess on Income Tax, Dividend Distribution Tax and Fringe Benefit Tax aggregating to Rs. 11,23,35,294/- in computing total income under the normal provisions of the Act.” 51. Learned counsel, however, submits that the assessee does not wish to press thisgrievance, and these grounds of appeal, therefore, may be dismissed as not pressed. The prayer is accepted. The ground of appeal is dismissed as not pressed. 52. Ground no. 14 is thus dismissed in the terms indicated above. 53. Ground no. 15 has already been dealt with earlier along with the related ground no. 5. No further adjudication is thus called for. 54. In grounds no. 16, the assessee has raised the following grievance: “That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in not allowing exclusion of Sales Tax Incentive and Excise Duty Exemption availed during the year under consideration amounting to Rs. 3,40,61,34,213/- and Rs. 53,23,56,012/- respectively, being capital in nature, in computing Book Profit u/s 115JB of the Act.” 55. Learned representatives fairly agree that the above issue is now covered, in favour of the assessee, by Hon’ble Calcutta High Court’s judgment in the case of PCIT Vs Ankit metal & Power Ltd [(2019) 416 ITR 591 (Cal)], by Hon’ble jurisdictional High Court’s judgment in the case of CIT Vs Harinagar Sugar Mills Ltd [ITA No 1132 of 2014, dated 4 th January 2017] and by a coordinate bench decision in the case of ACIT Vs JSW Steel Limited [(2019) 112 taxmann.com 55 (Mum)]. Learned Departmental Representative, however, relied upon the stand of the authorities below. 56. We find that a coordinate bench of this Tribunal, in JSW Ltd’s case (supra), has inter alia, observed as follows: 47. We further noted that Hon'ble Kolkata High Court, in the case of Pr. CIT v. Ankit Metal & Power Ltd. [2019] 109 taxmann.com 93/266 Taxman 237 Ltd. had considered an identical issue and after considering the decision of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) held that when a receipt is not in the character of income as defined under section 2(24) of the I.T. Act, 1961, then it cannot form part of the book profit u/s 115JB of the I.T. Act, 1961. The Hon'ble High court, further observed that sales tax subsidy received by the assessee is capital receipt and does not come within definition of income under section 2(24) of the I.T. Act, 1961 and when, a receipt is not a in the nature of income, it cannot ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 23 of 42 form part of book profit u/s 115JB of the I.T. Act, 1961. The Court, further observed that the facts of case before the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) were altogether difference, where the income in question was taxable, but was exempt under a specific provision of the Act, and as such it was to be included as a part of book profit, but where the receipt is not in the nature of income at all, it cannot be included in book profit for the purpose of computation u/s 115JB of the I.T. Act, 1961. 48. We further noted that the ITAT special bench of Kolkata Tribunal, in the case of Sutlej Cotton mills Ltd. v. Asstt. CIT [1993] 45 ITD 22 (Cal.) (SB), held that a particular receipt, which is admittedly not an income cannot be brought to tax under the deeming provisions of section 115J of the Act, as it defies the basic intention behind introduction of provisions of section 115JB of the Act. The ITAT Jaipur bench, in case of Shree Cement Ltd. (supra) had considered an identical issue and held that incentives granted to the assessee is capital receipt and hence, cannot be part of book profit computed u/s 115JB of the Act. Similarly, the ITAT Kolkata Bench, in the case of Sipca India (P.) Ltd. v. Dy. CIT [2017] 80 taxmann.com 87 (Trib.) had considered an identical issue and held that when, subsidy in question is not in the nature of income, it cannot be regarded as income even for the purpose of book profit u/s 115JB of the Act, though credited in the profit and loss account and have to be excluded for arriving at the book profit u/s 115JB of the Act. 49. Insofar as, case laws relied upon by the department , we find that all those case laws have been either considered by the Tribunal or High Court and came to conclusion that in those cases the capital receipt is in the nature of income, but by a specific provision, the same has been exempted and hence, the came to the conclusion that, once particular receipt is routed through profit and loss account, then it should be part of book profit and cannot be excluded, while arriving at book profit u/s 115JB of the Act 1961. 50. In this view of the matter and considering the ratio of case laws discussed hereinabove, we are of the considered view that when a particular receipt is exempt from tax under the Income tax law, then the same cannot be considered for the purpose of computation of book profit u/s 115JB of the I.T.Act 1961. Hence, we direct the Ld. AO to exclude sales tax subsidy received by the assessee amounting to Rs. 36,15,49,828/- from book profits computed u/s 115JB of the I.T. Act, 1961. 57. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench. Respectfully following the same, we uphold the plea of the assessee and direct the Assessing Officer to exclude the sales tax incentive subsidy for computing book profit under section 115 JB of the Act. The assessee gets the relief accordingly. 58. Ground nos. 16 is thus allowed in the terms indicated above. 59. No other issue was raised before so far as the appeal of the assessee is concerned. ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 24 of 42 60. In the result, the appeal of the assessee is partly allowed in the terms indicated above. 61. We will now take up the appeal filed by the Assessing Officer. 62. In ground no. 1, the Assessing Officer has raised the following grievance: “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing sales Tax incentives received under various schemes of different states amounting to Rs. 3,28,05,13,532 / - computed in total income by treating it capital in nature.” 63. This is an issue coming up time and again in the appeals in the case of the assessee, and, as learned representatives fairly agree, whatever we decide on the cross-appeals for the assessment years 2005-06 and 2006-07, which were heard along with these cross-appeals, will apply mutatis mutandis here as well. In our order for the assessment year 2006-07, while deciding the issue in favour of the assessee, we have inter alia observed as follows: 5. This is a legacy issue. The Assessing Officer has simply followed the stand taken by him in the preceding assessment years. In appeal, learned CIT(A), on the same lines as his stand in the immediately preceding assessment year, analysed the schemes in detail and held, except for Rajasthan and Himachal Pradesh Government‟s sales tax subsidy scheme, all other schemes categorically state the object and purpose as promotion of industries and allied purposes. So far as Rajasthan and Himachal Pradesh Government Schemes are concerned, learned CIT(A) noted that the scheme does not specifically mention such objects and simply provide for the eligibility. In the absence of a specific mention of the purpose, the CIT(A) held that these subsidies are required to be treated as revenue receipts in nature. None of the parties is satisfied and both the parties are in appeal before us- the assessee is aggrieved of the receipts on account of HP and Rajasthan State Government sales tax subsidy schemes being treated as revenue in nature, and the Assessing Officer is aggrieved of the relief being granted by the CIT(A) in respect of other sales tax exemption and remissions being treated as capital receipts in nature. 6. Learned representatives fairly agree that materially identical issues have come up for our consideration in the assessment year 2005-06, and whatever we decide for the assessment year 2005- 06 will follow mutatis mutandis in this assessment year as well. 7. Vide our order dated 31 st October 2022, accepting the plea of the assessee and rejecting the plea of the revenue, we have held as follows: 5. The relevant material facts, so far as necessary for adjudication of these grievances, are as follows. The assessee before us is a company engaged in the business of manufacturing of cement and generation of electricity. The assessee has set up its plants in different parts of the country, and as the location of some of these plants was in backward areas, the assessee had received certain sales tax concessions from the respective State Governments. These concessions were in the nature of exemptions and remissions etc, and were granted under specific schemes announced, under the industrial policies, from time to time. During the relevant previous year, the assessee received amounts aggregating to Rs 169,93,34,752, but all these receipts were treated as tax exempt on account of being in the nature of capital receipts. When income tax return filed by the assessee was subjected to the scrutiny assessment proceedings, the Assessing Officer noticed that the assessee had a lodged a claim for exclusion of Rs 169.93 crores, being sales tax exemption/incentives received by it, as capital receipt, and ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 25 of 42 hence not liable to tax. The Assessing Officer declined this claim, primarily on the basis of certain observations in the judgments in the cases of Tamilnadu Sugar Corporation Ltd Vs CIT [(2001) 251 ITR 843 (Mad)], CIT Vs Rajaram Maize Products [(2001) 251 ITR 427 (SC)], CIT Vs S Kumars Tyre Manufacturing Co [(2004) 266 ITR 325 (MP)], and CIT Vs Abhishek Industries Ltd [(2006) 286 ITR 1 (P&H)]. The entire amount of Rs 1169.93 crores was added to income of the assessee. Aggrieved, assssee carried the matter in appeal before the CIT(A). Learned CIT(A) took note of the fact that these amounts pertained to five different units under four schemes- namely Maharshtra‟s Dispersal of Industries Package Scheme of Incentives 1993 (Maratha Unit), Punjab‟s Industrial Incentives Code under the Industrial Policy, 1996 (Ropar and Bhatinda Units), Rajasthan‟s Sales Tax New Incentives Scheme for Industries, 1989 (Rabriyawas Unit), and Exemptions/ Concessions to Industries Excise & Taxation Department Notification No EXN C(9)2/9- dated 31-1-2-1994 (Himachal Unit). He discussed these schemes in quite a bit of detail-to the extent wordings of the preamble of the schemes are concerned, and concluded that while the amounts aggregating to Rs 130,57,12,796, in respect of Punjab and Maharashtra Schemes, are indeed capital receipts in nature, and exempt from tax as such, the amounts aggregating to Rs 39,36,21,956 are revenue in nature, and to that extent the Assessing Officer was justified in including the same in taxable income. None of the parties is satisfied. While the assessee is aggrieved of the amount of Rs 39,36,21,956 being included in his taxable income, the Assessing Officer is aggrieved of the learned CIT(A)‟s granting relief of Rs 130,57,12,796. Both parties are in appeal before us. 6. We have heard the rival contentions, perused the material on record, and duly considered the facts of the case in the light of the applicable legal position. 7. We find that the learned CT(A) has, in his elaborate analysis, primarily followed the Special Bench decision in the case of DCIT Vs Reliance Industries Ltd [(2004) 88 ITD SB 273 (Mum)]. Upon analysis of this decision, he has noted that „for deciding the nature of subsidy, whether capital or revenue, what should be seen and examined is the purpose for which the subsidy has been given, and not the timing of the subsidy or the manner in which it has been given to the industry‟, as is also held by Hon‟ble Supreme Court in the case of CIT Vs Ponni Sugar and Chemicals Ltd [(2008) 306 ITR 392 (SC)]. A large number of judicial precedents have been cited in this context. Learned CIT(A) has then held that so far as the object and purpose for which the subsidy is given, only the subsidy schemes of the Maharashtra and Punjab State specifically state that the subsidies in question are for achieving dispersal of industries outside Mumbai, to attract them to the underdeveloped and developing areas of the State, and to promote the growth of the industry in the State, in the preamble to the scheme. It is on this basis that he has held that so far as the subsidies given by the Maharashtra and Punjab States are concerned, these are required to be treated as capital in nature, whereas, the subsidies received from the State Governments of Himachal Pradesh and Rajasthan, in the absence of specific mention to the effect in the preambles of the subsidy schemes that these subsidies are required to be held to be revenue in nature. However, in our considered view, the approach of discerning the purpose of the subsidy, solely from the specific words used in the preamble of the scheme and without examining the overall scheme of the Act- which is admittedly to promote the growth of industry, is incorrect and superficial. The subsidies so received can be said to be revenue in nature unless these subsidies are for augmenting the profits of the assessee, and that is not even the case of the revenue. The CIT(A) is simply swayed by the wording of the preamble of the scheme- something clearly impermissible. These subsidy schemes are materially similar in nature, and there are, by now, a number of decisions of the coordinate benches, as also Hon‟ble Courts above, dealing with these schemes. It is also important to bear in mind the fact that the subsidies received by the assessee are in the nature of sales tax subsidies, and dealing with sales tax subsidies, Hon‟ble Gujarat High Court, in the case of CIT Vs Nirma Ltd [(2017) 397 ITR 49 (Guj)], has observed as follows: ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 26 of 42 7. So far as second issued as to Whether the Appellate Tribunal was right in law and on facts in upholding the decision of the CIT (A) and in directing the Assessing Officer to consider the Sales-tax exemption benefit of Rs. 5,45,81,171/- as capital receipts is concerned, Mr.Mehta contended that in view of the decision of the Calcutta and Punjab High Court, the Tribunal has committed an error in reversing the view taken by CIT (Appeals) so far as Tax Appeal No.226 of 2010 is concerned, wherein the CIT (A), after discussing the evidence has held in favour of the department. In this regard, he has relied upon the decision of High Court of Bombay in the case of CIT v. Reliance Industries Ltd. [2010] 8 taxmann.com 218/[2011] 339 ITR 632, wherein it is held that object of subsidy being to set up new units in backward area is a capital receipt and another decision of High Court of Calcutta in the case of CIT v. Chhindwara Fuels [2001] 114 Taxman 707/[2000] 245 ITR 9, wherein it is held that subsidy in the form of refund of sales-tax received after commencement of production cannot be treated as capital receipt. 8. On the other hand, Mr. Soparkar, learned counsel appearing for the respondent contended that so far as Tax Appeal No.226 of 2010 is concerned, after discussing the evidence on record, the Tribunal has followed earlier decision and discussed the issue in detail in para 54 and 55 of its decision, which reads as under:— "54. Per contra, the learned D.R. Supported the orders passed by the Assessing Officer and the learned CIT (A). Referring to the judgment in Sahney Steel and Press Works Limited v. CIT 228 ITR 253 (SC), he submitted that the impugned sales tax exemption increased the profits of the assessee by eliminating the expenses which the assessee would have had to incur later and therefore the impugned receipts were in the revenue field. He also referred to Explanation (10) to Section 43 (1) of the Income Tax Act inserted in with effect from 01/04/99 to emphasise that the action of the assessee in not reducing the cost of assets by the amount of subsidy for working out the Written Down Value was indicative of the fact that the impugned receipts were not in the nature of capital receipts. 55. We have heard both the parties and considered their rival submissions. Perusal of the scheme extending the aforesaid incentives to "prestigious" units announced by Government of Gujarat on 26/07/91 makes it amply clear that the scheme was announced to attract investment in core sector industry having potential, to spur industrial growth in ancillary, tertiary and secondary sector of the economy. The other scheme announced by the Government of Gujarat as Capital Investment Incentive Scheme on 11th September 1995 was intended to attract investments to generate greater employment in less industrially developed areas of Gujarat and also to secure balanced development of industries in Gujarat through dispersal of industries in the most backward area and backward areas. It is thus clear that the object of both the scheme was to ensure development of backward areas or for development of core sector industries in the State or for generating the employment. Perusal of both the schemes shows that the incentives extended to the eligible units were, inter alia, through exemption from payment of Sales Tax. Thus, the object of both the schemes was to attract capital investment to ensure development of backward areas and the modality or mechanism chosen to attract such investment was, inter alia, through exemption from payment of sales tax." 9. He further contended that in view of decisions of this Court in CIT v. Birla VXL Ltd. [2013] 32 taxmann.com 330/215 Taxman 117 (Guj.) and in Dy. CIT v. Munjal Auto Industries Ltd. [2013] 37 taxmann.com 115/218 taxman 135 (Guj.) the issue is squarely covered and the decisions which are sought to be relied upon by learned ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 27 of 42 advocate for the appellant are not applicable in the facts of the present case. In the case of Birla VXL Ltd. (supra), this Court has observed as under:— '12. It can thus be straightaway seen that the benefit, though computed in terms of the Sales Tax liability in the hands of the recipient, the same was not mean to give any benefit on day-to-day functioning of the business, or for making the industry more profitable. The principle aim of the scheme was to cover the capital outlay already made by the assessee in undertaking special modernization of its existing industry. 13. In a recent decision dated 28th January 2013 in Tax Appeal No. 450 of 2012 and connected appeals, we had an occasion to examine the nature of incentives received by the assessee from the State Government in the form of entertaining tax waiver for setting up multiplexes. In such context, we had in wake of the revenues contention that the receipt was revenue in nature, held and observed as under : "From the provisions of the said scheme, it clearly emerges that the subsidy though computed in terms of sales tax deferment or waiver, in essence it was meant for capital outlay expended by the assessee for set up of the unit in case of a new industrial unit and for expansion and diversification of an existing unit. As noted, such subsidy was available only to a new industrial unit or a unit undertaking expansion or diversification. Fixed capital investment has been defined as to include various investments in land under use, new construction, plant and machinery etc. The entitlement was related to percentage of fixed capital investment. It is undoubtedly true that such subsidy was computed in terms of sales tax deferment and necessarily therefore, would accrue to an industry only once the commercial production commences. However, this by itself would not be either a sole or concluding factor. In case of Sahney Steel and Press Works Ltd. and others v. Commissioner of Income-tax reported in 228 ITR 253, the Apex Court held and observed that the character of the subsidy in the hands of the recipient whether revenue or capital will have to be determined, having regard to the purpose for which the subsidy is given. The source of fund is quite immaterial. If the purpose is to help the assessee to set up its business or complete a project the monies must be treated as having been received for capital purposes. But, if monies are given to the assessee for assisting him in carrying out the business operations and given after the satisfaction of the conditions of commencement of production, such subsidy must be treated as assistance for the purpose of the trade." 14. In the result, we do not find that the Tribunal has committed any error. No question of law, therefore, arises. Tax Appeals are therefore dismissed.' 10. In the case of Munjal Auto Industries Ltd. (supra), this Court has observed as under:— "7. From the provisions of the said scheme, it clearly emerges that the subsidy though computed in terms of sales tax deferment or waiver, in essence it was meant for capital outlay expended by the assessee for set up of the unit in case of a new industrial unit and for expansion and diversification of an existing unit. As noted, such subsidy was available only to a new industrial unit or a unit undertaking expansion or diversification. Fixed capital investment has been defined as to include various investments in land under use, new ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 28 of 42 construction, plant and machinery etc. The entitlement was related to percentage of fixed capital investment. 8. It is undoubtedly true that such subsidy was computed in terms of sales tax deferment and necessarily therefore, would accrue to an industry only once the commercial production commences. However, this by itself would not be either a sole or concluding factor. In case of Sahney Steel and Press Works Ltd. and others v. Commissioner of Income-tax reported in 228 ITR 253, the Apex Court held and observed that the character of the subsidy in the hands of the recipient whether revenue or capital will have to be determined, having regard to the purpose for which the subsidy is given. The source of find is quite immaterial. If the purpose is to help the assessee to set up its business or complete a project the monies must be treated as having been received for capital purposes. Such But if monies are given to the assessee for assisting him in carrying out the business operations and given after the satisfaction of the conditions of commencement of production, such subsidy must be treated as assistance for the purpose of the trade." 11. He also submitted that in view of above decisions, these appeals may not be entertained. 12. We have heard both the learned counsel and perused the record. We have also gone through the decisions cited before us. After considering the material on record, we are of the view that the issues involved in these appeals are squarely covered by the decisions of this Court in Birla VXL Ltd. (supra) and in Munjal Auto Industries Ltd. (supra). Therefore, the questions of law posed for our consideration in these appeals are answered in favour of the assessee and against the department. Accordingly, all these appeals are dismissed. 8. In the case of JCIT Vs Grasim Industries Limited ( ITA Nos 2155/Mum/2016 and Ors; order date 29 th April 2022), a coordinate bench has dealt with these legal issues in considerable detail and observed as follows: 5.3.5. ............. the dominant purpose for which the incentive scheme per se introduced by the respective State Governments was only for the purpose of setting up of industries in the respective areas for industrial development in State and also to accelerate development and absolutely not for augmenting the profits of the assessee. Effectively, the schemes of various State Governments envisaged the rapid industrialisation, growth and new employment generation in the respective areas which would in turn promote the growth of the State. Hence, it could be safely concluded that subsidy / incentive granted is only for setting up of the units based on the fixed percentage of the capital cost and not for running the business of the assessee. Moreover, even this subsidy which is determined based on sales tax assessment orders for 9 years, 6 years etc., are subject to maximum outer limit already fixed under the respective schemes. Though the quantification of the subsidy has been made post commencement of business, the measurement of subsidy is immaterial. In our considered opinion, none of the schemes contemplated to finance the assessee in the form of subsidy / incentive for meeting the working capital requirements of the assessee company post commencement of business. Hence, by applying the purpose test, apparently, the subsidy / incentive received in the instant case would only have to be construed as capital receipts not chargeable to income tax. In this regard, we find that ld. AR placed reliance on the decision of Hon‟ble Supreme Court in the case of Ponni Sugars and Chemicals Ltd., reported in 306 ITR 392, wherein the incentive conferred under that scheme were two fold. First, in the nature of higher free sale sugar quota and second, in allowing the manufacturer to collect Excise duty on sale ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 29 of 42 price on the free sale sugar in excess of the normal quota, but to pay to the Government only the Excise duty payable on the price of levy sugar. The Hon‟ble Supreme Court in para 14 of its decision had held that “character of receipt of subsidy has to be determined with respect to the purpose for which the subsidy is given. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial.” In fact, the Hon‟ble Supreme Court while rendering this decision had duly considered its earlier decision in the case of Sahney Steel and Press Works Ltd., reported in 228 ITR 253 and had absolutely no quarrel with that judgement. Rather, it concurred with the decision rendered in Sahney Steel and Press Works Ltd., case. In this regard, it would be relevant to reproduce the operative portion of the decision of Hon‟ble Supreme Court in the case of Ponni Sugars and Chemicals Ltd., as under:- 14. The second case is Lincolnshire Sugar Co. Ltd. v. Smart 20 TC 643. In that case it was found that Lincolnshire Sugar Co. Ltd carried on the business of manufacturing sugar from home grown beet. The company was paid various sums under British Sugar Industry (Assistance) Act, 1931, out of monies provided by the Parliament. The question was whether these monies were to be taken into account as trade receipts or not. The object of the grant was that in the year 1981, in view of heavy fall in prices of sugar, sugar industries were in difficulty. The Government decided to give financial assistance to certain industries in respect of sugar manufactured by them from home- grown beet during the relevant period. Lord Macmillan held that— "What to my mind is decisive is that these payments were made to the company in order that the money might be used in their business." He further observed that: "I think that they were supplementary trade receipts bestowed upon the company by the Government and proper to be taken into computation in arriving at the balance of the company's profits and gains for the year in which they were received." 15. In the case before us, the payments were made to assist the new industries at the commencement of business to carry on their business. The payments were nothing but supplementary trade receipts. It is true that the assessee could not use this money for distribution as dividend to its shareholders. But the assessee was free to use the money in its business entirely as it liked and was not obliged to spend the money for a particular purpose like extension of docks as in the Seaham Harbour Dock Co. 5 case (supra). 16. There is a Canadian case St. John Dry Dock & Ship Building Co. Ltd. v. Minister of National Revenue 4 DLR 1, which has close similarity to the case of Seaham Harbour Dock Co. 's case (supra). In that case it was held that where subsidies were given under statutory authority, the statutory purpose for which they are authorised is relevant and may even be decisive in determining whether it is taxable income in the hands of the recipient. In that case, it was pointed out after discussing the Seaham Harbour Dock Co. 's case (supra)as well as that of Lincolnshire Sugar Co. Ltd. 5 case (supra)that subsidy given by the Canadian Government to encourage construction of dry docks was 'an aid to the construction of dry dock and not an operational subsidy'. 17. This precisely is the question raised in this case. By no stretch of imagination can the subsidies whether by way of refund of sales tax or relief of electricity charges or water charges can be treated as an aid to setting up of the industry of the assessee. As we have seen earlier, the payments were to be made only if and when the assessee commenced its production. The said payments were trade for a period of five years ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 30 of 42 calculated from the date of commencement of production in the assessee's factory. The subsidies are operational subsidies and not capital subsidies. 5.3.6. Yet another decision was rendered by Hon‟ble Supreme Court in the case of CIT vs. Chapalkar Brothers reported in 400 ITR 279 which held that where the object of respective subsidy schemes of State Government was to encourage development of multiple theatre complexes, incentives would be held to be capital in nature and not revenue receipts. The relevant operative portion of the judgment is reproduced hereunder:- 18. After discussing the judgment in Sahney Steel & Press Works Ltd.'s case (supra) this Court then held: "The importance of the judgment of this Court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to the applied in judging the character of a subsidy. The test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the Scheme with which we are concerned in this case is that the incentive must be utilised for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the Subsidy Scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the assistance under the Subsidy Scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant." 19. Sahney Steel was distinguished, in para 16 by then stating that this Court found that the assessee was free to use the money in its business entirely as it liked. 20. Finally, it was found that, applying the test of purpose, the Court was satisfied that the payment received by the assessee under the scheme was not in the nature of a helping hand to the trade but was capital in nature. 21. What is important from the ratio of this judgment is the fact that Sahney Steel was followed and the test laid down was the "purpose test". It was specifically held that the point of time at which the subsidy is paid is not relevant; the source of the subsidy is immaterial; the form of subsidy is equally immaterial. 22. Applying the aforesaid test contained in both Sahney Steel as well as Ponni Sugar, we are of the view that the object, as stated in the statement of objects and reasons, of the amendment ordinance was that since the average occupancy in cinema theatres has fallen considerably and hardly any new theatres have been started in the recent past, the concept of a Complete Family Entertainment Centre, more popularly known as Multiplex Theatre Complex, has emerged. These complexes offer various entertainment facilities for the entire family as a whole. It was noticed that these complexes are highly capital intensive and their gestation period is quite long and therefore, they need Government support in the form of incentives qua entertainment duty. It was also added that government with a view to commemorate the birth centenary of late Shri V. Shantaram decided to grant concession in entertainment duty ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 31 of 42 to Multiplex Theatre Complexes to promote construction of new cinema houses in the State. The aforesaid object is clear and unequivocal. The object of the grant of the subsidy was in order that persons come forward to construct Multiplex Theatre Complexes, the idea being that exemption from entertainment duty for a period of three years and partial remission for a period of two years should go towards helping the industry to set up such highly capital intensive entertainment centers. This being the case, it is difficult to accept Mr. Narasimha's argument that it is only the immediate object and not the larger object which must be kept in mind in that the subsidy scheme kicks in only post construction, that is when cinema tickets are actually sold. We hasten to add that the object of the scheme is only one -there is no larger or immediate object. That the object is carried out in a particular manner is irrelevant, as has been held in both Ponni Sugar and Sahney Steel. 23. Mr. Ganesh, learned Senior Counsel, also sought to rely upon a judgment of the Jammu and Kashmir High Court in Shree Balaji Alloys v. CIT [2011] 9 taxmann.com 255/198 Taxman 122/ 333 ITR 335. While considering the scheme of refund of excise duty and interest subsidy in that case, it was held that the scheme was capital in nature, despite the fact that the incentives were not available unless and until commercial production has started, and that the incentives in the form of excise duty or interest subsidy were not given to the assessee expressly for the purpose of purchasing capital assets or for the purpose of purchasing machinery. 24. After setting out both the Supreme Court judgments referred to hereinabove, the High Court found that the concessions were issued in order to achieve the twin objects of acceleration of industrial development in the State of Jammu and Kashmir and generation of employment in the said State. Thus considered, it was obvious that the incentives would have to be held capital and not revenue. Mr. Ganesh, learned Senior Counsel, pointed out that by an order dated 19.04.2016, this Court stated that the issue raised in those appeals was covered, inter alia, by the judgment in Ponni Sugars & Chemicals Ltd. case (supra) and the appeals were, therefore, dismissed. 25. We have no hesitation in holding that the finding of the Jammu and Kashmir High Court on the facts of the incentive subsidy contained in that case is absolutely correct. In that once the object of the subsidy was to industrialize the State and to generate employment in the State, the fact that the subsidy took a particular form and the fact that it was granted only after commencement of production would make no difference. 5.3.7. We further find that the Hon‟ble Gujarat High Court in CIT vs. Munjal Auto Industries Ltd., in Tax Appeal No.450 with 451-453 of 2012 dated 28/01/2013 also had an occasion to consider the very same issue in dispute before us. In this case also, the Revenue had taken a specific argument that since subsidy would be received only once unit goes for production, subsidy would be revenue nature. The Hon‟ble Gujarat High Court referred to the relevant subsidy scheme noted that concession was capped @125% of fixed capital investment and could be availed within 9 years. The Hon‟ble Gujarat High Court after considering the decision of Hon‟ble Supreme Court both in the case of Sahney Steel and Press Works Ltd., and Ponni Sugars and Chemicals referred to supra had held as under:- “7. From the provisions of the said scheme, it clearly emerges that the subsidy though computed in terms of sales tax deferment or waiver, in essence it was meant for capital outlay expended by the assessee for set up of the unit in case of a new industrial unit and for expansion and diversification of an existing unit. As noted, such subsidy was available only to a new industrial unit or a unit undertaking expansion or diversification. Fixed capital investment has been defined as to include various ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 32 of 42 investments in land under use, new construction, plant and machinery etc. The entitlement was related to percentage of fixed capital investment. 8. It is undoubtedly true that such subsidy was computed in terms of sales tax deferment and necessarily therefore, would accrue to an industry only once the commercial production commences. However, this by itself would not be either a sole or concluding factor. In case of Sahney Steel and Press Works Ltd. and others v. Commissioner of Income-tax reported in 228 ITR 253, the Apex Court held and observed that the character of the subsidy in the hands of the recipient whether revenue or capital will have to be determined, having regard to the purpose for which the subsidy is given. The source of find is quite immaterial. If the purpose is to help the assessee to set up its business or complete a project the monies must be treated as having been received for capital purposes. Such But if monies are given to the assessee for assisting him in carrying out the business operations and given after the satisfaction of the conditions of commencement of production, such subsidy must be treated as assistance for the purpose of the trade. 9. Such decision was considered in case of Ponni Sugars and Chemicals Ltd.(supra) and the Apex Court held and observed as under : “13. The main controversy arises in these cases because of the reason that the incentives were given through the mechanism of price differential and the duty differential. According to the Department, price and costs are essential items that are basic to the profit making process and that any price related mechanism would normally be presumed to be revenue in nature. In other words, according to the Department, since incentives were given through price and duty differentials, the character of the impugned incentive in this case was revenue and not capital in nature. On the other hand, according to the assessee, what was relevant to decide the character of the incentive is the purpose test and not the mechanism of payment. 14. In our view, the controversy in hand can be resolved if we apply the test laid down in the judgment of this Court in the case of Sahney Steel and Press Works Ltd. (supra). In that case, on behalf of the assessee, it was contended that the subsidy given was up to 10% of the capital investment calculated on the basis of the quantum of investment in capital and, therefore, receipt of such subsidy was on capital account and not on revenue account. It was also urged in that case that subsidy granted on the basis of refund of sales tax on raw materials, machinery and finished goods were also of capital nature as the object of granting refund of sales tax was that the assessee could set up new business or expand his existing business. The contention of the assessee in that case was dismissed by the Tribunal and, therefore, the assessee had come to this Court by way of a special leave petition. It was held by this Court on the facts of that case and on the basis of the analyses of the Scheme therein that the subsidy given was on revenue account because it was given by way of assistance in carrying on of trade or business. On the facts of that case, it was held that the subsidy given was to meet recurring expenses. It was not for acquiring the capital asset. It was not to meet part of the cost. It was not granted for the production of or bringing into existence any new asset. The subsidies in that case were granted year after year only after setting up of the new industry and only after commencement of production and, therefore, such a subsidy could only be treated as assistance given for the purpose of carrying on the business of the assessee. Consequently, the contentions raised on behalf of the assessee on the facts of that case stood rejected and it was held that the subsidy received by Sahney Steel could not be regarded as anything but a revenue receipt. Accordingly the matter was decided against the assessee. The importance of the judgment of this Court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 33 of 42 law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the scheme with which we are concerned in this case is that the incentive must be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant.” 10. In a recent judgement dated 8.1.2013 in case of DCIT-Circle1(2)-Baroda v. Inox Leisure Ltd.,we had an occasion to consider somewhat similar question in the backdrop of entertainment tax waiver scheme of State of Gujarat as well as State of Maharashtra. Even in such a case, the entertainment tax waiver which was granted in terms of sale of tickets was treated as capital in nature when it was found that same was relatable to the capital investment made by the assessee. It was held as under : “10. From the above noted provisions of thescheme it can be clearly seen that the entire purpose of granting tax exemption was for giving the boost to the terrorism sector. This was to be achieved by attracting higher investment in areas with tourism potential. In order to achieve such purpose, exemption from various taxes as may be applicable was granted. It is true that the exemption was to be computed in terms of tax otherwise payable by the industry. However, the purpose of such exemption was to meet with the capital outlay already undertaken by the assessee. This clearly comes out from various provisions of the scheme. For example, the scheme was applicable only to the new project or to a existing project provided investment in fixed capital or capacity was increased atleast by 50%.Thus, the very eligibility for seeking exemption was linked with new investment being made in fixed capital. Further though the scheme envisaged a certain period spanning for 5 to 10 years during which such exemption could be availed depending on the category of the unit, such exemption would cease the moment the total incentives touched 100% of the eligible capital investments. In other words, the upper limit of total incentive which the unit could receive from the State Government in the form of tax waiver would not exist 100% of the eligible capital investment regardless of the residue of the period of its exemption eligibility as per the scheme. From the combined reading of salient features of the scheme, we have no doubt in our mind that the incentive was being offered for recouping or covering a capital investment or outlay already made by the assessee.” 11. In the result we find no error in view of the Tribunal. Tax Appeals are dismissed. 5.3.7.1. It is pertinent to note that against this judgement, civil appeals were dismissed by the Hon‟ble Supreme Court vide its order dated 08/05/2018 on the ground that the issue is already covered in the decision of Chapalkar Brothers referred to supra. 5.3.8. Before us, the ld. Special Counsel for the Revenue referred to various decisions of Hon‟ble High Courts. But, all those decisions were rendered prior to the decision of Hon‟ble Supreme Court referred to above. Hence, the decisions relied upon by the ld. Special Counsel for the Revenue would not advance the case of the Revenue. ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 34 of 42 5.3.9. It is pertinent to note that in each of the aforesaid decisions of Hon‟ble Supreme Court, the Courts have been mindful of the fact that the subsidy has to be received after commencement of business and to be availed within 9,10 & 12 years, as the case may be, and yet by applying purpose test, it was held that subsidy was on capital account. 5.4. Applicability of Special Bench decision of Mumbai Tribunal in the case of Reliance Industries reported in 88 ITD 273. The ld. Special Counsel for the Revenue vehemently submitted that the decision of the Hon‟ble Special Bench has been reversed by the Hon‟ble Supreme Court by remitting the matter back to the Hon‟ble Bombay High Court. First of all, it would be relevant to bring on record the crux of the decision of the Special Bench in the case of Reliance Industries Ltd. In case of Special Bench decision of Reliance Industries Ltd, the scheme dealt with sales tax exemption under the scheme of Government of Maharashtra, 1979. Further the said scheme was implemented by SICOM. The following question was referred by the Hon‟ble President, Tribunal to the Special Bench: “Whether, on the facts and in the circumstances of the case and in law the assessee company is justified in its claim that the sales-tax incentive allowed to it during the previous year in terms of the relevant Government order constitutes capital receipt and is not to be taken into account in the computation of total income?” The Hon‟ble Tribunal for Asst Years 1984-85 and 1985-86 had held the sales tax exemption to be capital in nature as the same was given for industrial development of the backward districts as well as generation of employment. However, the matter was referred to the Special Bench as it was alleged that the decision for AY 1985-86 was virtually overruled by subsequent decision of the Mumbai Tribunal in the case of Bajaj Auto Ltd (ITA No. 49 and 1101 of 1991). The Special Bench held that the decision of Bajaj Auto has not overruled the decision of Hon‟ble Mumbai Tribunal for AY 1985-86 on the following basis: i) There cannot be any question of overruling the decision of one Bench by another bench of equal strength as it would be contrary to the established norms of judicial system in the country. ii) Even on merits it cannot be said that the Tribunal has laid out more stress on the form of the scheme and not their substance as held in Bajaj Auto as the Tribunal in the order for AY 1985-86 has explained the difference between exemption schemes of Maharashtra and Andhra Pradesh in detail. iii) Reliance placed by Tribunal in Asst Year 1985-86 on the decision of Hon‟ble Supreme Court in the case of Sahney Steel & Press Works Ltd. v. CIT (228 ITR 253) cannot be said to be erroneous. The Tribunal did recognise that the object with which subsidy is given is decisive as laid down by Hon‟ble Supreme Court. If the scheme is for setting up or expansion of industry in a backward area, it will be capital, irrespective of the modality or source of fund. If the scheme is for assisting of carrying out of business operations, it is revenue. Hon‟ble Supreme Court demonstrated the principle that the object of the subsidy must be given primary importance over the source of fund. ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 35 of 42 5.4.1. Ultimately the Special Bench after placing reliance on the decision of Hon‟ble Supreme Court in Sahney Steel and Hon‟ble Madras High Court in the case of CIT v. Ponni Sugars & Chemicals Ltd. Reported in 260 ITR 605 held that the decision of the Tribunal in Asst Year 1985-86 is correct and observed the following: 37....The observations of the Madras High Court lend support to the view that the purpose and object of the Scheme under which the subsidy is given is of more fundamental importance than the fact that the subsidy was received after the commencement of production or conditional upon it. Therefore, in our view and with respect, the Tribunal in the case of Reliance Industries Ltd. ( supra) had correctly interpreted and understood the ratio of the judgment of the Supreme Court in Sahney Steel & Press Works Ltd.‟s case (supra). 38. In this view of the matter, we answer the question referred to us in the affirmative. 5.4.2. The ld. AR vehemently submitted that the department did not challenge the decision of the Special Bench before the Hon‟ble Bombay High Court. However, he fairly stated that there was a subsequent decision of the Division Bench of this Tribunal which followed the Special Bench and that Division Bench order was challenged by the Revenue before the Hon‟ble Bombay High Court. The Hon‟ble Bombay High Court while disposing of the said appeal did not reverse the decision of the Special Bench and accepted the same. When that appeal was further challenged by the Revenue before the Hon‟ble Supreme Court, the Hon‟ble Supreme Court remitted the matter back to the Hon‟ble Bombay High Court. Accordingly, he argued that the decision of Special Bench was never reversed by the Hon‟ble Supreme Court as stated by the ld. Special Counsel for the Revenue and accordingly still is a good law and therefore a binding precedent on this Division Bench. In fact, in assessee‟s own case for A.Y.2001-02 in ITA No.778 of 2015 dated 18/12/2018 before the Hon‟ble Jurisdictional High Court, wherein the question Nos. c & d was exactly on this point. For the sake of convenience, the question Nos. c & d raised by the Revenue before the Hon‟ble Jurisdictional High Court is reproduced hereunder:- “(c) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in restoring the issue of taxability of the sale tax exemption benefit of Rs.58 crores availed by the assessee to the file of the Assessing Officer for deciding afresh after considering the decision of the Special Bench of the ITAT in the case of DCIT V. Reliance Industries Ltd., 88 ITD 273, which has not been accepted by the Revenue? (d) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in entertaining the additional ground without appreciating that the assessee had treated the amount of sales tax exemption benefit of Rs.58 crores as revenue receipt and had included this amount in the returned income and it had been taxed accordingly and the assessee did not raise this issue before the CIT(A) and the issue had attained finality?” 5.4.3. While disposing of the questions Nos. c & d, the Hon‟ble Jurisdictional High Court categorically held that the decision of the Special Bench of Tribunal had not been reversed or stayed by any higher judicial forum and it holds good as on date. The relevant operative portion of the judgement of Hon‟ble Jurisdictional High Court in this regard is reproduced as under:- “3. We will first address the questions no. (c) and (d), which are different elements of the same issue. The respondent assessee had received a subsidy. It is undisputed that ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 36 of 42 up to the level of Income Tax Appellate Tribunal, the assessee did not raise a contention that such subsidy was towards capital account and, therefore, not taxable. However, before the Tribunal such a contention was raised. The Tribunal by the impugned judgment relied upon its earlier judgment for the Assessment Year 1999- 2000 in case of this very assessee and restored the issue back to the Assessing Officer. In the earlier order, the Tribunal had remanded the issue to the file of the Assessing Officer "to decide the issue afresh after considering the decision of Special Bench of the Tribunal in the case of Reliance Industries Ltd. (supra)". Thus, the Tribunal remanded the issue back to the Assessing Officer to be decided in the light of the Special Bench judgment in the case of Reliance Industries Ltd. The Revenue's grievance in this respect is two fold. It was contended that the issue was raised for the first time before the Tribunal and the same should not have been permitted. Secondly, the view of the Tribunal in case of Reliance Industries Ltd. was challenged before the High Court. The High Court in a judgment dated 15.04.2009 in Income Tax Appeal No. 1299 of 2008 had held that no question of law in this respect arises and thereby confirmed the judgment of the Tribunal. It was pointed out that against this judgment of the High Court, the Department had approached the Supreme Court and the Supreme Court had held that a question of law did arise. The Supreme Court framed a question and placed the matter back before the High Court. We are informed that this appeal is still pending. 4. On the other hand, learned Counsel for the assessee firstly contended that the Tribunal had merely remanded the issue back to the Assessing Officer. In earlier orders, the Revenue had approached the Court against the similar orders of the Tribunal. The High Court on two occasions, in the order dated 27.09.2016 and 22.11.2016 passed in Income Tax Appeal Nos. 475 of 2014 and 102 of 2014 respectively had not entertained the challenge of the Revenue. In any case, it was contended that the facts on record are available and the Tribunal has merely asked the Assessing Officer to take a decision on the assessee's contention. 5. As long as the material exists on record, a contention raised by the assessee for the first time before the Tribunal, cannot be barred. So much is clear from series of judgments of various Courts including of this Court in case of CIT Vs. Pruthvi Brokers and Shareholders P. Ltd. (2012) 349 ITR 336. It is not the case of the Revenue that the assessee in the context of its contention on the nature of the subsidy, desired to produce additional evidence. It is true that the judgment of this Court confirming the order of the Tribunal in case of Reliance Industries Ltd. has been partially reversed by the Supreme Court. A question of law has been framed and placed for consideration of the 4 of High Court. However, this does not mean that the judgment of the Tribunal as on today stands reversed or stayed. In any case, quite apart from the judgment in the case of Reliance Industries Ltd. of the Special Bench of the Tribunal, it is always been for the assessee to contend before the Assessing Officer by pointing out the relevant clauses of the subsidy that in law the subsidy cannot be treated to be towards revenue account. It would be equally open for the Revenue to oppose such a contention if so advised. The Assessing Officer and the Revenue authorities would have to take a decision in accordance with law. These questions, therefore, are not considered.” (emphasis applied by us while placing reliance on the decision of Hon‟ble Jurisdictional High Court) 5.4.4. Against this judgement on other issues, the Revenue preferred an SLP before the Hon‟ble Supreme Court and the same was dismissed vide order dated 23/08/2019 in SLP (Civil) Diary No.22929/2019. In other words, the Revenue while preferring SLP before the Hon‟ble Supreme Court did not even challenge this ground of subsidy and ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 37 of 42 the decision of Special Bench of Tribunal in the case of Reliance Industries Ltd., Hence, the order of the Hon‟ble Jurisdictional High Court in assessee‟s own case for A.Y.2001-02 had become final on the very same issue. Though the said decision has been rendered for subsequent assessment year as compared to the years under consideration before us, in view of identical facts and the same legal issue, and more especially, in order to address the fact of binding precedent of Special Bench decision in the case of Reliance Industries Ltd., this Bench deems it fit to place reliance on the said decision also of the Hon‟ble Jurisdictional High Court. Accordingly, we categorically hold that the decision of the Special Bench still holds the field and is a good law. The entire contentions raised by the ld. Special Counsel for the Revenue in this regard are hereby dismissed. 5.4.5. Further, we find that the Co-ordinate Bench of Ahmedabad Tribunal in the case of ACIT vs. Genus Electrotech Ltd., reported in 72 taxmann.com 101 had an occasion to consider the fact of Special Bench decision in a more elaborate manner. The relevant operative portion is reproduced hereunder:- “11. We find that so far as the Special Bench decision of this Tribunal in the case of Reliance Industries Ltd. (supra) is concerned, it still holds the field. All that has happened, as a result of Hon'ble Supreme Court's decision dated 9th September 2011, is that Hon'ble Bombay High Court has now admitted the question "whether, on the facts and circumstances of the case, the Hon'ble Tribunal was right in holding that sales tax exemption was a capital receipt" and will, in due course though, adjudicate on this legal issue. To that extent, Hon'ble Bombay High Court's order dated 15th April 2009, to the extent of declining to admit this question, stands reversed. However, the decision of the Special Bench still holds good as the same has not, and at least not yet, even been examined by Hon'ble Bombay High Court. Mere admission of appeal against a decision, as is elementary, does not affect the biding nature of a judicial precedent. The Special Bench decision, in the case of Reliance Industries Ltd. (supra), was not reversed by Hon'ble Supreme Court, but was directed to be examined, on merits, by Hon'ble Bombay High Court. That is quite different from disapproving the special bench decision, but it appears that the coordinate bench was led to believe, and there could not have been any other reason for ignoring the special bench decision, that this Special Bench decision is reversed. That is patently incorrect, and when we pointed it out to the learned Commissioner (DR), he did not have much to say except to rely upon the coordinate bench decision which seems to have followed that approach. The coordinate bench, in the case of Jindal Steel & Power Ltd. (supra), did indeed travel much beyond its limited mandate in ignoring a binding judicial precedent simply because appeal against that special bench decision is now pending before Hon'ble Bombay High Court. When posed with a special bench decision and a division bench directly on the issue, though touching different chords, we have no difficulty in recognizing our limitations. The wisdom of a division bench, even if superior- as strenuously argued by the learned Commissioner, has to make way for the higher wisdom of a larger bench. It is this faith of judicial hierarchical system that is the strength of our functioning, and we must follow the same. We, therefore, regret our inability to follow the division bench in the case of Jindal Power, no matter how deeply we respect and admire the work of all our colleagues, and we would rather be guided by the special bench decision - which is exactly what another division bench, on the same set of facts as before us, did in the case of Ajanta Manufacturing Ltd. (supra). As for learned Commissioner (DR)'s suggestion that we should follow the jurisdictional High Court decision in the case off Colourman Dyechem Ltd. (supra), we find that Their Lordships, in this case, were dealing with an entirely different type of subsidy which was clearly dealing with an expansion situation. However, we would rather refrain from making any further detailed observations on this issue, as we are alive to ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 38 of 42 the fact that Hon'ble jurisdictional High Court, in Tax Appeal No 358 of 2012, has admitted appeal against the decision of this Tribunal in Ajanta's Manufacturing Ltd. case (supra) and all these issues will now come up for consideration of Their Lordships. The fact that appeal is admitted does not, as we have stated earlier as well, does not affect the binding nature of the judicial precedents. There is no dispute before us that the scheme under which the sales tax and excise duty subsidy are given to this assessee are the same as in the case of Ajanta Manufacturing Ltd. (supra). All the material facts being the same, there is no reason to take any other view of the matter than the view so taken by the coordinate bench. We must, therefore, uphold the conclusions arrived at by the Commissioner (Appeals), which are in consonance with the Special Bench decision in the case of Reliance Industries Ltd. (supra) and coordinate bench decision in the case of Ajanta Manufacturing Ltd. (supra), and decline to interfere in the matter.” (emphasis supplied by us) 5.4.6. In view of the above, no fault could be attributed on the ld. CIT(A) placing reliance on the decision of the Special Bench of the Tribunal and granting relief to the assessee in the instant case. 9. In the Special Bench decision in the case of Reliance Industries Ltd (supra), what came up for consideration was specifically the sales tax subsidy, and that decision, as we seen in the elaborate analysis of the coordinate bench- as extracted above still holds good in law. In the case of CIT Vs Chaphalkar Brothers [(2018) 400 ITR 279 (SC)], Hon‟ble Supreme Court has held that where the object of respective subsidy schemes of State Governments was to encourage the development of Multiple Theatre Complexes, incentives would be held to be capital in nature and not revenue receipts, and, following the same logic, the sales tax subsidy schemes, which are admittedly to encourage industrial growth in the specific areas and the overall scheme in all the sales tax subsidy and exemption schemes unambiguously indicate so, are capital receipts in nature. 8. We see no reasons to take any other view of the matter than the view taken by the coordinate bench in the assessee‟s own case for the immediately preceding assessment year. Respectfully following the same, we uphold the plea of the assessee and dismiss the grievance of the assessee. The relief granted by the CIT(A) in this regard also stands approved and confirmed..... 64. We see no reasons to take any other view of the matter than the view so taken in assessee’s own cases. Respectfully following the same, we approve and confirm the relief granted by the CIT(A) and decline to interfere in the matter. 65. Ground no. 1 is thus dismissed. 66. In ground no. 2, the Assessing Officer has raised the following grievance: “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing various expenditure grouped under the nomenclature Community Welfare Expenses" amounting to Rs. 1,05,39,853/- as a business expenditure.” 67. This is a legacy issue and pertains to the expenditure incurred for community welfare as the factories of the assessee are concerned in backward areas and the expenditure is incurred for the smooth functioning of the business. Right from the assessment years 1988-89 to 1994-95, ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 39 of 42 the coordinate benches have allowed appeal of the assessee on this point, and from the assessment years 1995-96 to 2004-05, in which the first appellate authority has deleted similar disallowance, the coordinate benches have rejected the grievances of the Assessing Officer, against the reliefs so granted by the CIT(A). Learned Departmental Representative does not dispute this position but relies upon the stand of the Assessing Officer nevertheless. 68. We see no reasons to take any other view of the matter than the view so taken by the coordinate benches all along. Respectfully following the same, we uphold the relief granted by the learned CIT(A) and decline to interfere in the matter. 69. Ground no. 2 is thus dismissed. 70. In ground no. 3, the Assessing Officer has raised the following grievance: “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing temple expenses amounting to Rs. 22,46,477/- as a business expenditure.” 71. Learned representative fairly agree that this issue also covered in favour of the assessee by decisions of co-ordinate bench an assessee own cases from assessment years 1995-96 to 2000-05, copies of these orders are placed before us in the paper book. It is also pointed out that the appeal filed by the department against the order of the co-ordinate bench and before the Hon’ble High Court was not admitted for the assessment year 1989-90 and that no appeals were files for the assessment years 1991-92, 1992-93 & 1993-94. Learned Departmental Representative however, relied upon the stand of the Assessing Officer. 72. We see no reasons to take any other view of the matter than the view so taken by the coordinate benches in assessee own cases for the preceding assessment years. Respectfully following the same, we uphold the relief granted by the learned CIT(A) and decline to interfere in the matter. 73. Ground no. 3 is thus dismissed. 74. In ground no. 4, the Assessing Officer has raised the following grievance: “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing Pooja/ function expenses amounting to Rs. 53,38,748/- as a business expenditure.” 75. Learned representative fairly agree that this issue is also a legacy issue and is covered by decisions of the co-ordinate benches an assessee own cases for the assessment years 1988-89 to 1989-90 & 1997-98 to 2000-05. Copies of the orders passed by the co-ordinate benches were also placed before us. Learned Departmental Representative, however, relied upon the stand of the Assessing Officer. ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 40 of 42 76. We see no reasons to take any other view of the matter than the view so taken by the coordinate benches in assessee own cases for the preceding assessment years. Respectfully following the same, we uphold the relief granted by the learned CIT(A) and decline to interfere in the matter. 77. Ground no. 4 is thus dismissed. 78. In ground no. 5, the Assessing Officer has raised the following grievance: “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing consultancy charges amounting to Rs. 40,36,016/- as a revenue expenditure.” 79. Learned representatives fairly agree that this issue is also a legacy issue and is covered by decisions of the co-ordinate benches an assessee own cases for the assessment years 1995-96 to 2000-05, copies of the orders passed by the co-ordinate benches were also placed before us. Learned Departmental Representative however relied upon the stand of the Assessing Officer. 80. We see no reasons to take any other view of the matter than the view so taken by the coordinate benches in assessee own cases for the preceding assessment years. Respectfully following the same, we uphold the relief granted by the learned CIT(A) and decline to interfere in the matter. 81. Ground no. 5 is thus dismissed. 82. In ground no. 6, the Assessing Officer has raised the following grievance: “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing service charges amounting to Rs. 26,000/- as a revenue expenditure.” 83. Learned representative fairly agree that this issue is also a legacy issue and is covered by decisions of the co-ordinate benches an assessee own cases for the assessment years 1995-96 to 2000-05, copies of the orders passed by the co-ordinate benches were also placed before us. Learned Departmental Representative however relied upon the stand of the Assessing Officer. 84. We see no reasons to take any other view of the matter than the view so taken by the coordinate benches in assessee own cases for the preceding assessment years. Respectfully following the same, we uphold the relief granted by the learned CIT(A) and decline to interfere in the matter. 85. Ground no. 6 is thus dismissed. 86. In ground no. 7, the Assessing Officer has raised the following grievance: ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 41 of 42 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing mine prospecting expenses amounting to Rs. 25,75,599/- as a revenue expenditure. 87. To adjudicate on this grievance, it is sufficient to take note of the fact that the expenditure in question is incurred on identifying the nature of deposits of limestone at various sites to plan mining operations, that the AO has made the addition even as he took note of the Tribunal decisions on the said issue, in favour of the assessee in its own cases, but added that the views of the Tribunal has not attained finality, and that the CIT(A) gave relief on the ground that as the Assessing Officer has not challenged the relief granted by the Tribunal, the matter has attained finality. No material has been brought before us to dislodge the findings of the learned CIT(A). In any event, even going by the observations of the Assessing Officer, the matter is squarely covered, in favour of the assessee, by decisions of the coordinate benches in assessee’s own case. We, therefore, uphold the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. 88. Ground no. 7 is thus dismissed. 89. So far as ground no. 8 of the revenue’s appeal is concerned, it has already been dealt with, and disposed of, while dealing with ground no. 10 in the asseee’s appeal. We need not, therefore, take it up again. 90. Ground no. 8 is thus dismissed. 91. In ground no. 9, the Assessing Officer has raised the following grievance: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing deduction u/s 35 D of Income Tax Act of Rs. 4,06,31,549/- being 1/5th of the expenditure incurred in A.Y.2001-02 and 2002-03 on issue of FCCB. 92. On a perusal of the impugned order, we find that the CIT(A) has merely remitted the matter to the file of the Assessing Officer with a direction “to verify the facts from records and allow consequential relief to the assessee as per law, if any”. The grievance of the Assessing Officer is thus misconceived and devoid of any legally sustainable merits. We reject the same. 93. Ground no. 9 is thus dismissed. ITA Nos. 6375 and 6405/Mum/2013 CO No. 166/Mum/2015 Assessment year: 2007-08 Page 42 of 42 94. In the result, the appeal of the revenue is dismissed. 95. The issue raised therein with respect to the admissibility of the claim under section 80IA in respect of the rail system has been remitted to the Assessing Officer for fresh consideration. The very grievance raised therein is thus rendered infructuous. The CO is thus dismissed as infructuous. 96. To sum up, while the appeal of the assessee is partly allowed, the appeal of the revenue, as also the CO, are thus dismissed. Pronounced in the open court today on the 07 th day of November, 2022 Sd/- Sd/- Sandeep S Karhail Pramod Kumar (Judicial Member) (Vice President) Mumbai, dated the 07 th November, 2022 Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) DR (6) Guard File By order etc True Copy Assistant Registrar Income Tax Appellate Tribunal Mumbai benches, Mumbai