Deputy Commissioner Of Income Tax, Circle-5, Jaipur V. M/s. GVK Jaipur Expressway Private Limited, Jaipur

ITA 751/JPR/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0877 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2020
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 30-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B K GUPTA CIT A
• Assessee Lawyers: O P AGRAWAL F
• Keywords: Business income; Depreciation; Rule of consistency; Earning of tax free income; Retrospective amendment; Question of law; Revenue expenditure; TDS; Rule 8D; Set aside
• Section: 43B; 40A(3); 143(3); 14A; 115JB; 80IB; 250; 80IA; 201; 64; 113; 43; 48; 73; 72; 13; 22; 147; 63; 154

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR TFLVL JH IH-IH-HKV~V] V/;{K ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: JUSTICE SHRI P.P. BHATT, PRESIDENT & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 375/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2010-11 M/S GVK JAIPUR EXPRESSWAY PRIVATE LIMITED TOLL PLAZA, AJMER ROAD, NH-8, VILLAGE- THIKARIA, JAIPUR CUKE VS. THE DCIT, CIRCLE-07, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCG5541J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA. NO. 749/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2011-12 THE DCIT, CIRCLE-07, JAIPUR. CUKE VS. M/S GVK JAIPUR EXPRESSWAY PRIVATE LIMITED 281, KM TOLL PLAZA, VILLAGE- THIKARIA, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCG5541J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT IZR;K{KSI.K @ C.O. NO. 25/JP/2018 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 749/JP/2018) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR 2011-12 M/S GVK JAIPUR EXPRESSWAY PRIVATE LIMITED TOLL PLAZA, AJMER ROAD, NH-8, VILLAGE- THIKARIA, JAIPUR CUKE VS. THE DCIT, CIRCLE-07, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCG5541J IZR;K{KSID@ OBJECTOR IZR;FKHZ@ RESPONDENT ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 2 VK;DJ VIHY LA-@ ITA. NO. 750/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2012-13 THE DCIT, CIRCLE-07, JAIPUR. CUKE VS. M/S GVK JAIPUR EXPRESSWAY PRIVATE LIMITED 281, KM TOLL PLAZA, VILLAGE- THIKARIA, AJMER ROAD, NH-8 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCG5541J VIHYKFKHZ@ APPEL LANT IZR;FKHZ@ RESPONDENT IZR;K{KSI.K @ C.O. NO. 26/JP/2018 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 750/JP/2018) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR 2012-13 M/S GVK JAIPUR EXPRESSWAY PRIVATE LIMITED TOLL PLAZA, AJMER ROAD, NH-8, VILLAGE- THIKARIA, JAIPUR CUK E VS. THE DCIT, CIRCLE-07, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCG5541J IZR;K{KSID@ OBJECTOR IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA. NO. 751/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2013-14 THE DCIT, CIRCLE-07, JAIPUR. CUKE VS. M/S GVK JAIPUR EXPRESSWAY PRIVATE LIMITED 281, KM TOLL PLAZA, VILLAGE- THIKARIA, AJMER ROAD, NH-8 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCG5541J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT IZR;K{KSI.K @ C.O. NO. 27/JP/2018 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 751/JP/2018) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR 2013-14 ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 3 M/S GVK JAIPUR EXPRESSWAY PRIVATE LIMITED TOLL PLAZA, AJMER ROAD, NH-8, VILLAGE- THIKARIA, JAIPUR CUKE VS. THE DCIT, CIRCLE-05, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCG5541J IZR;K{KSID@ OBJECTOR IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA. NO. 1090/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2014-15 M/S GVK JAIPUR EXPRESSWAY PRIVATE LIMITED 286, KM TOLL PLAZA, AJMER ROAD, NA-8, VILLAGE- THIKARIA, JAIPUR CUKE VS. THE DCIT, CIRCLE-07, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCG5541J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA. NO. 1075/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2014-15 THE DCIT, CIRCLE-07, JAIPUR CUKE VS. M/S GVK JAIPUR EXPRESSWAY PRIVATE LIMITED 281, KM TOLL PLAZA, VILLAGE- THIKARIA, AJMER ROAD, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCG5541J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA. NO. 467/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2015-16 THE DCIT, CIRCLE-07, JAIPUR CUKE VS. M/S GVK JAIPUR EXPRESSWAY PRIVATE LIMITED 281, KM TOLL PLAZA, VILLAGE- THIKARIYA, AJMER ROAD, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCG5541J ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 4 VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA. NO. 376/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2015-16 M/S GVK JAIPUR EXPRESSWAY PRIVATE LIMITED, TOLL PLAZA, AJMER ROAD, NH-8, VILLAGE- THIKARIA, JAIPUR CUKE VS. THE DCIT, CIRCLE-07, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCG5541J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SH. O. P. AGRAWAL (F.C.A.) & SH. MANISH AGRAWAL (FCA) JKTLO DH VKSJ LS @ REVENUE BY : SH. B. K. GUPTA (CIT) A LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 01/12/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 22/12/2020 VKNS'K@ ORDER PER BENCH: THESE ARE APPEALS FILED BY THE REVENUE AND THE APP EAL/CROSS OBJECTIONS FILED BY THE ASSESSEE AGAINST THE SEPARA TE ORDERS OF LD. CIT(A)-3, JAIPUR DATED 25.02.2019 FOR A.Y.2010-11, LD. CIT(A)-01, JODHPUR DATED 21.03.2018 FOR A.Y. 2011-12, LD. CIT( A)-3, JAIPUR DATED 23.03.2018 FOR A.Y.2012-13 & A.Y. 2013-14, LD. CIT( A)-22, ALWAR DATED 17.06.2019 FOR A.Y. 2014-15 AND LD. CIT(A)-22, ALWA R DATED 31.01.2019 FOR A.Y. 2015-16. SINCE THE COMMON ISSUES ARE INVOL VED, ALL THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OFF BY THIS CONSOLIDATED ORDER. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 5 2. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE AND THE ASSESSEE IN THEIR RESPECTIVE APPEALS/CROSS-OBJECTIONS FOR EACH OF THE IMPUGNED ASSESSMENT YEARS ARE AS FOLLOWS: ITA NO. 375/JP/2019 A.Y 2010-11 (ASSESSEES APPEAL) : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ACTION OF LD. AO IN COMPLETING THE ASSESSMENT WITHOUT FOLLOWING T HE DIRECTIONS OF HONBLE ITAT IN PROPERLY. APPELLANT PRAYS ORDER SO PASSED BY LD. AO IS WITHOUT JURISDICTION AND DESERVES TO BE H ELD BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS FURTHER ERRED IN CONFIRMING THE ACTION O F LD.AO OF TREATING INTEREST RECEIPTS OF RS. 2,40,27,526/- AS INCOME FROM OTHER SOURCES BY PLACING RELIANCE ON ORDER PASSED BY HIM FOR A.Y. 2012-13 ARBITRARILY. APPELLANT PRAYS THAT ALL THE C ASE LAWS RELIED UPON BY LD.CIT(A) WHILE PASSING ORDER FOR A.Y. 2012 -13 ARE DISTINGUISHABLE SO FAR AS IN ALL THE CITED CASES, E XCESS FUNDS WERE PARKED IN FDRS AT THE BEHEST OF ASSESSEE, WHERE IN THE INSTANT CASE FUNDS WERE KEPT IN FDRS UNDER BUSINESS COMPULS IONS, THUS THE ORDER PASSED BY LD.CIT(A) DESERVES TO BE SET A SIDE INTEREST RECEIPTS OF RS.2,40,27,526/- DESERVES TO BE TREATED AS BUSINESS INCOME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD.CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ACTION OF LD. AO IN TREATING INTEREST RECEIPTS OF RS.2,40,27,526/- A S INCOME FROM OTHER RECEIPTS BY COMPLETELY IGNORING THE FACT THA T SUCH INTEREST RECEIPTS WERE INCIDENTAL TO AND INTEGRAL PART OF TH E BUSINESS RECEIPTS OF THE ASSESSEE IN AS MUCH AS THE INTEREST WAS GENERATED ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 6 ON THE TOLL RECEIPTS DURING THE TIME THE SAME WERE RECEIVED AND WHEN IT WAS UTILIZED THEREAFTER. THEREFORE, THE ACT ION OF LD. AO DESERVES TO BE HELD BAD IN LAW AND THE INTEREST REC EIVED BY ASSESSEE DESERVES TO BE HELD AS ITS BUSINESS INCOME . ITA NO. 749/JP/2018 A.Y 2011-12 (REVENUES APPEAL): 1. WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(A) WAS JUSTIFIED IN ALLOWING THE CLAIM OF DEPRE CIATION OF RS. 26,73,99,482/- ON PUBLIC ROADS TREATING THE SAME AS BUILDING WHICH IS NOT PERMISSIBLE IN LAW AS THE OWNERSHIP RI GHT TO THE PUBLIC ROADS DOES NOT VEST WITH THE ASSESSEE FOR CL AIMING DEPRECIATION U/S 32? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN ALLOWING THE CLAIM OF DEPREC IATION OF RS. 6,20,514/- @ 60% ON EDP EQUIPMENT TREATING THE SAME AS THE COMPUTER EQUIPMENTS WHICH WAS CLASSIFIABLE UNDER TH E HEAD PLANT AND MACHINERY WHEREIN DEPRECIATION IS @ 15%? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN ALLOWING THE CLAIM OF DEDUCT ION U/S 801A OF RS. 82,05,581/- ON SALE OF SCRAP WHICH IS NOT INCOM E FROM BUSINESS ELIGIBLE FOR DEDUCTION U/S 801A? ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 7 CO NO. 25/JP/2018 A.Y 2011-12 (ASSESSEES CROSS OBJ ECTION): 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS GROSSLY ERRED IN HOLDING THE INTEREST IN COME OF RS. 1,11,22,443/- EARNED FROM REGULAR BUSINESS ACTIVITI ES OF THE ASSESSEE COMPANY AS INCOME FROM OTHER SOURCES WITHO UT APPRECIATING THE NATURE OF INCOME, THUS THE SAME DE SERVES TO HOLD AS BUSINESS INCOME. 1.1 THAT, LD. CIT(A) HAS FURTHER ERRED IN CONFIRMING TH E ACTION OF LD.AO IN TREATING INTEREST RECEIPTS AS INCOME FROM OTHER SOURCES BY COMPLETELY IGNORING THE FACT THAT SUCH INTEREST RECEIPTS WERE INCIDENTAL TO AND INTEGRAL PART OF BU SINESS RECEIPTS OF THE ASSESSEE IN AS MUCH AS THE INTEREST WAS GENE RATED ON THE TOLL RECEIPTS, IT IS THEREFORE PRAYED THAT SUCH BUS INESS INCOME DESERVES TO BE TREATED AS BUSINESS INCOME. ITA NO. 750/JP/2018 A.Y 2012-13 (REVENUES APPEAL): 1. WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(A) WAS JUSTIFIED IN ALLOWING THE CLAIM OF DEPRE CIATION OF RS. 24,06,59,534/- ON PUBLIC ROADS TREATING THE SAME AS BUILDING WHICH IS NOT PERMISSIBLE IN LAW AS THE OWNERSHIP RI GHT TO THE PUBLIC ROADS DOES NOT VEST WITH THE ASSESSEE FOR CL AIMING DEPRECIATION U/S 32? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN ALLOWING THE CLAIM OF DEPREC IATION OF RS. 6,86,787/- @ 60% ON EDP EQUIPMENT TREATING THE SAME AS THE COMPUTER EQUIPMENTS WHICH WAS CLASSIFIABLE UNDER TH E HEAD PLANT AND MACHINERY WHEREIN DEPRECIATION IS @ 15%? ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 8 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN ALLOWING THE CLAIM OF DEDUCT ION U/S 801A OF RS. 29,79,993/- ON SALE OF SCRAP WHICH IS NOT INCOM E FROM BUSINESS ELIGIBLE FOR DEDUCTION U/S 801A? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 43,37,48,247/- U/S 14A READ WITH RULE 8D THOUGH THE ASSESSEE FAILED TO PROVE THAT THE INVESTMENT IN SHARE APPLIC ATIONS WAS NOT HAVING ANY NEXUS WITH THE FUNDS ON WHICH INTEREST W AS PAID? CO NO. 26/JP/2018 A.Y 2012-13 (ASSESSEES CROSS OBJ ECTION): 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS GROSSLY ERRED IN HOLDING THE INTEREST IN COME OF RS. 4,34,21,230/- EARNED FROM THE BUSINESS ACTIVITIES O F THE ASSESSEE COMPANY AS INCOME FROM OTHER SOURCES WITHOUT APPREC IATING THE NATURE OF INCOME, THUS THE SAME DESERVES TO BE HOLD AS BUSINESS INCOME. 1.1 THAT, LD.CIT(A) HAS FURTHER ERRED IN CONFIRMING THE ACTION OF LD.AO IN TREATING INTEREST RECEIPTS AS INCOME FROM OTHER SOURCES BY COMPLETELY IGNORING THE FACT THAT SUCH INTEREST RECEIPTS WERE INCIDENTAL TO AND INTEGRAL PART OF BUSINESS RECEIPT S OF THE ASSESSEE IN AS MUCH AS THE INTEREST WAS GENERATED ON THE TOL L RECEIPTS, IT IS THEREFORE PRAYED THAT SUCH BUSINESS INCOME DESERVES TO BE TREATED AS BUSINESS INCOME. ITA NO. 751/JP/2018 A.Y 2013-14 (REVENUES APPEAL): 1. WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(A) WAS JUSTIFIED IN ALLOWING THE CLAIM OF DEPRE CIATION OF RS. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 9 21,65,93,581/- ON PUBLIC ROADS TREATING THE SAME AS BUILDING WHICH IS NOT PERMISSIBLE IN LAW AS THE OWNERSHIP RI GHT TO THE PUBLIC ROADS DOES NOT PERMISSIBLE IN LAW AS THE OWN ERSHIP RIGHT TO THE PUBLIC ROADS DOES NOT VEST WITH THE ASSESSEE FO R CLAIMING DEPRECIATION U/S 32? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN ALLOWING THE CLAIM OF DEPREC IATION OF RS. 1,39,809/- @ 60% ON EDP EQUIPMENT TREATING THE SAME AS THE COMPUTER EQUIPMENTS WHICH WAS CLASSIFIABLE UNDER TH E HEAD PLANT AND MACHINERY WHEREIN DEPRECIATION IS @ 15%? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN ALLOWING THE CLAIM OF DEDUCT ION U/S 801A OF RS. 6,78,895/- ON SALE OF SCRAP WHICH IS NOT INCOME FROM BUSINESS ELIGIBLE FOR DEDUCTION U/S 801A? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 1,19,06,05,811/- U/S 14A READ WITH RULE 8D THOUGH T HE ASSESSEE FAILED TO PROVE THAT THE INVESTMENT IN SHARE APPLIC ATIONS WAS NOT HAVING ANY NEXUS WITH THE FUNDS ON WHICH INTEREST W AS PAID? 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN ALLOWING THE CLAIM OF EXPEND ITURE OF RS. 1,81,229/- ON ACCOUNT OF PAYMENT OF PF AND ESI CONT RIBUTION BEYOND THE DUE DATES RELYING UPON THE HIGH COURTS JUDGMENTS PASSED IN THE CASE OF CIT VS. UDAIPUR DUGDH UTPADAK SAHAKARI SANGH LTD 265 CTR 5999 DTR 131 (RAJ.) AND CIT VS. J VVNL 265 ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 10 CTR 62 WHICH IS NOT JUSTIFIABLE AS THE SIMILAR PAYM ENTS SHOULD BE DEPOSITED ON THE DUE DATES SPECIFIED BY THE GOVT. F OR THE SAME PURPOSE? CO NO. 27/JP/2018 A.Y 2013-14 (ASSESSEES CROSS OBJ ECTION): 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT (A) HAS GROSSLY ERRED IN CONFIRMING THE ACTION OF LD.AO IN TREATING THE INTEREST INCOME OF RS. 4,17,41,267/- E ARNED FROM THE BUSINESS ACTIVITIES OF THE ASSESSEE COMPANY AS INCO ME FROM OTHER SOURCES WITHOUT APPRECIATING THE NATURE OF INCOME, THUS THE SAME DESERVES TO BE HOLD AS BUSINESS INCOME. 1.1 THAT, LD. CIT(A) HAS FURTHER ERRED IN CONFIRMIN G THE ACTION OF LD.AO IN TREATING INTEREST RECEIPTS AS INCOME F ROM OTHER SOURCES BY COMPLETELY IGNORING THE FACT THAT SUCH INTEREST RECEIPTS WERE INCIDENTAL TO AND INTEGRAL PART OF BU SINESS RECEIPTS OF THE ASSESSEE IN AS MUCH AS THE INTEREST WAS GENE RATED ON THE TOLL RECEIPTS, IT IS THEREFORE PRAYED THAT SUCH BUS INESS INCOME DESERVES TO BE TREATED AS BUSINESS INCOME. ITA NO. 1090/JP/2019 A.Y 2014-15 (ASSESSEES APPEAL ): 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT (A) HAS GROSSLY ERRED IN UPHOLDING THE DISALLOW ANCE OF RS. 1,15,92,95,718/- MADE BY INVOKING PROVISIONS OF SEC 14A OUT OF THE INTEREST EXPENSES CLAIMED, ARBITRARILY WITHOUT APPRECIATING THE SUBMISSION MADE, THEREFORE THE DISALLOWANCE MADE DE SERVES TO BE ALLOWED AS CLAIMED. 1.1 THAT THE LD. CIT (A) HAS FURTHER ERRED IN IGNORING THE FACT THAT THE AMOUNT PAID WAS TOWARDS SHARE APPLICATION MONEY, AND ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 11 NO SHARES WERE ALLOTTED IN THE RELEVANT YEAR, THROU GH WHICH AN ASSUMPTION OF EARNING ANY EXEMPT INCOME IN THE FO RM OF DIVIDEND, FOR FUTURE COULD BE MADE. APPELLANT PRAYS THAT UTILIZATION OF MONEY IN MAKING APPLICATION FOR SHAR ES DOES NOT AMOUNT TO INVESTMENT ON WHICH A POSSIBILITY OF EARN ING ANY TAX- FREE INCOME COULD BE PRESUMED. THUS DISALLOWANCE SO MADE U/S 14A BY PRESUMING A POSSIBLE INVESTMENT ARISING IN F UTURE, AND FURTHER PRESUMING EARNING OF TAX-FREE INCOME ON SUC H PRESUMED INVESTMENT, IS BEYOND THE SCOPE OF PROVISIONS OF SE C 14A, AND HENCE DESERVES TO BE DELETED. 1.2 THAT THE LD.CIT(A) HAS FURTHER ERRED IN IGNORING TH E DECISIONS OF VARIOUS HIGH COURTS WHEREIN IT HAS BEE N HELD THAT DISALLOWANCE U/S 14A CAN BE MADE ONLY TO THE EXTENT OF EXEMPT INCOME EARNED, WHICH IS NIL IN THE INSTANT CASE A ND THAT THE CBDT CIRCULAR CANNOT OVERRIDE THE EXPRESS PROVISION S OF SEC 14A READ WITH RULE 8D OF IT RULES. 1.3 THAT THE LD. CIT(A) HAS FURTHER ERRED IN NOT FOLLOW ING THE PRINCIPLE OF CONSISTENCY AS IN THE IMMEDIATE TWO PR ECEDING ASSESSMENT YEARS, WHEREIN LD.CIT(A) HAD INVOKED THE PROVISIONS OF SEC 36(1)(III) FOR MAKING DISALLOWANCE OF INTERE ST ON THE AMOUNT EMPLOYED IN MAKING SHARE APPLICATION MONEY O UT OF THE FUNDS SO BORROWED, EVEN THOUGH SHARES WERE NOT ALL OTTED DURING THE YEAR UNDER APPEAL AND HENCE THE FACTS ARE SAME AS IN THE PRECEDING YEARS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS GROSSLY ERRED IN TREATING THE INTEREST R ECEIPTS OF RS. 8,42,77,207/- AS INCOME FROM OTHER SOURCES, BY CO MPLETELY ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 12 IGNORING THE FACT THAT THE SUCH INTEREST RECEIPTS W ERE INCIDENTAL TO AND INTEGRAL PART OF THE BUSINESS RECEIPTS OF THE A SSESSEE IN AS MUCH AS THE SOURCE OF TERM DEPOSITS ON WHICH INTERE ST WAS GENERATED IS THE TOLL RECEIPTS ONLY AND THESE DEPOS ITS ARE ON ACCOUNT OF TEMPORARY SURPLUS OF BUSINESS RECEIPTS D UE TO TIME DIFFERENCE BETWEEN TOLL RECEIPTS AND INCURRING IF E XPENDITURE/ LIABILITIES. THEREFORE, THE ACTION OF LD. AO DESERV ES TO BE HELD BAD IN LAW AND THE INTEREST RECEIVED BY ASSESSEE DESERV ES TO BE HELD AS ITS BUSINESS INCOME. ITA NO. 1075/JP/2019 A.Y 2014-15 (REVENUES APPEAL) : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, WHETHER THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT THE CO MPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB( 2) IS TO BE MADE WITHOUT RESORTING TO THE COMPUTATION AS CONTEM PLATED U/S 14A R.W. RULE 8D OF THE INCOME TAX RULES, 1962? 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, WHETHER THE LD CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO CONSIDER INCOME FROM SCRAP OF SALE AMOUNTING TO RS. 49,98,366/- FOR THE PURPOSE OF ALLOWING DEDUCTION U/S 801A OF THE ACT WITHOUT A PPRECIATING THAT THE WORD DERIVED FROM USED IN THE SAID DECIS ION HAS NARROWER CONNOTATION AND DOES NOT INCLUDE SOURCES O F INCOME BEYOND THE FIRST DEGREE AS HELD BY THE HONBLE COUR TS THROUGH VARIOUS JUDGMENTS INCLUDING THAT IN THE CASE OF (I) LIBERTY INDIA VS. CIT (2009) 317 ITR 218 (SC) (II) PANDIAN CHEMIC ALS LTD VS. CIT (2003) 262 ITR 278 (SC) (III) PANDIAN CHEMICALS LTD VS. CIT (2004) 270 ITR 448 (MADRAS)? ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 13 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, WHETHER THE LD. CIT WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 1,80,960/- MADE U/S 36(1)(VA) R.W.S 2(24)(X) ON PAYMENT OF EMPLOYEES CONTRIBUTION TOWARDS PF TO THE FUND BEYO ND DUE DATE WHEN SLP FILED BY THE REVENUE BEFORE THE HONBLE SU PREME COURT IN CASE OF M/S JAIPUR VIDYUT VITRAN NIGAM LTD IS PE NDING? 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITI ON OF RS. 11.33 CRORES MADE BY AO ON ACCOUNT OF PERIODIC OVERLAY EX PENSES SIMPLY ON THE BASIS OF ESTIMATION CERTIFICATE GIVEN BY CONSULTANTS? ITA NO. 467/JP/2019 A.Y 2015-16 (REVENUES APPEAL): 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, WHETHER THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT THE CO MPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2) IS TO BE MADE WITHOUT RESORTING TO THE COMPUTATION AS CONTEMPLATE D U/S 14A R.W. RULE 8D OF THE INCOME TAX RULES, 1962? 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, WHETHER THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING THE CLAIM OF R S. 11.33 CRORES ON ACCOUNT OF PERIODIC OVERLAY EXPENSES SIMPLY ON T HE BASIS OF ESTIMATION CERTIFICATE GIVEN BY CONSULTANTS THEREBY RESTRICTING THE ADDITION TO RS. 25 CRORES AS AGAINST ADDITION OF RS . 36.33 CRORES MADE BY THE AO? ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 14 ITA NO. 376/JP/2019 A.Y 2015-16 (ASSESSEES APPEAL) : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT (A) HAS GROSSLY ERRED IN UPHOLDING THE DISALLOW ANCE OF RS. 1,11,92,41,369/-, BEING INTEREST EXPENSES BY INVOKI NG PROVISIONS OF SECTION 14A SOLELY FOR THE REASON THAT ASSESSEE HAD MADE INVESTMENT OF RS. 9,40,80,00,000/- IN SHARE CAPITAL OF ONE OF THE GROUP COMPANIES, THOUGH NO EXEMPT INCOME WAS EARNED BY ASSESSEE FROM SUCH INVESTMENT. 1.1 THAT THE LD. CIT (A) HAS FURTHER ERRED IN CONFI RMING THE DISALLOWANCE U/S 14A IN RESPECT OF INVESTMENT MADE IN SHARE CAPITAL OF ONE OF THE GROUP COMPANIES BY IGNORING T HE FACT THAT INVESTMENT WAS IN THE NATURE OF STRATEGIC INVESTME NT AND DISALLOWANCE U/S 14A IN RESPECT THEREFORE THE DISAL LOWANCE MADE BY LD.AO WAS UNWARRANTED AND DESERVED TO BE DELETED . 1.2. THAT, THE LD.CIT(A) HAS FURTHER ERRED IN NOT CONSIDERING THE ALTERNATIVE PLEA OF ASSESSEE THAT IF AT ALL DISALLO WANCE WAS TO BE CONFIRMED, THE SAME OUGHT TO HAVE BEEN U/S 36(1)(II I) AND NOT U/S 14A OF THE INCOME TAX ACT, 1961 AS INTEREST EXP ENSES WERE NOT INCURRED IN RELATION TO ANY EXEMPT INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS FURTHER ERRED IN CONFIRMING THE ACTION O F LD.AO IN TREATING THE INTEREST RECEIPTS OF RS. 15,52,14,900/ - AS INCOME FROM OTHER SOURCES NOT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT, BY COMPLETELY IGNORING THE FACT THAT ASSESSEE HAS A LREADY EXCLUDED THE SAID INCOME WHILE CLAIMING DEDUCTION U /S 80IA THUS, FURTHER DISALLOWING THE SAME TANTAMOUNTS TO DOUBLE ADDITION THEREFORE, DESERVES TO BE DELETED. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 15 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DISALLOW ANCE TO THE EXTENT OF RS.25,00,00,000/- OUT OF DISALLOWANCE MAD E BY LD.AO (BY HOLDING THE MANDATORY PERIODIC OVERLAY AS CONTI NGENT LIABILITY) OF RS. 36,33,00,000/-. APPELLANT PRAYS THAT PROVISI ON OF LIABILITY OF MANDATORY PERIODIC OVERLAY WAS REVISED ON THE BASIS OF ACTUAL EXPENSES INCURRED IN A.Y.2016-17, THUS CONSEQUENT D ISALLOWANCE CONFIRMED DESERVES TO BE DELETED. 3. AT THE OUTSET, THE LD A/R SUBMITTED THAT THE AP PEAL OF THE ASSESSEE IN ITA NO. 1090/JP/2019 FOR A.Y 2014-15 HA S BEEN FILED WITH A DELAY OF 4 DAYS AND PRAYED THAT THE DELAY SO HAPPEN ED MAY BE CONDONED AND THE APPEAL BE ADMITTED FOR ADJUDICATIO N. AFTER HEARING BOTH THE PARTIES, THE DELAY SO HAPPENED IS HEREBY C ONDONED AND THE APPEAL OF THE ASSESSEE IS HEREBY ADMITTED FOR ADJUD ICATION. TREATMENT OF INTEREST INCOME FOR THE PURPOSES OF CO MPUTATION OF DEDUCTION U/S 80IA FOR A.YS 2010-11 TO 2015-16 4. THE ASSESSEE HAS TAKEN THIS COMMON GROUND OF APP EAL IN ITS APPEAL/CROSS OBJECTION FILED FOR THE ASSESSMENT YEA RS 2010-11 TO 2015-16 CHALLENGING THE ACTION OF THE LD . CIT(A) IN UPHOLDING THE DISALLOWANCE OF DEDUCTION U/S 80IA ON THE INTEREST RECEIPTS BY TREATING THE SAME AS INCOME FROM OTHER SOURCES AS AGAINST INCOME FROM BUSINESS ACTIVITIES. 5. DURING THE COURSE OF HEARING, THE LD. AR SOUGHT PERMISSION TO MODIFY THE GROUNDS OF APPEAL FOR EACH OF THE RESPEC TIVE ASSESSMENT ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 16 YEARS 2010-11 TO 2015-16 INSTEAD OF THE GROUNDS OF APPEAL SO TAKEN BY THE ASSESSEE IN ITS APPEAL ORIGINALLY FILED. THE MO DIFIED GROUNDS OF APPEAL FOR A.Y 2010-11 READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. AO HAS GROSSLY ERRED IN MAKING ADDITION OF A SUM O F RS. 2,40,27,523/- WHICH AMOUNTS TO DOUBLE ADDITION AS THE ASSESSEE HAD ITSELF DISALLOWED THIS AMOUNT FOR THE COMPUTAT ION OF BOOK PROFITS FOR THE PURPOSE OF SECTION 80IA OF I.T. AC T, 1961. 6. IT WAS SUBMITTED THAT SIMILAR MODIFIED GROUNDS O F APPEAL ARE SOUGHT TO BE TAKEN FOR EACH OF THE OTHER YEARS UNDE R APPEAL I.E. A.YS 2011-12 TO 2015-16 WHICH ARE SIMILARLY WORDED EXCEP T FOR THE CHANGE IN THE QUANTUM OF INTEREST INCOME INVOLVED. IT WAS SUB MITTED THAT THE ASSESSEE ON REVIEW OF THE APPEAL DOCUMENTATION NOTI CED THAT IT HAS SUO-MOTO DISALLOWED THE INTEREST RECEIPTS WHILE COM PUTING BOOK PROFITS FOR THE PURPOSES OF DEDUCTION U/S 80IA OF THE ACT A ND THE SAID FACT HAS INADVERTENTLY ESCAPED ITS ATTENTION AT THE TIME OF FILING OF THE APPEAL. IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS DIS ALLOWED THE INTEREST RECEIPTS WHILE WORKING OUT DEDUCTION U/S 80IA OF TH E ACT AND THE SAID ACTION OF THE ASSESSING OFFICER HAS RESULTED INTO D OUBLE ADDITION OF THE SAME AMOUNT AND THE ASSESSEE CANNOT BE PENALIZED FO R SUCH INADVERTENT ERROR WHERE IT HAS SUO MOTO DISALLOWED THE INTEREST RECEIPTS WHILE WORKING OUT THE DEDUCTION U/S 80IA OF THE ACT . IT WAS ACCORDINGLY SUBMITTED THAT THE MODIFIED GROUNDS OF APPEAL MAY B E ADMITTED AND NECESSARY RELIEF MAY BE GRANTED TO THE ASSESSEE BY DIRECTING THE ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 17 ASSESSING OFFICER TO DELETE THE SAID DISALLOWANCE W HILE WORKING OUT THE DEDUCTION U/S 80IA OF THE ACT. 7. PER CONTRA, THE LD. CIT/DR SUBMITTED THAT IT IS A SETTLED POSITION THAT INTEREST RECEIPTS SHOULD NOT QUALIFY FOR DEDUC TION U/S 80IA OF THE ACT AND THE SAME IS THE CONSISTENT POSITION WHICH H AS BEEN ADOPTED BY THE ASSESSING OFFICER FOR ALL THESE YEARS. AS REGAR DS THE SUBMISSION OF THE LD. AR THAT THE ASSESSEE ALREADY DISALLOWED THE INTEREST RECEIPTS FOR WORKING OUT THE BOOK PROFIT FOR CALCULATION OF DEDU CTION U/S 80IA OF THE ACT AND THERE SHOULD NOT BE ANY FURTHER DISALLOWANC E, IT WAS SUBMITTED THAT THE SAID FACT NEED VERIFICATION AND THE REVENU E HAS NO OBJECTION WHERE THE MATTER IS SET ASIDE TO THE FILE OF THE AS SESSING OFFICER FOR NECESSARY VERIFICATION. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. DURING THE COURSE OF HEARING, THE ASSESSEE HAS SOUGHT PERMISSION TO RAISE THE MODIFIED GROUND OF A PPEAL IN PLACE OF EXISTING GROUNDS OF APPEAL STATING THAT THE ASSESSE E HAS ITSELF DISALLOWED THE INTEREST RECEIPT WHILE WORKING OUT T HE DEDUCTION U/S 80IA OF THE ACT. WHERE THE ASSESSEE HAS SUO MOTO DISALLO WED THE INTEREST RECEIPT WHILE WORKING OUT THE DEDUCTION U/S 80IA OF THE ACT, WE FIND THAT PRINCIPALLY, BOTH THE PARTIES ARE IN AGREEMENT THAT SUCH INTEREST RECEIPTS SHOULD NOT QUALIFY FOR DEDUCTION UNDER SEC TION 80IA OF THE ACT AND THE MATTER IS NO MORE IN DISPUTE. THE FACT THA T ASSESSEE HAS SUO MOTO DISALLOWED THE INTEREST RECEIPT FOR THE PURPOS ES OF DEDUCTION U/S 80IA IS A MATTER OF RECORD WHICH CAN BE VERIFIED FR OM THE RETURN OF INCOME FILED BY THE ASSESSEE FOR THE RESPECTIVE ASS ESSMENT YEARS. WE ACCORDINGLY ALLOW THE MODIFICATION IN THE GROUND OF APPEAL SO TAKEN BY ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 18 THE ASSESSEE COMPANY AND THE MATTER IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER TO CARRY OUT THE NECESSARY VERIFI CATION AND WHERE ON SUCH VERIFICATION, IT IS SO FOUND THAT THE ASSESSEE HAS SUO MOTO DISALLOWED THE INTEREST RECEIPTS WHILE WORKING OUT THE DEDUCTION U/S 80IA OF THE ACT, NO FURTHER ADDITION IS SUSTAINABLE IN THE EYES OF LAW AND THE ADDITION MADE BY THE ASSESSING OFFICER IS HEREB Y DIRECTED TO BE DELETED. 9. IN THE RESULT, THE EXISTING GROUNDS OF APPEAL AR E TREATED AS WITHDRAWN AS PER REQUEST OF THE ASSESSEE AND MODIFI ED GROUND OF THE APPEAL FOR THE RESPECTIVE ASSESSMENT YEARS I.E, A.Y 2010-11 TO A.Y 2015-16 SO TAKEN BY THE ASSESSEE ARE ADMITTED AND A LLOWED FOR STATISTICAL PURPOSES. TREATMENT OF MISC. INCOME FOR THE PURPOSES OF COMPU TATION OF DEDUCTION U/S 80IA FOR A.YS 2011-12 TO 2014-15 10. THE REVENUE HAS TAKEN THIS COMMON GROUND OF APP EAL IN ITS APPEAL FILED FOR THE ASSESSMENT YEARS 2011-12 TO 20 14-15 CHALLENGING THE ACTION OF THE LD. CIT(A) IN ALLOWING THE CLAIM OF DEDUCTION U/S 80IA ON MISCELLANEOUS RECEIPTS IN FORM OF SALE OF SCRAP AND INSURANCE RECEIPTS. 11. IN THIS REGARD, THE LD. CIT/DR SUBMITTED THAT T HE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IA OF THE ACT IN RESPECT OF INCOME DERIVED FROM OPERATING AND MAINTAINING OF THE HIGHWAY. THE AO HA S TREATED THE INCOME FROM SALE OF SCRAP AND INSURANCE RECEIPTS RE CEIVED BY THE ASSESSEE AS INCOME FROM OTHER SOURCES AND CONSEQU ENTLY, HAS NOT ALLOWED DEDUCTION U/S 80IA OF THE ACT BY OBSERVING THAT THE SAME IS NOT DERIVED FROM THE BUSINESS OF THE ASSESSEE. IN SUPPO RT, RELIANCE WAS ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 19 PLACED ON HONBLE SUPREME COURT DECISION IN CASE OF LIBERTY INDIA V. CIT [2009] 183 TAXMAN 349 (SC) AND PANDIAN CHEMICAL S LTD. V. CIT [2003] 262 ITR 278 (SC). IT WAS ACCORDINGLY SUBMITT ED THAT NO DEDUCTION MAY BE ALLOWED TO THE ASSESSEE U/S 80IA I N RESPECT OF INCOME FROM SALE OF SCRAP AND INSURANCE RECEIPTS AS THE SAME ARE NOT DERIVED FROM THE BUSINESS OF MAINTAINING AND OPERAT ING THE HIGHWAYS. 12. PER CONTRA, THE LD. A/R SUBMITTED THAT THE SCRA P HAS BEEN GENERATED IN THE NORMAL COURSE OF BUSINESS OF OPERA TION AND MAINTENANCE OF THE TOLL HIGHWAY AND IS A NORMAL BUS INESS TRANSACTION WHICH IN ANY CASE COULD NOT BE HELD AS NON-BUSINESS RECEIPT. THE SCRAP INCLUDE THE METAL CRASH BARRIERS, PEDESTRIAN GUARD RAILS ETC. WHICH ARE FIXED ON THE TOLL ROAD AND GOT DAMAGED IN THE ACCID ENTS WHICH HAD TAKEN PLACE AND BEING NO MORE WORTHY OF USAGE AS SU CH HAS BECOME SCRAP. HAD THERE BEEN NO BUSINESS OF OPERATING AND MAINTAINING OF THE TOLL HIGHWAY, THERE WOULD BE NO QUESTION OF GENERAT ION OF ANY SUCH SCRAP, THUS THE INCOME FROM SALE OF SCRAP IS NORMAL BUSINESS INCOME AND THEREFORE IS ELIGIBLE FOR DEDUCTION U/S 80IA. W ITH REGARD TO THE INSURANCE CLAIMS, IT WAS SUBMITTED THAT THE SAME WE RE RECEIVED ON THE ASSETS USED IN THE TOLL BUSINESS WHICH GOT DAMAGED AND INSURANCE CLAIMED WAS RECEIVED. IT WAS SUBMITTED THAT THE US E OF SUCH ASSETS IS INCIDENTAL TO THE TOLL OPERATIONS ACTIVITY AND THE CLAIM SO RECEIVED IS PART OF THE BUSINESS RECEIPTS ELIGIBLE FOR DEDUCTION U/S 80IA. 13. IT WAS FURTHER SUBMITTED THAT ASSESSEE WAS HAVI NG INCOME OF SIMILAR NATURE IN PRECEDING ASSESSMENT YEAR A.Y 201 0-11 WHERE THE TRIBUNAL (ITA NO. 14/JP/2015) UPHELD THE ORDER OF THE LD. CIT(A) WHO HAD ALLOWED THE INCOME FROM SALE OF SCRAP TO BE INC LUDED IN THE PROFITS ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 20 OF ELIGIBLE BUSINESS FOR THE PURPOSES OF DEDUCTION U/S 80IA OF THE ACT. IT WAS SUBMITTED THAT AGAINST THE SAID ORDER, THOUG H THE DEPARTMENT HAD FILED APPEAL BEFORE THE HONBLE RAJASTHAN HIGH COURT, HOWEVER, ON THIS PARTICULAR ISSUE, NO GROUND OF APPEAL WAS TAKE N UP BY THE DEPARTMENT AS APPARENT FROM THE SUBSTANTIAL QUESTIO N OF LAW ADMITTED BY THE HONBLE HIGH COURT IN DB ITA NO. 142/2017 FO R A.Y 2010-11. IT WAS ACCORDINGLY SUBMITTED THAT SINCE THE ISSUE IS I DENTICAL AND SETTLED IN FAVOUR OF THE ASSESSEE AS THE DEPARTMENT HAS NOT CH ALLENGED THE DECISION OF THE TRIBUNAL IN THE EARLIER YEAR, FOLLO WING THE PRINCIPLE OF CONSISTENCY, THE LD CIT(A) HAS RIGHTLY HELD THAT IN COME FROM SALE OF SCRAP AND INSURANCE RECEIPTS IS ELIGIBLE FOR DEDUCT ION U/S 80IA OF THE ACT. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSED THE MATERIAL AVAILABLE ON RECORD. THERE ARE RECEIPTS ON ACCOUNT OF SCRAP SALE IN EACH OF THE YEARS UNDER CONSIDERATION AND RECEIPTS ON AC COUNT OF INSURANCE CLAIM FOR A.Y 2011-12. THE CLAIM OF THE ASSESSEE I S THAT THE SCRAP HAS BEEN GENERATED IN THE REGULAR COURSE OF BUSINESS OF OPERATION AND MAINTENANCE OF THE TOLL HIGHWAY AND IS IN THE FORM OF METAL CRASH BARRIERS, PEDESTRIAN GUARD RAILS, ETC WHICH GET DAM AGED DUE TO ROAD ACCIDENTS AND OTHER REGULAR WEAR AND TEAR, AND THER EFORE, NEEDS TO BE REPLACED AND IS THUS, A PART OF NORMAL BUSINESS TRA NSACTION ELIGIBLE FOR DEDUCTION U/S 80IA. THE CLAIM OF THE REVENUE IS TH AT SUCH RECEIPTS ARE NOT HAVING THE FIRST DEGREE OF NEXUS WITH TOLL OPER ATION ACTIVITY AND THUS NOT DERIVED FROM THE MAINTAINING AND OPERATING THE HIGHWAY AND ACCORDINGLY NOT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. THE CO- ORDINATE BENCH IN ASSESSEES OWN CASE FOR A.Y 2010- 11 HAD AN OCCASION ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 21 TO EXAMINE SIMILAR MATTER AND WHILE DISPOSING OF SI MILAR GROUND OF APPEAL HAS HELD AS UNDER:- 14.3. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD. CIT (A) WH ILE DECIDING THE ISSUE HAS GIVEN THE FOLLOWING FINDING OF FACT :- 9.3. I HAVE CAREFULLY CONSIDERED THE FINDINGS OF T HE AO AS ALSO THE SUBMISSION OF THE APPELLANT. IT MAY BE NOT ED THAT THE INCOME FROM SALE OF SCRAP AMOUNTING TO RS. 7665 89/- AND RECEIPT ON ACCOUNT OF UNCLAIMED SECURITY DEPOSI T AMOUNTING TO RS. 140300/- WAS NOT CONSIDERED FOR DEDUCTION U/S 80IB OF IT ACT BY THE AO BY HOLDING T HAT SUCH INCOME WAS NOT FROM THE ELIGIBLE BUSINESS. IN THIS CONNECTION IT MAY BE NOTED THAT AS REGARDS THE SALE OF SCRAP THE SCRAP WAS GENERATED FROM THE NORMAL COURS E OF BUSINESS AND IT IS ALSO FACT THAT AS AND WHEN THE I TEMS FROM WHICH SUCH SCRAP WAS GENERATED WERE PURCHASED, THE EXPENSES ON SUCH PURCHASES WAS CLAIMED IN THE P & L A/C. IT MAY BE MENTIONED THAT IT IS NOT A CASE OF INDEPENDENT PURCHASE AND SALE OF SCRAP ITEM AND IT IS A CASE WHERE SUCH SCRAP ITEMS WERE GENERATED FROM THE SAME BUSINESS ON WHICH DEDUCTION U/S 80IB IS CLAIME D. THEREFORE THE RECEIPT OF RS. 766589/- IS TO BE CONS IDERED FOR DEDUCTION U/S 80IB OF IT ACT. HOWEVER , AS REGA RDS THE UNCLAIMED SECURITY DEPOSITS OF RS. 140300/-, IT MAY BE NOTED THAT THE APPELLANT HAS NOT FURNISHED SPECIFIC DETAILS OF SUCH SECURITY DEPOSIT EITHER BEFORE THE AO OR BE FORE THE APPELLATE AUTHORITY WHICH MAY DEMONSTRATE THAT SUCH RECEIPT WAS FROM THE BUSINESS ACTIVITIES ON WHICH DEDUCTION U/S 80IB WAS ALLOWABLE. ACCORDINGLY, SUCH AMOUNT OF RS. 140300/- CANNOT BE CONSIDERED FOR CLA IM OF DEDUCTION U/S 80IB OF IT ACT. IN VIEW OF THESE FAC TS, THE GROUND OF APPEAL IS TREATED TO BE PARTLY ALLOWED. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 22 THE LD. D/R COULD NOT CONTROVERT THE ABOVE FINDING OF THE LD. CIT (A). IN VIEW OF THE ABOVE OBSERVATION OF THE LD. C IT (A), WE FIND NO REASON TO INTERFERE IN THE ORDERS OF THE LD. CIT (A), THE SAME IS HEREBY UPHELD. THE GROUND RAISED BY THE REVENUE IS REJECTED. 15. THE COORDINATE BENCH HAS THUS AGREED WITH THE F INDINGS OF THE LD CIT(A) WHEREIN HE HAS HELD THAT THE SALE OF SCRAP W AS GENERATED IN THE NORMAL COURSE OF BUSINESS AND IT WAS NOT A CASE OF INDEPENDENT PURCHASE AND SALE OF SCRAP ITEM AND IT IS A CASE WH ERE SUCH SCRAP ITEMS WERE GENERATED FROM THE SAME BUSINESS ON WHICH DEDU CTION U/S 80IB IS CLAIMED. IN THE YEARS UNDER CONSIDERATION, FOLLOWIN G THE DECISION OF THE COORDINATE BENCH, THE LD CIT(A) HAS CONSISTENTLY TA KEN THE SIMILAR VIEW AND HAS ALLOWED THE CLAIM OF THE ASSESSEE. WE ALSO FIND THAT IT IS A CONSISTENT VIEW TAKEN BY OTHER BENCHES OF THE TRIBU NAL AS CAN BE SEEN FROM THE DECISION OF THE CHENNAI BENCHES OF THE TRI BUNAL IN CASE OF M/S. L&T TRANSPORTATION INFRASTRUCTURE LIMITED VS I NCOME TAX OFFICER (ITA NO.1680/MDS./10 DATED 22.07.2011 ). IN THAT CASE, L&T TRANSPORTATION INFRASTRUCTURE LTD. HAS ENTERED INTO A CONCESSION AGREEMENT WITH GOVERNMENT OF INDIA & GOVERNMENT OF TAMIL NAIDU TO UNDERTAKE THE CONSTRUCTION OF A BYPASS ROAD NEAR CO IMBATORE AND A BRIDGE ON NH-47, ACROSS RIVER NAYAL DEVELOP ON 'BUI LD, OPERATE AND TRANSFER BASIS AND WHILE DISPOSING OFF GROUND RELA TING TO ELIGIBILITY OF RECEIPTS FROM SALE OF SCRAPS FOR DEDUCTION U/S 80IA , THE COORDINATE BENCH HAS HELD AS UNDER: 18. THE LAST ISSUE RELATES TO SCRAP SALES. WE FIND FORCE IN THE SUBMISSIONS OF THE LD. LEARNED AUTHORIZED REPRESENT ATIVE IN THIS ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 23 RESPECT. WE FIND THAT SALE OF SCRAP REPRESENTS THE SALE OF LEFT OVER MATERIALS WHICH WERE ACQUIRED FOR DEVELOPING ROAD. NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE LOWER AUTHORITIES TO CONTROVERT THE ABOVE SUBMISSION OF THE ASSESSEE THUS WE AGREE THAT THE ABOVE SALE OF SCRAP WAS INTIMATELY CONNECTED WITH T HE BUSINESS OF DEVELOPING OPERATING AND MAINTAINING INFRASTRUCTURE FACILITY AND INCOME FROM SUCH SALE GOES ON TO REDUCE THE EXPENDI TURE OF DEVELOPING THE INFRASTRUCTURE FACILITY AND TRULY SP EAKING THE SAME IS NOT AN INDEPENDENT INCOME TO THE ASSESSEE. WE TH EREFORE, DELETE THE DISALLOWANCE OF DEDUCTION U/S.80-IA IN R ESPECT OF THE SALE OF SCRAP AND ALLOW THIS PART OF THE GROUND OF THE ASSESSEE. 16. IN LIGHT OF AFORESAID DISCUSSIONS WHERE THE MAT TER HAS ALREADY BEEN EXAMINED BY THE COORDINATE BENCH IN THE EARLIE R YEAR IN ASSESSEES OWN CASE, AND THE FACT THAT THE REVENUE HAS NOT CHALLENGED THE SAME BEFORE THE HONBLE HIGH COURT, AND IN ABSE NCE OF ANY CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND FOLL OWING THE CONSISTENT VIEW TAKEN BY OTHER BENCHES OF THE TRIBUNAL, WE DON OT SEE ANY BASIS TO INTERFERE WITH THE EARLIER DECISION TAKEN BY THE CO ORDINATE BENCH IN ASSESSEES OWN CASE, WHERE ONE OF US WAS ALSO A PAR TY. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO ALLOW CLAIM OF DEDU CTION U/S 80IA ON SUCH SCRAP SALE RECEIPTS FOR THE RESPECTIVE ASSESSMENT Y EARS. 17. NOW COMING TO INSURANCE RECEIPTS AMOUNTING TO RS 59,98,435/- PERTAINING TO A.Y 2011-12, IT HAS BEEN CONTENDED BY THE LD AR THAT SUCH INSURANCE RECEIPTS ARE TOWARDS CLAIM MADE IN RESPEC T OF ASSETS USED IN THE TOLL OPERATION ACTIVITY WHICH GOT DAMAGED AND S UCH RECEIPTS ARE INCIDENTAL TO ITS ACTIVITY OF MAINTAINING AND OPERA TING THE HIGHWAY AND ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 24 THUS ELIGIBLE FOR DEDUCTION U/S 80IA. WE FIND THAT WHERE SUCH INSURANCE CLAIMS ARE IN RESPECT OF ASSETS USED IN THE TOLL OP ERATIONS WHICH HAVE BEEN CAPITALIZED AND FORM PART OF BLOCK OF ASSETS, THE RECEIPTS ARISING IN FORM OF INSURANCE CLAIMS WILL GO TO REDUCE THE BLOC K OF ASSETS INSTEAD OF BEING ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. THE MATTER IS ACCORDINGLY SET-ASIDE TO THE FILE OF THE ASSESSI NG OFFICER TO EXAMINE THE SAME AFRESH AFTER PROVIDING REASONABLE OPPORTUN ITY TO THE ASSESSEE. 18. IN THE RESULT, THE GROUNDS OF APPEAL SO TAKEN BY THE REVENUE FOR THE RESPECTIVE ASSESSMENT YEARS I.E, A.Y 2011-12 TO A.Y 2014-15 ARE DISPOSED OFF IN LIGHT OF AFORESAID DIRECTIONS. CLAIM OF PERIODIC OVERLAY EXPENSES FOR A.Y 2014-15 & 2015-16 19. IN ITS GROUNDS OF APPEAL, THE DEPARTMENT HAS CH ALLENGED THE ACTION OF THE LD CIT(A) IN DELETION OF ADDITION OF RS. 11.33 CRORES IN A.Y 2014-15 AND RS. 11.33 CRORES IN A.Y 2015-16 ON ACCO UNT OF OVERLAY EXPENSES CLAIMED IN PROFIT & LOSS A/C. AND THE ASSE SSEE IN ITS CROSS APPEAL FOR A.Y 2015-16 HAS CHALLENGED THE CONFIRMAT ION OF DISALLOWANCE OF RS. 25.00 CRORES (OVER AND ABOVE RS 11.33 CRORES ) OUT OF PERIODIC OVERLAY PROVISION MADE AND CLAIMED IN THE PROFIT & LOSS ACCOUNT. 20. BRIEF FACTS PERTAINING TO THESE GROUNDS ARE THA T THE ASSESSEE COMPANY HAS DEBITED A SUM OF RS. 11.33 CRORES IN AY 2014-15 AND RS. 36.33 CRORES IN AY 2015-16 IN ITS PROFIT & LOSS ACCOUNT TOWARDS PROVISION FOR THE SECOND PERIODIC OVERLAY OF THE PA VEMENT (TOLL ROAD). THE AO HAS HELD THAT THERE IS NO SCIENTIFIC BASIS F OR MAKING THIS PROVISION AND HELD THE SAME AS CONTINGENT LIABILITY AND THUS MADE THE ADDITION. IN APPEAL, THE LD. CIT(A) HELD THAT THAT AS PER THE CONCESSION ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 25 AGREEMENT BETWEEN THE ASSESSEE AND NHAI, EXPENDITUR E FOR KEEPING THE ROUGHNESS OF THE EXPRESSWAY AT 2500MM/KM IS MAN DATORY AND THE APPELLANT COMPANY HAS TO RELAY THE SURFACE EVERY 5 YEARS THUS IT IS AN ASCERTAINED LIABILITY AND NOT CONTINGENT LIABILITY HOWEVER, ALLOWED THE EXPENSES TO THE TUNE OF RS. 11.33 CR FOR BOTH THE A SSESSMENT YEARS AND DISALLOWED RS. 25.00 CRORES IN AY 2015-16. NOW THE DEPARTMENT IS CHALLENGING THE RELIEF GIVEN BY LD. CIT(A) AND THE ASSESSEE AGAINST THE ADDITION SUSTAINED BY THE LD CIT(A). 21. IN THIS REGARD, THE LD A/R SUBMITTED THAT CONTI NGENT LIABILITIES ARE LIABILITIES THAT MAY BE INCURRED BY AN ENTITY DEPENDING ON THE OUTCOME OF AN UNCERTAIN FUTURE EVENT SUCH AS TH E OUTCOME OF A PENDING LAW SUIT. THESE LIABILITIES ARE NOT RECORDE D IN COMPANYS ACCOUNTS AND SHOWN BELOW LINE IN THE BALANCE SHEET AS FOOTNOTE WHEREAS IN THE INSTANT CASE, PROVISION HAS BEEN MAD E TO COVER UP EXPENSES THAT WILL HAVE TO BE NECESSARILY INCURRED IN FUTURE. THERE WAS NO UNCERTAINTY AS TO WHETHER SUCH EXPENSES WILL BE INCURRED OR NOT, IT IS JUST THAT QUANTUM OF EXPENSE COULD NOT BE ESTIMATED WITH 100% ACCURACY AS THE SAME WILL DEPEND UPON EXTENT OF DET ERIORATION AND RAPIDLY OF DETERIORATION IN THE RIDING QUALITY OF P AVEMENT. WITH WHAT RAPIDITY IT DETERIORATES, TO WHAT EXTENT AND PERIOD ICITY IT REQUIRES RESURFACING IN ORDER TO GIVE SMOOTH RIDING QUALITY TO THE TOLL PAYING ROAD USERS, IS A FUNCTION OF THE VOLUME OF TRAFFIC, THE LOADS CARRIED BY THE TRAFFIC AND THE DAMAGE CAUSED BY CLIMATIC CONDITION S (EXTREME TEMPERATURES, HEAVY RAINS / FLOODS, ACCIDENTS RESUL TING IN SPILLOVER OF CHEMICAL MATERIALS ETC.) IN ORDER TO ENSURE SMOOTH RIDING QUALITY, THE CONCESSION AGREEMENT PRESCRIBES CERTAIN STANDARDS T O BE MAINTAINED BY THE COMPANY IN TERMS OF SURFACE ROUGHNESS. THE PR ESCRIBED STANDARDS ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 26 REQUIRE THE COMPANY TO UNDERTAKE SURFACE RENEWAL CO AT TO THE PAVEMENT AS AND WHEN THE ROUGHNESS VALUE OF THE PAV EMENT REACHES 3500 MM/KM TO BRING IT DOWN TO 2500 MM/KM. IT WAS FURTHER SUBMITTED THAT IRRESPECTIVE OF THE ROUGHNESS VALUE IN ANY CASE, RENEWAL COAT HAS TO BE LAID AT LEAST ONCE EVERY 5 YEARS AS PER CLAUSE 4.5.1 OF SCHEDULE-L TO THE CONCESSION AGREEMENT WHICH IS REP RODUCED BELOW. 4.5.1 PAVEMENT RIDING QUALITY THE RIDING QUALITY OF THE PAVEMENT SHALL BE ENSURED BY SATISFYING THE MINIMUM REQUIREMENTS GIVEN HEREIN UN DER. I) SURFACE ROUGHNESS OF THE PROJECT HIGHWAY ON COMPLETION OF CONSTRUCTION SHALL BE 2500 MM/KM AS MEASURED BY THE 5 TH WHEEL BUMP INTEGRATOR. II) SURFACE ROUGHNESS SHALL NOT EXCEED 3500 MM/KM DURING THE SERVICE LIFE OF PAVEMENT AT ANY TIME. A RENEWAL COAT OF 25 MM OF BITUMINOUS CONCRETE SHALL BE LAID EVERY 5 YEARS AFTER INITIAL CONSTRUCTION OR WH ERE THE ROUGHNESS VALUE REACHES 3500 MM/KM WHICHEVER IS EARLIER TO BRING IT TO INITIAL VALUE OF 2500 MM/KM. 22. IT WAS SUBMITTED THAT SINCE THE TIMING FOR RENE WAL OF SURFACE AND THE AREA IS FIXED I.E. IN EVERY FIVE YEARS AND IT I S MANDATORY AS PER THE TERMS OF AGREEMENT AND ASSESSEE COMPANY HAS NO OPTI ON BUT TO ACT ACCORDING TO THE AGREEMENT, THEREFORE, THE EXPENDIT URE ON SURFACE RENEWAL COAT IS AN ASCERTAINED LIABILITY. ACCORDING LY THE COMPANY HAS TO ACCUMULATE SUFFICIENT FUNDS OUT OF THE TOLL FEE INC OME COLLECTED FROM ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 27 ROAD USERS WHICH PRIMARILY CAUSES THE DAMAGE REQUIR ING RESURFACING. FOR THIS PURPOSE, THE ASSESSEE HAD OBTAINED A REPORT FR OM AN INDEPENDENT CONSULTANT AUTHORIZED BY NHAI FOR THIS PURPOSE, WHO ESTIMATED THE TOTAL COST TOWARDS THE SECOND PERIODIC OVERLAY AT RS. 56. 64 CRORES AND ACCORDINGLY YEARLY AN AMOUNT OF RS. 11.33 CRORES AR E RETAINED FOR THE PURPOSES TILL THE DATE WHEN SUCH OVERLAY IS CARRIED OUT WHICH COMMENCED FROM AY 2011-12 AND ONWARDS. 23. IT WAS SUBMITTED THAT IN ORDER TO DERIVE COMFOR T TO MEET THE ABOVE EXPENDITURE AND TO PRESENT THE TRUE AND FAIR VIEW OF THE AFFAIRS OF THE COMPANY REGARDING PROFITABILITY AND ALSO SINCE IT IS ASCERTAINED LIABILITY, THE COMPANY HAS CHARGED THE EQUIVALENT A MOUNT TO ITS PROFITS AND DEBITED IT TO THE P&L ACCOUNT. SUCH RETENTION O F FUNDS IS A BUSINESS NECESSITY RATHER THAN EXPENSE FOR EARNING OTHER INC OME AND THUS THE PROVISION MADE TOWARDS THE SURFACE RENEWAL COAT BEI NG ASCERTAINED LIABILITY DESERVES TO BE ALLOWED AS CLAIMED. IT IS ALSO A MATTER OF FACT THAT THE EXPENDITURE TOWARDS THE SECOND PERIODIC OV ERLAY FOR THE FIRST TIME WAS PROVIDED IN AY 2011-12 AND THE SAME WAS AL LOWED AS CLAIMED IN ALL THE ASSESSMENT YEARS BEGINNING FROM A.Y.2011 -12 TILL 2013-14, AFTER MAKING NECESSARY VERIFICATION IN THE ASSESSME NT PROCEEDINGS CONCLUDED U/S 143(3) OF THE INCOME TAX ACT, 1961. S INCE FACTS AND THE CIRCUMSTANCES AS EXISTED IN EARLIER ASSESSMENT YEAR S REMAINED THE SAME IN THE YEARS UNDER APPEAL THUS AS PRINCIPLE OF CONS ISTENCY, THE SAME SHOULD BE ALLOWED IN BOTH OF THE ASSESSMENT YEARS. 24. IT WAS SUBMITTED THAT THOUGH EACH AND EVERY ASS ESSMENT YEAR IS INDEPENDENT YEAR AND PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 28 ASSESSMENT PROCEEDINGS, HOWEVER SOME SORT OF CONSIS TENCY IS REQUIRED WHILE FINALIZING THE ASSESSMENT TO ENSURE UNIFORMIT Y. THE RULE OF JUDICIAL PRECEDENT FLOWS FROM ARTICLE 14 OF THE CONSTITUTION OF INDIA WHICH GUARANTEES EQUALITY TO EVERY CITIZEN BEFORE LAW. EQ UALITY BEFORE LAW IMPLIES RULE OF LAW FOR ALL WHEREIN THERE IS NO SCO PE FOR ARBITRARINESS OR ANY DISCRIMINATION. IT IS A SETTLED LAW THAT THE RU LE OF JUDICIAL PRECEDENT ARE BINDING NOT ONLY ON THE COURTS OR QUASI-JUDICIA L AUTHORITIES BUT EVEN ADMINISTRATOR, TAX AND REVENUE AUTHORITIES AS THE S AME ASSURES CONSISTENCY, EQUALITY AND NON-PREJUDICE. THE HONBL E SUPREME COURT IN S.I. ROOPLAL AND ANOTHER VS. LT. GOVERNOR AIR 2000 SC 594 HAS OBSERVED THAT PRECEDENTS WHICH ENUNCIATE RULES OF L AW FROM THE FOUNDATION OF ADMINISTRATION OF JUSTICE UNDER OUR S YSTEM. THIS IS FUNDAMENTAL PRINCIPLE WHICH EVERY PRESIDING OFFICER OF THE JUDICIAL FORUM OUGHT TO KNOW, FOR CONSISTENCY IN INTERPRETATION OF LAW WHICH ALONE CAN LEAD TO PUBLIC CONFIDENCE IN OUR JUDICIAL SYSTEM. T HE HONBLE SUPREME COURT HAS LAID DOWN TIME AND AGAIN THAT PRECEDENT L AW MUST BE FOLLOWED BY ALL CONCERNED, DEVIATION FROM THE SAME, SHOULD BE ONLY ON A PROCEDURE KNOWN TO LAW. A SUBORDINATE COURT IS BOUN D BY THE ENUNCIATION OF LAW MADE BY THE SUPERIOR COURTS AND IN SUPPORT, RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS: DIRECTOR OF INCOME TAX (EXEMPTIONS) VS. ESCORTS CAR DIAC DISEASES HOSPITAL SOCIETY (DELHI) 300 ITR 75 DCIT, SPL. RANGE VS. JINDAL PHOTO FILMS LTD. (DELHI ) 113 ITD 624 CIT VS. GOPAL PUROHIT (BOM.) 188 TAXMAN 140 DY. CIT VS. GOEL ERECTORS & PIPE MANUFACTURERS (P) LTD. 45 DTR 473 ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 29 ARVIND FASHIONS LTD. VS. ASSTT. CIT (AHD B) 45 DT R 299 25. IT WAS SUBMITTED THAT PROVISION HAS BEEN MADE I N RESPECT OF AN ASCERTAINED LIABILITY IN TERMS OF THE CONCESSION AG REEMENT AND THE YEARLY PROVISION IS BASED ON THE INDEPENDENT CONSUL TANT REPORT WHO HAS BEEN APPOINTED IN CONSULTATION WITH THE NHAI TO WOR K OUT THE ESTIMATION OF THE TOTAL COST TO BE INCURRED ON SUCH PERIODIC SURFACE RENEWAL COAT. THUS AMOUNT OF PROVISION IS CHARGED T O THE PROFIT & LOSS ACCOUNT SO AS TO GIVE THE TRUE AND FAIR VIEW OF THE FINANCIAL STATEMENTS OF THE ASSESSEE COMPANY TO ITS SHAREHOLDER AND OTHE R AUTHORITIES INCLUDING NHAI. IT IS ALSO A MATTER OF FACT THAT TH E AMOUNT PROVIDED FOR IN THE PRECEDING ASSESSMENT YEARS HAS ALSO BEEN ALL OWED AS EXPENDITURE. 26. IT WAS FURTHER SUBMITTED THAT SUCH PROVISION FO R SECOND PERIODIC OUTLAY WAS MADE IN F.Y.2010-11 TO F.Y.2013-14 ON TH E BASIS OF ESTIMATED EXPENDITURE @ RS.11,33,00,000/- EVERY YE AR, I.E. AGGREGATING RS.45,32,00,000/-. HOWEVER, IN A.Y.2015 -16, ON THE BASIS OF ACTUAL EXAMINATION OF SITES, ACTUAL EXPENDITURE WAS ESTIMATED AT MUCH HIGHER AMOUNT, THUS TOTAL PROVISION FOR SUCH O UTLAY IN 5TH YEAR WAS REVISED TO RS. 81,65,00,000/- AND ACCORDINGLY, BALANCE ESTIMATED EXPENDITURE WAS CLAIMED IN AY 2015-16 WHICH COMES T O RS. 36.33 CR. BUT IN FY 2015-16, WHEN THE SURFACE RENEWAL COAT WA S CARRIED OUT, THE AMOUNT OF ACTUAL EXPENDITURE WAS INCURRED AT RS.1,4 5,50,86,247/-, I.E. PROVISION ALREADY MADE FELL SHORT BY RS.63,85,86,24 7/-, WHICH AMOUNT WAS CHARGED TO PROFIT & LOSS A/C FOR THE YEAR ENDIN G 31.03.2016 AND WAS ALLOWED IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE ACT. HERE IT ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 30 IS RELEVANT TO STATE THAT LD. AO HAS NOT ALLOWED TH E AMOUNT OF PROVISION MADE IN EARLIER YEARS WHICH STOOD DISALLOWED AND TH IS HAS RESULTED INTO NON-ALLOWANCE OF THE EXPENDITURE INCURRED ON THE PE RIODIC OVERLAY TO THE EXTENT OF THE DISALLOWANCE MADE IN AY 2014-15 A ND 2015-16. 27. IN VIEW OF ABOVE, IT WAS SUBMITTED THAT PROVISI ON MADE BY ASSESSEE IS TO MEET OUT COST OF RENEWAL OF PAVEMENT TO BE INCURRED IN FUTURE, WHICH IS ASCERTAINED LIABILITY IN VIEW OF C LAUSE 4.5.1 OF CONCESSION AGREEMENT. IN FACT AS PER BASIC ACCOUNTI NG CONCEPT OF PRUDENCE, ALL THE POSSIBLE LOSSES SHOULD BE ANTICIP ATED BUT NOT FUTURE INCOME. 28. IT WAS SUBMITTED THAT THE LD. CIT(A) THOUGH ADM ITTED THAT IT IS AN ASCERTAINED LIABILITY BUT FAILED TO APPRECIATE THE FACT THAT WHEN IN AY 2015-16 IT CAME TO THE KNOWLEDGE OF THE APPELLANT C OMPANY THAT THE COST OF 2 ND PERIODIC OVERLAY AS ESTIMATED ABOUT 4 YEARS AGO WA S VERY LOW AND THEREFORE KEEPING IN VIEW THE SUBSEQUENT ES TIMATION MADE IN F.Y. 2014-15, THE APPELLANT COMPANY IN AY 2015-16, PROVIDED A SUM OF RS. 36.33 CRORES INSTEAD OF 11.33 CRORES. IT WAS SU BMITTED THAT THE LD. CIT(A) UPHELD THE DISALLOWANCE OF RS. 25.00 CRORES BY IGNORING THE AFORESAID FACTS AND THE COMPANY HAS NOT CLAIMED ENT IRE AMOUNT IN AY 2016-17 BUT HAS CLAIMED THE AMOUNT OF EXPENDITURE W AS REDUCED BY PROVISIONS MADE AND CLAIMED IN EARLIER YEARS AND UP TO AY 2014-15 ONLY A SUM OF RS. 45.32 CRORES WERE PROVIDED IN THE BOOK S, ASSESSEE HAS DEBITED A SUM OF RS. 36.33 CRORES IN ITS PROFIT & L OSS ACCOUNT WHICH WAS THE BALANCE AMOUNT OF REVISED ESTIMATED COST TO BE INCURRED ON 2 ND ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 31 PERIODIC OVERLAY. AS SUBMITTED ABOVE, THE TOTAL COS T FINALLY INCURRED IN FY 2015-16 WAS FAR HIGHER AT RS. 145,50,86,247/-. 29. IT WAS SUBMITTED THAT THE EXPENDITURE INCURRED ON PERIODIC OVERLAY WAS MUCH HIGHER AND SINCE THE SAME IS INCUR RED IN TERMS OF THE CONCESSION AGREEMENT AND IS MANDATORY IN NATURE, TH E SAME DESERVES TO BE HELD AS ASCERTAINED LIABILITY. FURTHER SINCE THE ACTUAL EXPENDITURE WAS MUCH HIGHER THAN THE ESTIMATION DONE AND THE AC TUAL EXPENDITURE AS REDUCED BY THE PROVISIONS MADE IN EARLIER YEARS WAS ALLOWED BY THE DEPARTMENT AND NO DOUBT WHATSOEVER WAS RAISED, THER EFORE, THE REVISED AMOUNT CLAIMED IN AY 2015-16 AT RS. 36.33 CRORES DE SERVES TO BE ALLOWED. 30. IT WAS FINALLY SUBMITTED THAT IN VIEW OF CBDT CIRCULAR NO. 37/2016 DATED 02.11.2016, IT IS A REVENUE NEUTRAL EXERCISE GIVEN THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT AND IN SUCH CASES, THE CBDT HAS ASKED THE REVENUE OFFICERS NOT TO FILE /PRESS THE APPEAL ALREADY FILED. 31. PER CONTRA, THE LD. CIT/DR SUBMITTED THAT THE A SSESSEE IS MAINTAINING AND OPERATING JAIPUR KISHANGARH HIGHWAY (90.38 KMS) UNDER BOT AGREEMENT. IT HAS MADE A PROVISION FOR OV ERLAYING OF THE SAID HIGHWAY, WHICH ACCORDING TO THE ASSESSEE, WAS TO BE DONE AFTER EVERY 5 TH YEAR IN VIEW OF THE CONCESSIONAIRE AGREEMENT EXECU TED WITH NHAI. THE ASSESSEE HAS TREATED THE SAME AS ASCERTAI NED LIABILITY AND HAS CLAIMED THE SAME IN ITS P & L ACCOUNT. IN THE A SSESSMENT ORDER, THE AO HAS DISALLOWED THE SAME AS THE PROVISIONS WAS NO T MADE ON ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 32 SCIENTIFIC BASIS AND CONSIDERED THE SAME AS CONTING ENT LIABILITY. THE LD. CIT(A) HAS DELETED THE DISALLOWANCE BY CONSIDERING THE PROVISION SO MADE BY THE ASSESSEE AS ASCERTAINED LIABILITY. 32. IN THIS REGARD, IT WAS SUBMITTED THAT IN THE CA SE OF ROTORK CONTROLS INDIA (P.) LTD. VS CIT [2009] 180 TAXMAN 4 22 (SC), THE HONBLE APEX COURT HAS CONSIDERED THE VARIOUS JUDIC IAL PRONOUNCEMENTS AND HELD AS UNDER: A PROVISION IS A LIABILITY WHICH CAN BE MEASURED O NLY BY USING A SUBSTANTIAL DEGREE OF ESTIMATION. A PROVISION IS RE COGNIZED WHEN: (A) AN ENTERPRISE HAS A PRESENT OBLIGATION AS A RES ULT OF A PAST EVENT; (B) IT IS PROBABLE THAT AN OUTFLOW OF RESOURCES WIL L BE REQUIRED TO SETTLE THE OBLIGATION; AND (C) A RELIABLE ESTIMATE CAN BE MADE OF THE AMOUNT O F THE OBLIGATION. IF THESE CONDITIONS ARE NOT MET, NO PROVISION CAN B E RECOGNIZED. 33. IT WAS SUBMITTED THAT IN THE INSTANT CASE, IT C OULD BE SEEN FROM THE ASSESSMENT ORDER THAT THE AO HAS DISALLOWED PRO VISION FOR OVERLAY BY OBSERVING THAT THE SAID PROVISIONS HAS NOT BEEN MADE ON SCIENTIFIC BASIS. IT IS TO BE SEEN THAT IN THE APPELLATE ORDER , WHILE ALLOWING THE PROVISION MADE BY THE ASSESSEE, THE LD. CIT(A) HAS TOTALLY IGNORED THE ABOVE FINDING OF THE AO AND THE SAID FINDING HAS NE ITHER BEEN CONTROVERTED BY THE LD. CIT(A) NOR BY THE ASSESSEE AND IT WAS JUST SUBMITTED THAT THE PROVISION WAS MADE ON THE BASIS OF THE REPORT OF A CONSULTANT AND THERE IS NOTHING ON RECORD WHICH COU LD ESTABLISH THAT THE SAID PROVISION WAS MADE ON SCIENTIFIC BASIS. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 33 34. IT WAS FURTHER SUBMITTED THAT AS HELD BY THE HO NBLE APEX COURT THAT A PROVISION IS RECOGNIZED WHEN (A) AN ENTERPRI SE HAS A PRESENT OBLIGATION AS A RESULT OF A PAST EVENT. THE PROVISI ON FOR OVERLAY HAS BEEN MADE WHICH IS REQUIRED TO BE DONE IN FY 2014-1 5. THUS, PROVISION SO MADE IS NOT ON THE BASIS OF PAST EVENT, INSTEAD IT HAS BEEN MADE ON THE BASIS OF FUTURE EVENTS, WHICH CANNOT BE RECOGNI SED IN VIEW OF THE LAW AS LAID DOWN BY THE HONBLE APEX COURT IN THE C ASE OF ROTORK CONTROLS INDIA (P.) LTD. VS CIT (SUPRA). 35. WITHOUT PREJUDICE TO THE ABOVE, IT WAS SUBMITTE D THAT IT WOULD BE APPROPRIATE TO REFER TO THE RELEVANT CLAUSE 4.5.1 O F SCHEDULE-L TO THE CONCESSIONAIRE AGREEMENT AS UNDER: 4.5.1 PAVEMENT RIDING QUALITY THE RIDING QUALITY OF THE PAVEMENT SHALL BE ENSURED BY SATISFYING THE MINIMUM REQUIREMENTS GIVEN HEREIN UN DER. I) SURFACE ROUGHNESS OF THE PROJECT HIGHWAY ON COMPLETION OF CONSTRUCTION SHALL BE 2500 MM/KM AS MEASURED BY THE 5 TH WHEEL BUMP INTEGRATOR. II) SURFACE ROUGHNESS SHALL NOT EXCEED 3500 MM/KM DURING THE SERVICE LIFE OF PAVEMENT AT ANY TIME. A RENEWAL COAT OF 25 MM OF BITUMINOUS CONCRETE SHALL BE LAID EVERY 5 YEARS AFTER INITIAL CONSTRUCTION OR WHERE THE ROUGHNESS VALUE REACHES 3500 MM/KM WHICHEVER IS EARLIER TO BRING IT TO INITIAL VALUE O F 2500 MM/KM. 36. IT WAS SUBMITTED THAT FROM A PLAIN READING OF C LAUSE (II), IT COULD BE SEEN THAT AS SOON AS ROUGHNESS VALUE REACHES 300 MM/KM, THE SAME IS TO BROUGHT TO 2500 MM/KM BY PLACING RENEWAL COAT. IF FOR INSTANCE, ROUGHNESS VALUE REACHES 3500 MM/KM FOR A STRETCH OF 10 KMS ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 34 IN THE BLOCK OF 5 YEARS, THEN IT HAS TO BE BROUGHT DOWN TO 2500 MM/KM BY PLACING RENEWAL COAT OF 25 MM BITUMINOUS CONCRET E IN THAT YEAR ITSELF AND IT CANNOT BE POSTPONED TO THE 5 TH YEAR. FURTHER, IF IN THE FIFTH YEAR, THE ROUGHNESS VALUE IS LESS THAN 3500 MM/KM F OR THAT PARTICULAR STRETCH OF 10 KMS WHICH GOT RENEWAL COAT IN THE EAR LIER YEAR, THEN AS PER THE ABOVE CLAUSE (II), THE RENEWAL COAT IS NOT REQUIRED FOR THAT STRETCH OF 10 KMS IN THE 5 TH YEAR. IT MAY BE MENTIONED THAT IN NOTE 31 TO THE BALANCE SHEET FOR THE YEAR ENDING ON 31.03.2 012 I.E. FOR AY 2012-13 AS APPEARING, IT HAS BEEN STATED AS UNDER: 31 PROVISION FOR SECOND PERIODIC WEARING COURSE OV ERLAY:AS PER CONCESSION AGREEMENT ENTERED INTO BY THE COMPANY WI TH NATIONAL HIGHWAYS AUTHORITY OF INDIA, COMPANY HAS TO RENEW B ITUMINOUS CONCRETE COAT OF THE ROAD EVERY 5 YEARS. NEXT SUCH RENEWAL IS TO BE UNDERTAKEN DURING FINANCIAL YEAR 2014-15. AS PER ACCOUNTING STANDARD 29(AS 29), PROVISIONS, CONTINGENT ASSET S, COST OF OVERLAY OF BITUMINOUS CONCRETE TO BE MADE IN FINANC IAL YEAR 2014-15, AS REQUIRED BY OPERATION AND MAINTENANCE REQUIREMENTS IS ESTIMATED AT RS. 56.64 CRORE AND 1/ 5 TH OF THE SAME I.E. RS. 11.33 CRORE (PREVIOUS YEAR: RS. 11.33 CRORE) IS PROVIDED FOR THE YEAR. THUS, IT APPEARS THAT WHILE MAKING PROVISION FOR OV ERLAY, THE ENTIRE LENGTH OF THE HIGHWAY HAS BEEN TAKEN INTO CONSIDERA TION, WHICH APPEARS TO BE NOT CORRECT INTERPRETATION OF CLAUSE (II). SO , WHEN THE BASIS OF ESTIMATION ITSELF IS NOT CORRECT, HOW THE PROVISION CAN BE RELIABLE OR MADE ON SCIENTIFIC BASIS. 37. IT WAS FURTHER SUBMITTED THAT THE INITIAL PROVI SION OF OVERLAY FOR THE ENTIRE HIGHWAY WAS ESTIMATED AT RS. 56.64 CRORE IN THE FY 2010-11, WHEREAS THE SAME WAS REVISED TO RS. 81.65 CRORE IN THE 5 TH YEAR WHILE ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 35 PLACING THE WORK ORDER AND WORK WAS COMPLETED DURIN G FY 2015-16 INCURRING AN EXPENDITURE OF RS. 145.50 CRORE. IN VI EW OF THESE FACTS WHETHER, IT COULD BE SAID THAT THE PROVISION FOR OV ERLAY WAS RELIABLE OR MADE SCIENTIFICALLY AS THERE IS NO PARITY BETWEEN T HE ESTIMATE AND THE ACTUAL EXPENDITURE. 38. IT WAS FURTHER SUBMITTED THAT IN ITS WRITTEN SU BMISSION, IT HAS BEEN EMPHASIZED BY THE LD. AR THAT IN EARLIER YEARS , NO SUCH DISALLOWANCE WAS MADE ON THIS ISSUE AND THUS, IN VI EW OF THE PRINCIPLE OF CONSISTENCY, THE DECISION OF LD. CIT(A) MAY BE U PHELD. IN THIS REGARD, IT WAS SUBMITTED THAT THE PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS AND EACH ASSESSMENT YEAR IS SEPARATE AND INDEPENDENT ONE. THE ISSUE MAY NOT HAVE BEEN EXAMIN ED AT ALL IN EARLIER YEARS OR THE SAME MAY NOT BE EXAMINED CRITI CALLY. IF NO DISALLOWANCE WAS MADE BY THE AO IN EARLIER YEAR, IT DOES NOT MEAN THAT THE REVENUE SHOULD PUT BLINKERS IN LATER ASSESSMENT YEARS AND CANNOT TAKE A CORRECT DECISION IN SUBSEQUENT YEARS AS THER E IS NO HEROISM IN PERPETUATING AN INADVERTENT MISTAKE, IF ANY. 39. IT WAS ACCORDINGLY SUBMITTED THAT PROVISION FOR OVERLAY WAS NOT MADE ON SCIENTIFIC BASIS AND THUS, CANNOT BE TREATE D AS ASCERTAINED LIABILITY AND NOTHING BUT A CONTINGENT LIABILITY DE PENDING ON HEALTH OF HIGHWAY IN THE BLOCK OF 5 YEARS AND RENEWAL COAT PL ACED ON THE LENGTH OF HIGHWAY DURING THE PERIOD OF 5 YEARS AND THE LD . CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION WITHOUT APPRECIA TING THE BASIS OF ESTIMATION FOR OVERLAY AND WITHOUT APPRECIATING CLA USE (II) AS REFERRED ABOVE, IN A CORRECT PERSPECTIVE AND THUS, THE ADDIT ION SO DELETED BY LD. CIT(A) MAY KINDLY BE RESTORED. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 36 40. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE MATTER REQUIR ES EXAMINATION FROM TOUCHSTONE OF WHETHER IT IS A REVENUE NEUTRAL EXERC ISE GIVEN THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT AND EVEN WHERE THE ACTION SO TAKEN BY THE REVENUE IS UPHELD, WHETH ER IT WILL HAVE ANY IMPACT ON THE TAXABLE INCOME IN THE HANDS OF THE AS SESSEE. SECONDLY, THE INTERPLAY BETWEEN THE PRINCIPLE OF CONSISTENCY AND PRINCIPLE OF RES JUDICATA IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. THIRDLY, WHETHER THE PROVISION SO MADE TOWARDS SECOND PERIOD IC WEARING COURSE OVERLAY OF THE TOLL ROAD IS IN THE NATURE OF ASCERT AINED LIABILITY OR NOT. 41. IT IS AN ADMITTED AND UNDISPUTED FACT THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IA(4)(I) OF THE ACT IN RESPECT OF INCOME DERIVED FROM OPERATING AND MAINTAINING OF THE HIGHWAY AND T HE SAID CLAIM OF DEDUCTION HAS BEEN MADE BY THE ASSESSEE COMPANY IN ITS RETURN OF INCOME AND WHICH HAS BEEN DULY ALLOWED BY THE ASSES SING OFFICER FOR A.Y 2014-15 AND A.Y 2015-16. IN ITS PROFIT/LOSS AC COUNT, THE ASSESSEE COMPANY HAS DEBITED A SUM OF RS 11,33,00,000/- TOWA RDS PROVISION FOR SECOND PERIODIC WEARING COURSE OVERLAY OF THE BOT R OAD AS PER CLAUSE 4.5.1 OF SCHEDULE L OF THE CONCESSIONAIRE AGREEMENT EXECUTED WITH NHAI. THE ASSESSING OFFICER HAS DISALLOWED THE SAM E WHILE DETERMINING THE INCOME UNDER THE REGULAR PROVISIONS HOLDING THA T THE BASIS OF ESTIMATION OF SUCH COST OF OVERLAY EXPENSES IS NOT DONE ON A SCIENTIFIC BASIS AND IS THUS IN A NATURE OF CONTINGENT LIABILI TY AND THE REVISED INCOME FROM BUSINESS WAS DETERMINED AT RS 76,01,30, 659/- (AFTER ADDING BACK RS 11,33,00,000/- BESIDES OTHER ADJUSTM ENTS) AND THEREAFTER, DEDUCTION U/S 80IA(4)(I) WAS DETERMINED AT RS 76,01,30,659/-. FOR A.Y 2015-16, SIMILAR DISALLO WANCE OF ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 37 RS 36,33,00,000/- WAS MADE AND THE REVISED INCOME F ROM BUSINESS WAS DETERMINED AT RS 1,89,95,65,026/- (AFTER ADDING BAC K RS 36,33,00,000/- BESIDES OTHER ADJUSTMENTS) AND THEREAFTER, DEDUCTIO N U/S 80IA(4)(I) WAS DETERMINED AT RS 1,89,95,65,026/- . IN THE INSTANT CASE, WE THEREFORE FIND THAT THERE IS NO DISPUTE THAT SUCH PROVISION T OWARDS COST OF OVERLAY EXPENSES IS RELATED TO THE BUSINESS ACTIVITY OF OPE RATING AND MAINTAINING OF THE HIGHWAY AND ANY ADDITION MADE TOWARDS SUCH P ROVISION WOULD ENHANCE THE TAXABLE PROFIT WHICH IS ELIGIBLE FOR DE DUCTION U/S 80IA(4)(I) OF THE ACT AND WOULD THUS BE A REVENUE NEUTRAL EXER CISE. THE CENTRAL BOARD OF DIRECT TAXES HAS ALSO ISSUED A CIRCULAR NO. 37/2016 WAY BACK IN NOVEMBER 2016 STATING THAT THE COURTS HAVE GENERALLY HELD THAT WHERE THE EXPENDITURE DISALLOWED IS RELATED TO THE BUSINESS ACTIVITY AGAINST WHICH CHAPTER VI-A DEDUCTION HAS BEEN CLAIM ED, THE DEDUCTION NEED TO BE ALLOWED ON THE ENHANCED PROFITS AND THE BOARD HAS SINCE ACCEPTED THE SAID POSITION AND HAS ALSO DIRECTED IT S OFFICERS THAT APPEAL MAY NOT TO BE FILED ON THIS GROUND AND THE APPEAL A LREADY FILED MAY BE WITHDRAWN/NOT PRESSED UPON. THE CONTENTS OF THE SAI D CIRCULAR READS AS UNDER: SUBJECT : CHAPTER VI-A DEDUCTION ON ENHANCED PROF ITS-REG. CHAPTER VI-A OF THE INCOME-TAX ACT, 1961 ('THE ACT' ), PROVIDES FOR DEDUCTIONS IN RESPECT OF CERTAIN INCOMES. IN CO MPUTING THE PROFITS AND GAINS OF A BUSINESS ACTIVITY, THE ASSES SING OFFICER MAY MAKE CERTAIN DISALLOWANCES, SUCH AS DISALLOWANC ES PERTAINING TO SECTIONS 32, 40(A)(IA), 40A(3), 43B E TC., OF THE ACT. AT TIMES DISALLOWANCE OUT OF SPECIFIC EXPENDITURE C LAIMED MAY ALSO BE MADE. THE EFFECT OF SUCH DISALLOWANCES IS A N INCREASE IN ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 38 THE PROFITS. DOUBTS HAVE BEEN RAISED AS TO WHETHER SUCH HIGHER PROFITS WOULD ALSO RESULT IN CLAIM FOR A HIGHER PRO FIT-LINKED DEDUCTION UNDER CHAPTER VI-A. 2. THE ISSUE OF THE CLAIM OF HIGHER DEDUCTION ON TH E ENHANCED PROFITS HAS BEEN A CONTENTIOUS ONE. HOWEVER, THE CO URTS HAVE GENERALLY HELD THAT IF THE EXPENDITURE DISALLOWED I S RELATED TO THE BUSINESS ACTIVITY AGAINST WHICH THE CHAPTER VI-A DE DUCTION HAS BEEN CLAIMED, THE DEDUCTION NEEDS TO BE ALLOWED ON THE ENHANCED PROFITS. SOME ILLUSTRATIVE CASES UPHOLDING THIS VIE W ARE AS FOLLOWS: (I) IF AN EXPENDITURE INCURRED BY ASSESSEE FOR THE PURPOSE OF DEVELOPING A HOUSING PROJECT WAS NOT ALLOWABLE ON A CCOUNT OF NON-DEDUCTION OF TDS UNDER LAW, SUCH DISALLOWANCE W OULD ULTIMATELY INCREASE ASSESSEE'S PROFITS FROM BUSINES S OF DEVELOPING HOUSING PROJECT. THE ULTIMATE PROFITS OF ASSESSEE AFTER ADJUSTING DISALLOWANCE UNDER SECTION 40(A)(IA ) OF THE ACT WOULD QUALIFY FOR DEDUCTION UNDER SECTION 80-IB OF THE ACT. THIS VIEW WAS TAKEN BY THE COURTS IN THE FOLLO WING CASES: INCOME-TAX OFFICER - WARD 5(1) VS. KEVAL CONSTRUCTION, TAX APPEAL NO. 443 OF 2012, DECEMBER 10, 2012, GUJARAT HIGH COURT.' COMMISSIONER OF INCOME-TAX-IV, NAGPUR VS. SUNIL VISHWAMBHARNATH TIWARI, IT APPEAL NO. 2 OF 2011, SEPTEMBER 11, 2015, BOMBAY HIGH COURT. (II) IF DEDUCTION UNDER SECTION 40A(3) OF THE ACT IS NOT ALLOWED, THE SAME WOULD HAVE TO BE ADDED TO THE PRO FITS OF THE UNDERTAKING ON WHICH THE ASSESSEE WOULD BE ENTITLED FOR ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 39 DEDUCTION UNDER SECTION 80-IB OF THE ACT. THIS VIEW WAS TAKEN BY THE COURT IN THE FOLLOWING CASE: PRINCIPAL CIT, KANPUR VS. SURYA MERCHANTS LTD., I.T . APPEAL NO. 248 OF 2015, MAY 03, 2016, ALLAHABAD HIG H COURT. THE ABOVE VIEWS HAVE ATTAINED FINALITY AS THESE JUD GMENTS OF THE HIGH COURTS OF BOMBAY, GUJARAT AND ALLAHABAD HAVE B EEN ACCEPTED BY THE DEPARTMENT. 3. IN VIEW OF THE ABOVE, THE BOARD HAS ACCEPTED THE SETTLED POSITION THAT THE DISALLOWANCES MADE UNDER SECTIONS 32, 40(A)(IA), 40A(3), 43B, ETC. OF THE ACT AND OTHER SPECIFIC DIS ALLOWANCES, RELATED TO THE BUSINESS ACTIVITY AGAINST WHICH THE CHAPTER VI-A DEDUCTION HAS BEEN CLAIMED, RESULT IN ENHANCEMENT O F THE PROFITS OF THE ELIGIBLE BUSINESS, AND THAT DEDUCTION UNDER CHAPTER VI-A IS ADMISSIBLE ON THE PROFITS SO ENHANCED BY THE DISALL OWANCE. 4. ACCORDINGLY, HENCEFORTH, APPEALS MAY NOT BE FILE D ON THIS GROUND BY OFFICERS OF THE DEPARTMENT AND APPEALS AL READY FILED IN COURTS/ TRIBUNALS MAY BE WITHDRAWN/ NOT PRESSED UPON. THE ABOVE MAY BE BROUGHT TO THE NOTICE OF ALL CONCERNED . 42. IN THE INSTANT CASE, AS WE HAVE STATED ABOVE, T HERE IS NO DISPUTE THAT SUCH PROVISION TOWARDS COST OF OVERLAY EXPENSE S IS RELATED TO THE BUSINESS ACTIVITY OF OPERATING AND MAINTAINING OF T HE HIGHWAY AND ANY ADDITION MADE TOWARDS SUCH PROVISION WOULD ENHANCE THE TAXABLE PROFIT WHICH IS ELIGIBLE FOR DEDUCTION U/S 80IA(4)(I) OF T HE ACT. HERE, IT IS ALSO RELEVANT TO NOTE THAT THE DISALLOWANCE HAS BEEN MAD E BY THE ASSESSING ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 40 OFFICER WHILE COMPUTING THE PROFITS OF THE BUSINESS UNDER THE REGULAR PROVISIONS OF THE ACT HOWEVER NO ADJUSTMENT HAS BEE N MADE WHILE COMPUTING THE BOOK PROFITS FOR THE PURPOSES OF MAT U/S 115JB OF THE ACT AND THEREFORE, AS FAR AS COMPUTATION OF BOOK PR OFITS AND CONSEQUENT MAT LIABILITY IS CONCERNED, THE SAME IS NOT UNDER D ISPUTE AND OUR FINDINGS ON REVENUE NEUTRALITY IS THUS LIMITED TO C OMPUTATION OF PROFITS UNDER THE REGULAR PROVISIONS OF THE ACT WHICH ARE E LIGIBLE FOR DEDUCTION U/S 80IA(4)(I) OF THE ACT. THE CBDT HAS STATED IN ITS AFORESAID CIRCULAR THAT THE APPEAL AND GROUND WHERE SO TAKEN SHOULD NO T BE PRESSED/WITHDRAWN AND THEREFORE, TAKING THE SAME IN TO CONSIDERATION WHICH IS BINDING ON THE REVENUE AUTHORITIES, THE GR OUND OF APPEAL SO TAKEN BY THE REVENUE DESERVED TO BE DISMISSED ON TH IS ACCOUNT ITSELF FOR BOTH THE YEARS UNDER CONSIDERATION. 43. THE ASSESSEE HAS PROVIDED FOR THE PROVISION FOR SECOND PERIODIC WEARING COURSE OVERLAY FOR THE FIRST TIME DURING TH E FINANCIAL YEAR 2010- 11 RELEVANT TO ASSESSMENT YEAR 2011-12 AND IN ITS F INANCIAL STATEMENTS FOR THE YEAR ENDED ON 31.03.2011 HAS MADE THE FOLLO WING DISCLOSURE AND THE CONTENTS THEREOF READS AS UNDER: PROVISION FOR SECOND PERIODIC WEARING COURSE OVERL AY: AS PER CONCESSION AGREEMENT ENTERED INTO BY THE COMPANY WI TH NATIONAL HIGHWAYS AUTHORITY OF INDIA, COMPANY HAS TO RENEW B ITUMINOUS CONCRETE COAT OF THE ROAD EVERY 5 YEARS. NEXT SUCH RENEWAL IS TO BE UNDERTAKEN DURING FINANCIAL YEAR 2014-15. AS PER ACCOUNTING STANDARD 29(AS 29), PROVISIONS, CONTINGENT ASSET S, COST OF OVERLAY OF BITUMINOUS CONCRETE TO BE MADE IN FINANC IAL YEAR 2014-15, AS REQUIRED BY OPERATION AND MAINTENANCE REQUIREMENTS IS ESTIMATED AT RS. 56.64 CRORE AND 1/ 5 TH OF THE SAME I.E. RS. 11.33 CRORE (PREVIOUS YEAR: NIL) IS P ROVIDED FOR THE YEAR. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 41 44. SIMILAR PROVISION OF RS 11.33 CRORES HAS BEEN M ADE DURING EACH OF THE SUBSEQUENT FINANCIAL YEARS RELEVANT TO A.Y 2 012-13 AND A.Y 2013- 14 AND IN ITS RETURN OF INCOME FOR EACH OF THESE TH REE ASSESSMENT YEARS, THE ASSESSEE HAS CLAIMED THE SAME AS AN ALLOWABLE E XPENDITURE WHILE DETERMINING THE PROFITS UNDER THE REGULAR PROVISION S OF THE ACT AS WELL AS WHILE DETERMINING BOOK PROFITS FOR THE PURPOSES OF COMPUTATION OF MAT LIABILITY U/S 115JB OF THE ACT. THE ASSESSING O FFICER WHILE PASSING THE ASSESSMENT ORDER U/S 143(3) FOR EACH OF THESE A SSESSMENT YEARS HAS NOT MADE ANY DISALLOWANCES AND/OR ADJUSTMENT TO THE BOOK PROFITS TOWARDS SUCH PROVISION AND HAS THUS ACCEPTED THE CL AIM OF THE ASSESSEE COMPANY. IT IS A WELL SETTLED LEGAL PROPOSITION, AS HAS BEEN LAID DOWN BY THE COURTS FROM TIME TO TIME AND WHICH HAS BEEN REITERATED BY THE HONBLE SUPREME COURT IN CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD . (394 ITR 449) THAT: WHILE IT IS TRUE THAT THE PRINCIPLE OF RES JUDICATA WOULD NOT APPLY TO ASSESSMENT PROCEEDINGS UNDER THE ACT, THE NEED F OR CONSISTENCY AND CERTAINTY AND EXISTENCE OF STRONG A ND COMPELLING REASONS FOR A DEPARTURE FROM A SETTLED POSITION HAS TO BE SPELT OUT WHICH CONSPICUOUSLY IS ABSENT IN THE PRESENT CASE. IN THIS REGARD WE MAY REMIND OURSELVES OF WHAT HAS BEEN OBSERVED B Y THIS COURT IN RADHASOAMI SATSANG V. CIT (193 ITR 321): 'WE ARE AWARE OF THE FACT THAT STRICTLY SPEAKING RE S JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS. AGAIN, EA CH ASSESSMENT YEAR BEING A UNIT, WHAT IS DECIDED IN ON E YEAR MAY NOT APPLY IN THE FOLLOWING YEAR BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 42 ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY O R THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NO T BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR.' 45. IN LIGHT OF ABOVE, THERE HAS TO BE COMPELLING REASONS FOR A DEPARTURE FROM THE PAST SETTLED POSITION WHEREIN TH E ASSESSEE HAS BEEN HELD ELIGIBLE FOR SUCH CLAIM ALL THESE YEARS AND SU CH REASONS HAVE TO BE SPELT OUT CLEARLY BY THE ASSESSING OFFICER. IT HAS BEEN CONTENDED BY THE LD A/R THAT DURING THE YEAR UNDER CONSIDERATION, TH ERE IS NO CHANGE IN THE NATURE OF PROVISION SO MADE BY THE ASSESSEE COM PANY WHICH IS FLOWING OUT OF THE REQUIREMENTS OF THE CONCESSIONAI RE AGREEMENT EXECUTED WITH NHAI AND DETERMINED BASED ON AN INDEP ENDENT CONSULTANT REPORT WHO HAS BEEN APPOINTED IN CONSULT ATION WITH NHAI EXCEPT FOR THE FACT THAT THE QUANTUM OF PROVISION W AS REVISED IN THE FIFTH YEAR. EVEN ON PERUSAL OF THE ASSESSMENT ORDERS AND THE FINDINGS OF THE ASSESSING OFFICER, WE NOTE THAT THERE IS NO FINDING RECORDED BY THE ASSESSING OFFICER THAT THE NATURE OF PROVISION SO M ADE BY THE ASSESSEE COMPANY IS DIFFERENT FROM THE PAST YEARS OR NOT FLO WING FROM THE REQUIREMENTS OF THE CONCESSIONAIRE AGREEMENT EXECUT ED WITH NHAI. EVEN THE REPORT OF THE INDEPENDENT CONSULTANT WAS O BTAINED IN THE FIRST YEAR WHERE IT HAD ESTIMATED THE TOTAL COST OF RS 56 .64 CRORES WHICH HAS THEREFORE FORMED THE BASIS FOR SPREADING THE TOTAL COST EQUALLY ACROSS FIVE YEARS. WE THEREFORE FAILED TO UNDERSTAND THAT WHERE THE PROVISION FOR PERIODIC WEARING COURSE OVERLAY HAS BEEN ACCEPT ED ALL THESE YEARS AS AN ASCERTAINED LIABILITY, THEN ON WHAT BASIS, TH E SAID PROVISION IS TREATED AS A CONTINGENT LIABILITY FOR A.Y 2014-15 A ND A.Y 2015-16. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 43 INTERESTINGLY, EVEN FOR THESE TWO ASSESSMENT YEARS, WHILE THE ASSESSING OFFICER HAS TREATED THE PROVISION AS A CONTINGENT L IABILITY WHILE COMPUTING INCOME UNDER THE REGULAR PROVISIONS HOWEV ER AT THE SAME TIME, HAS NOT MADE ANY ADJUSTMENT TO THE BOOK PROFI TS TOWARDS SUCH PROVISION AS THE AMOUNT OR AMOUNTS SET ASIDE TO PR OVISIONS MADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILI TIES WHICH AGAIN BRING OUT THE DICHOTOMY AND INCONSISTENCY IN THE STAND OF THE ASSESSING OFFICER FOR THE SAME ASSESSMENT YEAR. THEREFORE, O N THIS GROUND AS WELL, WHERE THERE ARE NO CHANGES IN THE FACTS AND C IRCUMSTANCES OF THE CASE, FOLLOWING THE RULE OF CONSISTENCY AS UPHELD B Y THE COURTS FROM TIME TO TIME, WE ARE OF THE CONSIDERED VIEW THAT TH ERE IS NO BASIS TO INTERFERE WITH THE CONSISTENT POSITION WHICH HAS BE EN ACCEPTED IN THE EARLIER YEARS THAT IS, TO HOLD THAT THE PROVISION S O MADE IS TOWARDS AN ASCERTAINED LIABILITY AND WHICH IS ALLOWABLE FOR TA X PURPOSES WHILE COMPUTING THE INCOME UNDER THE NORMAL PROVISIONS OF THE ACT. 46. NOW, COMING TO THE MERITS OF THE CASE. IN ITS PROFIT/LOSS ACCOUNT, THE ASSESSEE COMPANY HAS DEBITED A SUM OF RS 11,33, 00,000/- TOWARDS PROVISION FOR SECOND PERIODIC WEARING COURSE OVERLA Y OF THE BOT ROAD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE COMPANY HAS SUBMITTED THAT AS PER THE CONCESSIONAIRE AGREEM ENT EXECUTED WITH NHAI, TO ENSURE SMOOTH RIDING QUALITY, CERTAIN MAIN TENANCE STANDARDS ARE REQUIRED TO BE MAINTAINED IN TERMS OF SURFACE R OUGHNESS AND IN THIS REGARD, A REPORT FROM AN INDEPENDENT CONSULTANT HAS BEEN OBTAINED WHICH HAS ESTIMATED THE TOTAL COST AT RS 56.64 CROR ES AND BASIS THE SAME, 1/5 OF THE SAID AMOUNT I.E, RS 11.33 CRORES W AS PROVIDED IN THE PROFIT/LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATIO N. THE ASSESSING OFFICER, THOUGH TAKEN NOTE OF THE SAID REPORT, HOWE VER HELD THAT IT IS AN ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 44 ESTIMATION CERTIFICATE ISSUED BY CONSULTING ENGINEE RS GROUP LTD AND THERE IS NO SCIENTIFIC BASIS OF MAKING THIS CERTIFI CATE AS THE DSIR LIKE AGENCIES FOLLOWS. HE THEREFORE DISALLOWED THE SAME WHILE DETERMINING THE INCOME UNDER THE REGULAR PROVISIONS HOLDING THA T THE BASIS OF ESTIMATION OF SUCH COST OF OVERLAY EXPENSES IS NOT DONE ON A SCIENTIFIC BASIS AND IS THUS IN A NATURE OF CONTINGENT LIABILI TY. ON APPEAL, THE LD CIT(A) HAS RETURNED A FINDING THAT EXPENDITURE RELA TED TO KEEPING THE ROUGHNESS OF THE HIGHWAY AT 2500 MM/KM IS A MANDATO RY CLAUSE AND THE ASSESSEE COMPANY HAS TO RELAY THE SURFACE EVERY FIVE YEARS AND IT IS THEREFORE AN ASCERTAINED LIABILITY AND THE ESTIMATI ON HAS BEEN DONE BASIS AN EXPERT REPORT AND THE RELEVANT FINDINGS OF THE LD CIT(A) READ AS UNDER: 11.4.2 AFTER CONSIDERATION OF THE CONCESSION AGREE MENT SIGNED BETWEEN THE APPELLANT COMPANY AND THE NHAI, IT IS M Y CONSIDERED VIEW THAT THE EXPENDITURE RELATED TO KEEPING THE ROUGHNE SS OF THE EXPRESSWAY AT 2500MM/KM IS A MANDATORY CLAUSE AND T HE APPELLANT COMPANY HAS TO RELAY THE SURFACE EVERY 5 YEARS WHIC H IS AN ASCERTAINED LIABILITY. THE ESTIMATION OF THE LIABILITY WAS MADE BY THE EXPERT COMMITTEE AT RS. 56.64 CRORES AND THE PROVISION HAS RIGHTLY BEEN CREATED AT RS. 11.33 CRORES PER ANNUM AND HAS RIGHT LY BEEN ALLOWED TILL A.Y 2013-14. ACCORDINGLY, THE APPELLANT COMPANY IS LIABLE TO GET THE BENEFIT OF ASCERTAINED CONTINGENT LIABILITY AT RS. 11.33 CRORES AS CLAIMED. ACCORDINGLY THE ADDITION OF RS. 11.33 CRORE IS DELE TED AND THE APPELLANTS GROUND OF APPEAL ON THE ISSUE IS ALLOWE D. 47. WE ALSO FIND THAT AS PER THE CONCESSIONAIRE AGR EEMENT EXECUTED WITH NHAI, THE ASSESSEE COMPANY IS REQUIRED TO MAIN TAIN THE HIGHWAY IN TRAFFIC WORTHY CONDITION THROUGH REGULAR MAINTEN ANCE AND PREVENTIVE ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 45 MAINTENANCE OF THE HIGHWAY AND IT HAS BEEN PROVIDED THAT MOST MANUAL FOR MAINTENANCE OF ROADS AND IRC-SP-35-1990 GUIDELINES FOR INSPECTION AND MAINTENANCE OF BRIDGES SHALL BE FOLL OWED BY THE ASSESSEE COMPANY. AND AS PART OF THE MAINTENANCE R EQUIREMENTS, PERIODIC MAINTENANCE OF PAVEMENT HAS BEEN SPECIFICA LLY PROVIDED AND WE DEEM IT APPROPRIATE TO REFER TO THE RELEVANT CLA USES IN THE CONCESSIONAIRE AGREEMENT WHICH READ AS UNDER: 4.5 PERIODIC MAINTENANCE OF PAVEMENT THE FRAMEWORK OF ACTIVITIES RELATING TO PAVEMENT MA INTENANCE AND REHABILITATION IN RESPECT OF FLEXIBLE AND RIGID PAV EMENT ARE GIVEN IN THE FLOW CHARTS IN APPENDIX 3.1 AND APPENDIX 3.2 RESPEC TIVELY. THE CONCESSIONAIRE SHALL SET FORTH IN THE OPERATIONS AN D MAINTENANCE MANUAL THE DETAILED PROCEDURES TO BE FOLLOWED UNDER EACH OF THESE ACTIVITIES, AND ALSO CHOOSE THE OPERATIONAL AND PER FORMANCE CRITERIA FROM THE IRC/MOST STANDARDS AND SPECIFICATIONS FOR EACH OF THE PERFORMANCE INDICATORS COVERED UNDER PAVEMENT CONDI TION SURVEY, ROUGHNESS AND BBD DEFLECTIONS. WHERE SUCH CRITERIA IS NOT SPECIFIED IN THE STANDARDS, THE CONCESSIONAIRE, FOR THE PURPOSE OF ROUTINE MAINTENANCE SHALL SET FORTH SUCH CRITERIA SO AS TO CONFORM TO INTERNATIONAL STANDARDS OR SOUND PAVEMENT MAINTENAN CE PRACTICES IN CONSULTATION WITH THE INDEPENDENT CONSULTANT FOR US ING THEM AS CRITERIA. 4.5.1 PAVEMENT RIDING QUALITY THE RIDING QUALITY OF THE PAVEMENT SHALL BE ENSURED BY SATISFYING THE MINIMUM REQUIREMENTS GIVEN HEREIN UNDER. I) SURFACE ROUGHNESS OF THE PROJECT HIGHWAY ON COMP LETION OF CONSTRUCTION SHALL BE 2500 MM/KM AS MEASURED BY THE 5 TH WHEEL BUMP INTEGRATOR. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 46 II) SURFACE ROUGHNESS SHALL NOT EXCEED 3500 MM/KM D URING THE SERVICE LIFE OF PAVEMENT AT ANY TIME. A RENEWAL COA T OF 25 MM OF BITUMINOUS CONCRETE SHALL BE LAID EVERY 5 YEARS AFT ER INITIAL CONSTRUCTION OR WHERE THE ROUGHNESS VALUE REACHES 3500 MM/KM WHI CHEVER IS EARLIER TO BRING IT TO INITIAL VALUE OF 2500 MM/KM. 4.5.2 STRUCTURAL CONDITION OF THE PAVEMENT I) THE STRUCTURAL CONDITION OF THE FLEXIBLE PAVEMEN T OF THE PROJECT HIGHWAY SHALL BE ASSESSED EVERY YEAR BY TAKING BENK ELMAN BEAM DEFLECTIONS AND WORKING OUT CHARACTERISTIC DEFLECTI ONS OF HOMOGENEOUS SECTIONS OF THE PROJECT HIGHWAY AS PER IRC-81-1997. WHEREVER THE CHARACTERISTIC DEFLECTION EXCEEDS 0.8 MM A BITUMINO US OVERLAY SHALL BE PROVIDED APPROPRIATELY DESIGNED ACCORDING TO IRC-81 -1997 OR ITS LATEST VERSIONS OR AMENDMENTS TO IT. II) IN THE CASE OF CEMENT CONCRETE PAVEMENT, JOINTS SHALL BE THOROUGHLY INSPECTED EVERY YEAR AND THE LOSS OF SEA LING COMPOUNDS MADE GOOD. 48. ON READING OF THE ABOVE CLAUSES, WE FIND THAT T HE ASSESSEE COMPANY IS REQUIRED TO FOLLOW THE OPERATIONAL AND P ERFORMANCE CRITERIA FROM IRC/MOST STANDARDS AND SPECIFICATION FOR EACH OF THE PERFORMANCE INDICATORS COVERED UNDER PAVEMENT CONDITION SURVEY, ROUGHNESS AND BBD REFLECTIONS AND WHERE SUCH CRITERIA IS NOT SPEC IFIED, THE ASSESSEE COMPANY IS REQUIRED TO ADHERE TO INTERNATIONAL STAN DARDS OR SOUND PAVEMENT MAINTENANCE PRACTICES IN CONSULTATION WITH INDEPENDENT CONSULTANT. IN RESPECT OF RIDING QUALITY OF PAVEME NT, IT HAS BEEN SPECIFICALLY PROVIDED THAT THE ASSESSEE COMPANY IS REQUIRED TO MAINTAIN SURFACE ROUGHNESS WHICH SHALL NOT EXCEED 3500 MM/KM DURING THE SERVICE LIFE OF PAVEMENT AT ANY TIME AND A RENEWAL COAT OF 25 MM OF ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 47 BITUMINOUS CONCRETE SHALL BE LAID EVERY 5 YEARS AFT ER INITIAL CONSTRUCTION OR WHERE THE ROUGHNESS VALUE REACHES 3500 MM/KM WHI CHEVER IS EARLIER TO BRING IT TO INITIAL VALUE OF 2500 MM/KM. WE THER EFORE FIND THAT THE ASSESSEE COMPANY HAS TO MAINTAIN THE PAVEMENT RIDIN G QUALITY BY WAY OF ROUGHNESS MEETING THE MINIMUM STANDARDS THROUGHO UT THE SERVICE LIFE OF THE PAVEMENT AND THE SAME IS CLEARLY EMERGI NG FROM THE OPERATION AND MAINTENANCE REQUIREMENTS OF THE CONCE SSIONAIRE AGREEMENT EXECUTED BY THE ASSESSEE COMPANY WITH NHA I AND WE DONT SEE ANY INFIRMITY IN THE FINDINGS OF THE LD CIT(A) WHERE HE HAS RETURNED A FINDING THAT IT IS MANDATORY CLAUSE/REQUIREMENT O F THE CONCESSIONAIRE AGREEMENT AND THE ASSESSEE COMPANY HAS TO RELAY THE SURFACE EVERY FIVE YEARS AND IT IS THEREFORE AN ASCERTAINED LIABI LITY. NOW, COMING TO THE BASIS OF ESTIMATION OF SUCH COST, THE ASSESSEE COMPANY HAS OBTAINED AND RELIED UPON A REPORT OF AN INDEPENDENT CONSULTANT, CONSULTING ENGINEERS GROUP LTD WHO HAS TAKING INTO CONSIDERATIONS THE STANDARDS SO SET IN THE CONCESSIONAIRE AGREEMENT AN D LENGTH OF THE HIGHWAY, HAS ESTIMATED THE TOTAL COST AND THE CONTE NTS OF THE SAID REPORT DATED 27.04.2011 READ AS UNDER: IN TERMS OF CLAUSE 4.5.1 (II) OF SCHEDULE-L OF THE CONCESSION AGREEMENT DATED 8 TH MAY, 2002, UNDER THE HEAD PAVEMENT RIDING QUALITY, THE CONCESSIONAIRE IS REQUIRED TO LAY A RENEWAL COAT OF 25MM OF BITUMINOUS CONCRETE AT THE END OF E VERY 5 YEARS AFTER INITIAL CONSTRUCTION OR WHEN THE ROUGHNESS VA LUE REACHES 3500MM/KM WHICHEVER IS EARLIER TO BRING IT TO THE I NITIAL VALUE OF 2500MM/KM. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 48 CONCESSIONAIRE HAS CARRIED OUT FIRST RENEWAL COAT I N 2009-10. NEXT PERIODIC RENEWAL SHALL BE DUE IN 2015. IT IS ESTIMATED THAT THE COST OF LAYING 25MM BITUMI NOUS CONCRETE, AS REQUIRED UNDER CLAUSE 4.5.1 (II) OF SCHEDULE-L O F THE CONCESSION AGREEMENT IN 2015 WORKS OUT TO BE RS. 56 .64 CR THE BROAD BREAK-UP OF WHICH IS ANNEXED. ANNEXURE: AREA CALCULATION SHEET S. NO. DESCRIPTION CHAINAGE LENGTH (KM) AREA (SQM) FROM TO 1 LENGTH OF MAIN CARRIAGEWAY 273.500 363.885 90.385 LENGTH OF TOLL PLAZA (JAIPUR) 286.662 287.115 0.453 LENGTH OF TOLL PLAZA (KISHANGARH) 360.640 361.060 0.420 NET LENGTH 89.512 2,193,044 .00 2 LENGTH OF SERVICE ROAD (LHS) 15.144 106,008.00 3 LENGTH OF SERVICE ROAD (RHS) 16.081 112,567.00 4 AREA OF JUNCTIONS 32,173.14 5 AREA OF TAPERING AT SR START/END LOCATION 7,025.15 6 TOTAL AREA 2,450,817.29 COST OF 25MM THICK BITUMINOUS CONCRETE AT CURRENT R ATES ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 49 S. NO. DESCRIPTION UNIT QTY RATE AMOUNT (RS) 1 BITUMINOUS CONCRETE CUM 61270.43 7003 429,076,837 2 TACK COAT SQM 2450817.29 8.0 19,606,538 TOTAL RS. 448,683,375 ESTIMATED COST OF 25MM THICK BITUMINOUS CONCRETE IN 2015 S. NO. DESCRIPTION UNIT QTY RATE AMOUNT 1 BITUMINOUS CONCRETE CUM 61270.43 8841 541,691,891 2 TACK COAT SQM 2450817.29 10.1 24,753,255 TOTAL RS. 566,445,146 49. WE THEREFORE FIND THAT THE INDEPENDENT CONSULTA NT HAS TAKING INTO CONSIDERATIONS THE STANDARDS SO SET IN THE CONCESSI ONAIRE AGREEMENT AND THE LENGTH OF THE HIGHWAY HAS ESTIMATED THE TOT AL COST. THE ASSESSING OFFICER HAS REJECTED THE SAID ESTIMATION HOLDING THAT THE BASIS OF ESTIMATION OF SUCH COST OF OVERLAY EXPENSES IS N OT DONE ON A SCIENTIFIC BASIS. WE FIND THAT ONCE THE CONSULTANT HAS TAKEN INTO CONSIDERATION THE STANDARDS OF ROUGHNESS AS SO SPECIFIED IN THE C ONCESSIONAIRE AGREEMENT WHICH IS IN TURN ARE BASED ON INTERNATION AL AND OTHER BENCHMARKS SO SPECIFIED FOR THE PAVEMENT RIDING QUA LITY STANDARDS, THE BASIS OF ESTIMATION IS CLEARLY BASED ON WELL LAID D OWN STANDARDS AND THE METHOD OF EVOLUTION OF SUCH STANDARDS OVER THE PERI OD OF TIME AND AS THEY STOOD TODAY IS CLEARLY A LONG DRAWN PROCESS OF REASONING AND EXPERIMENTATION WHICH IS NOTHING BUT SCIENTIFIC IN NATURE. FURTHER, ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 50 WHERE THE ASSESSING OFFICER IS NOT SATISFIED WITH S UCH ESTIMATION, HE IS REQUIRED TO SPECIFY THE REASONS AS TO WHY HE IS NOT SO SATISFIED AND MAY HAVE REFERRED THE MATTER TO ANOTHER EXPERT FOR SEEK ING HIS OPINION. MERELY STATING THAT HE IS NOT SATISFIED WITH SUCH R EPORT WILL NOT SATISFY THE REQUIREMENTS OF LAW AS ONCE THE ASSESSEE HAS MA DE A CLAIM SUPPORTED BY REPORT OF AN INDEPENDENT CONSULTANT, T HE ONUS SHIFTS ON THE REVENUE TO DISPROVE THE SAME WHICH IN THE PRESE NT CASE HAS NOT BEEN SATISFIED BY THE REVENUE. DURING THE COURSE O F HEARING, THE LD CIT D/R HAS STATED THAT THE ENTIRE LENGTH OF THE HIGHWA Y HAS BEEN CONSIDERED FOR ESTIMATING THE COST WHICH IS NOT COR RECT INTERPRETATION OF CLAUSE (II) AS SOME STRETCHES MAY REQUIRE RENEWAL C OAT IN THE INTERIM PERIOD AND NOT TOWARDS THE END OF FIFTH YEAR. WE F IND THAT THE ESTIMATION HAS BEEN MADE ON THE BASIS THAT THE WHOL E LENGTH OF THE HIGHWAY SHALL BE REQUIRED TO BE MAINTAINED WITH PRE SCRIBED ROUGHNESS STANDARD AND IT IS LIKELY THAT SUCH RENEWAL COST WI LL BE DONE TOWARDS THE END OF YEAR 2015 AND ACCORDINGLY, THE ESTIMATE HAS BEEN MADE AND WE DONT FIND ANY INFIRMITY THEREIN. IN CASE OF ROTORK CONTROLS INDIA (P) LTD VS CIT (SUPRA), THE HONBLE SUPREME COURT WAS PLEASED TO HELD AS UNDER: 10. WHAT IS A PROVISION? THIS IS THE QUESTION WHIC H NEEDS TO BE ANSWERED. A PROVISION IS A LIABILITY WHICH CAN BE M EASURED ONLY BY USING A SUBSTANTIAL DEGREE OF ESTIMATION. A PROVISI ON IS RECOGNIZED WHEN: (A) AN ENTERPRISE HAS A PRESENT OBLIGATION AS A RESULT OF A PAST EVENT; (B) IT IS PROBABLE THAT AN OUTFLOW OF R ESOURCES WILL BE REQUIRED TO SETTLE THE OBLIGATION; AND (C) A RELIAB LE ESTIMATE CAN BE MADE OF THE AMOUNT OF THE OBLIGATION. IF THESE C ONDITIONS ARE NOT MET, NO PROVISION CAN BE RECOGNIZED. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 51 11. LIABILITY IS DEFINED AS A PRESENT OBLIGATION AR ISING FROM PAST EVENTS, THE SETTLEMENT OF WHICH IS EXPECTED TO RESU LT IN AN OUTFLOW FROM THE ENTERPRISE OF RESOURCES EMBODYING ECONOMIC BENEFITS. 12. A PAST EVENT THAT LEADS TO A PRESENT OBLIGATION IS CALLED AS AN OBLIGATING EVENT. THE OBLIGATING EVENT IS AN EVENT THAT CREATES AN OBLIGATION WHICH RESULTS IN AN OUTFLOW OF RESOURCES . IT IS ONLY THOSE OBLIGATIONS ARISING FROM PAST EVENTS EXISTING INDEPENDENTLY OF THE FUTURE CONDUCT OF THE BUSINESS OF THE ENTERP RISE THAT IS RECOGNIZED AS PROVISION. FOR A LIABILITY TO QUALIFY FOR RECOGNITION THERE MUST BE NOT ONLY PRESENT OBLIGATION BUT ALSO THE PROBABILITY OF AN OUTFLOW OF RESOURCES TO SETTLE THAT OBLIGATIO N. 50. IN THE INSTANT CASE, THE ASSESSEE COMPANY HAS A PRESENT OBLIGATION ARISING OUT OF THE CONCESSIONAIRE AGREEM ENT EXECUTED WITH NHAI TO MAINTAIN THE HIGHWAY IN TRAFFIC WORTHY COND ITION THROUGH REGULAR AND PREVENTIVE MAINTENANCE OF THE HIGHWAY A ND WHICH MANDATORILY REQUIRES IT TO MAINTAIN THE PAVEMENT RI DING QUALITY BY WAY OF ROUGHNESS MEETING THE MINIMUM STANDARDS THROUGHO UT THE SERVICE LIFE OF THE PAVEMENT, THE SETTLEMENT OF WHICH IS EX PECTED TO RESULT IN AN OUTFLOW OF RESOURCES AND IN RESPECT OF WHICH A RELI ABLE ESTIMATE HAS BEEN MADE BASED ON REPORT OF AN INDEPENDENT CONSULT ANT. OUR VIEW IS FURTHER FORTIFIED BY THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN CASE OF UDAIPUR MINERAL DEVELOPMENT SYNDICATE (P.) LTD. VS DEPUTY COMMISSIONER OF INCOME-TAX [2003] 129 TAXMAN 728 (RAJASTHAN) WHEREIN THE HONBLE RAJASTHAN HIGH COUR T WAS PLEASED TO HELD AS FOLLOWS: ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 52 5. HEARD LEARNED COUNSEL FOR THE PARTIES. THE SUBMISS IONS MADE BEFORE THE CIT(A) IN WRITING READS AS UNDER : 'IT IS SUBMITTED THAT THE ASSESSEE-COMPANY IS ENGAG ED IN OPEN CAST MINING OF SOAPSTONE CRUDE. THE LEASE FOR THE E XPLORATION OF MINES HAS BEEN GRANTED BY THE GOVT. OF RAJASTHAN. FROM THE TERMS AND CONDITIONS OF THE LEASE AGREEMEN T, IT IS OBLIGATORY ON THE PART OF THE ASSESSEE-COMPANY TO R ESTORE THE LAND AS FAR AS POSSIBLE TO ITS ORIGINAL SHAPE. AN E XTRACT FROM CLAUSE 2 OF PART-V OF THE LEASE AGREEMENT IS REPROD UCED AS BELOW: AS FAR AS POSSIBLE THE LESSEE SHALL RESTORE THE SUR FACE LAND SO USED TO ITS ORIGINAL CONDITION. DURING THE YEAR UNDER CONSIDERATION, THE COMPANY HA D DUG NEW PITS IN THE MINING LEASE AREA FOR THE PURPOSE OF EX CAVATING SOAPSTONE CRUDE OUT OF WHICH SOME OF THE PITS DUG H AD NO ECONOMIC VALUE AND THE LAND DAMAGED BY DIGGING THE LAND WAS REQUIRED TO BE RESTORED. DIMENSIONS OF THE PIT DUG WHICH WERE UNECONOMIC WERE TO THE EXTENT OF 7568 CUB. MTR. AND THE ESTIMATED COST OF THEIR RE-FILLING COMES TO RS. 1,5 1,360 AND THEREFORE, THE LIABILITY IN RESPECT OF THE SAME HAD BEEN PROVIDED FOR AS PER THE CLAUSE 2 OF PART-V OF LEASE AGREEMEN T. THUS THE COST OF REFILLING OF ABOVE ASCERTAINED LIABILITY AN D IS ELIGIBLE FOR DEDUCTION BECAUSE THE ASSESSEE-COMPANY OBSERVES MER CANTILE SYSTEM OF ACCOUNTING.' 6. IT HAS ALSO BEEN BROUGHT TO OUR NOTICE THAT EVEN I N THE YEAR 1993-94 THOUGH THE ACTUAL EXPENDITURE HAS BEEN MADE , BUT THAT ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 53 HAS BEEN DENIED ON THE GROUND THAT CIT(A) HAS ALLOW ED THIS EXPENDITURE IN THE YEAR 1991-92. THUS IN BOTH THE Y EARS, THE CLAIM OF THE ASSESSEE HAS BEEN DISALLOWED. 7. CONSIDERING THE CLAUSE IN THE AGREEMENT I.E. AS FA R AS POSSIBLE THE LESSEE SHALL RESTORE THE SURFACE LAND SO USED T O ITS ORIGINAL CONDITION, THE MOMENT ASSESSEE DIGS PITS, HE IS BOU ND UNDER THE AGREEMENT TO FILL THOSE PITS AND LIABILITY DOES ACC RUE ON THE DATE WHEN THE PITS ARE DIGGED. THEREFORE, IN OUR VIEW, T HE TRIBUNAL HAS COMMITTED ERROR IN DISALLOWING THE CLAIM OF THE ASS ESSEE IN THE YEAR IN HAND I.E. 1991-92. WE AGREE WITH THE VIEW T AKEN BY CIT(A) THAT THE MOMENT ASSESSEE DIGS THE PITS, LIAB ILITY DOES ARISE AND HE IS ENTITLED FOR DEDUCTION OF THE EXPENSES WH ICH HE IS SUPPOSED TO INCUR FOR FILLING THOSE PITS, AS ASSESS EE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING. IT CAN CLAIM T HE EXPENSES INCURRED AS SOON AS IT DIGS THE PITS. 8. IN THE RESULT, WE RESTORE THE VIEW TAKEN BY CIT(A) . THE APPEAL STANDS ALLOWED. 51. IN LIGHT OF AFORESAID DISCUSSIONS AND IN THE EN TIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, THE MATTER IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IN THE RESULT, G ROUND OF REVENUES APPEAL FOR A.Y 2013-14 AND A.Y 2014-15 ARE DISMISSE D AND GROUND OF ASSESSEES APPEAL FOR A.Y 2015-16 IS ALLOWED. DISALLOWANCE U/S 14A/36(1)(III) FOR A.Y 2012-13 TO A.Y 2015-16 52. THIS GROUND IS RELEVANT FOR A.Y 2012-13 & 2013- 14 WHEREIN THE REVENUE IS IN APPEAL AGAINST THE FINDINGS OF THE LD . CIT(A) AND FOR A.Y ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 54 2014-15 AND 2015-16 WHERE THERE ARE CROSS APPEALS F ILED BY THE REVENUE AND THE ASSESSEE AGAINST THE ORDER LD. CIT( A). 53. BRIEFLY STATED FACTS OF THE CASE ARE THAT DURIN G THE F.Y 2011-12 RELEVANT TO A.Y 2012-13, THE ASSESSEE COMPANY HAS M ADE AN APPLICATION FOR ALLOTMENT OF 13.30% NON-CUMULATIVE REDEEMABLE PREFERENCE SHARES OF M/S GVK AIRPORT DEVELOPERS (P) LTD., A GROUP COMPANY AND HAS PAID AN AMOUNT OF RS. 940.80 CRORES AS SHARES APPLICATION MONEY FOR ALLOTMENT OF 940,800 SHARES H AVING A FACE VALUE OF RS. 10,000/- PER SHARE. SEPARATELY, THE ASSESSEE COMPANY HAS TAKEN A LOAN OF RS. 950 CRORES FROM IDFC BANK CARRYING RA TE OF INTEREST OF 12.98% ON RS 650 CRORES AND 12.75% ON RS. 300 CRORE S AND WHICH HAS BEEN UTILIZED FOR MAKING THE PAYMENT TOWARDS THE SH ARE APPLICATION MONEY OF RS. 940.80 CRORES. AS ON 31 ST MARCH, 2012, NO SHARES WERE ALLOTTED TO THE ASSESSEE COMPANY AND THE AMOUNT CON TINUE TO REMAIN INVESTED AS SHARE APPLICATION MONEY AND ACCORDING LY, REFLECTED AS SHARE APPLICATION MONEY UNDER THE HEAD LONG TERM L OANS AND ADVANCES IN THE BALANCE-SHEET OF THE ASSESSEE COMP ANY AS ON 31.03.2012 AND INTEREST EXPENSES OF RS. 43,37,58,34 7/- ON SUCH LOAN HAS BEEN DEBITED IN THE PROFIT/LOSS ACCOUNT FOR THE YEAR ENDED 31.03.2012. IN THE RETURN OF INCOME FILED FOR A.Y 2 012-13, WHILE COMPUTING INCOME UNDER THE HEAD INCOME FROM BUSINE SS/PROFESSION, THE ASSESSEE COMPANY HAS SUO-MOTO ADDED BACK THE SA ID EXPENSES DEBITED UNDER THE HEAD INTEREST AND PROCESSING CHA RGES ON LOAN TAKEN FOR INVESTMENT AND HAS THUS NOT CLAIMED THE SAME F OR TAX PURPOSES WHILE COMPUTING ITS INCOME UNDER THE REGULAR PROVIS IONS OF THE ACT AND NO EXEMPT INCOME HAS BEEN CLAIMED IN RESPECT OF SUC H INVESTMENT BY WAY OF SHARE APPLICATION MONEY. SIMILARLY, WHILE W ORKING OUT ELIGIBLE ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 55 PROFITS FOR THE PURPOSES OF CLAIM OF DEDUCTION U/S 80IA(4)(I), THE SAID EXPENSES DEBITED UNDER THE HEAD INTEREST AND PROCE SSING CHARGES ON LOAN TAKEN FOR INVESTMENT IN THE PROFIT/LOSS ACCOU NT WERE ADDED BACK. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER, ON OBSERVING THAT THE ASSESSEE HAS CLAIMED INTEREST EX PENSES TO THE TUNE OF RS. 43,37,58,347/- IN ITS PROFIT & LOSS ACCOUNT AND WHICH WERE PAID TO IDFC BANK AGAINST THE LOAN TAKEN FOR MAKING SUCH IN VESTMENT, ISSUED A SHOW CAUSE DATED 02.12.2014 WHEREIN THE ASSESSEE CO MPANY WAS ASKED TO EXPLAIN WHY THE SAME SHOULD NOT BE ADDED B ACK TO THE BOOK PROFIT FOR COMPUTATION OF MAT IN VIEW OF PROVISIONS OF SECTION 115JB(2) READ WITH EXPLANATION 1(F) OF THE INCOME TAX ACT, 1 961. 54. IN RESPONSE TO THE SHOW-CAUSE SO ISSUED BY THE ASSESSING OFFICER, THE ASSESSEE COMPANY SUBMITTED THAT THE PAYMENT OF SHARE APPLICATION MONEY DOES NOT GUARANTEE SHARE ALLOTMENT OF SHARES WHICH IS AT THE SOLE DISCRETION OF THE INVESTEE COMPANY AND TILL SU CH TIME, SHARES ARE ALLOTTED, THE ASSESSEE COMPANY IS NOT IN A POSITION TO RECEIVE ANY DIVIDEND INCOME FROM INVESTMENT BY WAY OF SHARE APP LICATION MONEY. IT WAS FURTHER SUBMITTED THAT EXPLANATION (1)(F) OF SE CTION 115JB(2) IS INEXTRICABLY LINKED TO EXPLANATION (1)(II) OF SECTI ON 115JB(2) AND IN ABSENCE OF EXEMPT INCOME CREDITED TO PROFIT AND LOS S ACCOUNT, THE DISALLOWANCE OF INTEREST EXPENSE IN RELATION TO INV ESTMENT IN SHARE APPLICATION MONEY CANNOT BE MADE. IT WAS SUBMITTED THAT THERE IS NO POSSIBILITY OF EARNING EXEMPT INCOME FROM SHARE APP LICATION MONEY AND IN FACT, NO INCOME HAS BEEN RECEIVED AND CREDITED T O THE PROFIT & LOSS ACCOUNT IN THE RELEVANT FINANCIAL YEAR AND THEREFOR E, THE INTEREST EXPENDITURE ON ACCOUNT OF INVESTMENT IN SHARE APPLI CATION MONEY ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 56 CANNOT BE ADDED BACK FOR THE PURPOSE OF COMPUTING B OOK PROFITS U/S 115JB OF THE ACT. 55. THE SUBMISSION SO FILED BY THE ASSESSEE WERE CO NSIDERED BUT NOT FOUND ACCEPTABLE TO THE ASSESSING OFFICER. AS PER A SSESSING OFFICER, THE INTENTION OF THE ASSESSEE IS CLEAR RIGHT FROM TIME OF MAKING THE SHARE APPLICATION MONEY THAT IT WAS FOR THE PURPOSE OF IN VESTMENT AND SUCH INVESTMENT HAVE BEEN MADE AFTER DISCUSSION AND AGRE EMENT WITH THE INVESTEE COMPANY WHICH WAS ALSO A GROUP/FELLOW SUBS IDIARY OF THE ASSESSEE COMPANY. THE ASSESSEE HAS ITSELF SUBMITTED THAT IT HAS PAID INTEREST OF RS. 43,37,48,347/- DURING THE YEAR UNDE R CONSIDERATION ON THE LOAN TAKEN FROM IDFC BANK WHICH HAS BEEN UTILIZ ED FOR MAKING INVESTMENT IN THE SHARE APPLICATION OF THE INVESTEE COMPANY. SUBSEQUENTLY, THE SHARES HAVE BEEN ALLOTTED IN F.Y 2014-15 RELEVANT TO A.Y 2015-16 AND IT IS THEREFORE NOT THE CASE WHERE SHARE APPLICATION MONEY HAS SUBSEQUENTLY BEEN REFUNDED. IT WAS ACCORD INGLY HELD BY THE ASSESSING OFFICER THAT SINCE SHARES HAVE EVENTUALLY GOT ALLOTTED, THE INVESTMENT AS SHARE APPLICATION MONEY WAS WITH A VI EW TO EARN DIVIDEND INCOME. IT WAS ALSO HELD THAT EVEN THOUGH THERE IS NO EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION, THE PRO VISIONS OF SECTION 14A ARE CLEARLY ATTRACTED AND IN THIS CASE, THERE I S A DIRECT CONNECTION BETWEEN THE BORROWED FUNDS ON WHICH THE INTEREST IS PAID AND THE INVESTMENT SO MADE BY WAY OF SHARE APPLICATION MONE Y, A FACT WHICH HAS BEEN ACCEPTED BY THE ASSESSEE. IT WAS ACCORDING LY HELD THAT A SUM OF RS. 43,37,48,347/- IS DIRECTLY ATTRIBUTABLE TO T HE EXEMPT INCOME WHICH WAS ADDED BACK TO THE TOTAL INCOME OF THE ASS ESSEE U/S 14A OF THE ACT. IT WAS ALSO HELD THAT THE BOOK PROFITS SHA LL BE INCREASED WITH ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 57 THE SAID AMOUNT OF RS. 43,37,48,347/- AS PER PROVIS IONS OF EXPLANATION 1(F) TO SECTION 115JB(2) OF THE ACT. 56. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) STATED THAT THE ASSE SSING OFFICER HAS NOT REBUTTED THE CONTENTION OF THE ASSESSEE THAT THE SH ARES WERE NOT ALLOTTED DURING THE PERIOD UNDER CONSIDERATION AND ALSO TAKEN NOTE OF THE CONTENTION OF THE ASSESSEE COMPANY THAT SO LONG AS SHARE ARE NOT ALLOTTED, THE AMOUNT DEPOSITED REMAINS AS SHARE APP LICATION MONEY AND NO EXEMPT INCOME COULD HAVE BEEN RECEIVED ON SUCH S HARE APPLICATION MONEY. FURTHER, REFERRING TO THE HONBLE DELHI HIGH COURT DECISION IN CASE OF CHEMINVEST LTD. VS. CIT 378 ITR 33 AND JAIP UR BENCH DECISION IN CASE OF DEEPAK VEGPRO (P) LTD. ALWAR VS. ACIT (ITA NO. 110/JP/2014 DATED 24.04.2017) HELD THAT NO DISALLOWANCE U/S 14A CAN BE MADE IN A YEAR IN WHICH NO EXEMPT INCOME HAS BEEN EARNED OR R ECEIVED BY THE ASSESSING OFFICER. AT THE SAME TIME, THE LD. CIT(A) INVOKED THE PROVISIONS OF SECTION 36(I)(III) OF THE ACT STATING THAT THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THE FACT THAT FUND S BORROWED WERE DIVERTED FOR NON BUSINESS PURPOSES AND THE ASSESSIN G OFFICER WAS DIRECTED TO DISALLOW THE SUM OF RS 43,37,48,247/- B Y INVOKING THE PROVISIONS OF SECTION 36(1)(III) OF THE ACT AND GRO UND OF APPEAL SO TAKEN BY THE ASSESSEE COMPANY WAS DISMISSED AND AGAINST S UCH FINDINGS, THE ASSESSEE IS NOT IN APPEAL BEFORE US. THE REVENUE I S IN APPEAL BEFORE US CHALLENGING THE ACTION OF LD. CIT(A) IN DELETING TH E DISALLOWANCE U/S 14A READ WITH RULE 8D. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 58 57. FURTHER, DURING THE APPELLATE PROCEEDINGS BEFOR E THE LD CIT(A), THE ASSESSEE COMPANY TOOK AN ADDITIONAL GROUND OF A PPEAL CHALLENGING THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDIT ION OF RS. 43,37,48,247/- TO THE BOOK PROFIT U/S 115JB EXP LANATION (1) CLAUSE (F) BY INVOKING THE PROVISIONS OF SECTION 14A OF TH E ACT. THE LD. CIT(A) ADMITTED THE SAID ADDITIONAL GROUND OF APPEAL HOLDI NG THAT THE SAME WAS A LEGAL GROUND AND ARISING FROM THE ORDER OF TH E ASSESSING OFFICER. THE LD CIT(A) HELD THAT SINCE THE ADDITION MADE U/S 14A IS DELETED, THE GROUND HAS BECOMES INFRUCTUOUS. 58. IN RESPECT OF FINANCIAL YEAR 2012-13 RELEVANT T O A.Y 2013-14, SIMILAR FACT PATTERN AND FINDINGS OF THE ASSESSING OFFICER AS WELL AS OF THE LD. CIT(A) EXIST EXCEPT FOR THE VARIATION IN TH E QUANTUM OF DISALLOWANCE OF INTEREST EXPENSE ON LOAN AMOUNT UTI LIZED TOWARDS PAYMENT OF SHARE APPLICATION MONEY WHICH STOOD AT RS. 1,19,06,05,811/- AS COMPARED TO RS 43,37,48,247 /- IN A.Y 2012-13. THE AMOUNT CONTINUE TO REMAIN INVESTED AS SHARE APP LICATION MONEY AND NO SHARES WERE ALLOTTED DURING THE FINANCIAL YE AR RELEVANT TO A.Y 2013-14 AND CONSEQUENTLY, NO QUESTION OF ANY DIVIDE ND INCOME ACCRUED AND/OR RECEIVED BY THE ASSESSEE. IN THE RETURN OF INCOME FILED FOR A.Y 2013-14, WHILE COMPUTING INCOME UNDER THE HEAD INC OME FROM BUSINESS/PROFESSION, THE ASSESSEE COMPANY HAS SUO- MOTO ADDED BACK THE AFORESAID INTEREST EXPENSES AND HAS THUS NOT CL AIMED THE SAME FOR TAX PURPOSES WHILE COMPUTING ITS INCOME UNDER THE R EGULAR PROVISIONS OF THE ACT AND NO EXEMPT INCOME HAS BEEN CLAIMED IN RE SPECT OF INVESTMENT BY WAY OF SHARE APPLICATION MONEY. THE ASSESSING OFFICER HELD THAT A SUM OF RS. 1,19,06,05,811/- IS DIRECTLY ATTRIBUTABLE TO THE ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 59 EXEMPT INCOME WHICH WAS ADDED BACK INVOKING PROVISI ONS OF SECTION 14A AND THE BOOK PROFITS FOR THE PURPOSES OF MAT WE RE CORRESPONDINGLY INCREASED WITH THE SAID AMOUNT OF RS. 1,19,06,05,81 1/- AS PER PROVISIONS OF EXPLANATION 1(F) TO SECTION 115JB(2) OF THE ACT. ON APPEAL, THE LD CIT(A) INVOKED THE PROVISIONS OF SEC TION 36(1)(III) INSTEAD OF SECTION 14A AND ADDITION MADE TO BOOK PROFITS U/ S 115JB(2) WAS DELETED. THE ASSESSEE IS NOT IN APPEAL AGAINST THE SAID FINDINGS OF THE LD CIT(A) AND THE REVENUE IS ONLY IN APPEAL BEFORE US CHALLENGING THE ACTION OF LD. CIT(A) IN DELETING THE DISALLOWANCE U /S 14A READ WITH RULE 8D. 59. IN RESPECT OF FINANCIAL YEAR 2013-14 RELEVANT T O A.Y 2014-15, SIMILAR FACT PATTERN AND FINDINGS OF THE ASSESSING OFFICER EXIST EXCEPT FOR THE VARIATION IN THE QUANTUM OF DISALLOWANCE OF INT EREST EXPENSE ON LOAN AMOUNT UTILIZED TOWARDS PAYMENT OF SHARE APPLICATIO N MONEY WHICH STOOD AT RS. 1,15,92,95,718/- AND UNLIKE PAST YEARS , THE ASSESSEE COMPANY HAS NOT SUO-MOTO DISALLOWED THE SAME IN ITS RETURN OF INCOME. THE AMOUNT CONTINUE TO REMAIN INVESTED AS SHARE APP LICATION MONEY AND NO SHARES WERE ALLOTTED DURING THE FINANCIAL YE AR RELEVANT TO A.Y 2014-15 AND CONSEQUENTLY, NO QUESTION OF ANY DIVIDE ND INCOME ACCRUED AND/OR RECEIVED BY THE ASSESSEE. IN THE RETURN OF INCOME FILED FOR A.Y 2014-15, WHILE COMPUTING INCOME UNDER THE HEAD INC OME FROM BUSINESS/PROFESSION, UNLIKE PREVIOUS TWO ASSESSMEN T YEARS, THE ASSESSEE COMPANY DIDNT SUO-MOTO ADDED BACK THE AF ORESAID INTEREST EXPENSES AND HAS THUS CLAIMED THE SAME FOR TAX PURP OSES WHILE COMPUTING ITS INCOME UNDER THE REGULAR PROVISIONS O F THE ACT. NO EXEMPT INCOME HAS BEEN CLAIMED IN RESPECT OF INVEST MENT BY WAY OF ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 60 SHARE APPLICATION MONEY. THE ASSESSING OFFICER HEL D THAT A SUM OF RS. 1,15,92,95,718/- IS DIRECTLY ATTRIBUTABLE TO THE EX EMPT INCOME WHICH WAS ADDED BACK INVOKING PROVISIONS OF SECTION 14A A ND THE BOOK PROFITS FOR THE PURPOSES OF MAT WERE CORRESPONDINGLY INCREA SED WITH THE SAID AMOUNT OF RS. 1,15,92,95,718/- AS PER PROVISIONS OF EXPLANATION 1(F) TO SECTION 115JB(2) OF THE ACT. ON APPEAL, THE LD. CI T(A) THOUGH CONSIDERED THE DECISION OF HIS PREDECESSOR FOR A.Y 2012-13 BUT DID NOT AGREE TO THE SAME AND DISALLOWANCE WAS SUSTAINED U/ S 14A OF THE ACT. THE LD. CIT(A) STATED THAT DURING THE ASSESSMENT PR OCEEDINGS, THE ASSESSEE HAS TAKEN THE PLEA THAT THE AMOUNT RAISED BY WAY OF LOAN HAS BEEN INVESTED AS STRATEGIC INVESTMENT IN THE GROUP COMPANY. HOWEVER, DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE HAS CLAIMED THAT IT IS A STRATEGIC INVESTMENT TO HAVE CONTROLLING STAKES IN THE GROUP COMPANY TO FURTHER ITS OWN BUSINESS INTEREST IS FAR FROM THE T RUTH. HOWEVER, DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE HAS TAKEN A N ALTERNATE PLEA THAT INTEREST EXPENDITURE IS NOT RELATED TO THE BUS INESS OF THE COMPANY AND HENCE, IS DISALLOWABLE U/S 36(1)(III) OF THE AC T. IT WAS HELD BY THE LD. CIT(A) THAT THE ASSESSEE CANNOT BE ALLOWED TO SHIFT STAND ON APPLICABILITY OF THE PROVISIONS OF THE ACT. WHETHER THE DISALLOWANCE IS TO BE MADE U/S 14A OR SECTION 36(I)(III) DEPENDS UPON FACTS AND CIRCUMSTANCES OF THE CASE AND IT IS THEREFORE RELEV ANT TO DETERMINE THE INTENTION AND THE PLANNING OF THE ASSESSEE COMPANY. IT WAS HELD BY THE LD. CIT(A) THAT IN THIS CASE, THE ASSESSEE HAD RAIS ED AN AMOUNT OF RS. 950 CRORES AS LOAN AND THE ENTIRE LOAN AMOUNT WAS I NVESTED IN THE GROUP CONCERN OF THE ASSESSEE. THEREFORE, THERE IS NO DOUBT THAT THE LOAN WAS RAISED WITH THE SOLE INTENTION OF INVESTIN G IN THE GROUP COMPANY WHICH HAS A BUSINESS OBJECT DIFFERENT TO TH AT OF THE ASSESSEE ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 61 COMPANY. FURTHER, REFERRING TO THE FEATURES OF PREF ERENCE SHARES VIS-- VIS EQUITY SHARES WHERE THE PREFERENCE SHARES CARRY A FIXED DIVIDEND RATE AND NOT VOTING RIGHTS UNLIKE EQUITY SHARES, HE LD THAT THE ASSESSEES PLEA THAT THE INVESTMENT IS ACTUALLY TO FURTHER ITS OWN BUSINESS INTEREST IS FAR FROM THE TRUTH. ACTUALLY THE INVESTMENT IS M ADE TO EARN DIVIDENDS ONLY. WHEN THE OBJECTIVE AND INTENTION OF A PARTICU LAR INVESTMENT IS VERY CLEAR THEN THE GUARDING PROVISION OF THE ACT IS SEC TION 14A ONLY AND HENCE, THE PROVISION OF SECTION 14A OF THE ACT HAS TO BE APPLIED. FURTHER, REFERRING TO THE CBDT CIRCULAR NO. 5/2014, THE PLEA OF THE ASSESSEE COMPANY THAT IN ABSENCE OF ANY DIVIDEND IN COME, NO DISALLOWANCE CAN BE MADE U/S 14A WAS ALSO NOT ACCEP TED. IT WAS ACCORDINGLY HELD THAT IT IS NOT A CASE WHERE THE IN VESTMENT WAS MADE FOR ANY STRATEGIC REASONS BUT IT IS A CASE OF PURE INVESTMENT FOR EARNING TAX FREE DIVIDEND INCOME AS EVIDENT FROM THE FACT T HAT THE PREFERENCE SHARES WERE ALLOTTED TO THE ASSESSEE COMPANY IN THE FOLLOWING YEAR AND NOT EQUITY SHARES AND THE DISALLOWANCE SO MADE BY T HE ASSESSING OFFICER U/S 14A WAS SUSTAINED. FURTHER, REFERRING TO THE SP ECIAL BENCH DECISION IN CASE OF VIREET INVESTMENT PVT. LTD (ITA NO. 502/DEL/2012 DATED 16/06/2017), IT WAS HELD THAT COMPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2) IS TO BE MADE WIT HOUT RESORTING TO THE COMPUTATION AS CONTEMPLATED U/S 14A READ WITH RULE 8D OF THE RULES 1962. AGAINST THE SAID ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL CHALLENGING THE SUSTENANCE OF DISALLOWANCE U/S 14A AND THE REVENUE IS IN CROSS APPEAL CHALLENGING THE ACTION OF THE LD. C IT(A) IN HOLDING THAT THE COMPUTATION U/S 115JB OF THE ACT HAS TO BE MADE WITHOUT RESORTING TO THE SECTION 14A OF THE ACT. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 62 60. IN RESPECT OF FINANCIAL YEAR 2014-15 RELEVANT T O A.Y 2015-16, SIMILAR FACT PATTERN AND FINDINGS OF THE ASSESSING OFFICER AS WELL AS THAT OF LD CIT(A) EXIST EXCEPT FOR THE VARIATION IN THE QUANTUM OF DISALLOWANCE OF INTEREST EXPENSE ON LOAN AMOUNT UTI LIZED WHICH STOOD AT RS. 1,11,92,41,369/- AND THE FACT THAT DURING THE F INANCIAL YEAR, THE INVESTEE COMPANY HAS FINALLY ISSUED PREFERENCE SHAR ES TO THE ASSESSEE COMPANY. HOWEVER, THERE IS NO CHANGE IN THE FACT TH AT NO DIVIDEND INCOME HAS ACCRUED OR RECEIVED BY THE ASSESSEE COMP ANY AND WHICH HAS BEEN CLAIMED EXEMPT IN THE RETURN OF INCOME. T HE AO MADE THE DISALLOWANCE INVOKING THE PROVISIONS OF SECTION 14A AND ALSO MADE THE CORRESPONDING ADDITION TO BOOK PROFITS U/S 115JB(2) . ON APPEAL, THE LD CIT(A) SUSTAINED THE DISALLOWANCE U/S 14A AND REGAR DING COMPUTATION OF BOOK PROFITS UNDER CLAUSE (F) OF EXPLANATION 1 T O SECTION 115JB(2) HELD THAT THE SAME IS TO BE MADE WITHOUT RESORTING TO THE COMPUTATION AS CONTEMPLATED U/S 14A READ WITH RULE 8D OF THE RU LES 1962. AGAINST THE SAID ORDER OF THE LD. CIT(A), THE ASSESSEE IS I N APPEAL CHALLENGING THE SUSTENANCE OF DISALLOWANCE U/S 14A AND THE REVE NUE IS IN CROSS APPEAL CHALLENGING THE ACTION OF THE LD. CIT(A) IN HOLDING THAT THE COMPUTATION U/S 115JB OF THE ACT HAS TO BE MADE WIT HOUT RESORTING TO THE SECTION 14A OF THE ACT. 61. IN LIGHT OF THE AFORESAID FACT PATTERN AND THE FINDINGS OF THE AO AS WELL AS THE LD CIT(A) FOR THE RESPECTIVE ASSESSMENT YEARS, TWO BROADER ISSUES ARISES FOR CONSIDERATION BEFORE US. FIRSTLY , THE APPLICABILITY OF SECTION 14A VIS--VIS SECTION 36(I)(III) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. THE SECOND ISSUE IS WHERE THE PROVISIONS OF SECTION 14A OF THE ACT ARE HELD APPLI CABLE, WHETHER RESORT ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 63 TO SECTION 14A CAN BE MADE WHILE COMPUTING THE BOOK S PROFITS U/S 115JB OF THE ACT. AND A THIRD AND CONNECTED ISSUE I S WHETHER THERE COULD BE ANY ADJUSTMENT TO BOOK PROFITS U/S 115JB C ONSIDERING THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE INDEPENDENT O F APPLICABILITY OF AND TAKING RECOURSE TO THE PROVISIONS OF SECTION 14 A OF THE ACT. 62. IN THIS REGARD, WE REFER TO THE CONTENTIONS AD VANCED BY THE BOTH THE PARTIES. DURING THE COURSE OF HEARING, THE LD. AR DRAWN OUR ATTENTION TO THE PROVISIONS OF SECTION 14A, WHICH R EAD AS UNDER: 14A. (1) FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT O F EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHIC H DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. (2) THE ASSESSING OFFICER SHALL DETERMINE THE AMOUN T OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHO D AS MAY BE PRESCRIBED, IF THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS A CT. (3) THE PROVISIONS OF SUB-SECTION (2) SHALL ALSO AP PLY IN RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE H AS BEEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PA RT OF THE TOTAL INCOME UNDER THIS ACT : PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHA LL EMPOWER THE ASSESSING OFFICER EITHER TO REASSESS UNDER SECTION 147 OR PASS AN ORDER ENHANCING THE ASSESSMENT OR REDUCING A REFUND ALREA DY MADE OR OTHERWISE INCREASING THE LIABILITY OF THE ASSESSEE UNDER SECTION 154 , FOR ANY ASSESSMENT YEAR BEGINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2001. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 64 63. IT WAS SUBMITTED THAT THE HEADING OF SECTION 14A, I.E. EXPENDITURE INCURRED IN RELATION TO INCOME NOT INC LUDIBLE IN TOTAL INCOME ITSELF PRESUPPOSES EXISTENCE OF EXEMPT INCO ME, AND THEN ONLY A PARTICULAR EXPENDITURE CAN BE TREATED AS INCURRED IN RELATION TO SUCH INCOME. IT IS THUS A MATTER OF LAW AND FACT BOTH T HAT CERTAIN INCOMES ARE NOT TO BE INCLUDED WHILE COMPUTING THE TOTAL IN COME AS THESE ARE EXEMPT UNDER VARIOUS PROVISIONS OF THE FINANCE ACT. FURTHER, BOOKS OF ACCOUNTS ARE USUALLY PREPARED AND CONSOLIDATED BY T HE ASSESSEE AFTER BALANCING THE ENTIRE INCOME EARNED (WHETHER TAXABLE OR NON-TAXABLE) AND EXPENDITURE INCURRED BY IT IN A PARTICULAR FINA NCIAL YEAR. HOWEVER, AS PER INCOME TAX ACT, EXPENSES INCURRED CAN BE ALLOWE D ONLY TO THE EXTENT THEY ARE RELATABLE TO THE EARNING OF TAXABLE INCOME. SECTION 14A WAS, THEREFORE INSERTED BY THE FINANCE ACT, 2001 WI TH RETROSPECTIVE EFFECT FROM 1 ST APRIL 1962 CLARIFYING THAT THIS WAS THE INTENTION OF THE LEGISLATURE FROM THE INCEPTION OF THE INCOME TAX AC T. SECTION 14A DEALS WITH EXPENSES INCURRED BY A PERSON TO EARN EXEMPT I NCOME. SUCH EXPENSES ARE NOT DEDUCTIBLE WHILE COMPUTING TOTAL I NCOME AND ARE DISALLOWED. THUS, PROVISIONS OF SECTION 14A ARE ATT RACTED IF AND ONLY IF: 1. THE ASSESSEE HAS CERTAIN INCOME WHICH IS NOT INC LUDIBLE IN HIS TOTAL INCOME UNDER ANY PROVISIONS OF THE ACT. 2. THE ASSESSEE HAS INCURRED EXPENDITURE IN RELATIO N TO EARNING OF SUCH INCOME WHICH IS EXEMPTED UNDER THE ACT. 64. IT WAS SUBMITTED BY THE LD AR THAT IN THE INSTA NT CASE, THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME IN ANY OF THE ASSESSMENT YEAR UNDER APPEAL ON SUCH INVESTMENTS. FURTHER FOR AY 2012-13 TO 2014-15, THE AMOUNT WAS LYING AS SHARE APPLICATION MONEY AND NO ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 65 SHARES WERE ALLOTTED TO IT, THUS THE PROVISIONS OF SECTION 14A ARE NOT ATTRACTED AS WELL AS APPLICABLE. 65. IT WAS SUBMITTED BY THE LD AR THAT LANGUAGE OF SECTION 14A IS NOT AT ALL AMBIGUOUS AND IN FACT VERY CLEAR AND BY VIRT UE OF THE SAME, ONLY EXPENDITURE ACTUALLY INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME SHALL BE DISALLOWED. IN NO WAY, IT COULD BE INTERPRETED THAT IT SEEKS TO DISALLOW EXPENSES INCURRED IN THE YEAR IN RELATION TO EXEMPT INCOME IN FUTURE YEARS, AS IT WOULD BE COMPLETELY A GAINST THE WELL- RECOGNIZED MATCHING CONCEPT. IT WAS SUBMITTED TH AT THE PRINCIPLE THAT DISALLOWANCE U/S 14A CAN BE MADE ONLY WHEN ASSESSEE HAS ACTUALLY EARNED EXEMPT INCOME, HAS BEEN AFFIRMED BY CATENA O F JUDICIAL PRONOUNCEMENTS AND REFERENCE WAS DRAWN TO THE DECIS ION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS. CIT REPORTED IN 378 ITR 33, WHEREIN IT WAS HELD THAT NO DISALLOWANCE U/ S 14A CAN BE MADE IN A YEAR IN WHICH NO EXEMPT INCOME HAS BEEN EARNED OR RECEIVED BY THE APPELLANT. FURTHER, REFERENCE WAS DRAWN TO THE JAIPUR BENCHES DECISION IN CASE OF DEEPAK VEGPRO (P) LTD., ALWAR V S. ACIT (ITA NO 110/JP/14 DATED 24.04.2017) AND MUMBAI BENCHES IN CASE OF DCIT VS JSW (ITA NO 6264 & 6103/MUM/18 DATED 14.05.2020) WHERE THE DISALLOWANCE MADE BY THE AO U/S 14A WAS DELETED BY RELYING ON THE HONBLE DELHI HIGH COURT DECISION IN CASE OF CHEMIN VEST LTD. (SUPRA) FOR THE REASON THAT NO DIVIDEND INCOME WAS RECEIVED DUR ING THE YEAR. 66. IT WAS FURTHER SUBMITTED THAT THE AO HAS MADE D ISALLOWANCE ON THE PREMISE THAT INVESTMENT IN SHARE APPLICATION MO NEY IS WITH THE INTENTION TO EARN DIVIDEND IN VIEW OF THE FACT THAT SHARES EVENTUALLY GOT ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 66 ALLOTTED AGAINST SHARE APPLICATION MONEY AND FURTHE RMORE SINCE SHARES APPLIED FOR WERE OF GROUP COMPANY, ALLOTMENT OF SHA RES WAS CERTAIN. IN THIS REGARD, IT WAS SUBMITTED THAT IT IS UNDISPUTED FACT THAT ASSESSEE HAS MADE INVESTMENT IN SHARE APPLICATION MONEY AGAINS T WHICH NO SHARES HAVE BEEN ALLOTTED TILL THE BALANCE SHEET DATE. FUR THER, A SHAREHOLDER IS ONLY ENTITLED TO RECEIVE DIVIDEND AND NOT A SHARE A PPLICANT. FURTHER, WHETHER AN INVESTEE COMPANY IS A GROUP COMPANY OR O THERWISE, IT HAS A SEPARATE LEGAL IDENTITY THAN INVESTOR COMPANY AND SHARE APPLICANT REMAINS APPLICANT AND DOES NOT BECOME SHAREHOLDER , SO AS TO BE ENTITLED TO CLAIM DIVIDEND. IN FACT, COMPANIES ACT DOES NOT CONTAIN SEPARATE PROVISIONS IN RESPECT OF STATUS OF SHARE A PPLICANT BEING RELATED CONCERN. THUS, BY NO STRETCH OF IMAGINATION, SHARE APPLICATION MONEY CAN BE TREATED EQUIVALENT TO INVESTMENT IN SHARES, WHICH WOULD RESULT INTO EXEMPT INCOME. IT IS ONLY AFTER ALLOTMENT OF S HARES THAT ASSESSEE BECOMES ELIGIBLE TO RECEIVE DIVIDEND, THUS, NO DISA LLOWANCE IS CALLED UNTIL THE SHARES ARE ACTUALLY ALLOTTED TO THE ASSES SEE AND THAT TOO ONLY WHEN THERE IS DIVIDEND INCOME FROM SUCH SHARES. IN SUPPORT, RELIANCE WAS PLACED ON FOLLOWING DECISIONS: ACIT VS ACRON DEVELOPERS (P) LTD. (ITA NO. 162/MUM/ 2015) ITO VS M/S LGW LIMITED (ITA NO. 267/KOL/2013) RAINY INVESTMENTS (P) LTD VS ACIT (ITA NO. 5491/MUM /2013) 67. IT WAS SUBMITTED THAT THE ASSESSEE HAS SINCE MA DE INVESTMENT IN SHARE APPLICATION ONLY (AND NO SHARES ALLOTTED), IT THUS CREATE NO RIGHT IN FAVOUR OF ASSESSEE TO RECEIVE DIVIDEND (IF ANY) DEC LARED BY INVESTEE COMPANY IN THE YEARS UNDER CONSIDERATION. THUS DISA LLOWANCE MADE ON SUCH GROUND U/S 14A IS NOT IN ACCORDANCE WITH LAW A ND DESERVES TO BE ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 67 DELETED AND THE FINDINGS OF THE LD CIT(A) IN A.Y 20 12-13 AND A.Y 2013- 14 WHICH MAY BE CONFIRMED AND THE FINDINGS OF THE L D CIT(A) FOR A.Y 2014-15 AND A.Y 2015-16 WHERE HE HAS TAKEN A DIVERG ENT VIEW NEED TO BE SET-ASIDE. 68. WITH REGARD TO THE SECOND ISSUE OF INCLUSION OF THE DISALLOWANCE MADE U/S 14A WHILE COMPUTING THE BOOK PROFIT U/S 11 5JB(2), IT WAS SUBMITTED THAT THE SAME DOES NOT FORM PART OF THE P ROFITS FOR THE PURPOSE OF MAT, FOR WHICH RELIANCE WAS PLACED ON TH E DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V S. VIREET INVESTMENT PVT LTD 165 ITD 27 (DELHI). IT WAS SUBMITTED THAT THE LD CIT(A) RELIED UPON THE DECISION OF THE SPECIAL BENCH AND HELD THA T THE COMPUTATION OF BOOK PROFITS UNDER CLAUSE (F) OF EXPLANATION 1 T O SECTION 115JB(2) IS TO BE MADE WITHOUT RESORTING TO THE COMPUTATION AS CONTEMPLATED U/S 14A READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 . IT WAS SUBMITTED THAT AS THE MATTER IS SETTLED BY THE SPECIAL BENCH IN THE CASE OF VIREET INVESTMENTS PVT. LTD., THEREFORE, THE ACTION OF LD, CIT(A) IS FULLY JUSTIFIED AND THE SAME DESERVES TO BE UPHELD. IN SUPPORT, REL IANCE WAS FURTHER PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: ESSAR TELEHOLDINGS PVT. LTD. (ITA NO. 438 OF 2012 D T. 7.8.2014) (MUMBAI HIGH COURT) BENGAL FINANCE AND INVESTMENTS P. LTD. (ITA NO. 337 OF 2013) (MUMBAI HIGH COURT) BHUSHAN STEELS LTD. (ITA NO 593 & 594/ 2015) (DELHI H/C) 69. PER CONTRA, THE LD. DR RELIED ON THE FINDINGS OF THE ASSESSING OFFICER AND THE FINDINGS OF THE LD CIT(A) FOR A.Y 2 014-15. FURTHER, THE LD ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 68 CIT/DR DRAWN OUR REFERENCE TO CBDT CIRCULAR NO. 5/2 014 DATED 11.02.2014 AND IN PARTICULAR, PARA 3 OF THE SAID CI RCULAR WHICH READS AS UNDER:- 3. THE MATTER HAS BEEN EXAMINED IN THE BOARD. IT I S PERTINENT TO MENTION THAT SECTION 14A OF THE ACT W AS INTRODUCED BY THE FINANCE ACT, 2001 WITH RETROSPEC TIVE EFFECT FROM 01.04.1962. THE PURPOSE FOR INTRODUCTI ON OF SECTION 14A WITH RETROSPECTIVE EFFECT SINCE INCEPT ION OF THE ACT WAS CLARIFIED VIDE CIRCULAR NO. 14 OF 2001 AS UNDE R: 'CERTAIN INCOMES ARE NOT INCLUDIBLE WHILE COMPUTIN G THE TOTAL INCOME, AS THESE ARE EXEMPT UNDER VARIOUS PROVISIONS OF THE ACT. THERE HAVE BEEN CASES WHERE DEDUCTIONS HAVE BEEN CLAIMED IN RESPECT OF SUCH EXE MPT INCOME. THIS IN EFFECT MEANS THAT THE TAX INCENTIVE GIVEN BY WAY OF EXEMPTIONS TO CERTAIN CATEGORIES OF INCOM E IS BEING USED TO REDUCE ALSO THE TAX PAYABLE ON THE NO N- EXEMPT INCOME BY DEBITING THE EXPENSES INCURRED TO EARN THE EXEMPT INCOME AGAINST TAXABLE INCOME. THIS IS A GAINST THE BASIC PRINCIPLES OF TAXATION WHEREBY ONLY THE N ET INCOME, I.E., GROSS INCOME MINUS THE EXPENDITURE, I S TAXED. ON THE SAME ANALOGY, THE EXEMPTION IS ALSO IN RESPE CT OF THE NET INCOME. EXPENSES INCURRED CAN BE ALLOWED ON LY TO THE EXTENT THEY ARE RELATABLE TO THE EARNING OF TAX ABLE INCOME'. THUS, LEGISLATIVE INTENT IS TO ALLOW ONLY THAT EXP ENDITURE WHICH IS RELATABLE TO EARNING OF INCOME AND IT THEREFORE FO LLOWS THAT THE EXPENSES WHICH ARE RELATABLE TO EARNING OF EXEMPT INCOME HAVE TO BE CONSIDERED FOR DISALLOWANCE, IRRESPECTIVE O F THE FACT WHETHER ANY SUCH INCOME HAS BEEN EARNED DURING TH E FINANCIAL YEAR OR NOT. 70. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSE D THE MATERIAL AVAILABLE ON RECORD. DURING THE F.Y 2011-12 RELEVAN T TO A.Y 2012-13, ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 69 THE ASSESSEE COMPANY HAS MADE AN APPLICATION FOR AL LOTMENT OF 13.30% NON-CUMULATIVE REDEEMABLE PREFERENCE SHARES OF M/S GVK AIRPORT DEVELOPERS (P) LTD., A GROUP COMPANY AND HAS PAID A N AMOUNT OF RS. 940.80 CRORES BY WAY OF SHARES APPLICATION MONE Y. THE SHARES WERE FINALLY ALLOTTED DURING THE FINANCIAL YEAR 201 4-15 RELEVANT TO A.Y 2015-16 AND THEREFORE, TILL SUCH TIME THE SHARES WE RE NOT ALLOTTED, THE AMOUNT SO PAID CONTINUES AS SHARE APPLICATION MONEY PENDING ALLOTMENT AND IT CANNOT BE REGARDED AS AN INVESTMENT IN SHARE S OR ANY ASSET WHICH IS CAPABLE OF YIELDING ANY DIVIDEND INCOME. GIVEN THAT THE SHARES WERE ALLOTTED ONLY DURING THE FINANCIAL YEAR 2014-15 RELEVANT TO A.Y 2015-16, THERE WAS NO QUESTION OF ANY DIVIDEND BEEN DECLARED/ACCRUED AND/OR RECEIVED BY THE ASSESSEE CO MPANY RIGHT THROUGH THE FINANCIAL YEARS RELEVANT TO A.Y 2012-13 TO A.Y 2014-15 AND EVEN DURING THE FINANCIAL YEAR 2014-15 RELEVANT TO A.Y 2015-16, NO DIVIDEND WAS ACTUALLY DECLARED/ACCRUED AND/OR RECEI VED BY THE ASSESSEE COMPANY. ACCORDINGLY, IN THE RETURN OF INCOME FILE D FOR THE RESPECTIVE ASSESSMENT YEARS, IT IS AN ADMITTED AND UNDISPUTED POSITION THAT NO DIVIDEND INCOME HAS BEEN CLAIMED AS EXEMPT FROM TAX . IT IS A SETTLED LEGAL POSITION THAT NO DISALLOWANCE CAN BE MADE U/S 14A IN A YEAR WHERE NO EXEMPT INCOME HAS BEEN EARNED OR RECEIVED BY THE ASSESSEE. THE LD AR HAS RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF CHEMINVEST LTD VS CIT (SUPRA) WHERE SIMILAR SUBSTANTIAL QUESTION OF LAW HAD ARISEN FOR CONSIDERATION AS TO WHETHER DISALLOWANCE UNDER SECTION 14A OF THE ACT CAN BE MA DE IN A YEAR IN WHICH NO EXEMPT INCOME HAS BEEN EARNED OR RECEIVED BY THE ASSESSEE?' AND THE HONBLE DELHI HIGH COURT, WHILE DISPOSING OFF THE SAID GROUND, WAS PLEASED TO HELD AS UNDER: ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 70 23. IN THE CONTEXT OF THE FACTS ENUMERATED HEREINB EFORE THE COURT ANSWERS THE QUESTION FRAMED BY HOLDING THAT T HE EXPRESSION 'DOES NOT FORM PART OF THE TOTAL INCOME' IN SECTION 14A OF THE ENVISAGES THAT THERE SHOULD BE AN ACTUAL REC EIPT OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EX PENDITURE INCURRED IN RELATION TO THE SAID INCOME. IN OTHER W ORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. 71. WE ALSO NOTE THAT SIMILAR VIEW HAS BEEN TAKEN B Y THE HONBLE DELHI HIGH COURT IN ITS SUBSEQUENT DECISION IN CASE OF PCIT VS OIL INDUSTRIES DEVELOPMENT BOARD [2019] 103 TAXMANN.COM 325 (DELHI) WHEREIN IT WAS PLEASED TO HELD AS UNDER: 3. THE ITAT RELIED UPON THE RULING OF THIS COURT I N CHEMINVEST LTD. V. CIT [2015] 378 ITR 33 WHICH RULED IN THE AB SENCE OF ANY EXEMPT INCOME, DISALLOWANCE UNDER SECTION 14-A OF T HE ACT OF ANY AMOUNT WAS NOT PERMISSIBLE. SINCE THE DECISION IN CHEMINVEST LTD. (SUPRA) WAS FOLLOWED, THERE IS N O SUBSTANTIAL QUESTION OF LAW THAT REQUIRES CONSIDERATION. AND THE SLP FILED BY THE REVENUE AGAINST THE SAID D ECISION OF THE HONBLE DELHI HIGH COURT HAS SINCE BEEN DISMISSED B Y THE HONBLE SUPREME COURT IN CASE OF PCIT VS OIL INDUSTRIES DEV ELOPMENT BOARD (2019) 262 TAXMAN 102(SC). SIMILAR VIEW HAS BEEN T AKEN BY THE HONBLE MUMBAI HIGH COURT IN CASE OF PCIT VS BALLARPUR INDUSTRIES LIMITED (ITA NO. 51 OF 2016 DATED 13.10.2016) WHEREIN THE HONBLE MUMBAI HIGH COURT WAS PLEASED TO HELD A S UNDER: ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 71 ON HEARING THE LEARNED COUNSEL FOR THE DEPARTMENT AND ON A PERUSAL OF THE IMPUGNED ORDERS, IT APPEARS THAT BOT H THE AUTHORITIES HAVE RECORDED A CLEAR FINDING OF FACT T HAT THERE WAS NO EXEMPT INCOME EARNED BY THE ASSESSEE. WHILE HOLDIN G SO, THE AUTHORITIES RELIED ON THE JUDGMENT OF THE DELHI HIG H COURT IN INCOME TAX APPEAL NO. 749/2014, WHICH HOLDS THA T THE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A OF THE INCOME TAX ACT, 1961 ENVISAGES T HAT THERE SHOULD BE AN ACTUAL RECEIPT OF THE INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS Y EAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. THE INCOME TAX APPELLATE TRIBUNAL HELD THAT THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 19 61 WOULD NOT APPLY TO THE FACTS OF THIS CASE AS NO EXEMPT INCOME WAS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT ANY A CTUAL INCOME WAS RECEIVED BY THE ASSESSEE AND THE SAME WAS INCLU DIBLE IN THE TOTAL INCOME. IN THE FACTS OF THE CASE, THE AUTHOR ITIES HELD THAT SINCE THE INVESTMENTS MADE BY THE ASSESSEE IN TH E SISTER CONCERNS WERE NOT THE ACTUAL INCOME RECEIVED BY THE ASSESSEE, THEY COULD NOT HAVE BEEN INCLUDED IN THE TOTAL INCO ME. THE FINDINGS OF FACTS RECORDED BY BOTH THE AUTHORIT IES DO NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. SINCE NO SUBSTANTIAL QUESTION OF LAW ARISES IN THIS INCOME TAX APPEAL, THE INCOME TAX APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 72 72. WE THEREFORE FIND THAT THERE IS A CONVERGENCE O F VIEW AMONG THE VARIOUS HONBLE HIGH COURTS ON THE MATTER AND FOLLO WING THE AFORESAID DECISIONS OF THE HONBLE HIGH COURTS, IT IS A CONSI STENT POSITION TAKEN BY THE VARIOUS BENCHES OF THE TRIBUNAL AS WELL INCLUDI NG JAIPUR BENCHES IN CASE OF DEEPAK VEGPRO (P) LTD VS ACIT (SUPRA) AND M UMBAI BENCHES IN CASE OF DCIT VS JSW LIMITED (SUPRA) THAT NO DISALLO WANCE CAN BE MADE U/S 14A IN A YEAR WHERE NO EXEMPT INCOME HAS BEEN E ARNED OR RECEIVED BY THE ASSESSEE THEREFORE, RESPECTFULLY FOLLOWING T HE DECISIONS REFERRED SUPRA, IN THE INSTANT CASE, WHERE THE FACTS ARE ON A STRONGER FOOTING IN THE SENSE THAT THERE WAS NO INVESTMENT BY WAY OF SH ARES WHICH WERE CAPABLE OF EVEN YIELDING ANY DIVIDEND INCOME AND TH E AMOUNT REMAIN INVESTED AS SHARE APPLICATION MONEY FOR A.Y 2012-13 TO A.Y 2014-15 AND EVEN FOR A.Y 2015-16 WHERE THE SHARES WERE FINA LLY ALLOTTED, THERE WAS NO DIVIDEND INCOME WHICH HAS ACCRUED AND CLAIME D EXEMPT, THE PROVISIONS OF SECTION 14A CANNOT BE INVOKED. IN TH E RESULT, THE FINDINGS, OF THE ASSESSING OFFICER FOR ALL THE YEARS UNDER CO NSIDERATION AS WELL AS OF THE LD CIT(A) FOR A.Y 2014-15 & 2015-16, IN SO F AR AS INVOCATION OF SECTION 14A IS CONCERNED, ARE SET-ASIDE. 73. HAVING SAID THAT, THE FACT OF THE MATTER REMAI NS THAT THE ASSESSEE COMPANY HAS TAKEN A LOAN OF RS. 950 CRORES FROM IDF C BANK CARRYING RATE OF INTEREST OF 12.98% ON RS 650 CRORES AND 12. 75% ON RS. 300 CRORES AND WHICH HAS BEEN UTILIZED FOR MAKING THE P AYMENT TOWARDS THE SHARE APPLICATION MONEY OF RS. 940.80 CRORES. ON SU CH BORROWINGS, THE ASSESSEE HAS INCURRED INTEREST EXPENDITURE OF RS. 4 3,37,58,247/- IN A.Y 2012-13 AND RS. 1,19,06,05,811/- IN A.Y 2013-14. I N ITS RETURN FILED FOR A.Y 2012-13 AND A.Y 2013-14, WHILE COMPUTING INCOME UNDER THE HEAD INCOME FROM BUSINESS/PROFESSION, THE ASSESSEE COM PANY HAS SUO- ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 73 MOTO ADDED BACK THE SAID EXPENSES DEBITED UNDER THE HEAD INTEREST AND PROCESSING CHARGES ON LOAN TAKEN FOR INVESTMENT AND HAS THUS NOT CLAIMED THE SAME FOR TAX PURPOSES WHILE COMPUTING I TS INCOME UNDER THE REGULAR PROVISIONS OF THE ACT AND NO EXEMPT INC OME HAS BEEN CLAIMED IN RESPECT OF SUCH INVESTMENT BY WAY OF SHA RE APPLICATION MONEY. SIMILARLY, WHILE WORKING OUT ELIGIBLE PROFI TS FOR THE PURPOSES OF CLAIM OF DEDUCTION U/S 80IA(4)(I), THE SAID EXPENSE S DEBITED UNDER THE HEAD INTEREST AND PROCESSING CHARGES ON LOAN TAKEN FOR INVESTMENT IN THE PROFIT/LOSS ACCOUNT WERE ADDED BACK. DURING TH E ASSESSMENT PROCEEDINGS, IT IS AGAIN AN ADMITTED POSITION OF TH E ASSESSEE THAT IT HAS PAID INTEREST DURING THE RESPECTIVE YEARS UNDER CON SIDERATION ON THE LOAN TAKEN FROM IDFC BANK WHICH HAS BEEN UTILIZED F OR MAKING INVESTMENT IN THE SHARE APPLICATION OF THE INVESTEE COMPANY. THE ASSESSING OFFICER HAS THEREAFTER RECORDED A CLEAR F INDING THAT THERE IS A DIRECT NEXUS BETWEEN THE BORROWED FUNDS ON WHICH TH E INTEREST IS PAID AND THE INVESTMENT SO MADE BY WAY OF SHARE APPLICAT ION MONEY, A FACT WHICH HAS BEEN ACCEPTED BY THE ASSESSEE. ON APPEAL BY THE ASSESSEE FOR A.Y 2012-13, THE LD. CIT(A) INVOKED THE PROVISI ONS OF SECTION 36(I)(III) AND THE RELEVANT FINDINGS READS AS UNDER : ..I FIND THAT THE APPELLANT DURING THE APPELLAN T PROCEEDINGS CATEGORICALLY CONFESSED THAT THERE IS REALLY A DIRECT NEXUS BETWEEN THE FUNDS BORROWED FROM IDFC OF RS. 950 CRORES AND THE UTILIZATION OF THESE FUNDS IN DEPOSIT TOWAR DS SHARE APPLICATION WITH M/S GVK AIRPORT DEVELOPERS PVT. LT D., A GROUP COMPANY UNDER THE SAME MANAGEMENT. HAVING PURUSED T HE FACTS AND MATERIAL ON RECORD, I AM OF THE CONSIDERED VIEW THAT THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THE ASPE CT THAT THE ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 74 FUNDS BORROWED WERE DIVERTED BY THE APPELLANT FOR N ON BUSINESS PURPOSES AND THEREFORE HE SHOULD HAVE APPLIED THE P ROVISION OF SECTION 36(I)(III) OF THE I.T. ACT AND THE SUBJECT INTEREST SHOULD HAVE BEEN DISALLOWED BEING UTILIZATION OF FUNDS FOR NON BUSINESS PURPOSES AS THE BUSINESS ACTIVITY OF THE APPELLANT IS TO OPERATE THE TOLL ROAD. THE LD. A/R WAS CONFRONTED DURING TH E APPELLATE PROCEEDINGS ABOUT THE ABOVE DISALLOWANCE BUT NO PRO PER EXPLAIN WAS GIVEN ON THIS ASPECT OF DISALLOWANCE BY LETTER DATED 21.03.2018. UNDER THESE CIRCUMSTANCES ONCE IT HAS BEEN ADMITTED THAT THE FUNDS BORROWED FROM IDFC ON WHICH THE PAYMENT OF IN TEREST WAS CLAIMED AS DEDUCTION OUT OF THE INCOME EARNED FROM ITS REGULAR BUSINESS ACTIVITY AS STATED ABOVE DOES NOT INCLUDE THE INVESTMENT OF SHARES. IN THE WAY THE INTEREST TO THE EXTENT PA ID ON THE LOAN TAKEN FROM IDFC CANNOT BE ALLOWED AS BUSINESS EXPEN DITURE. I, THEREFORE, DIRECT THE ASSESSING OFFICER TO DISALLOW A SUM OF RS. 43,37,48,247/- DEBITED IN THE PROFIT AND LOSS A/C B Y INVOKING THE PROVISION OF SECTION 36(I)(III) OF THE I.T. ACT. TH IS GROUND IS THEREFORE DISMISSED. 74. DURING THE COURSE OF HEARING, THE LD A/R REFERR ED TO THE ASSESSEES SUBMISSIONS DATED 21.03.2018 FILED BEFOR E THE LD CIT(A) AND THE CONTENTS THEREOF READS AS UNDER: WITHOUT PREJUDICE TO OUR SUBMISSION MADE WITH RESP ECT TO THE ADDITION MADE U/S 14A ON ACCOUNT OF INTEREST PAID O N THE FUNDS BORROWED FROM IDFC WHICH WERE APPLIED IN THE SHARE APPLICATION ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 75 MONEY OF M/S GVK AIRPORT DEVELOPERS PVT. LTD., IT I S FURTHER SUBMITTED AS UNDER: THAT THE AMOUNT BORROWED WAS SINCE UTILIZED IN THE SHARE APPLICATION MONEY AND NOT FOR THE REGULAR BUSINESS ACTIVITY OF THE ASSESSEE COMPANY THEREFORE DISALLOWANCE, IF ANY, MA DE THE SAME SHOULD HAVE BEEN DONE BY INVOKING THE PROVISION OF SECTION 36(1)(III) AS THE INTEREST PAID ON SUCH ADVANCE AND CLAIMED IN THE PROFIT & LOSS ACCOUNT AGAINST THE INCOME FROM TOLL OPERATION MAY NOT BE CONSIDERED AS LAID OUT FOR THE BUSINESS PURP OSES OF THE ASSESSEE COMPANY. AND SUBMITTED THAT IT WAS BY WAY OF AN ALTERNATE PL EA THOUGH WITHOUT IN ANY MANNER CONCEDING SUCH ADDITION, IT WAS SUBMITTE D THAT THE ADDITION, IF AT ALL COULD BE MADE, IT COULD BE MADE U/S 36(1)(III) OF THE ACT. HOWEVER, THE FACT OF THE MATTER REMAINS THAT T HE ASSESSEE HAS NOT CHALLENGED THE AFORESAID FINDINGS OF THE LD CIT(A) AND THUS, THE SAME HAS ATTAINED FINALITY AS FAR AS ASSESSEE IS CONCERN ED. SIMILAR FINDINGS HAVE BEEN RECORDED BY THE LD CIT(A) FOR A.Y 2013-14 WHICH ARE AGAIN NOT IN CHALLENGE BEFORE US. 75. WE THEREFORE FIND THAT IT IS AN ADMITTED FACT T HAT THERE IS A DIRECT NEXUS BETWEEN THE FUNDS BORROWED FROM IDFC BANK AND THE UTILIZATION OF THESE FUNDS IN DEPOSIT TOWARDS SHARE APPLICATION WITH M/S GVK AIRPORT DEVELOPERS PVT. LTD. AND THE AFORESAID INTE REST EXPENDITURE DEBITED IN THE PROFIT/LOSS ACCOUNT RELATES TO LOAN FUNDS SO TAKEN FROM IDFC BANK WHICH HAS BEEN UTILIZED FOR MAKING INVEST MENT IN THE SHARE APPLICATION OF M/S GVK AIRPORT DEVELOPERS PVT. LTD. IT IS ALSO A FACT THAT THE ASSESSEE COMPANY IS IN THE BUSINESS OF MAINTAIN ING AND OPERATING ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 76 OF HIGHWAYS AND THE INVESTMENT BY WAY OF SHARE APPL ICATION MONEY IN M/S GVK AIRPORT DEVELOPERS PVT. LTD., A GROUP COMPA NY WHICH IS IN BUSINESS OF DEVELOPMENT, CONSTRUCTION AND OPERATION OF DOMESTIC AND INTERNATIONAL AIRPORTS IS NOT PART OF THE REGULAR B USINESS ACTIVITY OF THE ASSESSEE COMPANY. MORE SO, IT IS CLEARLY A CASE WHE RE THE FUNDS HAVE BEEN MOBILIZED ON THE STRENGTH OF ASSESSEES BALANC E SHEET AND IN SUBSTANCE, GIVEN INTEREST FREE TO A GROUP COMPANY F OR PERIOD COMMENCING RIGHT FROM TIME OF PAYMENT OF SHARE APPL ICATION MONEY IN A.Y 2012-13 RIGHT UPTO TIME OF ALLOTMENT OF SHARES IN A.Y 2015-16. THERE IS NOTHING ON RECORD WHICH SHOULD REASONABLY JUSTIFY SUCH A LONG TIME GAP OF ALMOST FOUR YEARS BETWEEN THE PLACING O F SHARE APPLICATION MONEY AND ALLOTMENT OF SHARES, MORE SO, WHERE THE T RANSACTIONS ARE WITHIN THE SAME GROUP OF COMPANIES. THOUGH THE TRAN SACTION IN FORM HAS BEEN STRUCTURED BY WAY OF ISSUE OF PREFERENCE S HARES, IN SUBSTANCE, IT IS IN NATURE OF INTEREST FREE ADVANCEMENT OF FUN DS TO THE GROUP COMPANY. THOUGH THERE IS NO DISPUTE THAT BUSINESS RATIONALE AND EXPEDIENCY FOR ENTERING INTO SUCH TRANSACTION IS BE ST LEFT TO THE ASSESSEE COMPANY TO DECIDE, AT THE SAME TIME, THE REVENUE AU THORITIES ARE WELL WITHIN THEIR JURISDICTION TO EXAMINE AS TO HOW THE TEST OF BUSINESS EXPEDIENCY HAS BEEN SATISFIED IN THE GIVEN CASE MOR E SO WHERE THE BORROWED FUNDS HAVE BEEN ADVANCED TO THE GROUP COMP ANY FOR A REASONABLE LONG PERIOD OF TIME WITHOUT ANYTHING TAN GIBLE BENEFIT IN RETURN. IN THE INSTANT CASE, ONLY EXPLANATION WHICH HAS BEEN GIVEN SIMPLICITIER IS THAT THE INVESTMENT SO MADE IS FOR STRATEGIC PURPOSES AND TO OUR MIND, THE SAID EXPLANATION WITHOUT ELABORATI NG AS TO HOW THE SAME IS STRATEGIC AND IN FURTHERANCE OF BUSINESS IN TEREST OF THE ASSESSEE COMPANY IS NOT SUFFICIENT ENOUGH TO SATISFY THE TES T OF BUSINESS ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 77 EXPEDIENCY. THEREFORE, WHERE THE INTEREST BEARING BORROWED FUNDS HAVE BEEN INVESTED IN ANOTHER GROUP COMPANY WHICH I S NOT PART OF REGULAR BUSINESS ACTIVITY OF THE ASSESSEE COMPANY O R IN ANY WAY IN FURTHERANCE OF ITS BUSINESS ACTIVITY, THE LD CIT(A) HAS RIGHTLY INVOKED THE PROVISIONS OF SECTION 36(1)(III) OF THE ACT BY HOLD ING THAT INTEREST PAID ON SUCH ADVANCES AND CLAIMED IN THE PROFIT & LOSS ACCO UNT AGAINST THE INCOME FROM TOLL OPERATION MAY NOT BE CONSIDERED AS LAID OUT FOR THE BUSINESS PURPOSES OF THE ASSESSEE COMPANY. SIMILAR FINDING HAS BEEN RECORDED BY THE LD CIT(A) FOR A.Y 2013-14. WE THERE FORE DONOT FIND ANY INFIRMITY IN THE SAID FINDINGS OF THE LD CIT(A) AND THE SAME ARE HEREBY CONFIRMED FOR BOTH THE YEARS AND THE CONTENTIONS SO ADVANCED ON BEHALF OF THE REVENUE CANNOT BE ACCEPTED. 76. THE ASSESSEE HAS NOT DISPUTED THE SAID FINDINGS OF THE LD CIT(A) AND IS NOT IN APPEAL BEFORE US FOR A.Y 2012-13 AND A.Y 2013-14. IN ITS APPEAL FOR A.Y 2014-15 AND A.Y 2015-16, THE ASSESSE E HAS RATHER PLEADED TO FOLLOW THE DECISION OF LD CIT(A) FOR A.Y 2012-13 AND A.Y 2013-14 AS CAN SEEN FROM ITS GROUND OF APPEAL W HERE IT CONTENDS THAT THE LD. CIT(A) HAS ERRED IN NOT FOLLOWING THE PRINCIPLE OF CONSISTENCY AS IN THE IMMEDIATE TWO PRECEDING ASSESSMENT YEARS, WHEREIN HIS PREDECESSOR CIT(A) HAD INVOKED THE PROVISIONS OF SE C 36(1)(III) FOR MAKING DISALLOWANCE OF INTEREST ON THE AMOUNT EMPLO YED IN MAKING SHARE APPLICATION MONEY OUT OF THE FUNDS SO BORROWE D AND HENCE THE FACTS ARE SAME AS IN THE PRECEDING YEARS. 77. FOR A.Y 2014-15 AND A.Y 2015-16, THE LD CIT(A) HAS AGAIN RECORDED A SIMILAR FINDING THAT THE ASSESSEE HAD RA ISED AN AMOUNT OF ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 78 RS. 950 CRORES AS LOAN AND THE ENTIRE LOAN AMOUNT W AS INVESTED IN THE GROUP CONCERN OF THE ASSESSEE AND THEREFORE, THERE IS NO DOUBT THAT THE LOAN WAS RAISED WITH THE SOLE INTENTION OF INVESTIN G IN THE GROUP COMPANY WHICH HAS A BUSINESS OBJECT DIFFERENT TO TH AT OF THE ASSESSEE COMPANY AND ON SUCH BORROWINGS, THE ASSESSEE HAS IN CURRED INTEREST EXPENDITURE OF RS 1,15,92,95,718/- FOR A.Y 2014-15 AND RS 1,11,92,41,369/- FOR A.Y 2015-16. HAVING RECORDE D SUCH FINDINGS, WE FIND THAT THE LD CIT(A) WAS NOT CORRECT IN NOT FOLL OWING THE EARLIER ORDERS SO PASSED BY HIS LD. PREDECESSOR FOR A.Y 2012-13 AN D A.Y 2013-14 IN TERMS OF INVOCATION OF PROVISIONS OF SECTION 36(1)( III) OF THE ACT INSTEAD OF SECTION 14A OF THE ACT. GIVEN THAT THERE ARE NO CHANGES IN THE FACTS AND CIRCUMSTANCES OF THE CASE, FOLLOWING THE PRINCI PLE OF CONSISTENCY WHICH APPLIES EQUALLY TO THE ASSESSEE AND THE REVEN UE AS LAID DOWN BY THE HONBLE SUPREME COURT IN CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD (SUPRA), WE REVERSE THE SAID FINDINGS OF THE LD CIT(A) AND UPHOLD THE APPLICABILITY OF PR OVISIONS OF SECTION 36(1)(III) OF THE ACT FOR THE PURPOSES OF MAKING TH E DISALLOWANCE OF INTEREST EXPENSES DEBITED IN THE PROFIT/LOSS ACCOUN T FOR THESE TWO ASSESSMENT YEARS, I.E, A.Y 2014-15 AND A.Y 2015-16. 78. IN LIGHT OF AFORESAID DISCUSSIONS AND IN THE EN TIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AND FOLLOWING THE DECISIO NS REFERRED SUPRA, IN THE INSTANT CASE, WE SET-ASIDE THE INVOCATION OF PR OVISIONS OF SECTION 14A AND UPHOLD THE INVOCATION OF PROVISIONS OF SECT ION 36(1)(III) FOR THE PURPOSES OF MAKING THE DISALLOWANCE OF INTEREST EXP ENSES DEBITED IN THE PROFIT/LOSS ACCOUNT FOR EACH OF THE RESPECTIVE ASSE SSMENT YEARS I.E, A.Y 2012-13 TO A.Y 2015-16 UNDER APPEAL BEFORE US. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 79 79. NOW COMING TO THE SECOND ISSUE AS TO WHETHER R ESORT TO DISALLOWANCES MADE UNDER SECTION 14A CAN BE MADE WH ILE COMPUTING THE BOOKS PROFITS U/S 115JB OF THE ACT. IN THE INST ANT CASE, AS WE HAVE HELD THAT PROVISIONS OF SECTION 14A CANNOT BE INVOK ED FOR THE IMPUGNED ASSESSMENT YEARS AND THUS, NO DISALLOWANCE CAN BE M ADE U/S 14A OF THE ACT, THE QUESTION OF RESORTING TO DISALLOWANCES MADE UNDER SECTION 14A DOESNT ARISE AT FIRST PLACE WHILE COMPUTING TH E BOOKS PROFITS U/S 115JB OF THE ACT. 80. FURTHER, WE FIND THAT THE MATTER IS SQUARELY CO VERED IN FAVOUR OF THE ASSESSEE COMPANY BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN CASE OF VIREET INVESTMENTS PVT LTD (SUPRA) WHEREIN IT WAS HELD THAT COMPUTATION UNDER CLAUSE (F) OF EXPLA NATION 1 TO SECTION 115JB(2) IS TO BE MADE WITHOUT RESORTING TO THE COM PUTATION AS CONTEMPLATED U/S 14A READ WITH RULE 8D. THE SAID VI EW IS FURTHER FORTIFIED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. M/S BENGAL FINANCE & INVESTMENT PVT. LTD. (SUPRA) WHEREIN THE HONBLE HIGH COURT WAS PLEASED TO HELD AS UNDER:- 4. SO FAR AS QUESTION (B) IS CONCERNED, THE IMPUGN ED ORDER OF THE TRIBUNAL FOLLOWED ITS DECISION IN M/S ESSAR T ELEHOLDINGS LTD. VS. DCIT IN ITA NO. 3850/MUM/2010 TO HELD THAT AN AMOUNT DISALLOWED UNDER SECTION 14-A OF THE ACT CANNOT B E ADDED TO ARRIVE AT BOOK PROFIT FOR PURPOSES OF SECTION 115 JB OF THE ACT. THE REVENUES APPEAL AGAINST THE ORDER OF THE TRI BUNAL IN M/S ESSAR TELEHOLDINGS (SUPRA) WAS DISMISSED BY THIS COURT IN INCOME TAX APPEAL NO. 438 OF 2012 RENDERED ON 7 TH AUGUST, ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 80 2014. IN VIEW OF THE ABOVE, QUESTION (B) DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW. 81. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE KOLKATA HIGH COURT IN CASE OF CIT VS JAYSHREE TEA INDUSTRIES LTD (ITA NO. 47 OF 2014 DATED 19.11.2014) WHEREIN IT WAS HELD THAT THE PROVISION OF SECTION 115JB IN THE MATTER OF COMPUTATION IS A COMPLETE CO DE IN ITSELF AND RESORT NEED NOT AND CANNOT BE MADE TO SECTION 14A O F THE ACT. 82. NOW, COMING TO THE THIRD AND CONNECTED ISSUE AS TO WHETHER THERE COULD BE ANY INDEPENDENT ADJUSTMENT TO BOOK P ROFITS BY APPLYING CLAUSE (F) OF EXPLANATION UNDER SECTION 115JB OF TH E ACT. 83. IN THIS REGARD, THE LD CIT/DR HAS REFERRED TO T HE FINDINGS OF THE LD CIT(A) IN A.Y 2014-15 WHERE HE HAS REFERRED TO THE DECISION OF THE TRIBUNAL IN CASE OF ACIT VS RIDHI PORTFOLIO PVT LTD (IT(SS) NO. 106 TO 109/KOL/2016 DATED 16.02.2018) . IT WAS SUBMITTED THAT THOUGH THE LD CIT(A) HAS FOLLOWED THE SAID DECISION OF THE TRIBUN AL HOWEVER, FAILED TO APPRECIATE THAT IN THE SAID DECISION, THE TRIBUNAL HAS ALSO REFERRED TO THE DECISION OF THE HONBLE KOLKATA HIGH COURT IN CASE OF CIT VS JAYSHREE TEA INDUSTRIES LTD (ITA NO. 47 OF 2014 DATED 19.11.2014) WHEREIN IT WAS HELD THAT COMPUTATION OF AMOUNT OF E XPENDITURE RELATABLE TO EXEMPT INCOME MUST BE MADE INDEPENDENT LY BY APPLYING CLAUSE (F) OF EXPLANATION UNDER SECTION 115JB OF TH E ACT AND OUR REFERENCE WAS DRAWN TO FINDINGS OF THE HONBLE HIGH COURT WHERE IT WAS PLEASED TO HELD AS UNDER: ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 81 'WE FIND COMPUTATION OF THE AMOUNT OF EXPENDITURE R ELATABLE TO EXEMPTED INCOME OF THE ASSESSEE MUST BE MADE SINCE THE ASSESSEE HAS NOT CLAIMED SUCH EXPENDITURE TO BE NIL . SUCH COMPUTATION MUST BE MADE BY APPLYING CLAUSE (F) OF EXPLANATION 1 UNDER SECTION 115JB OF THE ACT. WE REMAND THE MAT TER FOR SUCH COMPUTATION TO BE MADE BY THE LEARNED TRIBUNAL. WE ACCEPT THE SUBMISSION OF MR. KHAITAN, LEARNED SENIOR ADVOCATE THAT THE PROVISION OF SECTION 115JB IN THE MATTER OF COMPUTA TION IS A COMPLETE CODE IN ITSELF AND RESORT NEED NOT AND CAN NOT BE MADE TO SECTION 14A OF THE ACT.' 84. FURTHER, THE LD. CIT/DR REFERRED TO THE CO-ORDI NATE BENCH DECISION IN CASE OF ACIT, KOLKATA VS JAY SHREE TEA & INDUSTRIES LTD. (ITA NO. 37/KOL/2017 DATED 08.06.2018) WHEREIN FOLLOWING THE AFORESAID DECISION OF THE HONBLE HIGH COURT, IT WA S HELD THAT THOUGH THE DISALLOWANCE MADE UNDER PROVISIONS OF SECTION 1 4A CANNOT BE APPLIED TO THE PROVISIONS OF SECTION 115JB OF THE A CT, AT THE SAME TIME, THE ASSESSING OFFICER IS STILL REQUIRED TO WORK OUT THE DISALLOWANCE IN TERMS EXPLANATION (1) CLAUSE (F) INDEPENDENTLY AFTE R CONSIDERING THE EXPENSES DEBITED IN THE PROFIT & LOSS ACCOUNT AND T HE MATTER WAS REMANDED BACK TO THE FILE OF AO TO WORK OUT THE DIS ALLOWANCES UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB INDEPE NDENTLY OF PROVISIONS OF SECTION 14A OF THE ACT. IT WAS SUBMITTED THAT AG AINST THE AFORESAID DECISION OF THE HONBLE HIGH COURT, THE SLP FILED B Y THE ASSESSEE HAS SINCE BEEN DISMISSED BY THE HONBLE SUPREME COURT ( SLP (C) NO. 9191/2015 DATED 26.02.2020). IT WAS ACCORDINGLY SU BMITTED THAT APPROPRIATE DIRECTIONS MAY BE ISSUED TO THE ASSESSI NG OFFICER TO COMPUTE THE AMOUNT OF EXPENDITURE RELATABLE TO EXEM PT INCOME MUST ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 82 BE MADE INDEPENDENTLY BY APPLYING CLAUSE (F) OF EXP LANATION UNDER SECTION 115JB OF THE ACT. 85. PER CONTRA, THE LD AR SUBMITTED THAT THE GROUND OF APPEAL TAKEN BY THE REVENUE IS LIMITED TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT THE COMPUTATION UNDER CLAUSE (F) OF EX PLANATION 1 TO SECTION 115JB(2) IS TO BE MADE WITHOUT RESORTING TO THE COMPUTATION AS CONTEMPLATED U/S 14A R.W. RULE 8D AND THEREFORE, TH E CONTENTION SO ADVANCED BY THE LD CIT D/R IS NOT EMERGING FROM THE GROUND OF APPEAL SO TAKEN BY THE DEPARTMENT. IT WAS FURTHER SUBMITT ED THAT THE DECISION OF THE HONBLE KOLKATA HIGH COURT IN CASE OF CIT VS JAYSHREE TEA INDUSTRIES LTD (SUPRA) HAS ALSO BEEN CONSIDERED BY THE AHMEDABAD BENCHES OF THE TRIBUNAL IN CASE OF DEPUTY COMMISSIONER OF INCOME-TAX, AHMEDABAD VS. ASIAN GRANTIO INDIA LTD [2020] 113 TAXMANN.COM 445 (AHMEDABAD - TRIB.) AND THE RELEVAN T FINDINGS READ AS UNDER: 7.7 REGARDING THE DISALLOWANCE UNDER MAT, WE NOTE T HAT THE AO IN THE INSTANT CASE HAS MADE THE DISALLOWANCE U/S 1 4A R.W.R. 8D OF THE INCOME TAX RULES FOR RS. 6,15,723/- WHILE DE TERMINING THE INCOME UNDER NORMAL COMPUTATION OF INCOME. FURTHER, THE AO WHILE DETERMINING THE INCOME UNDER MINIMUM ALTERNAT E TAX (MAT) AS PER THE PROVISIONS OF SECTION 115JB OF THE ACT, HAS ALSO ADDED THE DISALLOWANCE MADE UNDER THE NORMAL COMPUT ATION OF INCOME UNDER SECTION 14A R.W.R. 8D OF INCOME TAX RU LE FOR RS. 6,15,723/- IN PURSUANCE TO THE CLAUSE (F) OF EXPLAN ATION 1 TO SECTION 115JB OF THE ACT. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 83 7.8 HOWEVER, WE NOTE THAT IN THE RECENT JUDGMENT OF SPECIAL BENCH OF HON'BLE DELHI TRIBUNAL IN THE CASE OF ASST T. CIT V. VIREET INVESTMENT (P.) LTD. [2017] 82 TAXMANN.COM 415/165 ITD 27 HAS HELD THAT THE DISALLOWANCES MADE U/S 14A R.W.R. 8D CANNOT BE THE SUBJECT MATTER OF DISALLOWANCES WHILE DETERMINING T HE NET PROFIT U/S 115JB OF THE ACT. THE RELEVANT PORTION OF THE S AID ORDER IS REPRODUCED BELOW: 'IN VIEW OF ABOVE DISCUSSION, THE COMPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2), IS TO BE MADE WI THOUT RESORTING TO THE COMPUTATION AS CONTEMPLATED UNDER SECTION 14A, READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962.' 7.9 THE RATIO LAID DOWN BY THE HON'BLE TRIBUNAL IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE ON HAND. THUS I T CAN BE CONCLUDED THAT THE DISALLOWANCE MADE UNDER SECTION 14A R.W.R. 8D CANNOT BE RESORTED WHILE DETERMINING THE EXPENSE S AS MENTIONED UNDER CLAUSE (F) TO EXPLANATION 1 TO SECT ION 115JB OF THE ACT. 7.10 HOWEVER, IT IS ALSO PERTINENT TO NOTE THAT THE DISALLOWANCE NEEDS TO BE MADE WITH RESPECT TO THE EXEMPTED INCOM E IN TERMS OF THE PROVISIONS OF CLAUSE (F) TO SECTION 115JB OF THE ACT WHILE DETERMINING THE BOOK PROFIT. IN HOLDING SO, WE DRAW SUPPORT FROM THE JUDGMENT OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. JAYSHREE TEA INDUSTRIES LTD. IN GO NO.1501 OF 2014 [ITAT NO.47 OF 2014, DATED 19-11-14] WHEREIN IT WAS HELD THAT T HE DISALLOWANCE REGARDING THE EXEMPTED INCOME NEEDS TO BE MADE AS PER THE CLAUSE (F) TO EXPLANATION-1 OF SEC. 115J B OF THE ACT ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 84 INDEPENDENTLY. THE RELEVANT EXTRACT OF THE JUDGMENT IS REPRODUCED BELOW: 'WE FIND COMPUTATION OF THE AMOUNT OF EXPENDITURE R ELATABLE TO EXEMPTED INCOME OF THE ASSESSEE MUST BE MADE SINCE THE ASSESSEE HAS NOT CLAIMED SUCH EXPENDITURE TO BE NIL . SUCH COMPUTATION MUST BE MADE BY APPLYING CLAUSE (F) OF EXPLANATION 1 UNDER SECTION 115JB OF THE ACT. WE REMAND THE MAT TER FOR SUCH COMPUTATION TO BE MADE BY THE LEARNED TRIBUNAL. WE ACCEPT THE SUBMISSION OF MR. KHAITAN, LEARNED SE NIOR ADVOCATE THAT THE PROVISION OF SECTION 115JB IN THE MATTER OF COMPUTATION IS A COMPLETE CODE IN ITSELF AND RESORT NEED NOT AND CANNOT BE MADE TO SECTION 14A OF THE ACT.' 7.11 GIVEN ABOVE, WE HOLD THAT THE DISALLOWANCES MA DE UNDER THE PROVISIONS OF SEC. 14A R.W.R. 8D OF THE IT RULE S, CANNOT BE APPLIED TO THE PROVISION OF SEC. 115JB OF THE ACT A S PER THE DIRECTION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF JAYSHREE TEA INDUSTRIES LTD. (SUPRA). 7.12 NOW THE QUESTION ARISES TO DETERMINE THE DISAL LOWANCE AS PER THE CLAUSE (F) TO EXPLANATION-1 OF SEC. 115JB O F THE ACT INDEPENDENTLY. IN THIS REGARD, WE NOTE THAT THERE I S NO MECHANISM/ MANNER GIVEN UNDER THE CLAUSE (F) TO EXP LANATION-1 OF SEC. 115JB OF THE ACT TO WORKOUT/ DETERMINE THE EXPENSES WITH RESPECT TO THE EXEMPTED INCOME. HOWEVER, WE FIND TH AT THERE ARE JUDGMENTS ON THE ISSUE WHICH MANDATES THAT THE DISA LLOWANCE OF THE EXPENSES CANNOT EXCEED THE EXEMPT INCOME I.E. V ISION ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 85 FINSTOCK LTD. (SUPRA) OR ONLY THOSE INVESTMENTS SHO ULD ONLY BE CONSIDERED FOR THE PURPOSE OF THE DISALLOWANCE WHIC H HAVE RESULTED THE DIVIDEND INCOME. HOWEVER, WE ARE ALSO CONSCIOUS TO THE FACT THAT THE ABOVE JUDGMENTS WERE RENDERED IN CONNECTION WITH THE INCOME DETERMINED UNDER NORMAL COMPUTATION OF INCOME BUT TO OUR MIND THE SAME PRINCIPLES CAN ALSO BE APP LIED TO THE CASE ON HAND. IT IS BECAUSE, THE PROVISIONS OF SECT ION 115JB OF THE ACT REQUIRE TO MAKE THE DISALLOWANCE OF THE EXP ENDITURE RELATED TO ANY INCOME TO WHICH SECTION 10 APPLIES O THER THAN SECTION 10(38) OF THE ACT. ACCORDINGLY, WE HOLD THA T THE EXPENSES INCURRED IN CONNECTION WITH THE EXEMPTED INCOME CAN NOT EXCEED THE AMOUNT OF SUCH EXEMPTED INCOME UNDER THE PROVIS IONS OF SECTION 115JB OF THE ACT. ACCORDINGLY, WE LIMIT THE DISALLOWANCE OF THE EXPENSES TO THE EXTENT OF EXEMPT INCOME WHICH I S NIL IN THE CASE ON HAND. THUS NO DISALLOWANCE OF THE EXPENSE I S WARRANTED UNDER SECTION 115JB OF THE ACT. HENCE THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 86. IT WAS ACCORDINGLY SUBMITTED THAT AFTER CONSIDE RING THE DECISION OF THE HONBLE KOLKATA HIGH COURT AND TAKING INTO C ONSIDERATION THE FACT THAT THERE WAS NO EXEMPT INCOME, IT WAS HELD THAT N O DISALLOWANCE WAS WARRANTED EVEN INDEPENDENTLY U/S 115JB OF THE ACT A ND THE SAID DECISION SQUARELY APPLIES IN THE INSTANT CASE AND T HEREFORE, THERE SHOULD NOT BE ANY DISALLOWANCE U/S 115JB ON A STANDALONE B ASIS EVEN INDEPENDENT OF SECTION 14A OF THE ACT. 87. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSE D THE MATERIAL AVAILABLE ON RECORD. THE HONBLE KOLKATA HIGH COUR T IN CASE OF CIT VS ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 86 JAYSHREE TEA INDUSTRIES LTD (SUPRA) HAS HELD THAT T HE DISALLOWANCE AS PER THE CLAUSE (F) TO EXPLANATION-1 OF SEC. 115JB O F THE ACT IS REQUIRED TO BE DETERMINED INDEPENDENTLY AS THE SAME IS A COM PLETE CODE IN ITSELF AND CONSIDERING THE SAID DECISION, THE COORDINATE A HMEDABAD BENCHES OF THE TRIBUNAL IN CASE OF ASIAN GRANTIO INDIA LTD (SUPRA) HAS HELD THAT THERE IS NO MECHANISM/ MANNER GIVEN UNDER THE CLAUS E (F) TO EXPLANATION-1 OF SEC. 115JB OF THE ACT TO WORKOUT/ DETERMINE THE EXPENSES WITH RESPECT TO THE EXEMPTED INCOME, AND D RAWING SUPPORT FROM THE PRINCIPLES LAID DOWN UNDER NORMAL PROVISIO NS FURTHER HELD THAT THE DISALLOWANCE OF THE EXPENSES CANNOT EXCEED THE EXEMPT INCOME AND LIMITED THE DISALLOWANCE OF THE EXPENSES TO THE EXTENT OF EXEMPT INCOME WHICH WAS NIL IN THAT CASE. FOLLOWING THE SA ID PROPOSITION, IN THE INSTANT CASE AS WELL, GIVEN THAT THERE IS NO IN COME WHICH IS CLAIMED EXEMPT IN ANY OF THE YEARS UNDER CONSIDERATION, NO DISALLOWANCE OF THE EXPENSE IS WARRANTED UNDER SECTION 115JB OF THE ACT EVEN IN TERMS OF CLAUSE (F) TO EXPLANATION-1 OF SEC. 115JB OF THE AC T IN RESPECT OF ALL THE IMPUGNED ASSESSMENT YEARS. 88. IN THE RESULT, THE RESPECTIVE GROUNDS OF APPEAL TAKEN BY THE REVENUE ARE DISMISSED AND GROUNDS OF APPEAL TAKEN B Y THE ASSESSEE ARE ALLOWED IN LIGHT OF AFORESAID DIRECTIONS. DEPRECIATION ON TOLL ROAD U/S 32(1) FOR A.Y 2011-12 TO 2013-14 89. THE REVENUE HAS CHALLENGED THE ACTION OF THE LD . CIT(A) IN ALLOWING DEPRECIATION CLAIM OF THE ASSESSEE ON TOLL ROAD @ 10% TREATING THE SAME AS BUILDING FOR A.Y 2011-12, 2012-13 & 201 3-14 RESPECTIVELY. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 87 90. IN THIS REGARD, THE LD. AR SUBMITTED THAT THE A SSESSEE HAS CLAIMED DEPRECIATION ON TOLL ROAD @ 10% FOR THE FIRST TIME IN A.Y 2006-07 WHEN THE TOLL ROAD WAS FIRST PUT TO USE. THE SAID CLAIM OF THE ASSESSEE WAS NOT ALLOWED BY THE ASSESSING OFFICER WHILE COMPLETI NG THE ASSESSMENT U/S 143(3) AND THE MATTER THEREAFTER WAS TAKEN UP I N APPEAL AND THE TRIBUNAL VIDE ITS ORDER DATED 26.06.2009 IN ITA NO. 193/JP/2009 HAD ALLOWED THE SAID CLAIM OF THE ASSESSEE AND THE DEPA RTMENT HAS NOT PREFERRED ANY FURTHER APPEAL BEFORE THE HONBLE HIG H COURT AGAINST THE SAID CLAIM ALLOWED BY THE TRIBUNAL. IT WAS FURTHER SUBMITTED THAT SIMILARLY DISALLOWANCE WAS MADE BY THE ASSESSING OF FICER FOR A.Y 2007-08, 2008-09, 2009-10 & 2010-11 AND IN ALL THESE YEARS, THE LD. CIT(A) FOLLOWING THE ORDER OF THE TRIBUNAL FOR A.Y 2006-07 HAS ALLOWED THE CLAIM OF THE ASSESSEE WHICH WAS SUBSEQU ENTLY CONFIRMED BY THE TRIBUNAL. IT WAS SUBMITTED THAT ON FURTHER APP EAL BY THE REVENUE, THE HONBLE RAJASTHAN HIGH COURT HAS CONFIRMED THE ORDER OF THE TRIBUNAL FOR ALL THESE ASSESSMENT YEARS BY ITS COMM ON ORDER DATED 10.10.2017. IT WAS SUBMITTED THAT AGAINST THE SAID ORDER OF THE HONBLE RAJASTHAN HIGH COURT FOR A.Y 2010-11 IN DB APPEAL N O. 142/2017 DATED 10.10.2017, THE REVENUE HAD FILED AN SLP BEFORE THE HONBLE SUPREME COURT WHICH STOOD DISMISSED VIDE ORDER DATED 07.09. 2018 IN SLP (CIVIL) NO. 27373/2018 WHEREIN THE HONBLE SUPREME COURT HA S HELD THAT THEY FIND NO MERIT IN THE PETITION AND THE SLP SO FILED WAS DISMISSED. IT WAS ACCORDINGLY SUBMITTED THAT THE MATTER HAS SINCE BEE N SETTLED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE SUPR EME COURT BY DISMISSING THE SLP FILED BY THE DEPARTMENT AGAINST THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT IN A.Y 2010-11 IN DB NO. 142/JP/2017. IT WAS SUBMITTED THAT THE ORDER OF LD. CIT(A) FOR E ACH OF THE YEARS ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 88 UNDER CONSIDERATION WHERE HE HAS FOLLOWED THE DECIS ION OF THE HONBLE JURISDICTIONAL HIGH COURT THEREFORE DESERVE TO BE U PHELD AND THE APPEAL OF THE REVENUE BE DISMISSED. 91. PER CONTRA, THE LD. CIT/DR FAIRLY SUBMITTED THA T THE MATTER IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F HONBLE RAJASTHAN HIGH COURT IN ASSESSEES OWN CASE FOR THE PREVIOUS YEARS AND THE SLP FILED BY THE DEPARTMENT HAS BEEN DISMISSED. ON ENQ UIRY BY THE BENCH, IT WAS SUBMITTED THAT THERE IS NO REVIEW PETITION W HICH HAS EITHER BEEN FILED OR PENDING FOR ADJUDICATION BEFORE THE HONBL E SUPREME COURT. AT THE SAME TIME, HE SUPPORTED THE ORDER AND THE FINDI NGS OF THE ASSESSING OFFICER. 92. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE COMPANY IS ENGAGE D IN CONSTRUCTION, OPERATION AND MAINTENANCE OF HIGHWAYS AND IN ITS RE TURN OF INCOME, THE ASSESSEE COMPANY HAS CLAIMED DEPRECIATION ON TOLL R OAD TREATING THE SAME AS BUILDING WHICH IS ELIGIBLE FOR DEPRECIATION AT THE RATE OF 10%. THE ASSESSING OFFICER BY REFERRING TO PROVISIONS OF SECTION 32(1) AND DECISION OF THE HONBLE SUPREME COURT IN CASE OF IN DORE MUNICIPAL CORPORATION VS CIT REPORTED IN 247 ITR 803 HAS REJE CTED THE ASSESSEES CLAIM. DURING THE APPELLATE PROCEEDINGS, THE LD. CI T(A), FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR A.Y 2006- 07 WHERE THE DECISION OF THE HONBLE SUPREME COURT (IN DECISION REFERRED SUPRA) WAS HELD DISTINGUISHABLE, AND THE D ECISION OF HONBLE RAJASTHAN HIGH COURT DATED 10.10.2017 AFFIRMING THE DECISION OF THE COORDINATE BENCH, HAS ALLOWED THE CLAIM OF THE ASSE SSEE. WE REFER TO THE FINDINGS OF THE HONBLE RAJASTHAN HIGH COURT IN ITS ORDER DATED ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 89 10.10.2017 WHERE THE HONBLE RAJASTHAN HIGH COURT W AS PLEASED TO HELD AS UNDER:- 14. WE HAVE HEARD COUNSEL FOR THE PARTIES. 14.1 THE INTERPRETATION WHICH HAS BEEN PUT FORWARD BY THE COUNSEL FOR THE DEPARTMENT THAT THE NATIONAL HIGHWA Y IS NOT ROAD, IN THAT VIEW OF THE MATTER, THE SAME WILL NOT BE GO VERNED BY THE SCHEDULE OF APPENDIX-I AND THEY WILL NOT BE ENTITLE D FOR THE EXPENSES UNDER THE CAPITAL ACCOUNT. 14.2 WHILE CONSIDERING THE MATTER, WE HAVE TO GO BY THE COMMON PARLANCE OF ROAD WHERE PUBLIC AT LARGE HAS A N ACCESS. THE ASSESSEE WAS GRANTED LICENSE FOR CONSTRUCTION A GAINST WHICH HE HAS RIGHT TO USE AND COLLECT LICENSE FEE TO USE OF THE LAND. IN THAT VIEW OF THE MATTER, HE HAS RIGHT TO RESTRICT T HE PEOPLE WITHOUT NON PAYMENT OF TOLL TAX. 14.3 IN THAT VIEW OF THE MATTER, IF WE LOOK AT THE DEFINITION WHICH IS GIVEN UNDER THE INCOME TAX ACT, EVEN A DEV ELOPMENT MADE WHILE OCCUPYING THE PREMISES AND DEVELOPMENT O F A ROAD WAS THE MAIN AGREEMENT MOU REFERRED TO US. 14.4 IN VIEW OF WRITTEN SUBMISSIONS SUBMITTED BY MR . RANKA, IT IS NOT ONLY ROAD, THEY HAVE TO CONSTRUCT TOLL BOOTH AN D PROVIDE FACILITIES FOR THE STAFF FOR THE PURPOSE OF THEIR A CCOMMODATION. 14.5 IN THAT VIEW OF THE MATTER, THE SUPREME COURT JUDGMENT WHICH IS SOUGHT TO BE RELIED UPON BY THE DEPARTMENT WILL NOT APPLY AND THE TRIBUNAL HAS RIGHTLY INTERPRETED THE CHANGE IN LAW ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 90 AND MORE PARTICULARLY UNDER THE LAW WHICH HAS BEEN DEDUCTED AFTER YEAR 1983. 14.6 THUS, ON THE FIRST ISSUE, WE ARE IN COMPLETE A GREEMENT WITH THE VIEW TAKEN BY THE TRIBUNAL. 93. WE THEREFORE, FIND THAT THE MATTER HAS BEEN DEC IDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE RAJASTHAN HIGH COURT WH ERE THE DEPRECIATION CLAIM ON THE TOLL ROAD HAS BEEN HELD A LLOWABLE AT THE RATE OF 10% AS APPLICABLE TO BUILDINGS. FURTHER, THE SLP FILED BY THE DEPARTMENT HAS SINCE BEEN DISMISSED BY THE HONBLE SUPREME COURT VIDE ITS ORDER DATED 07.09.2018. THEREFORE, IN VIEW OF THE ADMITTED AND UNDISPUTED POSITION THAT THERE ARE NO CHANGES IN TH E FACTS AND CIRCUMSTANCES OF THE CASE AND THE MATTER HAS BEEN D ECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE RAJASTH AN HIGH COURT FOR THE EARLIER YEARS AND THE SLP AGAINST THE SAID DECI SION STOOD DISMISSED BY THE HONBLE SUPREME COURT, THE MATTER HAS ATTAIN ED FINALITY AND THEREFORE, SHOULD NOT BE A SUBJECT MATTER OF ANY FU RTHER DISPUTE BY THE REVENUE. THE MATTER IS ACCORDINGLY DECIDED IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE. THE GROUNDS OF APPEAL SO T AKEN BY THE REVENUE FOR THE RESPECTIVE ASSESSMENT YEARS ARE THU S DISMISSED. DEPRECIATION ON EDP EQUIPMENTS U/S 32(1) FOR A.Y 20 11-12 TO 2013-14 94. THE REVENUE HAS CHALLENGED THE ACTION OF THE LD . CIT(A) IN ALLOWING THE CLAIM OF THE DEPRECIATION ON EDP EQUIP MENT @ 60% AS CLAIMED BY THE ASSESSEE AS AGAINST 15% DETERMINED B Y THE ASSESSING OFFICER FOR A.Y 2011-12, 2012-13 AND 2013-14. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 91 95. IN THIS REGARD, THE LD. AR SUBMITTED THAT THE A SSESSEE HAS CLAIMED DEPRECIATION @ 60% IN RESPECT OF EDP EQUIPMENTS CON SISTING OF COMPUTERS, SERVERS, COMPUTER SOFTWARE ETC WHICH ARE DIRECTLY USED IN TOLL BOOTH OPERATIONS AND BACK OFFICE OPERATIONS CO NNECTING TO TOLL COLLECTION BOOTHS. IT WAS SUBMITTED THAT THE DEPREC ATION CLAIM WAS RESTRICTED TO 15% BY THE ASSESSING OFFICER ON THE A LLEGATION THAT THEY CANNOT BE CLASSIFIED AS COMPUTER AND COMPUTER SOFTW ARE AND WAS PART OF PLANT & MACHINERY ELIGIBLE FOR DEPRECIATION @ 15 %. IT WAS SUBMITTED THAT DISALLOWANCE OF SIMILAR NATURE WAS INITIALLY M ADE BY THE ASSESSING OFFICER IN A.Y 2006-07 WHEN THESE EDP EQUIPMENTS WE RE PUT TO USE FOR THE FIRST TIME AND ON APPEAL, THE TRIBUNAL VIDE ITS ORDER DATED 26.06.2009 IN ITA NO. 193/JP/2009 HAD ALLOWED THE C LAIM OF DEPRECIATION ON EDP EQUIPMENT @ 60%. IT WAS FURTHE R SUBMITTED THAT SIMILAR DISALLOWANCE WAS MADE BY THE ASSESSING OFFI CER FOR A.Y 2007-08, 2008-09, 2009-10 & 2010-11 WHEREIN THE LD. CIT(A) F OLLOWING THE ORDER OF THE TRIBUNAL FOR A.Y 2006-07 HAS ALLOWED THE CLA IM OF THE ASSESSEE. WHICH WAS SUBSEQUENTLY CONFIRMED BY THE TRIBUNAL. IT WAS SUBMITTED THAT ON FURTHER APPEAL BY THE REVENUE, THE HONBLE RAJASTHAN HIGH COURT HAS CONFIRMED THE ORDER OF THE TRIBUNAL FOR A LL THESE ASSESSMENT YEARS BY ITS COMMON ORDER DATED 10.10.2017. IT WAS SUBMITTED THAT AGAINST THE SAID ORDER OF THE HONBLE RAJASTHAN HIG H COURT FOR A.Y 2010-11 IN DB APPEAL NO. 142/2017 DATED 10.10.2017, THE REVENUE HAD FILED AN SLP BEFORE THE HONBLE SUPREME COURT W HICH STOOD DISMISSED VIDE ORDER DATED 07.09.2018 IN SLP (CIVIL ) NO. 27373/2018 WHEREIN THE HONBLE SUPREME COURT HAS HELD THAT THE Y FIND NO MERIT IN THE PETITION AND THE SLP SO FILED WAS DISMISSED. IT WAS ACCORDINGLY SUBMITTED THAT THE MATTER HAS SINCE BEEN SETTLED IN FAVOUR OF THE ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 92 ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COU RT BY DISMISSING THE SLP FILED BY THE DEPARTMENT AGAINST THE ORDER O F THE HONBLE JURISDICTIONAL HIGH COURT IN A.Y 2010-11 IN DB NO. 142/JP/2017. IT WAS SUBMITTED THAT THE ORDER OF LD. CIT(A) FOR EACH OF THE YEARS UNDER CONSIDERATION WHERE HE HAS FOLLOWED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT THEREFORE DESERVE TO BE U PHELD AND THE APPEAL OF THE REVENUE BE DISMISSED. 96. PER CONTRA, THE LD. CIT/DR FAIRLY SUBMITTED THA T THE MATTER IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F HONBLE RAJASTHAN HIGH COURT IN ASSESSEES OWN CASE FOR THE PREVIOUS YEARS AND THE SLP FILED BY THE DEPARTMENT HAS BEEN DISMISSED. ON SPE CIFIC ENQUIRY BY THE BENCH, IT WAS SUBMITTED THAT THERE IS NO REVIEW PET ITION WHICH HAS EITHER BEEN FILED OR PENDING FOR ADJUDICATION BEFOR E THE HONBLE SUPREME COURT. AT THE SAME TIME, HE SUPPORTED THE ORDER AND THE FINDINGS OF THE ASSESSING OFFICER. 97. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE MATTER IS SQU ARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCHES RIGHT FROM A.Y 2006-07 ONWARDS WHEREIN EDP EQUIPMENT HAVE BEEN HELD AS QUALIFYING FOR DEPRECIATION @ 60% AS AGAINST 15% APPLIED BY THE ASSESSING OFFICER . FURTHER, THE HONBLE RAJASTHAN HIGH COURT VIDE ITS ORDER DATED 10.10.2017 WHILE DISMISSING THE APPEAL FILED BY THE REVENUE WAS PLEA SED TO HELD AS UNDER:- 15. REGARDING ISSUE NO. 2, THE CONTENTION WHICH HA S BEEN RAISED THAT EQUIPMENT WHICH ARE ATTACHED WITH THE P OWER EQUIPMENT ARE NOT ENTITLED UNDER ITEM NO. 5 OF SCHE DULE-I, VIEW ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 93 OF THE FACT THAT NOTE 7 WILL NOT COVER COMPLETE EQU IPMENT WHICH ARE ATTACHED WITH THE SYSTEM BUT IN OUR CONSIDERED OPINION THE OPTICAL FIBERS WHICH ARE USED EXCLUSIVELY FOR THE C OMPUTER CONFIGURATION AND IT IS MANDATORY FOR THE OPERATION . IT IS PART OF COMPUTER SYSTEM. 15.1 IN THAT VIEW OF THE MATTER, THE VIEW TAKEN BY THE TRIBUNAL IS JUST AND PROPER. 98. FURTHER, THE SLP FILED BY THE DEPARTMENT AGAINS T THE DECISION OF THE HONBLE HIGH COURT HAS SINCE BEEN DISMISSED BY THE HONBLE SUPREME COURT VIDE ITS ORDER DATED 07.09.2018. THER EFORE, IN VIEW OF THE ADMITTED AND UNDISPUTED POSITION THAT THERE ARE NO CHANGES IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE MATTER HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONB LE RAJASTHAN HIGH COURT FOR THE EARLIER YEARS AND THE SLP AGAINST THE SAID DECISION STOOD DISMISSED BY THE HONBLE SUPREME COURT, THE MATTER HAS ATTAINED FINALITY AND THEREFORE, SHOULD NOT BE A SUBJECT MAT TER OF DISPUTE BY THE REVENUE. THE MATTER IS ACCORDINGLY DECIDED IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE. THE GROUNDS OF APPEAL SO T AKEN BY THE REVENUE FOR THE RESPECTIVE ASSESSMENT YEARS ARE THU S DISMISSED. DISALLOWANCE OF PF/ESI CONTRIBUTIONS FOR A.Y 2013-1 4 & 2014-15 99. THE REVENUE HAS CHALLENGED THE ACTION OF THE LD . CIT(A) IN ALLOWING THE CLAIM OF EMPLOYEES SHARE OF PF AND ES I CONTRIBUTIONS DEPOSITED BEYOND THE PRESCRIBED PERIOD AS PROVIDED IN THE RELEVANT STATUE FOR A.Y 2013-14 AND A.Y 2014-15. ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 94 100. IN THIS REGARD, THE LD. AR SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE S UPREME COURT WHILE DISMISSING THE REVENUE SLP IN CASE OF RAJASTHAN STA TE BEVERAGES CORPORATION LTD. REPORTED IN 250 TAXMANN 16 AS WELL AS THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN CASE OF PR. CIT VS. RAJASTHAN STATE SEED CORPORATION LTD [2016] 386 ITR 267. 101. PER CONTRA, THE LD. DR FAIRLY SUBMITTED THAT T HE MATTER IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBL E RAJASTHAN HIGH COURT. AT THE SAME TIME, HE SUBMITTED THAT THE DEP ARTMENT HAS FILED AN SLP IN CASE OF M/S JAIPUR VIDYUT VITRAN NIGAM LTD W HICH IS PENDING FOR ADJUDICATION BEFORE THE HONBLE SUPREME COURT. HE RELIED ON THE FINDINGS OF THE ASSESSING OFFICER. 102. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE LD. CIT(A) HAS RECORDED A FINDING OF FACT THAT THE ASSESSEE HAS DEPOSITED THE EMPLOYEES CONTRIBUT ION TOWARDS PF/ESI BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME. THE SAID FINDING OF THE LD CIT(A) REMAIN UNDISPUTED BEFORE US. IT IS TH EREFORE AN ADMITTED FACT THAT THE ENTIRE AMOUNT WAS DEPOSITED BY THE AS SESSEE BEFORE THE DUE DATE OF FILING OF THE RETURN UNDER SECTION 139( 1) OF THE ACT, THEN IN SUCH A SCENARIO, THE AMOUNT CANNOT BE DISALLOWED UN DER SECTION 36(1)(VA) OF THE ACT AS THE DUE DATE REFERRED TO I N SECTION 36(1)(VA) OF THE ACT NEED TO BE READ IN CONJUNCTION WITH SECTION 43B(B) OF THE ACT. IN CASE OF RAJASTHAN STATE BEVERAGES CORPORATION LTD (SUPRA), THE HONBLE RAJASTHAN HIGH COURT WAS PLEASED TO HELD AS UNDER: 5. SO FAR AS THE QUESTION RELATING TO PRIVILEGE FE ES AMOUNTING TO RS.26.00 CRORES IN THE INSTANT YEAR AS WELL AS THE DEDUCTION OF ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 95 CLAIM OF RS.17,80,765/- ON ACCOUNT OF PROVIDENT FUN D (PF) AND ESI IS CONCERNED, THIS COURT HAS EXTENSIVELY CONSID ERED THE AFORESAID TWO QUESTIONS IN ASSESSEE'S OWN CASE VIDE JUDGMENT AND ORDER DT.26.05.2016 REFERRED TO (SUPRA) AND HAS HELD THAT THE PRIVILEGE FEES BEING A REVENUE EXPENDITURE, IS REQU IRED TO BE ALLOWED AS A REVENUE EXPENDITURE. THIS COURT IN THE AFORESAID CASE HAS ALSO ALLOWED THE CLAIM OF THE ASSESSEE, IN SO FAR AS PAYMENT OF PF & ESI ETC. IS CONCERNED, ON THE FINDI NG OF FACT THAT THE AMOUNTS IN QUESTION WERE DEPOSITED ON OR BEFORE THE DUE DATE OF FURNISHING OF THE RETURN OF INCOME AND TAKI NG IN CONSIDERATION JUDGMENT OF THIS COURT IN CIT V. STAT E BANK OF BIKANER & JAIPUR [2014] 363 ITR 70/43 TAXMANN.COM 4 11/225 TAXMAN 6 (MAG.) (RAJ.) AND CIT V. JAIPUR VIDHUT VIT ARAN NIGAM LTD. [2014] 363 ITR 307/49 TAXMANN.COM 540/[2015] 2 28 TAXMAN 214 (MAG.) (RAJ.) AND ACCORDINGLY BOTH THE Q UESTIONS ARE COVERED BY THE AFORESAID JUDGMENT AND AGAINST THE R EVENUE. 103. IT IS ALSO NOTED THAT THE SLP FILED BY THE REV ENUE IN CASE OF RAJASTHAN STATE BEVERAGES CORPORATION LTD. HAS SINC E BEEN DISMISSED BY THE HONBLE SUPREME COURT HOLDING THAT THE COURT DO NOT FIND ANY MERIT IN THE PETITION AND THE SPECIAL LEAVE PETITIO N WAS ACCORDINGLY DISMISSED. WE THEREFORE FIND THAT THE MATTER IS NO MORE RES INTEGRA AND HAS ATTENDED FINALITY BY A SERIES OF DECISIONS BY T HE HONBLE RAJASTHAN HIGH COURT AND THE DECISION OF THE HONBLE SUPREME COURT BY WAY OF DISMISSAL OF SLP FILED BY THE REVENUE. REGARDING TH E CONTENTION OF THE LD CIT/DR THAT THE DEPARTMENT HAS FILED AN SLP IN C ASE OF M/S JAIPUR VIDYUT VITRAN NIGAM LTD, MERE FILING AN SLP BEFORE THE HONBLE SUPREME COURT IS NO BAR AGAINST FOLLOWING THE BINDING PRECE DENTS AS LAID DOWN BY ITA NO. ITA NO. 375 /JP/2019 AND OTHERS M/S G.V.K JAIPUR EXPRESSWAY PVT. LTD., JAIPUR VS. D CIT, JAIPUR 96 THE HONBLE JURISDICTIONAL HIGH COURT AS WE HAVE NO TED ABOVE. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, TH E MATTER IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE GROUNDS OF APPEAL SO TAKEN BY THE REVENUE FOR THE RESPECTIVE ASSESSME NT YEARS ARE THUS DISMISSED. 104. THE RESPECTIVE APPEALS FILED BY THE REVENUE AN D THE APPEALS/CROSS OBJECTIONS FILED BY THE ASSESSEE COMP ANY ARE ACCORDINGLY DISPOSED OFF IN LIGHT OF AFORESAID DIRECTIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 22/12/2020. SD/- SD/- TFLVL IH-IH-HKV~V FOE FLAG ;KNO (JUSTICE P.P. BHATT) (V IKRAM SINGH YADAV) V/;{K KK K @ PRESIDENT YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 22/12/2020. GANESH KUMAR VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S GVK JAIPUR EXPRESSWAY PVT. LTD, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CIRCLE-07, JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 375, 1090, 1075, 467 & 376/JP/2019, ITA NO. 749, 750, 751/JP/2018 & CO NO. 25, 26, 27/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR