ACIT CIRCLE-2(1)(1) Mumbai vs M/S BOMBAY DYEING & MANUFACTURING CO. LTD. Mumbai

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “B” MUMBAI BEFORE SHRI ABY T VARKEY (JUDICIAL MEMBER) AND SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) ITA No.

4484/MUM/2019 - A.Y 2014-15 ITA No.

4485/MUM/2019 - A.Y 2015-16 Asst.

Commissioner of Income-tax 2(1)(1), Mumbai, Room No.561, 5th Floor, Aayakar Bhavan, M.K.

Road, Mumbai-400 020 Vs.

M/s Bombay Dyeing & Manufacturing Co.

Ltd Neville House, JN Herdia Marg, Ballard Estate, Mumbai-400 001 PAN No.

AAACT 2328 K Appellant Respondent ITA No.

4291/MUM/2019 - A.Y 2014-15 ITA No.

4293/MUM/2019 - A.Y 2015-16 M/s Bombay Dyeing & Manufacturing Co.

AAACT 2328 K Appellant Vs Dy.

Commissioner of Income- tax 2(1), Mumbai, Room No.561, 5th Floor, Aayakar Bhavan, M.K.

Road, Mumbai- 400 020 Respondent Revenue by : Shri Ashok Kumar Kardam, CIT-DR Assessee by : Shri Yogesh Thar / Chaitanya Joshi / Karan Jain Date of Hearing : 29/12/2022 Date of pronouncement : 24/01/2023 PER OM PRAKASH K These cross app against two separate the Commissioner of Ld.

CIT(A)] for A respectively.

2.

As common gro same were heard consolidated order fo 3.

First we take cro 3.1 The grounds rai “GROUND NO.

1: ADD OF RS.

3630,53,2577- ON STOCK-IN-TRADE BY YEAR OF CONVERSION On the facts and circumst action of the AO in taxing of land being capital as conversion instead of The Appellant prays that t 36,30,53,2577- be deleted ROUND NO.

2 - ADDIT RESPECT OF EXPENDI U/S.

14A RWR 8D: On th has erred by not v / holding that addition to b reference to provisions of 1962 ("the Rules").

M/s Bombay Dy ITA Nos.

4484 ORDER KANT, AM peals by the assessee and Reven orders, both dated 09th April, Income-tax (Appeals)-4, Mumb Assessment Years 2014-15 ounds are involved in these cro together and disposed off b r convenience and to avoid reple oss appeals for A.Y. s for A.Y.

2014-15: ised by the assessee are reprodu DITION OF INCREMENTAL LONG TERM C N CONVERSION OF LAND, BEING CAPITA CONSIDERING COST INFLATION INDEX N INSTEAD OF CII OF YEAR OF SALE OF F tances of the case and in law, the CIT(A) erred g the incremental long term capital gains on acco sset into stock in trade by considering the CI f CII of the year of actual sale of flats by the Appe the impugned addition of incremental long term c d.

TION OF RS.

27.97,9357- TO BOOK PROFIT ITURE INCURRED IN RELATION TO EXEM he facts and the circumstances of the case and in book profit under section 115JB of the Act can f section 14A of the Act read with Rule 8D of the yeing & Manufacturing Co.

Ltd.

4, 4485, 4291 & 4293/M/2019 2 nue are directed 2019 passed by ai [in short, ‘the and 2015-16, oss appeals, the by way of this etion of facts. uced as under:- CAPITAL GAINS AL ASSET, INTO X CCIT) OF THE FLATS; d in confirming the ount of conversion CII of the year of ellant. capital gains of Rs.

TS U/S.

115JB IN MPT INCOME law, CIT (Appeal) nnot be made with Income-tax Rules, GROUND NO.

3 - SHOR 1.

On the facts and the not adjudicating the ground o 2.

Without prejudice to credit of TDS of Rs.

1,44^ 3.2 The grounds raised b 1. "Whether on the fact CIT(A) erred in holding Government of Maharas as 'capital receipt' wher on the assessee as to app 2. "Whether on the fa CIT(A) erred in holdin income while CBDT cir no exempt income is ea disallowance u/s 14A r.w 3. "Whether on the fa CIT(A) erred in holding stock in trades cannot b trade is effected without tax for capital gain aris be the point when the sto 4. "Whether on Ld.

CIT(A) erred in exc 15JB of the IT Act, when is therefore in contraven case of Apollo Tyres Ltd 4.

Briefly stated, f the year under con manufacturing and t also engaged in dev consideration, the as M/s Bombay Dy ITA Nos.

4484 RT CREDIT OF TDS; Rs.

1,44,21,9757-: circumstances of the case and in law, the ClT' of short credit of TDS amounting to Rs. ing to Rs.

1,44,21 o above, the Appellant prays that the.AQ.be dir ^1,975/- as per law.” by the Revenue are reproduced as under:- ts and in the circumstances of the case and g that the receipt of Rs.26,07,02,254/- as s shtra under ‘The Package Scheme, of Incent re as there is no obligation cast plying the subsidy for any particular purpose cts and in the circumstances of the case and g that no disallowance can be made if the cular no.

5/2014 dtd 11.02.2014 clearly spec arned on the investments for the purpose o w.r.

8D, these are to be included?" cts and in the circumstances of the case and g that the whole of Capital Gains on conve e brought to tax in the year in which only par t appreciating the fact that the time of charge sing from conversion of capital asset to stock ock in trade is sold or otherwise transferred? the facts and in the circumstances of the cas cluding the sales tax subsidy for computing n the same is not provided for in section 115J ntion to the law laid down by HonTDle Supre d. vs CIT(255 ITR 273)?" facts of the case are that the a nsideration was engaged in th trading of textile polyester stapl velopment of real estate.

For ssessee filed its return of incom yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 3 '(Appeal) erred in 1,975/-. rected to grant the d in law, the Ld. subsidy from the tive ('PSI’) 2007' e?" d in law, the Ld. ere is no exempt cified that even if of calculation of d in law, the Ld. ersion of land to rt sale of stock in eability of income k in trade should ?" se and in law, the g book profit u/sl JB of the Act and eme Court in the assessee during he business of le fiber and was the year under me electronically on 29/11/2014 dec provisions of the Inco profit of ₹44,41,08,2 return of income file assessment and stat complied with.

In th of the Act, the A disallowances and as of the Act at ₹354 ₹40,69,06,175/-.

As was of the Act was normal provisions of income at ₹354,42,0 relief. ,0 relief.

Aggrieved, bot are in appeals before above.

5.

The Ground No computation of long converted from ‘capit of the appeal of the R the appeal of the asse 5.1 The brief facts q in the process of rea M/s Bombay Dy ITA Nos.

4484 claring total income at Nil un ome-tax Act, 1961 (in short, ‘the 237/- under section 115JB of ed by the assessee was select tutory notices under the Act w he assessment completed unde Assessing Officer made certai ssessed total income under no 4,42,01,379/- and computed the income determined under s less than the income compu f the Act, the Assessing Officer 1,379/-.On appeal, the Ld.CIT th the assessee and the Income- e the ITAT, raising the grounds o.1 of the appeal of the asse term capital gain on sale of l tal asset’ into ‘stock in trade’.

T Revenue is also connected with essee. qua the issue in dispute are th al estate development of its lan yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 4 der the normal e Act’) and book f the Act.

The ted for scrutiny were issued and r section 143(3) in additions / ormal provisions book profit of r section 115JB uted under the r took the total (A) allowed part -tax Department s as reproduced essee relates to land which was The Ground No.3 h ground No.1 of hat the assessee nd parcel, which were appearing in its one such capital ass year earlier to presen prescribes for offer o year of sale of stock transaction.

Firstly, be declared for incom been raised in the Gr assessee was followin business profit from accordingly also offe ‘capital asset’ into ‘s in the year under c method’.

Whereas, ac have declared in the of section 45(2) of computation of quan agitated by the asse working out the long market value (FMV) o of capital asset into indexed cost of the a was applied upto the transferred as agains M/s Bombay Dy ITA Nos.

4484 s books of accounts as Capital a et into stock-in-trade of real es nt assessment year.

The section of capital gain tax on such co k in trade. in trade.

The two issues are the point of time when the cap me-tax Act purpose, ( i.e the is round No.

3 of the appeal of the ng percentage completion meth m such real estate project. ered long term capital gain on stock in trade’ amounting to ₹2 onsideration based on ‘percent ccording to the Revenue the cap year of sale of stock in trade a f the Act.

The second issu ntum of long-term capital gain, essee in ground no.

1 of its g-term capital gain, the assess of the capital asset as on the da stock in trade.

However, whi acquisition of the capital asset, e year in which the stock-in-tra st the claim of Revenue that in yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 5 asset , converted sate business in 45(2) of the Act onversion in the involved in this pital gain was to ssue which has Revenue) .

The hod for declaring The assessee n conversion of 206,09,36,801/- tage completion pital gain should s per provisions ue is regarding which has been appeal.

While ee took the fair ate of conversion ile reducing the , the indexation ade was sold or dexation of cost of acquisition should stock was converted assessee on both th percentage completio the capital asset in rejected by the Asses The claim of the assess financial year in which t timing of the taxation whenever the sale of fla capital gain correspond same assessment year. term capital gain are to be accepted and the d required to be brought t FMV@ 1981(cos FY Desc rip Area sold @Rs.92/ t.

2013- 14 One ICC 169,178 15,64,37 (As per ROI Two ICC 198.799 18,289,5 367,977.00 33,853,8 2013- 14 One ICC- Scal 143, 038 143,038 13,159,4 (As per new worki ng) Two ICC- Scal 49,337 4,539,00 Two ICC- Scal 143,220 13,176,7 M/s Bombay Dy ITA Nos.

4484 d be allowed up to the year in w d into stock-in-trade.

The con he issues i.e. offer of capital g on method and indexed cost o the year of the sale of stock- sing Officer observing as under see cannot be accepted because capital gai the capital asset is converted into stock in stock in tra of the capital gain is differed to the poin at occurs during the relevant assessment ye ing to the area sold will have to be offered fo .

Accordingly the contention of the assesse be taxed based on percentage of completion differential long term capital gain as work to tax. st) Index Indexed Conversion LTCG sq.f facto r cost Price 6 939 146,149,491 2,188,772,167 2,042,622 08 939 171,738,480 2,610,218,660 2,438,480 884 317,887,971 4,798,990,828 4,481,102 496 785 103,302.044 2,585,123,073 2,481,821 04 711 32,373,318 677,189,263 644,916.9 82 785 103,437,739 1,965,888.396 1,862,450 yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 6 which the capital ntentions of the gain as per the of acquisition of -in-trade , were :- in accrues in the ade.

However the nt of sale.

Thus ar the long term or tax in the very ee that the long n method cannot ked out below is %com pletio n Capital gain already offered 2.677 43.26 % 883638569.9 0.180 2,857 2,060,936.801 1,029 945 0.658 Onc e ICC 15,684 1,442,92 Two ICC 3,516 323,472 As it is apparent that fr offered by the assess indexation till the year o both the claims of the a purpose of 'transfer Percentagecompletion 'unitconcept of the t bepresumed that only p recognizes the ownersh completion is applicable in form of Percentage accounting standards a investment in land into Afterwards he offers 50 offer is acceptable for th Profession' but for the important for Long Term much construction is £t wisesale of the flats.

A Capital Gain as per indexation till the year Income Tax Act, 1961 th after removing the wro method for the worki 206,09,36,801/-under t differential amount in assessee.

Penalty proce 5.2 On appeal, the capital gain on acco M/s Bombay Dy ITA Nos.

4484 8 785 11,326,985 2,83,46,636 272,129,6 785 2,539,255 48,259,875 46,720 Total of 2013-14 Capital gain offered in ROI Differential Capital Gain rom the above details that LTCG of Rs.

206, see applying percentage completion meth of sale. h of sale.

But as per the provisions of the Incom assessee are not allowable.

Single flat is the r' within the definition of Capital method can't be applied because it doe transfer.

When one single flat is part of the same has been transferred.

The co hip transfer and not the concept of part c e for the income under Income"from Business Completion Method where it has been re nd Income Tax Act also.

For example if a per stock in trade and manages to construct 1 0% under percentage completion method.

In he income offered under the head Income fro purpose of Long Term‘Capital Gain it will m Capital Gain that how many flats were so ted.

The Capital Gain will be worked out on Accordingly, both the claim of the assessee, the working under percentage completio of sale are hereby rejected.

So as per the p he Long Term Capital Gain works out at Rs. ong claim of indexation and rejecting percen ing of LTCG.

Since the assessee has alre the head LTCG, the amount of Rs.3,246,1 the capital gain offered, is added to th eedings u/s 271(l)(c) of the Act is initiated se e Ld.CIT(A) on the first issue ount of conversion of capital a yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 7 651 5,307,038,903 2,060,938,801 3,245,102,102 09,36,801/- was hod and taking me Tax Act, 1961 one unit for the Gain Working. esn't follow the sold it can't onceptof transfer completion.

Part s and Profession' ecognized under rson converts his 10 flats out of it. this situation his om Business and l not work.

It is old and not how the basis of unit i.e., Long Term on method and provisions of the 530,70,38,903/~ ntage completion eady offered Rs.

102,102/-, being he income ofthe eparately.” of taxing entire asset being land into stock in trade in in trade by the As completion method, 2012-13 and direc percentage completio 5.3 On the second i of acquisition, the as Karnataka High Cou Corporation 244 CT for the cost of asset, should be applied. e applied. provisions of section acquisition in the ye request of the as Corporation (supra). reproduced as under “8.6 From perusal of Para that facts of the Appellan High Court in the case o considered by Hon'bie Co converted into stock-in-t agreement dated 16.03.1 agreement was entered in called upon the assessee made by assessee only w purchaser of the fiats in t has taxed the capita! ga therefore, the case, cited b Court in the case of Arun S M/s Bombay Dy ITA Nos.

4484 n the year in which it was conv ssessing officer and not as followed the finding of the IT ted to tax the capital gain on method. issue of applying cost of indexa ssessee referred to the decision urt in the case of CIT vs Ru TR 304 (Kar) and submitted tha the capital gain index for the The Ld.CIT(A), however, in vi n 45(2) of the Act for index ear in which asset was convert sessee following CIT vs Ru .

The relevant finding of th :- a 9 of the judgement of Hon'bie Karnataka High nt are different from the facts decided by the H of CIT V/s Rudra Industrial Commercial Corpor urt, although theimmovable property owned by trade in the year 1987-88 and the assessee 1988 with M/s Unitech Ltd, but, in the year 19 nto, the Revenue did not treat it as a transfer.

Ra to pay taxes in subsequent year.

The claim for when the assessee executed registered sale deed the F.Yr.

1992-93.

The facts of the Appellant are in in the year in which assets were converted by theAppellant is not applicable in its case.

The H Shoonglu Trust v/s CIT(supra) has observed that yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 8 verted into stock per percentage TAT for the A.Y. n following the ation on the cost n of the Hon’ble udra Industrial at for indexation year of the sale iew of the clear xed cost of the ted, rejected the udra Industrial he Ld.CIT(A) is Court, it is evident Hon'bie Karnataka ration. ka ration.In the case y the assessee was entered into an 988-89, when the ather the Revenue, r capital gain was d in favour of the e different.

The AO to stock-in-trade, Hon'bie Delhi High benefit of index of cost of inflation is given t actual gain and not on the principle determined by t granting indexation cost i the other hand, Sec 45(2) to be taxed in the yea appreciation of facts, Sec 4 "Notwithstanding anything co way of conversion by the ow abusiness carried on by him sh such stock-in-trade is sold oth value of the asset on the date consideration received or accr 8.7 From perusal of the S asset is converted into st applied for the year in wh ground raised by the Appe 6.

Before us, the pages 1 to 249 and pages 250 to 256.

7.

We have heard in dispute and perus 3, the Revenue has applying percentage gains under section the binding precede assessee itself.

The as under:- “54.

In accordance w converts Fixed Assets M/s Bombay Dy ITA Nos.

4484 to ensure that tax payer pays the capital gain e increase in the capital value of the property du the Hon'bie Court has been duly considered by in the year in which asset was converted into st very clearly defines that profit or gain arising fr ar in which asset is converted into stock-in-t 45(2) is reproduced as under:- ontained in sub-section (1), the profits or gains arising f wner of a capita! asset into, or its treatment by him hall be chargeable to income-tax. as his income of the p herwise transferred by him and, for the purposes of Sec e of such conversion or treatment shall be deemed to b ruing as a result of the transfer of the capital asset]".

Section, it is evident that transfer taken place in tock-in-trade and law is very clear about indexa hich transfer has taken place.

In view of the abo ellant on this regard is, dismissed.” assessee has filed a paper b also a supplementary paper b rival submissions of the partie sed the relevant materials on re s challenged the finding of th completion method instead o 45(2). d o 45(2).

We find that the Ld.CIT ent on the issue in dispute relevant finding of the ITAT in with the aforesaid policies, in the year in whi being Land to Stock-in-trade the unrealiz yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 9 tax on the real or ue to inflation, The the Ld.

A.O while tock-in- trade.

On rom the transfer is trade.

For proper from the transfer by as stock-in-trade of previous year inwhich c 48, the fair market e the fullvalue of the the year in which ation cost is to be ove discussion, the book containing book containing es on the issues ecord.

In ground he Ld.CIT(A) for f taxing capital T(A) has followed in the case of A.Y.

2012-13 is ich the company zed appreciation i.e. the difference betw stock in trade and the c revaluation reserve.

Ba appropriate amount is loss in proportion of rev Capital Gains and Busi contemplated in the pr Estate Activity is offered to gains on conversion (pertaining to revenue a 55.

Our attention w income Tax Act, 1961 (" "transfer, in relation to a ………. ……… "(iv) In a case whe treated by him a conversion or trea Hence, under section 4 (conversion to stock in t per non obstante provi gains shall be chargeab stock in trade is sold or would actually happen strict interpretation of s conversion of stock in completed.

However, it from real estate activi method each year durin there is chargeable to t reading down of. sectio gains on conversionsh thecorresponding busin percentage completion assessee has made disc Statement in relation t revaluation reserve on under: M/s Bombay Dy ITA Nos.

4484 een the market value of land on the date of cost of the said land in books of the compa ased on Percentage Completion Method of released from Revaluation Reserve to statem venue recognized.

In other words, the revenu iness Profits is accounted on the same bas rovisions^ the act.

Accordingly, each year in d to Tax under the head Long Term Capital G n of Fixed Assets to Stock in Trade) & B accruing thereafter). ereafter). was drawn towards-the provision of section "the Act") a capital asset, Includes, - ere the asset is converted by the owner ther as, stock-in-trade of a business carried on atment".

45 of the Act, profits & gains arising from trade) is chargeable to tax in the year of tran ision contained in sub section (2) of section le to income tax as incomeof the previous ye otherwise transferred by him.

Since the sale when the flats are completed and ownersh section 45(2) would suggest that the capita n trade would be chargeable to tax wh would be inconsistent to say that the busine ity would be chargeable to tax on percent ng the construction activity and thecapital tax in a different year i.e. when the project on 45(2) of the Act would therefore mean hould be charged to tax in the same ness income is offered to tax, on the n method which the company is followin closure by way of a note at serial no.

31 in N to the Revaluation Reserve andamount rel credited to profit and loss account and w yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 10 f conversion into any is credited to accounting, the ment of Profit & ue comprising of sis each year, as ncome from Real Gains (pertaining Business income 2(47)(iv) of the reof into, or is by him, such m such transfer sfer.

However as n 45, the capital ear in which such of Stock in Trade ip transferred, a al gains rising on hen; -(project is ess profits arising tage completion gains portion of t is completed.

A that the capital year in which same basis i.e. ng.

Further, the Notes to Financial leased from the which is read as "31.

The Company h of the freehold land in trade at market v amounting to Rs.

7 to Revaluation Res crores) has been ' re Loss in proportion o the accounting Polic 56.

We find from reco the relevant provision o gain on the conversion only part sale of stock in capital gain in the yea circumstances, direct th the proportionate capit accordingly.

This issue o with the above direction 8. rection 8.

Respectfully foll ground No.

3 of appe 9.

In respect of gr the assessee has rel High Court in the c supra) which has bee of Hoogly Flour Mills law raised before the reproduced as under "(i) Whether, the app computation of income year 1992-93 instead of of s.

48 r/w s.

45(2) of t (ii) Whether the AO ha cost of land sold by the M/s Bombay Dy ITA Nos.

4484 has during the year ended March 31, 2012 conve d under real estate development from Fixed Ass value and the difference between the market val 764.30 crores (2010-11 Rs.

853.96 crores) has be serve.

An amount of Rs.

165.27 crores (2010-1 eleased from revaluation reserve to Statement o of revenue recognized on the area sold in accor cy." ords that lower authorities proceeded on tot of the Act and have brought to tax the who of the land (fixed asset) to stock intrade in t n trade iseffected and assessee has offered t r under consideration.

We, in view of the he AO to verify the sale of stock in trade effe tal gains in the relevant years and the same of assessee's appeal is set aside for verificati ns.” lowing the finding of the Tribu al of the Revenue is accordingly round No.1 of the assessee, th lied on the decision of the Hon case of CIT vs Rudra Industr en further followed by the Tribu Co Ltd vs DCIT; Shrenco Ltd. e Hon’ble Karnataka High Court , for ready reference: pellate authorities are correct in adopting fo from capital gains, the cost of inflation index of index for the financial year 1987-88 in view the Act ? ad correctly worked out the capital gains of th e assessee as per the index relevant to financial yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 11 erted a part ets to Stock lue and cost een credited 1 Rs.

70.57 of Profit and rdance with tal misreading of ole of the capital the year in which theproportionate above facts and cted and offered should be taxed ion purpose only unal (supra), the y dismissed. e Ld. sed. e Ld.Counsel of n’ble Karnataka rial Corporation unal in the case The question of t on the issue is or the purpose of x for the financial of the provisions, he property on the l year 1998-99 as this asset had been con considered by the app recorded a perverse fin 10.

In respect of ab submission of the parties “9.

The material on reco immovable properly, con entered into an agreemen said company was expe assessee their share in th regularly.

In the year 19 not treat it as a transfer a capital gains is made onl the purchaser of the flats calculating capital gains prevailing in 1988, the d in-trade and consequentl regard, the question tha taken into consideration f 10.

Sec.

45(2) which is re "45.

Capital gains.—(1) . (2) Notwithstanding anyt transfer by way of conve him as stock-in-trade of a as his income of the pre transferred by him and, f date of such conversion consideration received or 11.

Explanation (iii) to s. which bears to the cost of year in which the asset is in which the asset was h April, 1981, whichever is 12.

A harmonious interp capital gains is to be tak market value of the asse value of the property on payable, it is the market that market value the ind be taken into considerati M/s Bombay Dy ITA Nos.

4484 nverted into stock-in-trade on 16th March, 198 pellate authorities in the proper perspective a ding ? bove question of law raised, after s, the Hon’ble High Court held as und ord discloses that the appellant a partnership fi nverted the same into stock-in-trade in the yea nt dt.

16th March, 1988 with M/s Unitech Ltd. ected to develop the property, construct flats he constructed buildmg.

The assessee is assess 988-89 when this agreement was entered into, and called upon the assessee to pay tax.

Howe ly when the assessee executed registered sale d s in the financial year 1992-93. r 1992-93.

At that stage, f instead of taking the cost inflation index, they date on which the immovable property was con ly entered into contract for development of the at arises for consideration is, which is the rel for the purpose of assessing the capital gains. elevant reads as under : ............. thing contained in sub-s. (1) the profits or gains ersion by the owner of a capital asset into, or a business carried on by him shall be chargea evious year in which such stock-in-trade is s for the purposes of s.

48, the fair market value o n or treatment shall be deemed to be the f r accruing as a result of the transfer of the capi .

48 defines indexed cost of acquisition which m f acquisition the same proportion as Cost Infla s transferred bears to the Cost Inflation Index held by the assessee or for the year beginning s later. pretation of these two provisions makes it cle ken into consideration.

First we have to find ou t on the date of conversion, then to find out w the date of transfer, So, in order to compute value on the date of transfer that is relevant a dex cost of acquisition as prescribed on the dat ion and not the date of conversion}In the instan yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 12 88 which was not and consequently r considering the der:- firm, which owned ar 1987-88.

They . under which the s and give to the sed to income-tax the Revenue did ever, the claim for deeds in favour of for the purpose of took the index as verted into stock- e property.

In this levant date to be s arising from the r its treatment by ble to income-tax sold or otherwise of the asset on the full value of the ital asset." means an amount ation Index for the x for the first year on the 1st day of ear as to how the ut what is the fair what is the market the capital gains and in arriving at te of transfer is to nt case, the index cost of acquisition was 22 cost of acquisition on th serious error in taking 16 with the said assessmen Therefore, when the impu n the impu with the aforesaid statuto answered in favour of the 11.

We find that Ho firstly, the market v transfer of stock-in acquisition also on th But before us, the as ratio of the decision and not for the purp In our opinion, the which is in its favou Hon’ble High Court prescribe for taking f such conversion for received or acquiring also cost of acquis conversion, however Karnataka High Cou Corporation (supra), the file of the Ld.AO conversion of capital M/s Bombay Dy ITA Nos.

4484 23 on the date of transfer in the year ending 19 he date of conversion is 161.

Therefore, the 61 as the index.

The appellate authorities have nt and have taken 223 as correct index cos ugned order passed by the appellate authorities ory provisions, the said substantial questions o e assessee and against the Revenue.” on’ble High Court has directed value of the capital asset as on n-trade and secondly, for in he date of sale or transfer of the ssessee is seeking only applicatio for indexation of the cost of a pose of sale consideration of th assessee cannot choose part r ignoring the other part of the t.

Though the provisions o fair market value of the asset a the purpose of full value of th g as a result of transfer of the ca sition to be indexed till the r, in view of the decision o urt in the case of CIT vs Ru we feel it appropriate to resto O for computing the long term l asset into stock in trade in a yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 13 993 and the-index AO committed a rightly interfered st of acquisition. s is in accordance of law have to be d to adopt both, n the date of the ndexed cost of e stock in trade. on of part of the acquisition only he capital asset. of the decision e decision of the f section 45(2) as on the date of he consideration apital asset and date of such of the Hon’ble udra Industrial ore this issue to capital gain on accordance with law.

The ground No allowed for statistical 12.

In ground No. ground No. ₹27,97,935/- under Rules, 1962 to the expenditure incurred 13.

Before us, the L issue was raised be ground.

However, Ld.CIT(A).

He furth adjudicated in the a Tribunal has followed of Vireet Investments SB).

The relev under:- “57.

The next issue confirming the actio under section 14A o profit under section grounds: - GROU BEING THE PROF •On the facts and in pursuant to the directio M/s Bombay Dy ITA Nos.

4484 o.1 of the appeal of the assesse l purpose.

2, the assessee has challeng section 14A read with rule 8D book profit under section 115 d in relation to exempt income.

Ld.Counsel of the assessee sub efore the Ld.CIT(A) by way o the same has not been adju her submitted that identical i assessee’s own case for A.Y.

20 d the decision of the Special Be s (P) Ltd (2017) 58 ITR (AT) 31 vant finding of the Tribunal is in this appeal of assessee is against the on of the AO / TPO making addition o of the Act r.w.r 8D of the Rules, while c 115JB of the Act.

For this assessee has r UND NO: 9: ADDITION OF RS.

2,73,960/- G AMOUNT DISALLOWED U/S 14A OF ACT WHILE COMPUTING BOOK ITS U/S.115JBOFTHEACT the circumstances of the case and in la ons of the l.d.

DRP. erred in adding the disa yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 14 ee is accordingly ged addition of D of Income-tax JBin respect of mitted that this f an additional udicated by the issue has been 012-13 wherein ench in the case 3 (Delhi – Trib)( s reproduced as e order of DRP of disallowance computing book raised following aw the I A.

AO, allowance made u/s NA to the book pr earning exempt income 58.

At the outset, the is covered in favour Special Bench of this (P.) Ltd. [2017] 58 ITR clearly held that no di Rules can be made w Act.

The learned CIT above proposition.

Ac by the special benf Investments (P.) Ltd. disallowance and allo 14.

Respectfully fol this issue to the file follow the finding of t The ground No.2 o allowed for statistical 15. stical 15.

The Ground No credit of TDS amoun This ground was also way of an addition ₹1`,44,21,975/- be a this ground has also claim of TDS is a appropriate to restor M/s Bombay Dy ITA Nos.

4484 rofits on the alleged ground that expendi e. learned Counsel for the assessee stated of assessee and against Revenue by t s Tribunal in the .case of ACIT vs.

Vire R (AT) 313 (Delhi - Trib.) (SB) wherein th isallowance under section 14A of the Act while computing book profit under sectio T Departmental Representative could not ccordingly, we are of the view that this is fch decision of this Tribunal in the c (supra), respectfully following the same w this issue of assessee's appeal.” lowing the finding of the Tribu of the Assessing Officer with the Tribunal in earlier and in a f the appeal of the assessee l purpose. .3 of the appeal of the assessee nting to ₹1,44,21,975/- allowed o raised by the assessee before t nal ground and sought that allowed on the basis of form 2 not been adjudicated by the Ld matter of verification, theref re this issue to the file of the A yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 15 iture pertains to d that this issue the decision of eet Investments he Tribunal has t r.w.r 8D of the on 115JB of the t controvert the ssue is covered case of Vireet , we delete the unal, we restore the direction to ccorence of law. is accordingly relates to short to the assessee. the Ld.CIT(A) by TDS credit of 26AS.

However, d.CIT(A).

As this fore, we feel it Assessing Officer for deciding in accord statistical purpose.

16.

In ground No. income added on ac Incentives (PSI), 200 amounting to ₹26,07 17.

Before us, the issue in dispute is sq bench of the Tribuna No.1716/Mum/2017 reproduced as under “28.

We have gone thro that the State Governm of industries to the les "The Package Scheme o based on the level of Fix Company is eligible for g commenced at Patalgan question as to whethe determined, having reg given by way of assista 'trading1 receipt.

1 receipt.

The so setting up a business o received for 'capital' p commencement of prod purpose of trade.-This-v Sahney Steel and Press Electronics India Pvt Ltd order dated 26-02-201 revenue receipt since i with the production.

Re M/s Bombay Dy ITA Nos.

4484 dance to law .

The ground No 1, the Revenue has challeng ccount of subsidy under Packa 07 as capital receipt not cha ,02,254/-.

Ld.

Counsel of the assessee quarely covered by the order of al in assessee’s own case for A.

The relevant finding of t :- ough facts and circumstances of the case and ment of Maharashtra with a view to encoura s developed areas of the State of Maharas of Incentives, 2007" w.e.f.

01.04.2007.

The PS xed Capital Investment or Employment Gene getting subsidy on account of investment ma nga and Ranjangaon.

Further, in the contex er it is of 'revenue' or 'capital1 in nature gard to the purpose for which the subsidy ance in carrying on the business, it has to ource of the fund is immaterial.

If the purpos or complete a project, it must be treated purpose.

But if it is given only after and c duction,. such subsidies must be treated as a view has been taken by the Hon'ble Supreme Works Ltd. (supra).

Similarly, Delhi Tribuna d. v.

Addl.

CIT in ITA No.

1404/Del/2007 for 10, has held the sales tax subsidy availed by t was not linked with setting up of indust eliance was also placed on the decision of th yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 16 .3 is allowed for ged deletion of age Scheme of argeable to tax submitted that f the co-ordinate Y.

2012-13 (ITA the Tribunal is d noted the facts age the dispersal shtra announced SI was applicable eration.

Assessee ade in new plant t of subsidy, the will have to be is given.

If it is be treated as a se was to help in as having been conditional upon assistance for the e Court in case of al in -case of L G AY 2002-03 vide y the assessee as ry, rather linked he Special Bench of Mumbai Tribunal Re after considering the de that if a subs if a subsidy Is rec constitutes 'capital' rece the commencement of fundamental importanc 'capital1.

This decision'o High Court in CIT v.

Relia 29.

Further, the Hon Ltd. (supra), after cons character of the receipt has to be determined w and that if the purpose more profitably then th assistance under the su (or to expand the exis Further, it was held th relevant, the source is also invited to a recent Balaji Alloys vs.

CIT (20 (supra) and Sahney Ste subsidy and insurance nature.

In arriving at its were given to achieve and generation of emp achieve a public purpo incentives for the benef Court in CIT v.

Rasoi SupremeCourt in Pon Government of West Be its capacities, moderni 'capital' receipt.

30.

Further, the Cent dated 01-08-1974 wher for helping the growth subsidy can be regarded has been time and aga binding on Revenue an contrary to the binding M/s Bombay Dy ITA Nos.

4484 eliance Industries Limited (supra), wherein t ecision of the Supreme Court in Sahney Ste ceived for development of industries in ba eipt regardless of the fact that it has been re production, as it is the 'purpose' of the sch ce in determining the nature of the subsidy of the Special Bench has been upheld by H ance Industries Limited [2011] 339 ITR 632 (B 'ble Supreme Court has held in Ponni Sugar sidering the decision in Sahney Steel (supr t of a subsidy in the hands of the assessee with respect to the 'purpose' for which the su e of a subsidy is to enable the assessee to r he receipt is on 'revenue' account but if th bsidy scheme is to enable the assessee to s sting unit then the receipt would be on 'c hat the point of time at which the subsid irrelevant and the form of subsidy is irrelev decision of the Hon'ble Jammu & Kashmir H 011) 333 ITR 385 (J&K), wherein, consider eel (supra) it is held that the excise duty subsidy received under a State Scheme ar decision, the High Court noted that the fore dual objectives, viz. ives, viz. acceleration of industr ployment in the State and that such incenti ose, could not- be construed as production fit of the assessee alone.

Similarly, the Hon'b Limited (201.1) 335 ITR 438 (Cal), follow nni Sugar (supra) has held the subsidy engal under scheme of industrial promotion zation and improving its marketing capab tral Board of Direct Taxes ('CBDT) has issued rein it has clarified that where the subsidy is of industries and not for supplementing th d as 'capital' receipt in the hands of the reci in held by various Courts that Circulars issu d it is not open to the Revenue even to ra g circular.

Therefore, it is the purpose' un yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 17 the Tribunal has, eels (supra), held ckward areas, it ceived only after heme which is of y as 'revenue1 or Hon'ble Bombay Bom.). rs and Chemicals a) held that the under a scheme ubsidy is granted run the business he object of the et up a new unit capital' account. dy is >aid is not vant.

Attention is High Court in Shri ring Ponni Sugar refund, interest re of 'capita!' in egoing incentives rial development ives designed to n or operational ble Calcutta High ing the ratio of received from for expansion of bilities would be Circular No.

142 s primarily given heir profits, such pient.

Further, it ued by CBDT are ise a contention der the Scheme which is relevant to dec and other factors like th irrelevant consideratio incentive/component o 'revenue1 or 'capital' na PSI is to enable the Com encourage industrial de on capital account in th tax.

Accordingly, this iss 18.

Respectfully foll the finding of the L addition on account o (PSI), 2007 is upheld accordingly dismissed 19.

Ground No.2 o ₹27,97,935/- under s expenditure incurred 20.

Brief facts qua under consideration, however, the Assessi Rules, 1962 read wit ₹27,97,935/-.

The L for A.Y.

2012-13 wh the case of Cheminv been followed, deleted M/s Bombay Dy ITA Nos. y ITA Nos.

4484 cide whether the incentives are 'capital' or ' he point of time when incentive is received, t ns.

For the same reasons, nomenclature of an incentive will not be decisive for d ature of such benefits.

Thus, considering tha mpany to set up a hew unit or to expand an evelopment in the State, the subsidy / incen e present case of the assessee and hence, n sue of the assessee's appeal is allowed. " lowing the earlier order of the T Ld.

CIT(A) on the issue in disp of subsidy under Package Schem d.

Ground No.1 of the appeal of d. of the Revenue’s appeal relates section 14A read with rule 8D i d in relation to exempt income. the issue in dispute are that , assessee has not earned any ing Officer, applying Rule 8D of th section 14A of the Act made Ld.

CITA) following the finding herein decision of Hon’ble Delh vest Ltd vs CIT in ITA No.74 d the addition. yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 18 revenue1 receipt the form, etc are e given to any determining the t the purpose of n existing unit to ntives received is ot chargeable to Tribunal (supra), pute in deleting me of Incentives f the Re venue is s to addition of in respect of the during the year exempt income; f the Income-tax disallowance of of the Tribunal i High Court in 49 of 2014 has 21.

In view of above error in the order of on the issue in dispu dismissed.

22.

Ground No.4 of of subsidy received u while computing book 23.

This ground wa way of additional gro in favour of the ass Tribunal decision No.1017/Mum/2017 of the co-ordinate b Orchards Pvt.

Ltd further relied on the High Court in the ca above decisions, the assessee observing as “11.5 The facts of th Tribunals and Hon’ble Therefore, respectfully f Ltd (supra), Degee Orc Shree Cement Ltd (supra M/s Bombay Dy ITA Nos.

4484 e facts and circumstances, we f the Ld.CIT(A) in following bind ute.

Ground No.

Ground No.2 of the Revenu f the appeal of the Revenue rela under Package Scheme of Incent k profit under section 115JB of s raised by the assessee before t ound and it was claimed that iss essee by way of the co-ordinat in the case of Alok In 7).

The assessee further relied bench of the Tribunal in the c d (ITA No.4613/Mum/2016). decision of the Tribunal and Ho ase of Shree Cement Ltd (supra) Ld.CIT(A) allowed the additiona s under:- he Appellant are similar to the facts consid Rajasthan High Court as discussed in the f following judgement of Hon’ble Tribunal in hards Pvt Ltd (supra), Shree Cement Ltd (s a), appeal of the assessee on this ground is al yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 19 do not find any ding precedence ue is accordingly ates to exclusion tives (PSI), 2007 the Act. the Ld.CIT(A) by sue was covered te bench of the ndustries (ITA on the decision case of Deegee The assessee on’ble Rajasthan .

In view of the al ground of the dered by Hon’ble foregoing paras. n Alok Industries supra) and CIT v llowed.” 24.

Before us, the decision of Hon’ble Ankit Metal & Pow that interest and po computing book profi finding of the Hon’ble “26.

Now the second iss incentive subsidies receiv the schemes in question a under Section 115 JB of relying on the decision in 27.

In this case since we incentives 'Interest subsi within the definition of 'I a receipt is not on in the Section 115JB of the Act question was taxable but to be included as a part income at all it cannot b Section 115JB of the Inc interest and power subs while computing book pr 25.

Respectfully foll Court, the finding of The ground of appeal 26.

Now we take up raised by the assesse 1.

On the in law M/s Bombay Dy ITA Nos.

4484 Ld.

Counsel of the assessee Calcutta High Court in the ca wer Ltd (416 ITR 591)(Cal) wh wer subsidy would have to be fit under section 115JB of the Ac e High Court is reproduced as u sue which requires adjudication is as to whet ved by the assessee from the Gover the Government of W are to be included for the purpose of computat of the Income Tax Act, 1961 as contended by n the case ofAppollo Tyres Ltd. (supra). have already held that in relevant assessment idy1 and 'Power subsidy' is a 'capital receipt' Income' under Section 2(24) of Income Tax Ac character of income it cannot form part of the t, 1961.

In the case of Appollo Tyres Ltd. (sup t was exempt under a specific provision of the A t of the book profit.

But where a receipt is no be included in book profit for the purpose of co come Tax Act, 1961.

For the aforesaid reason, idy under the schemes in question would hav rofit under Section 115 JB of the Income Tax Ac lowing the finding of the Hon’bl the Ld.CIT(A) on the issue in dis l of the Revenue is accordingly d p the cross appeal for A.Y.

2015- ee are reproduced as under: e facts and the circumstances of the w, the Ld.

CIT(A) erred in not adjudic yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 20 e relied on the ase of PCIT vs herein it is held excluded while ct.

The relevant under:- ther the aforesaid West Bengal under tion of book profit y the revenue by year 2010-11 the and does not fall ct, 1961 and when book profit under ra) the income in Act as such it was t in the nature of omputation under we hold that the ve to be excluded ct, 1961.” le Calcutta High spute is upheld. dismissed. -16.

The ground case and cating the ground ₹5,12, 2.

Withou prays TDS of 26.1 The grounds ra under: 1. "Whether case and receipt of Governme Scheme where as to applyin 2. "Whether case and disallowa while CBD specified the inves disallowa included?

3. "On the fa in law, t assessee Bench of Ltd., with M/s Bombay Dy ITA Nos.

4484 d of short credit of TDS amou 579/-. ut prejudice to the above, the ap that the AO be directed to grant the f Rs.5,12,579/- as per law. aised by the Revenue are rep r on the facts and in the circumstanc in law, the Ld.

CIT(A) erred in holding f Rs. ding f Rs.

15,66,26,347 / - as subsidy ent of Maharashtra under The of Incentive (PSI) 2007' as 'capita s there is no obligation cast on the ass ng the subsidy for any particular purp r on the facts and in the circumstanc in law, the Ld.

CIT(A) erred in holdin ance can be made if there is no exemp DT circular no.

5/2014 dtd 11.02.201 that even if no exempt income is e stments for the purpose of calcu ance u/s 14A r.w.r.

8D, these ar ?" facts and in the circumstances of the the Ld.CIT(A) erred in allowing relie relying on the decision of Hon'ble ITAT Delhi in the case of Vireet Inves hout appreciating the facts that the is yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 21 unting to ppellants, e credit of produced as ces of the g that the from the Package al receipt' sessee as pose?" ces of the ng that no pt income 14 clearly arned on ulation of re to be case and ef to the e Special stment (P) ssue has not reach Court in reported Profit dis However, Court in t 594/2015 4.

Whether case and addition revaluatio being fix violation Tax Act, 1 5.

Whether case and sales tax of the IT section contraven Court in 273)?" 27.

In ground 1 as TDS.

The identical g to the file of the Ld.A M/s Bombay Dy ITA Nos.

4484 hed to its finality as the Hon'ble De its decision in the case of Goetz In in 361 IT 505 held that while comput sallowance us 14A is required to b , in its later judgment the Hon'ble D the case of Bhushan Steel Ltd. (ITA N 5) has taken a contrary view". on the facts and in the circumstanc d in law, the Id.

CIT erred in dele of Rs.

112,67,62,506/- on acc on reserve created for revaluation ed assets converted into stock in tr of provisions of section 115JB of th 1961?" on the facts and in the circumstanc d in law, the Ld.

CIT(A) erred in exclu x subsidy for computing book profit u T Act, when the same is not provide 115JB of the Act and is ther ntion to the law laid down by Hon'ble the case of Apollo Tyres Ltd.

Tyres Ltd. vs CIT ssessee has raised the issue of ground for A.Y.

2014-15 has bee AO for allowing credit as per th yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 22 elhi High ndia Ltd., ting Book be made.

Delhi High No.

593 & ces of the eting the count of of land rades, in he Income ces of the uding the u/s115JB ed for in refore in Supreme T(255 ITR f short credit of en restored back he provisions of the Act.

Accordingly also restored to the fi 28.

As far as groun concerned, same are assessee for A.Y.

201 mutandis.

29.

In ground 4 of deletion of addition reserve on account o into stock in trade.

Tribunal in A.Y.

20 under:- “10, Ground Mo, 5 : V to Book Profit u/s 115 debiting P & L Accoun that similar addition During the year A.Y assessment order pa The Hon'bie ITAT had Relevant para of Hon' "41.

After hearing rival contentio during the year under considera trade.

Such conversion was do Reserve got created in its books in the books of account.

In comp AO has added the entire amou applying the provisions of Claus explained that in its segmenta segments: a.

Textile Division b.

Polyster Division M/s Bombay Dy ITA Nos.

4484 , this ground in the year under ile of the A.O. ds 1, 2, 3 & 5 of the appeal of t e covered by our decision in t 14-15 and therefore, same are d f the appeal, the Revenue has n of ₹112,67,62,506/- towar of conversion of the amount b The Ld.

CIT(A) following the 12-13 has deleted the additio Vide this ground, Appellant has agitated a 5JB towards alleged creation of revaluat nt for an amount of ₹ 112,67,62,5067-.

A was made in assessee's own case in Yr 2012-13 assessee filed an appea ssed u/s 143(3) r.w.s.

144 C(13) before d decided the appeal of the assessee for 'ble ITAT order is reproduced as under: ns, we find that facts that the Assessee in its bus tion converted certain portion of land lying in the one at the market value of the land. the land.

Consequen , being the excess of the market value of the Lan puting the "book profits'" for the purposes of secti nt of Revaluation Reserve created during the y e (b) of Explanation I to section 115JB(2) of the al P&L account, the Assessee has disclosed yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 23 consideration is the Revenue are the case of the decided mutatis challenged the rds revaluation eing ‘fixed asst’ e finding of the on observing as against addition tion reserve by Appellant stated A.Yr 2012-13. al against the e Hon'ble ITAT. r A.Yr 2012-13. siness of real estate, had e fixed asset into stock-in ntly, certain Revaluation nd over the carrying costs ion 115JB of the Act, the year to its audited profits Act.

Before us assessee results of the following c.

Real Estate Division In respect of the Real Estate S opening stock of certain work-in ICC-I Project and ICC-2 Project (a) For ICC-1 Project: Rs.384,34 (b) For 1CC-2 Project: Rs.398,54 During the year under consider further pieces of land, hitherto h with the requirement of the provi land determined by approved v assessee in its Paper Book befo such market value.

Thus, for conversion into stock-in-trade, as For ICC Project 1: Accoun tCode Grouped as 13270 Current Assets, Loans and Advance s 11105 Fixed Assets 11521, 11525, 11510 Capital work Progress (unde Fixed Assets) Reserve 22210 s & Surplu For ICC Project 2: M/s Bombay Dy ITA Nos.

4484 Segment, as at the beginning of the relevant yea -progress relating to two residential projects und The Opening W1P of the two Projects was as foll 4,95,000/- 4,27,000/- ration, for the purpose of these two projects, eld by it as fixed assets, into Stock-in-trade.

For ision of section 45(2) of the Act, the assessee go valuer as per valuation report dated 10.03.2011 ore us.

The entries for conversion were passed in these two transactions.viz. tions.viz. (i) revaluation of ssessee has passed one consolidated accounting Entry Debit s Stock-in trade A/c 377,85,47,25 0 To Land A/c. in er To capitalized Costs A/c.

To us Revaluatio n Reserve yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 24 ar- the assessee carried der construction, namely, lows: the assessee converted r this purpose, consistent ot the market value of the 1.

This report is filed by n the books of account at fixed asset; and (ii) its g entry as under: - Credit 4,03,630 1,88,04,439 375,95,30,18 2 Accoun tCode Grouped as Current Assets, Loans and 13270 Advance s Fixed 11105 Assets Capital work 11521, 11525, 11510 Progress (unde Fixed Assets) Reserve 22210 s & Surpl It is evident from the Account Co credit to the Revaluation Reserv Assets, Loans and Advances.' created out of profits for the ye conversion, the entire value of Consequently, this entire cost am as 'Land cost on conversion o 'Construction Expenses' as an i lying in 'Stock-in-Trade' of const by crediting the P&L account an Crs. to the Profit and Loss Accou that it does not reflect any amoun 42.

During the year, the projects which were debit real estate segment, thes assessee before us that th the basis of 'percentage Accounts as part of the no has recognized revenue M/s Bombay Dy ITA Nos.

4484 Entry Debit Stock-in trade A/c 390,32,79,00 0 To Land A/c. in er To capitalized Costs A/c.

To lus Revaluatio n Reserve odes and the relevant Groupings mentioned in th ve account has been created with a correspond It is evident that this is not a case where the ear.

Having recorded the stock-in-trade at its f f such stock in trade becomes tha cost for t mounting to Rs.

768.18 Crs (i.e.Rs.

377.85 Crs + off free hold land from fixed assets to stock in item of debit to P&L account.

Needless to say, truction business, it is once again recognised as d debiting Asset Account.

From this it is clear tha unt reflects the cost of the Stock-in-Trade to the nt carried to reserves. reserves.

Assessee incurred certain further expenses to ted directly to the P&L account and in computing se have been duty considered separately.

It wa he Revenues from the said construction business completion method1.

See note 31on page 1 & otes on Significant Accounting Policies.

Accordin of Rs.258,62,49,100/- in respect of 1CC-1 Pro yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 25 Credit 4,16,954 1,94,25,403 388,34,36,64 3 he above entries that the ding debit to the 'Current Revaluation Reserve is fair value at the time of the real estate division. + 390.33 Crs) is recorded n trade' under the head to the extent the land is part of closing inventory at this debit ofRs.

768.18 real estate business and owards these two g the profits of the as claimed by the s is recognized on & 2 of the Annual ngly, the Assessee oject and revenue ofRs.260,78,49,630/-for IC Real Estate Projects base revenues as above, the po Reserve which relates to the sale released to the P&L account.

Th withdrawn and credited to the Pr Entries passed for release from R (a) For 1CC-1 Project Revaluation Reserve...........,Dr.

8 To Profit and Loss Account...

Cr. (b) For 1CC-2 Project: Revaluation Reserve...........

Dr.

8 To Profit and Loss Account.. .Cr.

This is given by the assessee in explaining this Position.

43.

Having recognized the reven in-trade and its valuation.

As th extent of the revenues from the part of work-in-progress by credi Sheet.

This is reflected in the foll (a) For ICC-i Project: Stock-in-trade (Balance Sheet)..

To Profit and Loss A/c..,.....,.....C (b) For ICC-2 Project: Stock-in-trade (Balance Sheet)..

To Profit and Loss A/c.............

C From the above, we find that Re Stock-in-trade.

Thus, Revaluatio the AO.

The amount of Revalua the P&L account (Debit side) recognized as revenue corresp method (Credit side or reflected Balance Sheet.

The profits of the on Percentage Completion Meth again adding the revaluation. valuation.

Re merely double accounting of t accounting for profits not yet e completed and not yet sold and w 44.

We have gone through the which applies only in case of A requires the bookprofits to be i called.

The underlined words im to the Reserve Account.

Indeed 'carry" as we shall shortly see, !(a)(i) debited to the profit and lo shades of meaning as would be dictionary.

However, in the conte 1, it appears that the following sh M/s Bombay Dy ITA Nos.

4484 CC-2 Project, aggregating to Rs.

519,40,98 730 ed on the percentage completion method.

Havin ortion of the Revaluation e recognized as per percentage completion meth us, to that extent, the proportionate part of the 'R rofit and Loss Account (Amount Rs.

165.27 Crs,).

Revaluation Reserve 81,69,56,453 .

81,69,56,453 83,57,27,418 .

83,57127,418 its paper book at page 82 note no.

31 to 32, the a nues as above, the assessee claimed that it is no he revalued amount of land is included in the co project are not yet recognize the revalued amo iting theP&L account and carrying forward the do lowing accounting treatment: .Dr.

582,43,61,125 Cr, 582,43,61,125 .Dr.

605,67,27,668 Cr.

605067,27,668 evaluation Reserve was created on transfer of l on Resen/e was not created by debiting the P&L ation Reserve embedded in the value of the stoc is, at the end of the year, based on the ma ponding to the revenues recognized based on d as part of the Closing work-in-progress (debit e assessee as shown in its P&L account duly co hod on the portions sold during the year and henc eser\fe to such declared profits.

The addition, mad the book profits actually earned by the asses arned by the assessee in respect of the portio which is carried forward as part of closing work-in provision of Clause (b) of Explanation to secti Appropriation of profitsJ. profitsJ.

Clause (b) of Explanatio increased by "the amounts carried to any rese mply a transfer of the relevant amounts, from the d, this is duly supported by not only the dictiona but, also by the use of the words 'if any amoun ss account in the text of Explanation 1 itself.

The e evident from the extracts from the Webster's d ext in which the words 'earned to' are used, in c hades ,of meaning are relevant in the present con yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 26 0/-,Working of the ng recognized the od needs to be evaluation Reserve' is audited accounts w left with Closing stock- ost of the project, to the unt is carried forward as osing WIP to the Balance land from Fixed Asset to account as assumed by ck-in-trade transferred to atching principles, either n percentage completion side) carried forward to nsiders the profits based ce there is no warrant for de by the AO leads to not ssee but also leads to on of the project not yet n-progress. ' ion 115JB(2) of the Act, on I to section 115JB(2) erves by whatever name Profit and Loss Account ary meaning of the word nt' referred to in clauses e word 'earn/ has several dictionary and the Oxford lause (c ) of Explanation ntext; viz.;- In Merriam Webster’s Collegiate '6: to transfer from one place (a '4: a quantity that is transferred place value'.

In. the Oxford English Referenc (in reckoning) transfer (a figure) It is apparent from the plain rea read with the above referred sh to bein creased in computing and Loss Account to the Reser there is no transfer of amounts the reserves in the present ca reserves do not reflect the abo misdirected himself in making t 45.

We have gone through th Supreme Court in the case of N this case, the question before depreciation (AAD) could be re of Explanation 1 to section 115 interpretation ofclause(b) on pa "....9.

We quote herein below E "Explanation I. anation I.

For the purpose profit and loss account for the r by,) * (a/***** amounts carried to any reserve section 33A C; or if any, amoun account, and as reduced by.." 10.

We find merit in this civil ap an addition under clause (b) tw (a) There must be a debit of the (b) The amount so debited mus Since the amount of AAD is re amount did not enter the stre hence clause b) of Explanation (b) of the Explanation Ito sectio and loss account.

At this stage those that are routed through p loss account, for example, a reserve.

It is not appropriation o The term 'Appropriation Financial -Statements' is following words: "An account sometimes includ application of profits towards di M/s Bombay Dy ITA Nos.

4484 Dictionary: as a column) to another (—, a number in adding d in addition from one number place to the adjac ce Dictionary: e) to a column of a higher value' ading of the phrase 'amounts carried to' in clau hades of meanings of the word 'carry' that the the book profits are the amounts that are tran rves Account.

As claimed by id Counsel Sh.

Th s from the Profit and Loss Account to the Res ase are created by way of revaluation of land ve, it is evident that the AO has misread the pr the addition to the book profits in this behalf. he case law relied on by the Counsel for as National Hydroelectric Power Corporation v 'CI e the Hon'ble Supreme Court was as to wh egarded as amountcarried to reserves within th 5JB or not.

In this context, the Supreme Court age 376, 377 in the following words: Explanation I tosection 115JB of the 1961 Act w es of this section, 'book profit' means the net pro relevant previous yearprepared under subsectio es, by whatever name called, other than a reser nt referred to in clauses (a) to (li) is debited to th ppeal.

On reading explanation L quoted above, wo conditions must be jointly satisfied: e amount to the profit and loss account. st be carried to the reserve. e reserve. educed from sales, there is no debit in the prof am of income for the purposes of determina n I 'was not applicable.

Further, "reserve" as c on 1 15JB of the 1961 Act is required to be ca e it may be stated that there are broadly, two profit and loss account and those which are n Capita!

Resen/e such as Share Premium A of profits...." of profits' is explained in the Guidance Note o ssued by the Institute of Chartered Accountan ded as a separate section of-the- profit and l ividends, reserves etc." yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 27 g)' cent one of higher use (b) of Explanation 1 amounts contemplated nsferred from the Profit har in the present case, serves Account Indeed, d which means that the rovisions of the law and ssessee of the Hon'ble T (320 ITR 374)(SC).

In hether advance against e meaning of clause (b) t has explained the true which reads asunder: ofit as shown in the on ('2), as increased -• (b) the rve specified under he profit and loss it is clear that to make fit and loss account The ation of net profit at all, contemplated by clause arried through the profit types of reserves, viz., ot carried via profit and Account.

AAD is not a on Terms used in nts of India in the loss statement showing It is evident on the given facts Indeed, the debit to the Profit a and not 'Application of profits".

46.

Therefore, we are of the Hydroelectric Power Corporatio (b) of the Explanation-1 to sect 47.

The assessee claimed tha and as per Clause (b) of sectio by the Board of directors in re reserves.

The text of said sec 217 are given in the Directors' from para I of the Directors Re such appropriation is that of pro Revaluation Reserve is not c Directors Report pursuant to se duly filed with the Registrar of which indicates that the provisi 'amounts carried to reserves' a different from its interpretation clause (b) of the Explanation I t 48. on I t 48.

Disclosures requirement un 6 (B)(i)(h) of the general instruc the Companies Act, 1956, the under the caption 'Reserves an format of Revised Schedule requirements, the amounts tra audited annual accounts und disclosed does not include an been duly audited by the statu company and filed with the Re the accounts are not in accord that Revaluation Reserve is no the nature of appropriation of profits by invoking clause (b) of 49.

We are of the view that the clause (1) of the Explanation requires that the book profits increased by - 'the amount retirement or disposal of such Memorandum explaining the p following words. "It is noted that in certain directly to the general re M/s Bombay Dy ITA Nos.

4484 s that the revaluation reserve is not created by and Loss Account indicates the cost of land to view that in the light of the decision of Supr on Ltd. (supra),the addition made by invoking t tion 115JB(2) cannot be sustained. at disclosure under section 217 of the Compa n 217(1) of the Companies Act, 1956, requires espect of the amounts which the company pr ction is set to out as annexure-5.The disclosur ' Report starting from page 32 of the audited a eport that various appropriations out of profits ofits "transferred to General Reserve"..

The ass considered as 'appropriation for the purposes ection 217 of the companies act 1956 and the f Companies and no objections have been rais ions of section 217 have been duly complied w as understood under the Act inthe context of se n under the Companies Act.

In view of the ab to section 115JB (2) is evidently inappropriate. nder Revised Schedule VI to the Companies Ac ctions for preparation of Balance Sheet under appropriations by of transfer to / from reserves nd Surplus'.

Annexure -6 sets out a copy of the VI.

Ld Counsel explained that in compl nsferred to General Reserve have been discl der the caption 'Appropriations' and the list ny amount transferred to 'Revaluation Reserv utory auditors of the company, approved by t roved by t egistrar of Companies.

None of the three autho dance with the Revised Schedule and hence, t ot created out of the profits of the company.

Th f profit and therefore, the question of adding f Explanation f (I) to section 115JB (2) does no e action of the AO is contrary to the scheme of I to section 115J8 (2) of the Act.

Clause (j shown in the profit and loss account for a standing in revaluation reserve relating to r h asset 'The said clause was introduced by F provisions of Finance Bill, 201.2 has explain n cases, the amount landing in the revaluation serve on disposal of revalued asset.

Thus, the yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 28 y 'Application of profits'. o the real estate division reme Court in National the provisions of clause anies Act 1956 is made s disclosure in the report roposes to carry to any res pursuant to section accounts.

It is apparent s are disclosed and one sessee claimed that the s of disclosures in the said Directors Report is sed whatsoever of date with.

Indeed, the phrase ection 115JB cannot be bove, the application of ct 1956 in terms of para Revised Schedule VI to s needs to be disclosed relevant portions of the liance with the above losed at page 69 of the of 'Appropriations' so ve'.

The accounts have the shareholders of the orities have alleged that this conclusively proves hese reserves are not in the same to the book t arise. the provisions of MAT - (j) of the Explanation 1 given year should be revalued asset on the Finance Act, 2012.

The ned the rationale in the n reserve is taken e gain attributable to revaluation of the ass amend section II5JB to p be increased in the amo asset which has been ret disposed, the same is not cr Explanatory memorandum to th Para II of the relevant portio standing to the Revaluation R year in which the relevant asse valuation of inventory is essen valuation of inventories does Supreme Court in the case of Court has explained at Page 4 Loss Account in the following w "T owing w "The true purpose of crediting entered on the other side of th the entries relating to the sa transactions on which there ha loss actually realised on the ye In any case, this is not a cas does not permit upward revalu Stock-in-trade at a revalued am no commercial profit earned by of introduction of MAT was th dividends to its shareholders b allowance, depreciation etc.

Ac revaluation reserve created du clause (b) of explanation (1) to assesses has released a sum profit and loss account, in that This issue of assessee's appea 10.1 Neither there is any f consideration, therefore, Appellant's own case for allowed.” 30.

We have heard dispute and perused CIT(A) has followed b M/s Bombay Dy ITA Nos.

4484 set is not subject to MAT liability.

It is, theref provide that the book profit of the purpose of se ount standing in the revaluation reserve relatin tired or redited to the profit and Loss account" Rele he Finance Bill, 2012are set out at Annexure 7. on of Explanatory Memorandum clearly indic Reserve should be treated as part of taxable B et is retired or disposed.

In view of the above, ntially a part of the process of determining the not give rise to any profits [see an early d f Chainrup Sampatram V.

CIT (24 FIR 481).

85, the purpose of crediting the value of unsold words: g the value of, unsold stock is to balance th he account at the time of their purchase, so th ame stock from both sides of the account ave been actual sales in the course of the yea ar's trading." se of revaluation of stocks.

The Indian Accou uation of stock-in-trade.

This is, a case of tra mount.

Indeed, in the year of creation of Revalu y the Assesses Company by virtue of revaluat hat certain companies were declaring significa but not paying any tax because of various tax ccordingly, we delete the addition made by AO uring the year to its audited profit applying th o section 115JB (2) of the Act.

However, the AO m of Rs.

O m of Rs.

165,26,83,871/-from revaluation reser case this is not to be added as income under s al is partly allowed..." factual change nor any legal change du respectfully following the judgement o A.Yr.,2012-13, appeal of the assessee rival submission of the parties the relevant material on record binding precedent on the issue yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 29 fore, proposed to ection 115JB shall ng to the revalued vant Extracts from the ." cates that the amount Book Profits only in the we are of the view that trading results and that decision of the Hon'ble The Hon'ble Supreme d stock in the Profit and he cost of those goods hat the cancelling out of would leave only the ar showing the profit or nting Standards (AS-2) nsfer of Fixed Asset to uation Reserve, there is tion.

The entire purpose ant book profits, paying shields like investment O of the entire amount of he provisions of section O will verify whether the rve and credited to the section 115JB of the Act uring the year under of Hon'ble ITAT in e on this ground is on the issue in d.

Since the Ld. e in dispute, we do not find any error we uphold the same. accordingly dismissed 31.

In the result, a appeals of the Revenu Order pronoun 1963 on 24/01/202 Sd/- (ABY T VARK JUDICIAL MEM Mumbai; Dated: 24/01/2023 Pavanan, Sr.

P.S (on contract) Copy of the Order forwa 1.

The Appellant 2.

The Respondent.

3.

The CIT(A)- 4.

CIT 5.

DR, ITAT, Mumbai 6.

Guard file. //True Copy// M/s Bombay Dy ITA Nos.

4484 r in the order of the Ld.CIT(A) a .

Ground No.4 of the appeal of d. appeals of the assessee are par ue are dismissed. nced under Rule 34(4) of th 23.

Sd/ KEY) (OM PRAKAS MBER ACCOUNTANT arded to : BY ORDE (Sr.

Private S ITAT, M yeing & Manufacturing Co.

4, 4485, 4291 & 4293/M/2019 30 and accordingly, f the Revenue is rtly allowed and he ITAT Rules, /- SH KANT) MEMBER ER, Secretary) Mumbai