TaxTMI 
TaxTMI 
2012 (12) TMI 729
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....f water and electricity expenses as the business of the assessee was commenced after 01.10.2007 and therefore the expenses incurred after 01.10.2007 are allowable. The rest of the expenses amounting to Rs. 6,65,511/- (Rs. 7,24,860-59,349) were to be capitalized 4. The appellant craves to add or amend any ground any grounds of appeal before the appeal is heard or disposed off. 5. It is prayed that the order of the Ld. CIT(A) be cancelled and that of the assessing officer may be restored." 3. In Ground No.1, revenue contended that CIT(A) erred on facts and circumstances of the case and in law in deleting the addition of Rs.7,31,737/-, made by the AO, on account of rental income. 3( i ) . Ld. 'DR' placed reliance on the order passed by the AO and referred to para 3.3 of the appellate order passed by the CIT(A) and Paper Book page No.33, evidencing rent agreement. Ld. 'DR' prayed that the order passed by the CIT(A) is factually and legally incorrect. 3( ii ). Ld. 'AR', on the other hand, placed reliance on the order passed by the CIT(A) . Ld. 'AR' contended that the agreement was not renewed and annual real income can be charged to tax. 4. We have carefully perused the rival subm....
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....ings, the assessee company has filed a copy of the rent agreement dated 7.12.2003. The agreement is effective from 12.12.2003 and monthly rent for this property is Rs. 48,,000/-. As per the agreement, there has to be 10% increase every year. 3.7 Thus according to the rent agreement, if the figure of 10% increase is used, the rent receivable from 7.12.2006 onwards should have been Rs. 63,888/- p.m. Similarly, the rent receivable from 7th December, 2007onwards should have been Rs. 70,2777- as per the rent agreement. However, the assessee is only showing rental income of Rs. 55,000/- p.m. in the return of income. 3.8 The rental income which the assessee should have received on the basis of the rent agreement from letting out of this property to M/s Gian Chand Ashok Kumar, is worked out as below :- Rent for 7 months from 1st April, 2007 to 7.12.2007 Rs. 63,888 x 7 Rs. 4,47,216/- Rent for 5 months from 8.12.2007 to 31.3.2008 Rs. 70,277 x 5 Rs. 3,51,385/- 3.9 The total amount of rent receivable from M/s Gian Chand Ashok Kumar thus should have been Rs.7,98,601/- (Rs.4,47,216/- + Rs. 3,51,385/-) for the let out property. However, the assessee has shown rental income ....
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.... with reference to the relevant clause of the Rent Agreement, as relied upon by the AO. The CIT(A) has not disputed the correctness of the said clause. It is further undisputed that the said agreement has been entered by the concerned party at will and voluntarily. Therefore, there is no statutory bar u/s 23(1) of the Act, to exclude the said express terms, for the purpose of enhancement of rent in the said Rent Agreement. Thus, having regard to factual matrix of the case, documentary evidence in the form of Rent Agreement cannot be ignored and, hence, the findings of the ld. CIT(A) are reversed and findings of the AO are restored. This ground of appeal of the revenue is allowed. 5. In Ground No.2, revenue contended that CIT(A), erred in deleting the addition made by the AO in respect of the subsidy receivable at Rs.30,00,000/-, as revenue receipt. Ld. 'DR' supported the findings of the AO, based on the decision of the jurisdictional High Court, in the case of M/s Abhishek Industries 286 ITR 1 (P&H). 5( ii ) Ld. 'AR', on the other hand, referred to various clauses of the scheme of subsidy and contended that the impugned subsidy is capital investment subsidy, @ 15% of the investm....
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....al Policy & Promotion). The amount of subsidy was @ 15% of investment in plant and machinery subject to a ceiling of Rs. 30,00,000/-. 4.3.1 The Assessing Officer taxed the subsidy as revenue receipt by relying upon the decision of Hon'ble Punjab & Haryana High Court in the case of M/s Abhishek Industries Ltd. (286 ITR 1), but that judgment was in respect of sales tax subsidy. In that case the Hon'ble High Court had held that subsidy was in the form of operational subsidy provided by the State after the industry had been set up and commenced commercial production. The facts of the instant case are entirely distinguishable from the facts of M/s Abhishek Industries Ltd., since the subsidy in this case is capital investment subsidy calculated @ 15% of plant and machinery. The purpose of subsidy was for the development of industries and generation of employment in the State of Himachal Pradesh, improve the availability of capital and increase market access to provide a flipp to the private investments in the state. One has to apply the 'purpose test' as enumerated by Hon'ble Supreme Court in the case of Ponni Sugars 85 Chemicals Ltd. & Others (306 ITR 392) for determining whether an ex....
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....e Supreme Court in the case of CIT V Ponni Sugars & Chemicals Ltd. (2008) 306 ITR 392 (S.C) held that subsidy for repayment of capital loan is capital receipt. It was held by the Hon'ble Apex Court that where main eligibility condition in scheme, under which assessee Sugar Mill was granted subsidy, was that subsidy must be utilized for repayment of loans taken by assessee to set-up new unit or for substantial expansion of existing unit. In such a situation, the subsidy is in the nature of capital receipt and not exigible to tax. 9. Having regard to the fact-situation of the present case and above legal and factual discussions, the case of the assessee is not covered by the decision of the jurisdictional High Court, as conceived by the AO. Therefore, the findings of the ld. CIT(A) are upheld. Consequently, this ground of appeal of the revenue is dismissed. 10. In Ground No.3, revenue contended that CIT(A) erred in deleting the addition made by the AO of Rs.6,65,511/- on account of capitalization of water and electricity expenses, as the business of the assessee commenced after 01.10.2007. 11. In the course of present appellate proceedings, ld. 'DR' placed reliance on the order pa....