TaxTMI 
TaxTMI 
2014 (5) TMI 961
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....e assessee's appeal on all counts. Being aggrieved with the order of ld. CIT (A), the Department is in appeal before us and has taken following grounds of appeal. 1. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs.85,19,51,413/- made on account of treatment of sales tax subsidy as revenue receipt. 2. On the facts and circumstances of the case and in law, the CIT (A) has erred in deleting the addition of Rs.11,44,58,672/- made on account of treatment of trial run expenses as capital in nature. 3. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs.64,57,845/- by allowing depreciation on computer accessories @ 60%. 4. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs.15,00,000/- on account of penalty paid to custom authorities. 5. The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing. 4. Brief facts apropos ground no. 1 are that AO noticed from the computation of the income that the assessee company had claimed sales tax subsidy amounting to Rs.85,19,51,413/....
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....rom the opening balance given by the Government of Maharashtra to control that the subsidy in the form of sales tax collected and retained over years did not exceed the approved quantum. 4.2 It was further submitted that the scheme postulated the following important conditions, among others, for eligibility under the scheme: (i) Effective possession of land by an eligible Unit, (ii) Tying up of the means of finance for the project the satisfaction of the concerned implementing agency (iii) Acquisition of fixed assets at site to an extent of at least 10% of the total fixed assets as envisaged for the project, and (iv) Evidence regarding expenditure on the project, including advances and pre-operative expenses paid, aggregating to at least 25% of the capital cost envisaged for the project." 4.3 Thus, it was submitted that the purpose of the subsidy was to help the assessee to set up its business or complete a project. The assessee relied on the decision of Hon'ble Supreme Court in the case of CIT , Madras Vs. Ponni Sugars & Chemicals Ltd, 306 ITR 392 wherein it was held that the character of the receipt in the hands of the recipient has to be determined with respect to the purp....
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....s tax subsidy of Rs.87,85,15,268/-. This was claimed as a capital receipt. The AO brought the same to tax on the ground that the receipt in question is a revenue receipt. On appeal the Commissioner of Income Tax (Appeals) followed the orders of his predecessor on the issue and allowed the claim of the assessee. Aggrieved the Revenue is in appeal before us. 5.1. The 'C' Bench of the Tribunal in assessee's own case for the Assessment Years 1997-98, 2000-2001, 2002-03, 2003-04, 2004-05 upheld the orders of the First Appellate Authority. The First Appellate Authority at page 7 of his order has given a comparison of the 1979 scheme with the 1993 scheme. The Tribunal in its order held as follows:- "5. The ground raised in Revenue's appeal in ITA No . 5323/Del/2011 (Assessment Year 1997-98) read as under:- (i) On the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs.22,85,62,948/- made on account of treatment of sales tax subsidy as revenue receipts. (ii) The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing. 6. One common issue raised in Revenue appeals pertains to deleti....
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....scheme is for promotion of Industrialization in backward area of the State of Maharashtra. Further, eligibility criteria and steps for processing of scheme (e.g. approval from government authorities, financing of project, expenditure on project, approval from SICOM, mode of disbursement of sales tax incentive etc.) are similar in both the schemes. Ld.CIT(A) found that according to the PSI 1993 purpose of the scheme is for encouraging setting up of manufacturing unit in backward area in the state. While granting subsidies for capital investment, the Maharashtra government does not disburse any amount by way of subsidy but allows industrial undertaking to collect usual charge on account of sales tax and retain it as capital subsidy instead of depositing the sales tax collected. From this Ld.CIT(A) observed that the purpose of the scheme is not to support carrying on business in a more profitable manner but is for promotion /setting up the production unit in backward area. Collection of sales tax amount is simply a measurement of the subsidy to be allowed. Ld. CIT(A) held that one cannot say that subsidy was granted for carrying on its business operation in day to day manner. Before ....
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....pecial Bench decision of the Tribunal in the case of Reliance Industries Ltd. (supra). Though the scheme applicable in the case of Reliance Industries Ltd. was 1979 scheme, however, in the 1993 scheme terms and conditions were of the same nature and intent. For this purpose, a comparative chart was referred by the Ld. CIT (A). As per the comparative chart the terms and conditions applicable in 1979 scheme were of the same nature and intent of the 1993 scheme. We further note that Mumbai Tribunal in the case of Everest Industries Ltd. in ITA no. 814/Mum/2007 has held that salient features of the 1993 scheme are identical to that of 1979 scheme. We further note that the Tribunal in ITA no.678 and 679/Del/2012 in the case of M/s Indo Rama Textiles Ltd. on identical facts has held that the decision of the Mumbai Tribunal, special Bench In the case of Reliance Industries 88 ITD 273 is applicable. Accordingly, in the background of the aforesaid discussion and precedents, we hold that the Ld. CIT(A) has passed a reasonable order which does not need any interference on our part. Accordingly, we uphold the same. 5.2. Respectfully following the same we uphold the order of the First Appellat....
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.... decision of Hon'ble Delhi High Court in the assessee's own case reported at 333 ITR page 18 wherein it has been held that where the new unit proposed to be set up by the assessee was the expansion of its business operation, the expenditure incurred on the proposed unit, is to be allowed as business expenditure even if the project was abandoned. 9. Ld. DR relied on the order of AO. 10. We have considered the rival submissions and perused the record of the case. The facts are not disputed. The three CP plants were already in operation since 1996 and two new CP plants were set up for expansion of the existing business. Expenses claimed as deduction were after the start of business operations of the new CP plants, though on a trial run basis. The ld. CIT (A) has pointed out in para 6.9 that the business organizations, administration and the funds of existing as well as the new plants were same and controlled by the common management of the assessee company itself. The staff working at various units were enrolled with the assessee and the company managed the manufacturing operations as carried out by the respective plants, both old units as well as the new units. Further, the assesse....
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....iation of Rs.77,49,413/- on computers. AO noted that computers were reflected under the head furniture and fittings in the fixed assets schedule but the assessee had claimed depreciation @ 60% on computers. After considering the assessee's submissions, AO allowed depreciation @ 10%. 15. The ld. CIT(A) allowed the assessee's appeal, inter-alia, observing that classification of computers under the head furniture and fittings, in the books of account was irrelevant. 16. At the outset, ld. counsel submitted that this issue is covered by the decision of Tribunal in assessee's own case for AY 2008-09 vide ITA No.5831/Del/2011 dated 26th March 2013 wherein it has been observed in Para 23 as under: "23. On a careful considerations of the contentions, we hold that the classification for the purpose of computation of depreciation under the Companies Act has no relevance. The disallowance cannot be based merely on entries made in the books of accounts or in the annual accounts. The AO has not brought out any infirmity in the claim of the assessee. Under these circumstances we uphold the findings of the CIT(A) and dismiss this ground of Revenue." Consistent with the view taken for AY 2008-....
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....of the Customs Act, 1962 and penalty of Rs.8 lacs u/s 112(a) of the Customs Act 1962. Alternatively, the assessee was required to re-export the car on payment of notional penalty in terms of section 112(a) of the Act. Consequently, the assessee incurred expenditure on account of redemption fees of Rs.15 lacs payable to Custom Authorities u/s 125 of the Customs Act, 1962 for release of an imported car. These facts are not disputed by the revenue authority. Therefore, the findings of ld. CIT (A) that the sum of Rs.15 lacs was purely of compensatory nature in the form of additional duty for not complying with certain procedural requirements specified in the DGFT notification, cannot be faulted. The issue that if the amount payable is in compensatory and not penal in nature then the same is an allowable deduction, is no more res integra. 23. We find that Hon'ble Delhi High Court in the case of Usha Micro Process Control (Supra) has observed in Para 10 as under: "8. The observations of the CEGAT are pertinent. They are extracted below: 18. Keeping in view the totality of the facts and circumstances of the case, we reduce the fine in lieu of the confiscation to Rs. 4,00,000.00 (Rupees....