2016 (5) TMI 716
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....eduction of written down value of plant and machinery by reduction of subsidy amount of Rs. 15,00,000 and thereby the admissible depreciation common to the assessment years 2004-05, 2005-06 and 2007-08. 4. The facts are that the assessee had received investment subsidy of Rs. 15,00,000 from the Central Government in the year 1987 in accordance with a scheme for providing impetus in setting up industries in backward districts. Since that year in which subsidy was received, the said amount has been shown under the head "reserves and surplus" in the balance- sheet of the assessee. It is the contention of the assessee that since the said subsidy amount was received as an incentive not for specific purpose of meeting a portion of the cost of the assets, hence, it does not partake of the character of payment intended either directly or indirectly to meet the actual cost of the assets. Therefore, the question of not including in the written down value of the Central Government investment subsidy of Rs. 15,00,000 does not arise. The assessee further stated that the Department in the past has made no objection with regard to this issue. The Assessing Officer examined this issue from the po....
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.... did not require the reduction. The same formula for computing the written down value may be adopted even if the assets do not continue in the block and proportionate subsidy be deducted from the cost of the block. Therefore, in no case, the assessee should not get the depreciation benefit on capital expenditure that it did not actually incur. In accordance with Explanation 10 to section 43(1) of the Act, the Assessing Officer reduced from the cost of capital asset by a detailed order for the assessment year 2004-05. Aggrieved by the order of the Assessing Officer, the assessee preferred appeal before the first appellate authority. 5. Before the learned Commissioner of Income-tax (Appeals), the assessee objected to the disallowance by placing reliance on the decision of the hon'ble Supreme Court in the case of CIT v. P. J. Chemicals Ltd. [1994] 210 ITR 830 (SC). The learned Commissioner of Income-tax (Appeals) noted that the decision of the hon'ble Supreme Court was pronounced on September 14, 1994, and Explanation 10 to section 43(1) was inserted with effect from April 1, 1999. Since the decision relates to a prior period before the amendment of the Act, the ratio of the ....
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.... conditions for its deductibility from 'actual cost'. The amount of subsidy is not to be deducted from the 'actual cost' under section 43(1) for the purpose of calculation of depreciation, etc." It is submitted that the decision in CIT v. P. J. Chemicals Ltd. [1994] 210 ITR 830 (SC) has settled the law on this point. Before this decision given on September 14, 1994, there was a sharp divergence of judicial opinion. Considering the entire controversy it was held in CIT v. P. J. Chemicals Ltd. [1994] 210 ITR 830 (SC) as follows (page 841) : "The Government subsidy, it is not unreasonable to say, is an incentive not for the specific purpose of meeting a portion of the cost of the assets, though quantified as or geared to a percentage of such cost. If that be so, it does not partake of the character of a payment intended either directly or indirectly to meet the 'actual cost' we should prefer the reasoning of the majority of the High Courts to the one found acceptable by the High Court of Punjab and Haryana (paragraph H at page 841 of the Report)." This case was dealing with the law as it existed in the assessment year 1983-84. On the basis of the provisions....
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....fy the financial aid, is not a payment directly or indirectly, to meet any portion of the "actual cost". After careful consideration, we find that the case of the assessee is squarely covered by the decision of the hon'ble Supreme Court in the case of CIT v. P. J. Chemicals Ltd. [1994] 210 ITR 830 (SC). We, therefore, reverse the order of the learned Commissioner of Income-tax (Appeals) for all the assessment years. Accordingly, ground No. 3 taken by the assessee for all the assessment years is allowed. 9. In ground No. 4 for the assessment year 2004-05, the assessee has objected to the confirmation of disallowances of expenses as under : (i) Rs. 1,85,142 towards advertisement, sales promotion and product development. (ii) Rs. 1,56,431 towards share maintenance expenses. (iii) Rs. 2,61,386 towards miscellaneous expenses. 10. In ground No. 5 for the assessment year 2005-06, the assessee has objected to the confirmation of disallowance of expenses as under : (i) Rs. 1,17,783 towards share maintenance expenses. (ii) Rs. 2,35,613 towards miscellaneous donation. 10.1 Since the issue common to both the assessment years, they are disposed as under : 11. Facts are that th....
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....authorities have not given specific observation for disallowing the expenses with a speaking order and, accordingly, relied on the decision of the hon'ble Gujarat High Court in the case of Sayaji Iron and Engg. Co. v. CIT [2002] 253 ITR 749 (Guj) ; [2002] 172 CTR (Guj) 339, wherein, it is held that ad hoc disallowances being based on conjectures and surmises cannot be sustained. 14. We have heard the rival contentions and perused the record of the case. The Assessing Officer and the learned Commissioner of Income-tax (Appeals) in their orders have disallowed 20 per cent. with regard to advertisement, sales promotion and product development expenses under section 37(1) for the assessment year 2004-05 for the inability of the assessee to provide direct evidence to establish that these expenses wholly and exclusively incurred for the purpose of business. We find that the disallowance has been restricted to 20 per cent. without any rhyme and reason. Therefore, the disallowance of expenses is not apparently clear. Under these circumstances, in the interest of justice and fairness, we feel it deem and proper to restrict the disallowance to 5 per cent. of the above disallowances made....
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....sioner of Income-tax under section 263 in the earlier years is nothing but an attempt to avoid due payment of tax and, therefore, the learned Commissioner of Income-tax (Appeals) upheld the order of the Assessing Officer wherein the Assessing Officer has rightly brought the amount to tax under MAT. Aggrieved, the assessee is in appeal before the Tribunal. 17. The learned authorised representative before us submitted that this issue is squarely in favour of the assessee by the decision of the Cuttack Bench in the assessee's own case in ITA No. 277/CTK/2010 for the assessment year 2005-06 order dated April 4, 2011. The learned authorised representative submitted that the matter regarding BIFR has been considered by the learned Commissioner of Income-tax in his order under section 263 dated March 31, 2010, for the assessment year 2005-06, which was a subject matter of appeal before the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal has held that the assessee is not liable to be taxed under section 115JB and quashed the order under section 263. A copy of the said order of the Tribunal is filed by the assessee in the paper book before us. Therefore, the matter reg....