TaxTMI 
TaxTMI 
2018 (1) TMI 785
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....sallowance u/s 80-IA by Rs. 47,70,86,078/- by making adjustment in the transfer price of power captively consumed. ii) That on the facts and in the circumstances of the case the ld. CIT(Appeals) was not justified and erred in law in confirming the disallowance made by the AO on account of Education Cess amounting to Rs. 1,42,79,859/-. iii) That on the facts and in the circumstances of the case the Ld. CIT(Appeals) was not justified and erred in confirming the disallowance made by the AO on account of profit on sale of investment amounting to Rs. 1,76,22,643/- & profit on sale of fixed assets amounting to Rs. 1,18,52,588/- while computing book profit u/s 115JB of the Act." ITA No. 181/JP/2016 (Ground of Revenue's appeal): "In view of the facts and circumstances of the case, the Ld. CIT(A), Ajmer has erred in : i) Deleting the disallowances made by the AO on account of sales tax subsidy by treating the amount of Rs. 31,86,07,921/- as capital receipts instead of revenue receipt; ii) Deleting the disallowance made by the AO on account of sales tax subsidy by treating the amount of Rs. 31,86,07,921/- as capital receipt and the same i....
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....ot permissible for revenue to recompute the profit & gains of the eligible unit by substituting it with any other Market Value. It was submitted that the above view has also been again upheld by the Tribunal in assessee's own case for AY 2010-11 vide order dated 27.04.2016. 5. It was submitted that the fact of the present case is similar to AY 2010-11. In the said year, transfer price rate was adopted by considering rate of sale of power through one of the mode. However, AO adopted the rate by considering average of sale to all the mode. Similarly in the present case, rate has been adopted by considering AALC of one of the unit whereas AO adopted the rate by considering average of AALC of all the units. Hence disallowance made in present case needs to be quashed since Departmental appeal has been dismissed in AY 2010-11 by stating that as long as the assessee has adopted a 'Market Value' as the transfer price, it is sufficient compliance of law. Substitution of another market rate by the AO is not permissible. 6. It was submitted that only contention of CIT(A) is that the Tribunal order of earlier year is not applicable since in the present case, market value adopted of Ja....
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.... The assessee has adopted a 'value' which is market value and the department has substituted the same by another value. The department is contending that the 'market value' as adopted by AO is the most appropriate since it represents price charged by the State Grid to various customers including the assessee. Hence, the same should be considered. The AR of the assessee submits that the value adopted by assessee represents 'market value' since it is based on real transactions between unrelated parties and the details for the same are available in public domain. The issue before us is whether in such situations where there are two or more market values available and if the Assessee has adopted a 'value' which is 'market value', whether it is permissible for the Revenue to still replace the same by another 'market value'....... 11. At this stage, it is necessary to refer to the relevant provisions of the Act i.e. Sec 80IA(8), which states that- "Where any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods or services held for the purposes of any other business carried o....
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....wherein while interpreting the Transfer Pricing provisions, the courts have held that it is the assessee who is the best judge to know the transactions undertaken & thus finding out the comparable cases from the vast database available in the public domain. Once the assessee has adopted the same, the AO has to examine whether the same is market price or not. AO has the power to adopt the market price only when the price adopted by the assesee does not correspond to market value. In the present case, we find that the assessee has adopted a rate at which actual transactions have been undertaken by unrelated entities. The volumes of transaction as relied upon are also substantial and hence it cannot be said that the assessee has hand picked some transactions, which are beneficial to it. The DR submitted that since the assessee has itself drawn power from the grid, the grid rate represents the 'best market value' & hence the same should only be adopted. We are not agreeable to the above contention of the department. No doubt the grid rate is market value but there is no concept of 'best' market value in law. If by using the said adjective, Revenue seeks to infer that grid rate is the o....
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....aken by the Coordinate Benches have been affirmed. 10. In the instant case, we find that both the authorities below as well as the assessee has not taken into consideration the provisions of section 80A(6) which has been brought on the statue books by the Finance Act, 2009 and which overrides the provisions of section 80IA(8) of the Act. Unlike section 80IA(8) which defines market value commonly for both sale and purchase by the eligible undertaking, section 80A(6) provides for separate market value with reference to sale and purchase by the eligible undertaking. Another fundamental change which has been brought-in is that the market value is made subject to statutory or regulatory restrictions, if any. In the context of present case where electricity has been generated and captively consumed, determination of the market value for claiming tax exemption has been aligned with the regulatory mechanism in terms of Electricity Act 2003 and related tariff regulations where the rate at which the electricity is supplied by the generating company to the distribution company is not the same at which the electricity is supplied by the distribution company to the consumers. The assessee co....
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....f such goods or services as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date : Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation.-For the purposes of this sub-section, "market value", in relation to any goods or services, means the price that such goods or services would ordinarily fetch in the open market We also refer to the amendment brought in by the Finance Act, 2009 in section 80A of the Act where sub-section 6 has been specifically brought on the statue book by the legislation which reads as under: Amendment of section 80A. 29. In section 80A of the Income-tax Act,- (a) after sub-section (3), the following sub-sections shall be inserted, and shall b....
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...., the expression "market value"- (i) in relation to any goods or services sold or supplied, means the price that such goods or services would fetch if these were sold by the undertaking or unit or enterprise or eligible business in the open market, subject to statutory or regulatory restrictions, if any; (ii) in relation to any goods or services acquired, means the price that such goods or services would cost if these were acquired by the undertaking or unit or enterprise or eligible business from the open market, subject to statutory or regulatory restrictions, if any. We now refer to the Notes to the clauses to the Finance Bill 2009 and the relevant notes in relating to section 80A(6) reads as under: "The proposed sub-section (6) provides that notwithstanding anything to the contrary contained in section 10A or section 10AA or section 10B or section 10BA or in any provisions of Chapter VIA under the heading "C-Deductions in respect of certain incomes", where any goods or services held for the purposes of the undertaking or unit or enterprise or eligible business are transferred to any other business carried on by the assessee or where any goods or servi....
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....f the aforesaid has been allowed in the same assessment year; (ii) the aggregate of the deductions under the various provisions referred to in (i) above, shall not exceed the profits and gains of the undertaking or unit or enterprise or eligible business, as the case may be; (iii) no deductions under the various provisions referred to in (i) above, shall be allowed if the deduction has not been claimed in the return of income; These amendments will take effect retrospectively from the 1st April, 2003, and will accordingly apply in relation to assessment year 2003-04 and subsequent years. Further it is also proposed to amend section 80A to provide that the transfer price of goods and services between the undertaking or unit or enterprise or eligible business and any other undertaking or unit or enterprise or business of the assessee shall be determined at the market value of such goods or services as on the date of transfer. Further, the expression "market value" has been defined to mean,- (a) in relation to any goods or services sold or supplied, means the price that such goods or services would fetch if these were sold by the u....
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....e, the return of income was originally filed on 30.09.2008, notice u/s 143(2) was issued on 3.9.2009, assessment order was thereafter passed on 31.12.2010 and subsequently, the order of the ld CIT(A) was passed on 30.03.2012. Accordingly, the proceedings for the impunged assessment year were pending before the Assessing officer and the provisions of section 80 A(6) will apply in the instant case. It is however noted that the authorities below have not examined the matter after taking into consideration the provisions of section 80A(6) of the Act. As we have stated above, the provisions of section 80A(6) will override the provisions of section 80IA(8) read with the explanation thereto. If we examine and compare the provisions of section 80IA(8) and 80A(6), it is noted are as follows: 1) Unlike section 80 IA(8), section 80A(6) starts with non obstante clause and provides that notwithstanding anything contrary contained in chapter VI-A, application of arm's length price is mandatory for computing profits eligible for deduction, of the eligible unit. 2) Market value, in section 80-IA(8) is defined commonly both for transfer and acquisition by the eligible uni....
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....hra Pradesh State Electricity Board by the paper unit of the assessee can by no means be the market rate at which the power plant of the assessee could have sold its production in the open market. In the open market the buyer would obviously be a distribution company or a company engaged both in generation and distribution. Therefore, the rate at which electricity is sold to any such company can only be the market rate contemplated by the section. The judgment in the case of Thiru Arooran Sugars Ltd. (supra) has no manner of application for the simple reason that the Court in that case was concerned with the question as to the market value of sugarcane grown by the assessee at home. The Supreme Court was of the opinion that the sugarcane grown at home would be deemed to have been sold to the sugar mill at the same rate at which sugar cane was purchased by the sugar mill. That obviously is correct because if the sugarcane grown at home had not been sold to the sugar mill of the assessee itself, the sugarcane would have been sold in the open market. The rate of sale in the open market would be the same at which sugarcane was purchased by the sugar mill of the assessee. But in the cas....
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....t wherein the market value of the electricity sold and purchased are to be determined separately and has been made subject to statutory and regulatory restrictions. Further, the earlier decisions of the Coordinate Benches are distinguishable as the provisions of section 80A(6) were not considered in those decisions. The decision of the Hon'ble Rajasthan High Court wherein the decision of the Coordinate Benches has been affirmed therefore doesn't support the case of the assessee. In the interest of justice and fair play, following our decision in case of Chambal Fertilizers (supra) and given the provisions of section 80A(6) which overrides section 80IA(8) and are clearly applicable in the instant case and have not been considered by the authorities below, we deem it appropriate to set aside the matter back to the file of the Assessing officer to examine the same afresh taking into consideration the above discussions. 13. Regarding ground No. 2 of assessee's appeal, briefly the facts of the case are that the assessee has claimed deduction on account of education cess (EC) & secondary and higher education cess (SHEC) on Income tax & Dividend Distribution Tax amounting to Rs. 1,42,7....
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....n. 18. In the matter of interpretation of the taxing statutes, the law courts would not be justified in introducing some other expressions which the Legislature thought fit to omit. A fiscal statute shall have to be interpreted on the basis of the language used therein and not de hors the same. This view is supported by principles of interpretation expressed in following decisions- - Orissa State Warehousing Corporation-vs. CIT (1999) 237 ITR 589 (SC) - Vodafone International Holdings BV-vs.-UOI (2012) 341 ITR 1 (SC) 19. The said omission was clarified by CBDT Circular No. 91/58/66 - ITJ (19) dated 18-05-1967, wherein it has been stated that the effect of the omission of the word 'cess' from Sec. 40(a)(ii) is that only taxes paid are to be disallowed from AY 1962-63 onwards and not the Cess. Since Circular is binding on the Department as also held by Hon'ble Apex Court in the case of Commissioner of Customs-vs.-Indian Oil Corpn. Ltd. (2004) 267 ITR 272 (SC), cess should not be disallowed while computing total income for the year under consideration. 20. Reliance in this regard is placed on the decision of Duncans Industries Ltd.-vs-JCIT (2003) 87 ITD 457 ....
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.... tax. 25. We have heard the rival contentions and purused the material available on record. In the case of M/s Chambal Fertilizers & Chemicals Limited Vs. ACIT, Kota (Supra), we (speaking through one of us) had an occasion to examine the said issue at great length and therein, after considering similar contentions as raised by the ld AR as in the instant case, we have held that the nature of education cess, and secondary and higher education cess is clearly additional surcharge for the purposes of the Union and being a surcharge, it partake the nature and character of tax and thus disallowable under the provisions of section 40(a)(ii) of the Act. The relevant discussion and findings are reproduced herewith: "62. We have heard the rival contentions of both the parties and perused the material available on the record. In order to appreciate the alternate contentions raised by both the parties, we refer to the provisions of section 40(a)(ii) of the Act which is the subject matter of examination before us which reads as under: Section 40(a)(ii) - Amounts not deductible. 40. Amounts not deductible. Notwithstanding anything to the contrary in sectio....
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....n the previous year, any net agricultural income exceeding five thousand rupees, in addition to total income, and the total income exceeds fifty thousand rupees, then,- (a) the net agricultural income shall be taken into account, in the manner provided in clause (b) [that is to say, as if the net agricultural income were comprised in the total income after the first fifty thousand rupees of the total income but without being liable to tax], only for the purpose of charging income-tax in respect of the total income; and (b) the income-tax chargeable shall be calculated as follows:- (i) the total income and the net agricultural income shall be aggregated and the amount of income-tax shall be determined in respect of the aggregate income at the rates specified in the said Paragraph A, as if such aggregate income were the total income; (ii) the net agricultural income shall be increased by a sum of fifty thousand rupees, and the amount of income-tax shall be determined in respect of the net agricultural income as so increased at the rates specified in the said paragraph A, as if the net agricultural income as so increased were the total income; ....
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....ons and shall be increased by a surcharge for purposes of the Union, calculated at the rate of two and one-half per cent of such tax. In cases in which tax has to be deducted under sections 193, 194, 194A, 194B, 194BB, 194D and 195 of the Income-tax Act, at the rates in force, the deductions shall be made at the rates specified in Part II of the First Schedule and shall be increased, by a surcharge for purposes of the Union, calculated in each case, in the manner provided therein. (6) In cases in which tax has to be deducted under sections 194C, 194E, 194EE, 194F, 194G, 194H, 194-I, 194J, 194LA, 196B, 196C and 196D of the Income-tax Act, the deductions shall be made at the rates specified in those sections and shall be increased by a surcharge for purposes of the Union, calculated,- (a) in the case of every individual, Hindu undivided family, association of persons and body of individuals, whether incorporated or not, at the rate of ten per cent of such tax where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds eight hundred and fifty thousand rupees; (b) in the case of every co-operative ....
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....s to which the provisions of Chapter XII or Chapter XII-A or section 115JB or sub-section (1A) of section 161 or section 164 or section 164A or section 167B of the Income-tax Act apply, "advance tax" shall be computed with reference to the rates imposed by this sub-section or the rates as specified in that Chapter or section, as the case may be: Provided further that the amount of "advance tax" computed in accordance with the provisions of section 111A or section 112 of the Income-tax Act shall be increased by a surcharge for purposes of the Union as provided in Paragraph A, B, C, D or E, as the case may be, of Part III of the First Schedule: Provided also that in respect of any income chargeable to tax under sections 115A, 115AB, 115AC, 115ACA, 115AD, 115B, 115BB, 115BBA, 115E and 115JB of the Income-tax Act, "advance tax" computed under the first proviso shall be increased by a surcharge for purposes of the Union, calculated,- (a) in the case of every individual, Hindu undivided family, association of persons and body of individuals, whether incorporated or not, at the rate of ten per cent of "advance tax" where the total income exceeds eight hundred an....
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....e tax" determined in accordance with sub-clause (ii) and the sum so arrived at shall be the income-tax or, as the case may be, "advance tax" in respect of the total income: Provided that the amount of income-tax or "advance tax" so arrived at, as reduced by the rebate of income-tax calculated under Chapter VIII-A of the said Act, shall be increased by a surcharge for purposes of the Union calculated in each case, in the manner provided therein. (11) The amount of income-tax as specified in sub-sections (4) to (10) and as increased by a surcharge for purposes of the Union calculated in the manner provided therein, shall be further increased by an additional surcharge for purposes of the Union, to be called the "Education Cess on income-tax", so as to fulfill the commitment of the Government to provide and finance universalised quality basic education, calculated at the rate of two per cent of such income-tax and surcharge." We now refer to the Notes to clauses of the Finance Bill 2004 which provides as under : "It is also proposed that the amount of income-tax as specified in sub-clauses (4) to (10) of clause 2 of the Finance (No. 2) Bill, 2004 an....
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....om income other than "Salaries" The rates for deduction of income-tax at source during the financial year 2004-05 from incomes other than "Salaries" have been specified in Part II of the First Schedule to the Bill and apply to income by way of interest on securities, interest other than "interest on securities", insurance commission, winnings from lotteries or crossword puzzles, winnings from horse races and income of non-residents (including non-resident Indians). The rates are the same as those specified in Part II of the First Schedule to the Finance Act, 2003. The tax deducted at source in each case shall be increased by a surcharge for purposes of the Union to be calculated as follows: (i) in the case of every individual, Hindu undivided family, association of persons and body of individuals at the rate of ten per cent, of such tax where the income or the aggregate of such incomes paid or likely to be paid exceeds Rs. 8,50,000; (ii) in the case of every co-operative society, firm, local authority and company, at the rate of two and one-half per cent, of such tax; and (iii) in the case of every artificial juridical person, at the rate of ten ....
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....(5 of 1986), being goods manufactured or produced, shall be a duty of excise (in this section referred to as the Education Cess on excisable goods), at the rate of two per cent, calculated on the aggregate of all duties of excise (including special duty of excise or any other duty of excise but excluding Education Cess on excisable goods) which are levied and collected by the Central Government in the Ministry of Finance (Department of Revenue), under the provisions of the Central Excise Act, 1944 (1 of 1944) or under any other law for the time being in force. (2) The Education Cess on excisable goods shall be in addition to any other duties of excise chargeable on such goods, under the Central Excise Act, 1944 (1 of 1944) or any other law for the time being in force. (3) The provisions of the Central Excise Act, 1944 (1 of 1944) and the rules made thereunder, including those relating to refunds and exemptions from duties and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Education Cess on excisable goods as they apply in relation to the levy and collection of the duties of excise on such goods under the Central ....
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....nance Act, 1994 (32 of 1994). (3) The provisions of Chapter V of the Finance Act, 1994 (32 of 1994) and the rules made thereunder, including those relating to refunds and exemptions from tax and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Education Cess on taxable services, as they apply in relation to the levy and collection of tax on such taxable services under Chapter V of the Finance Act, 1994 or the rules, as the case may be. We now refer to the Finance Minister's speech while introducing the Finance Bill 2004 in the Parliament: "22. In my scheme of things, no issue enjoys a higher priority than providing basic education to all children. The NCMP mandates Government to levy an education cess. I propose to levy a cess of 2 per cent. The new cess will yield about Rs. 4000 - 5000 crore in a full year. The whole of the amount collected as cess will be earmarked for education, which will naturally include providing a nutritious cooked midday meal. If primary education and the nutritious cooked meal scheme can work hand in hand, I believe there will be a new dawn for the poor children of India." ....
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.... relevant to determine is its exact nature rather than its nomenclature. The nature of education cess is clearly tax and nothing else. Now looking at the issue from the angle of recovery of education cess, there is no separate machinery in the Income tax Act for recovery of unpaid education cess and imposition of interest and penalty in case of default in payment of unpaid cess. This also clearly indicates that cess is a part of tax and all recovery mechanisms & consequences pertaining to recovery of tax apply to recovery of cess also without explicit mention of the word "education cess". Infact, clause 83 (3) of the Finance Bill 2004 makes this position crystal clear when it states that "the provisions of the Central Excise Act, 1944 and the rules made thereunder, including those relating to refunds and exemptions from duties and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Education Cess on excisable goods as they apply in relation to the levy and collection of the duties of excise on such goods under the Central Excise Act, 1944 or the rules, as the case may be." Though the same has been stated in the context of Cent....
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....in accordance with the provisions of section 10 of the Act." "The road cess and public works cess are to be assessed on the annual net profits under sections 72 to 76 of the Cess Act, 1880. The net annual profits have to be calculated on the average of the net profits for the last three years of the mine or the quarry and if the annual net profits of the property cannot be ascertained in the aforesaid manner then it is left to the Collector to determine the value of the property first in such manner as he considers expedient and determine 6 per cent. on that value which would be deemed to be the annual net profits. The Cess Act of 1930 follows the same pattern so far as the ascertainment of annual net profits is concerned. These profits arrived at according to the provisions of the two Cess Acts can by no stretch of reasoning be equated to the profits which are determined under section 10 of the Act. It is not possible to see, therefore, how section 10(4) could be applicable at all in the present case. Thus, on the language of the provisions both of the Act and the two Cess Acts the applicability of section 10(4) cannot be attracted. But even according to the decided cases....
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....rdinate Bench in case of Sesa Goa Ltd Vs JCIT [2013] 60 SOT 121 (Panaji) wherein it was held as under: "35. We heard the rival submissions and carefully considered the same. In our opinion, education cess and secondary higher education cess levied by the assessee has been collected as part of the income-tax and the provisions of section 40(a)(ic) & (ii) are clearly applicable and the assessee is not entitled for the deduction. The said payment is not a fee but is a tax. In case of fees, payment is made against getting certain benefit or services while tax is imposed by the Government and is levied for which the person who pay the tax is not promised in return to get any benefit or service. The assessee is not getting any benefit or services in return by making the payment towards the education cess and secondary higher education cess. Therefore, it cannot be said that it is an expenditure incurred wholly and exclusively for the purpose of the business and is not part of tax. We do not find any infirmity or illegality in the order of the CIT(A) while confirming the disallowance made by the assessing officer in this regard. Thus, disallowance of Rs. 19,72,00,814/-is hereby c....
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.... AR that where the legislature wanted certain taxes other than income-tax to be excluded for the purposes of computation of taxable income, it has specially provided for the same. The instances are amounts paid as wealth-tax, securities transaction tax and fringe benefit tax in section 40 of the IT Act. Had there been any intention of disallowing education cess, such provision would have been specifically been enacted which has not been done. We have given a careful consideration to the aforesaid contention of the ld AR but we are afraid we are unable to accede to the same. As we have already held above, the basis character of education cess as intended by the legislature is tax which is levied on the profits or gains of the business and given that such tax has already been provided in section 40(a)(ii) as not an allowable deduction, there was nothing more that was required or expected from the legislature. The levy of wealth tax, securities transaction tax and fringe benefit tax are not on the profits or gains of business or profession, hence, there was a necessity felt by the legislature and which was specifically provided for. 64. In light of above discussions and the f....
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....at the provisions of the Central Excise Act, 1944 and the rules made thereunder, including those related to refunds and duties etc. shall as far as may be applied in relation to levy and collection of Education Cess on excisable goods. A conjoint reading of these provisions would amply demonstrate that Education Cess as a surcharge, is levied @ 2% on the duties of excise which are payable under the Act. It can, therefore, be clearly inferred that when there is no excise duty payable, as it is exempted, there would not be any Education Cess as well, inasmuch as Education Cess @ 2% is to be calculated on the aggregate of duties of excise. There cannot be any surcharge when basic duty itself is Nil. 22) It is rightly pointed out by the learned counsel for the appellants that the CESTAT in the earlier two judgments given in Bharat Box Factory Ltd. and Cyrus Surfactants Pvt. Ltd., held that Education Cess and Higher Education Cess would also refundable along with excise duty and in view thereof, another co-ordinate Bench of CESTAT could not take a contrary view in Jindal Drugs Ltd. Judicial discipline warranted reference of the matter to the Larger Bench which it did not do. In....
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....ise, it became a special Duty of Excise by way of Education Cess chargeable and collected under Finance Act, 2004 and fell within the ambit of clause (3) of Explanation appended to Notification dated 26/6/2001. Consequently, rebate became available on collection of surcharge on Excise Duty under Finance Act, 2004 in terms of existing Notification dated 26/6/2001 immediately. Later Notification including the Education Cess in enumerative definition in the circumstances was only clarificatory and by way of abandoned caution, but not a new rebate in relation to Excise Duty or any part thereof as statutorily pronounced as well as specified Excise Duty levied and collected under the Finance Act." We are in agreement with the aforesaid reasons accorded by the Rajasthan High Court, since it is in consonance with the legal principle enunciated by this Court. For this purpose, we may refer to the judgment in the case of Collector of Central Excise, Patna v. Tata Engineering and Locomotive Co.10 In that case, issue pertained to valuation of cess which was levied @ 1/8 per cent of ad valorem 'value' of the central excise duty. The Court held that the calculation of 1/8 per cent ad va....
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....2 dated 27.01.2014) in the assessee's own case for AY 2008-09. Respectfully following the same, we hereby confirm the order of the ld CIT(A) and dismiss the ground of appeal taken by the assessee. 30. Now, coming to the appeal filed by the Revenue. In ground no. 1, the Revenue has challenged the action of the ld CIT(A) in deleting the disallowances made by the AO on account of sales tax subsidy by treating the amount of Rs. 31,86,07,921/- as capital receipts instead of revenue receipt. In ground no. 2, the Revenue has challenged the deletion of disallowance made by the AO on account of sales tax subsidy by treating the amount of Rs. 31,86,07,921/- as capital receipt and the same is not includible in the book profit u/s 115JB of the IT Act, without appreciating the facts of the case. 31. The ld. AR submitted that the matter has been decided in favour of the assessee by the recent decision of Hon'ble Rajasthan High Court 63 in assessee's own case in DB ITA No. 204/2010 dated 22/08/2017 and DB ITA No. 85/2014 dated 22/08/2017. 32. In DB ITA No. 204/2010 dated 22/08/2017, the substantial question of law framed for consideration by Hon'ble Rajasthan High Court was as under:- ....
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....as framed while admitting the appeal by the Hon'ble Rajasthan High court: "(i) Whether the Tribunal was legally justified in holding that the sales tax subsidy received by the assessee for Rs. 40,53,06,138/- in the form of sales tax exemption and also not to be included in book profit u/s 115JB ignoring the purpose of subsidy, which was given to enhance the production employment and sales in the State of Rajasthan which are post operational activities?" 35. While disposing off the above substantial question of law, the Hon'ble High Court held that "the issue No. 1 is squarely covered by the decision taken today in D.B. ITA No. 204/2010." 36. Respectfully following the decision of the Hon'ble Rajasthan High Court referred supra, we affirm the order of the ld CIT(A) and dismiss both the grounds of appeal of the Revenue. 37. In the result, the assessee's appeal is partly allowed for statistical purposes and revenue's appeal is dismissed. 38. Now, we refer to AY 2013-14 wherein the respective grounds of appeal are as follows: ITA No. 178//JP/2016 (Ground of Assessee's appeal): " i) That on the facts and in the circumstances of the case, Ld. CIT(Appeals)....
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....162/JP/16 shall apply mutatis mutandis to this appeal as well. In respect of ground no. (iii) relating to disallowance made by the A.O on account of gift expenses to the tune of Rs. 4,13,437/-, we have gone through the order of the lower authorities and donot see any infirmity in the same. Hence, this ground of appeal is dismissed. In the result, assessee's appeal is partly allowed for statistical purposes. 41. In ITA No. 182//JP/2016 in respect of ground of appeal no. (i)& (ii) admittedly the facts and circumstances of the case are similar to AY 2012-13. Our findings and directions contained in ITA No. 181/JP/16 shall apply mutatis mutandis to this appeal as well. 42. In respect of ground no. 3 & 4 of revenue's appeal wherein the Revenue has challenged the action of the ld CIT(A) in deleting the disallowance of electricity duty exemption of Rs. 6,57,98,024 holding the same as capital receipt and further not including the same while determining the books profits u/s 115JB of the Act. 43. Briefly, the facts of the case are that during the year under consideration, the assessee company has received Rs. 6,57,98,024 by way of electricity duty exemption under Rajasthan Investme....
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....he judgment of the Special Bench of this Tribunal rendered in the case of DCIT vs. Reliance Industries Ltd. Ld. CIT (A) decided the issue in para 47 to 50 as under:- "Decision I have considered the facts of the case and submissions of the ld. A/R and have gone through the original notification dated 28/07/2003 issued by the govt. of Rajasthan, Finance (Tax Division) Department. The important/relevant features for the purpose of deciding the issue are as under:- i) The notification starts with the "Heading Rajasthan Investment Promotion Policy2003". With a view to provide investors an attractive opportunity to invest in the State of Rajasthan, the following scheme is introduced in the state. Clause-2: Operative Period : The scheme shall come into operation with effect from 1st July, 2003 and shall remain in force upto 31st March, 2008. Clause-3: Applicability of the scheme The scheme shall be applicable to all new investments and investments made by existing units and enterprises for modernization/diversification, subject to the condition that such units shall commence commercial production/operations owing to such inves....
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.... 200 crore upto Rs. 400 crore 75% 3 Rs. 400 crore or more 100% 48. It is a fact that the appellant had installed a CPP at Chittorgarh LZS, Chanderia during assessment year 2005-06. The company generated 83.0507 crore unit therefrom. In view of the above notification, the electricity duty was waived to the appellant extent of Rs. 8,55,50,700/-. Had there been no such waiver, the appellant would have claimed the payment of electricity duty as revenue expenditure. Further the appellant itself has routed the same through P&L account as revenue item. As per the decision cited by AO in the case of Rajaram Maize Product by the Hon'ble Supreme Court was delivered on 23/7/2001 that the power subsidy received by the respondent was of revenue nature inasmuch as it went towards reduction of the electricity bills. 49. The A/R has cited the decision of Bombay Spt. Bench ITD 273 (2004) in the case of DCIT vs. Reliance Industries Ltd. In this case the following point was to be decided; "whether on the facts and in the circumstances of the cae and in law the assessee company is justified in its claim that the sales tax incentive allowed to it during the previous year i....
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....n in clause 8 of the scheme was 50% of the electricity duty for seven years in addition to the subsidy available under clause 7 of this scheme but the appellant has not claimed any deduction mentioned in clause 7. By amendment order dated 28-03- 2005 of Govt. of Rajasthan, the Finance Department (Tax Division), the scheme has been amended to the extent that the emption would be available to 100% if the total new investment is Rs. 400 crore or more in CPP. The appellant has established the CPP in 2005-06 for the first time in Chanderia Smelter Unit. The capital investment is also more than Rs. 400 crore. The CPP is established within the period from 1-7-2003 to 31-3-2008. The commercial production has also commenced in the same financial year. Thus all the terms and conditions of the scheme do clearly define that the waiver of electricity duty by the Govt. of Rajasthan was with a purpose to held the assessee to establish a new power plant and not to held in day to day operations of the power plant. Therefore, the decision of the Hon'ble Spl. Bench, Bombay in the case of Reliance Industries is fully applicable to the appellant's case. Therefore, the disallowance made by the ....
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....ranted on the basis of refund of sales tax on raw material, machinery and finished goods were also of capital nature as the object of granting refund of sale tax was that the assessee could set up new business or expand his existing business. The contention of the assessee in that case was dismissed by the Tribunal and, therefore, the assessee had come to this court by way of a special leave petition. It was held by this Court on the facts of that case and on the basis of the analyses of the scheme therein that the subsidy given was on revenue account because it was given by way of assistance in carrying on of trade or business. On the facts of that case, it was held that the subsidy given was to meet recurring expenses. It was not for acquiring the capital asset. It was not to meet part of the cost. It was not granted for production of or bringing into existence any new asset. The subsidies in that case were granted year after year only after setting up of the new industry and only after commencement of production, and therefore, such a subsidy would only be treated as assistance given for the purpose of carrying on the business of the assessee. Consequently, the contentions raise....
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....f the company because the work undertaken was dock extension. According to the House of Lords, the assistance in the form of a grant was made by the Government with the object that by its use men might be kept in employment and, therefore, its receipts was capital in nature. The importance of the judgment lies in the fact that the company had applied for financial assistance to the Unemployment Grants Committee. The Committee gave financial assistance from time to time as the work progressed and the payments were equivalent to half the interest for two years on approved expenditure met out of loans. Even though the payment was equivalent to half the interest amount payable on the loan (interest subsidy) still the House of Lords held that money received by the company was not in the course of trade but was of capital nature. The judgment of House of Lords shows that the source of payment or the form in which the subsidy is paid or the mechanism through which it is paid is immaterial and that what is relevant is the purpose for payment of assistance. Ordinarily such payments would have been on revenue account but since the purpose of the payment was to curtain/obliterate unemployment....