TaxTMI 
TaxTMI 
2018 (11) TMI 1628
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....ounds:- 1. That the impugned appellate order is bad both on facts and law. 2. That the learned Appellate Authority wrongly and illegally confirmed the disallowance of deduction U/s 8OIC by an amount of Rs. 1,70,78,838/- being received as transport subsidy to reimburse the excess transport expenses incurred on transportation of raw material & finished goods in the hilly areas ignoring the submissions, pleading and evidence on record or alternatively should be treated as capital receipt being non-taxable. 3. That the learned Appellate Authority wrongly and illegally confirmed the disallowance of deduction U/s 80IC by an amount of Rs. 24,98,964/- being the sale tax rebate not paid under sales tax deferment rebate scheme ignoring the submissions, pleading and evidence on record or alternatively should be treated as capital receipt being non taxable. 4. That the learned Appellate Authority wrongly and illegally held that interest income of Rs. 23,00,560/- on FDRs obtained for ILC/FLC opened for raw material purchase, is not eligible for deduction U/s 80 IC ignoring the submissions, pleading and evidence on record and alternatively be reduced from the cost of raw material ....
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....essment year 2007-08, issue being covered by Meghalaya Steel Ltd.) (Page No.1-23 of Compilation of Judgments), whereas, so far as the issue of sales tax rebate under sales tax deferment scheme is concerned, the Hon'ble Supreme Court has allowed Civil Appeal No. 15563 & 15564 filed by Appellant against the P&H High Court judgment in case No. ITA 352/2013 decided on 4.8.2015 for assessment year 2007-08. The relevant part of the order of the Hon'ble Supreme Court in group of cases with the lead case being Commissioner of Income Tax vs M/s Vijay Steel Industries in Civil Appeal No.5107/2015 Dt.21-09-2017 is as under:- "After hearing the learned counsel for the parties we find that the issue raised in these appeals is covered against the Revenue by the decision of this Court in " Commissioner of Income Tax, Madras Vs. Ponni Sugars and Chemicals Ltd." reported in (2008) 9 SCC 337, or in the alternate, in "Commissioner of Income Tax Vs. M/s. Meghalaya Steels Ltd. ", reported in (2016) 3 SCALE 192. Therefore, the appeals of the Revenue are dismissed and the appeal (s) of the assessee(s) is allowed. However, in a particular case, if it is found that the facts or issue is di....
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....industry, then the receipts are to be considered as capital in nature. However, if the receipts are in the nature of facilitation / helping hand to the trade, the same are to be construed as Revenue in nature. What is important is the object for which the subsidy / incentive is granted. That the object is carried out in a particular manner is irrelevant. Once the object of the subsidy was to industrialize the State and to generate employment in the State, the fact that a subsidy took a particular form and that it was granted only after commencement of production, would not make any difference. The Hon'ble Supreme Court made reference to the decision of the Hon'ble J&K High Court in the case of 'Shri Balaji Alloys v CIT' (supra), wherein, the Hon'ble High Court while considering the scheme of refund of excise duty and interest subsidy, has held that the receipts were capital in nature despite the fact that the incentives were not available until and unless the commercial production has started and despite the fact that these incentives were not given to the assessee expressly for the purpose of capital assets. The relevant part of the decision of the Hon'ble Supreme ....
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....ect. That the object is carried out in a particular manner is irrelevant, as has been held in both Ponni Sugar and Sahney Steel. Mr. Ganesh, learned Senior Counsel, also sought to rely upon a judgment of the Jammu and Kashmir High Court in Shri Balaji Alloys vs. C.I.T. (2011) 333 I.T.R. 335. While considering the scheme of refund of excise duty and interest subsidy in that case, it was held that the scheme was capital in nature, despite the fact that the incentives were not available unless and until commercial production has started, and that the incentives in the form of excise duty or interest subsidy were not given to the assessee expressly for the purpose of purchasing capital assets or for the purpose of purchasing machinery. After setting out both the Supreme Court judgments referred to hereinabove, the High Court found that the concessions were issued in order to achieve the twin objects of acceleration of industrial development in the State of Jammu and Kashmir and generation of employment in the said State. Thus considered, it was obvious that the incentives would have to be held capital and not revenue. Mr. Ganesh, learned Senior Counsel, pointed out that by an ord....
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....ted 20.5.2011 in ITA No. 121 of 2011 ( Vishal Tools & Forgings Private Limited v. Commissioner of Income Tax, Jalandhar (Punjab). Today, argument have been addressed by learned counsel for the assessee on Question No.(iv) only. He submitted that netting of interest for purposes of calculation required to be done and relying upon judgement of the Apex Court in ACG Associated Capsules Private Limited vs. Commissioner of Income Tax, Central -FV, Mumbai, (2012) 3 (SC) 321 and judgement of Delhi High Court in Commissioner of Income Tax Vs. Shashi Export House, (2010) 46 DTK (Del.) 34, submitted that the matter requires to be remanded to the Assessing officer to re-compute deduction under section 80HHC of the Act in terms of the aforesaid judgement of the Apex court. 5. Ld. Counsel for the Revenue did not dispute the aforesaid submission. In view of the above, the Question No. (iv) stands answered in terms of judgement of the Apex Court in ACG Associated Capsules Private Limited's case (supra) and the matter is remanded to the Assessing officer for passing fresh order in terms of the said judgement with regard to the claim of the assessee u/s 80HHC of the Act. 20. Accordingly, b....
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....ure and character of the subsidy received on VAT deferment as 'capital receipt', we deem it fit to admit this additional ground. 18. In the additional ground, the assessee has claimed that since the subsidy on account of VAT deferment is as capital receipt, the same is not liable to be taxed taking into considering while computing the book profit u/s 115JB of the Act. He in this respect has relied upon the decision of the Lucknow Bench of the Tribunal in the case of 'ACIT Vs. L.H. Sugar Factory Ltd and Anr" in ITA Nos. 339, 417 & 418/LKW/2013, 518 & 53/LKW/569 & CO No. 26 & 27/LKW/2013 order dated l9.2.2016. The relevant issue has been discussed in para 50 of the said order, which is reproduced for the sake of convenience. "50. From the above paras, we find that the Tribunal has duly considered the judgment of the Hon'ble Apex Court rendered in the case of Apollo Tyres Ltd. ((Supra) and thereafter, it was noted by the Tribunal in this case that as per the decision of Special Bench of the Tribunal rendered in the case of Rain Commodities Ltd. Vs. DCIT, 41 DTR 449, if profit and loss account is not in accordance with Part II & Part III of Schedule VI to the Companies Act, 1956 b....
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....961, when it has been clearly laid down by Supreme Court in its decision in the cases of Cambay Electric Supply Industrial Co. Ltd. Vs. CIT 1978 (TR/SC) 50:1978) 1/3 ITR 84/SC) that the words derived from referred to in the section 80IC has narrower meaning than attributable to and the freight subsidy cannot be treated as profit derived from Industrial Undertaking through it may be attributable to Industrial Undertaking? 2. In the facts and circumstances of the case, Ld. CIT(A) has erred in holding that the Transport Subsidy was rightly taken into consideration by the assessee in working out the profits and gains of the business undertaking relying on the decision of Calcutta High Court in the case of Merino Ply and Chemicals Ltd. Vs. CIT (1004) 122 CTR (Cal) 262 :(1994) 209 ITR 508 (Cal.) where the point in issue was whether a receipt on account of transport/freight subsidy was of a revenue nature and was inseparably connected with the business and not whether it was income derived from the business of the industrial undertaking and eligible for deduction u/s 80HH/80IA/80IB of the Income Tax Act. 1961? 3. In the facts and circumstances of the case, Ld. CIT(A) has erred in no....
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....given above while deciding ITA No. 366/Chd/2013 vide grounds No.2, 3 & 5 of the appeal of the assessee, these issues are accordingly decided in favour of the assessee. 22. Ground No.5 : Vide this ground, the Revenue has agitated the action of the CIT(A) in allowing on deduction u/s 80IC of the Act in respect of bank interest on FDRs. This issue has been dealt with by us while deciding ground No.4 of the appeal of the assessee in ITA No. 366/Chd/2013. In view of our above observation, this issue is accordingly restored to the file of the Assessing officer to decide it afresh, as per directions, given above. Ground Nos. 6 & 7 are general in nature and do not require any adjudication This appeal of the Revenue stands partly allowed. ITA No.589/Chd/2014 (A.Y. 2009-10)-Assessee's appeal 23. The assessee has filed this corresponding appeal relating to assessment year 2009-10. The assessee in this appeal has taken the following grounds of appeal:- 1. That the impugned appellate order is bad both on facts and law to the extend the additions/ disallowances have been confirmed. 2. That the learned Appellate Authority wrongly and illegally disallowed t....
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....quential in nature and does not require and adjudication. 28. Ground No.6 is general in nature and needs no specific adjudication. 29. Apart from above, the assessee has taken following additional ground of appeal :- That the amount VAT Deferment of Rs. 89,41,810/- may be excluded while computing book profits u/s 115JB as being the capital receipt and not liable to tax in view of the proposition laid down in the case of Shree Balaji Alloys & Ors. 30. The issue raised in this additional ground has already been dealt with and adjudicated by us in favour of the assessee while deciding the additional ground of appeal raised in ITA No. 366/Chd/2013. This ground is accordingly decided in favour of the assessee. In the result, this appeal of the assessee is partly allowed. ITA No.584/Chd/2014 (A.Y. 2010-11)-Revenue's appeal 31. The Revenue in this appeal has taken the following effective grounds:- 1. In the facts and circumstances of the case, Ld. CIT(A) has erred in holding that the Transport Subsidy received from the Himachal Govt. by the assessee is allowed to be included as profit derived from Industrial Undertaking and eligible as deduction u/s 80IC of the Income Tax....
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....chal Govt. for the benefit of any incentive of Sales Tax leviable on the sale of manufactured goods under Himachal Pradesh General Sales Tax Act. 1968 and the income derived from such rebate is not an income derived from industrial undertaking. However, the immediate source of this rebate was the scheme of Govt. to give such rebate and not the conduct of the business of the industrial undertaking. 5. In the facts and circumstances of the case, Ld. CIT(A) has erred in deleting the addition of Rs. 2,19,320/- made on account of Miscellanous Receipts, without appreciating the fact that these receipts have not been derived by the assessee from the business activities of the industrial undertaking 6. In the facts and circumstances of the case, Ld. CIT(A) has erred in allowing the relief on account of disallowance of Bank Interest of Rs. 21,49,556/- under section 80IC of the Income Tax Act, 1961, without appreciating the fact that the Department has not accepted the decision of Hon'ble ITAT in ITA No.643/Chd/2011 dated 17.06.2013 on the issue of deduction under section 80IC and the department has preferred an appeal before the Hon'ble Punjab and Haryana High Court, Chandigar....
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....t which has been incurred in relation to the amounts on which interest of Rs. 1684582/- ignoring the pleadings, evidence and material on record alternatively the total interest income of Rs. 3834078/- should be properly computed after deducting the expenses incurred. 3. That the learned Appellate Authority wrongly and illegally confirmed the disallowance of Rs. 4969652/- being the memorandum entries relating to the purchase value in foreign exchange of Import of raw material on credits payments and payments thereof later on, while computing the profit and gains u/s 80IC without considering the pleadings and evidence on record. 4. That the learned Appellate Authority wrongly and illegally confirmed the disallowance of Rs. 1,63,064/- being profit on sale of Bus while computing the profit and gains for deduction u/s 80IC or alternatively the amount should not be added after disallowance being not liable to tax u/s 32, without considering and ignoring the pleadings and evidence/material on record. 5. That the learned Appellate Authority wrongly and illegally is allowed the claim of deduction @ 30% on rental income of Rs. 351340/- u/s 24. 6. That the learned Appellate Author....
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....date i. e. on expiry on FLC. Bank charges at the conversion rate applicable on that date. Copy of the statement showing the value of Indian rupees on the date of receipt of material when a relevant entry passed in the books of account although no payment was made and in column-6 amount actually paid in Indian rupees on due date, is enclosed. Appellants real and actual liability of the payment is when the payment is made to the bank and not when the goods are received in the premises. The first entry was contrageneral entries and due to rate fluctuation, the plus or minus difference are taken to foreign currency exchange fluctuation account. Any plus or minus, directly effects the costs of the raw material to the assessee company. The difference is not the real income or loss arising to the assessee. The payment is made at a predetermined time which is mentioned in the FLC documents. We, therefore, submit that the sum of Rs. 49,69,652/- though shown separately infact should be reduced from the costs of the raw material. It is, therefore, submitted that the amount of Rs. 49,69,652/- is intrinsically and directly connected with the activities of the industries undertaking and mainly r....
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....le of bus is a capital receipt, hence, not liable for deduction u/s 80IC of the Act. However, he has further submitted that since the sale price is adjustable in block of asset as per section 32, hence, this income needs to be excluded even from the total assessed income. 46. We agree with the above contention of the Ld. Counsel for the assessee that the said amount being capital receipt is required to be adjusted in the value of the block of asset, however, the same is not liable to be taken into consideration while computing taxable income of the assessee. This issue in the above terms is allowed in favour of the assessee. 47. Ground No.5 : The assessee vide ground No.5 has agitated the action of the lower authorities in disallowing the claim of standard deduction @ 30% on account of rental income. In our view, the lower authorities have rightly denied the claim of rental income to be eligible for deduction u/s 80IC of the Act. However, we find force in the contention of the Ld. AR that the standard deduction of 30% out of rental income is allowable to the assessee as per the statutory provisions of section 24 of the Income tax Act. This ground is accordingly allowed and th....
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....loys & Ors. 52 The issue raised in this additional ground has already been dealt with and adjudicated by us in favour of the assessee while deciding the additional ground of appeal raised in ITA No. 366/Chd/2013. This ground is accordingly decided in favour of the assessee. In the result, this appeal of the assessee is partly allowed ITA No.1101/Chd/2016 (A.Y. 2011-12 -Revenue's appeal) 53. In this appeal, the Revenue has taken following grounds of appeal: 1. In the facts and circumstances of the case, the Ld. C1T(A) has erred in deleting the addition of Rs. 64,29,094/- made by the AO on account of interest free advances without appreciating the judgment given by Hon'ble Punjab & Haryana High Court in the case of M/s. Abhishek Industries Ltd. (2006) 286 ITR. 2. In the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 54,75,479/- made by the AO on account of disallowance of proportionate interest on investments made without appreciating the judgment given by Hon'ble Punjab & Haryana High Court in the case of M/s. Abhishek Industries Ltd.(2006) 286 ITR. 3. In the facts and circumstances of the case, the Ld. CIT(A) h....
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....in respects of Misc. receipts. This issue has been discussed by the Ld. CIT(A) in para 9 of the order. The Assessing officer held that the Misc. receipts of Rs. 1,64,980/- was not income earned from the business activity of the assessee and, hence, was not eligible for deduction u/s 80IC of the Act. The Ld. CIT(A), however, has given a finding that these receipts were in fact re-imbursement of the expenditure claimed by the assessee in earlier years and, hence, these were relating to the business activity of the assessee and thus the reimbursement of the same goes into increase the income of the assessee which otherwise was eligible for deduction u/s 80IC of the Act. In view of this, we do not find any infirmity in the order of the CIT(A). This appeal of the Revenue is therefore, dismissed. 58. Ground Nos.4 & 5 are general in nature and do not require any specific adjudication. In the result, this appeal of the Revenue is dismissed ITA No. 585/Chd/2013 (A.Y. 2008-09) - Revenue's appeal:- 59. In this appeal, the Revenue has taken following grounds of appeal: 1. In the facts and circumstances of the case, the Ld. C1T(A) has erred in deleting the penalty of Rs....