TaxTMI 
TaxTMI 
2022 (1) TMI 731
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....strative expenses under rule 8D without recording satisfaction as required under Section 14A of Income Tax act 1961 and rule 8D(1) (a) & (b) of Income tax rules 1962. 3. That on the facts and in the circumstances of the case, the lower authorities erred in disallowing expenses without examining the direct and immediate connection with dividend income. There was no expenditure incurred "in relation to" dividend exempt income. 4. That on the facts and in the circumstances of the case, the lower authorities erred by including such investments under rule 8D(2)(iii) from which no exempt dividend is received or not likely to be exempted. 5. That on the facts and in the circumstances of the case, the lower authorities erred in law in not appreciating the difference between a "simple investment" to earn income from dividend or interest or a "Business investments" made as a promoter with a motive to hold a controlling stake with a view to manage the company. 6. It is contended that on the facts and circumstances of the case and in law, refund of Excise duty (Self Cenvat Credit) amounting to Rs. 3,29,12,376/- is a capital receipt not liable to tax under the provisions of Income Tax A....
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...., if any, u/s 14A (2) of the Act, the disallowance has to be restricted in relation to the other companies from whom the dividend has been received and that too, to the extent of actual expenditure so incurred. For this purpose, the appellant relied upon the judgment of Hon'ble Delhi High Court in the case of Maxopp Investment Ltd. vs. CIT in 347 ITR 272. 4.2 However, the ld. Assessing Officer denying the assessee's claim having regard to the nature of expenses claimed and the exempt income earned, proceeded to apply Rule 8D and worked out the disallowance at Rs. 1,95,33,819/-. The ld. CIT (Appeals) gave relief to the extent of Rs. 1,66,07,634/- on the ground that in so far as the interest expenditure is concerned, the assessee had not utilized any borrowed funds for acquisition of investments but were made from assessee's own surplus funds. However, he confirmed the computation of administrative expenses @ 0.5% under Rule 8D(2)(iii) on the total average investments and confirmed the disallowance of Rs. 29,26,185/-. 5. After hearing both the parties and on perusal of the material placed on record, we find that the Assessing Officer has nowhere recorded his satisfaction as to why ....
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....al Government has announced a new Industrial Policy and allowed various concessions for the State of Jammu & Kashmir floated by Office Memorandum dated 14th June 2002 on the request of the Government of Jammu & Kashmir for a special package for development of the industries in the State. 6.1 The Government of India, Ministry of Commerce & Industry (Department of Industrial Policy and Promotion) issued its Office Memo dated 14th June 2002 - copy thereof has been placed at page 281 of the paper book wherein it was provided that keeping in view the fact that the State of Jammu & Kashmir lagged behind in industrial development, there was need for structured interventionist strategies to accelerate the industrial development of the State and boost investors' confidence. These fiscal incentives were to be provided to the new industrial units as well as to the industrial units who have made substantial expansion. The fiscal incentive provided under the scheme is discussed in paragraph 3.1 of the Memorandum as under: (i) The new industrial units and existing industrial units on their substantial expansion, as defined, set up growth centres, industrial infrastructure development centres ....
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....merely for paying off old debts or for equipment already in place." 6.3 All these notifications, as issued by the Central Excise for the refund of central excise paid by the new industrial undertakings or who have taken substantial expansion were considered by the Hon'ble J&K High Court in the case of Shree Balaji Alloys vs. CIT in 333 ITR 335 and after considering the aims and objects of the scheme formulated by the Central Government for the refund of central excise (generally called CENVAT), held that the purpose of the scheme was to boost the industrialization of J&K to create employment opportunities in the State. 7. The ld. Assessing Officer however, held that refund of Excise credit in the form of subsidy received by the industrial undertaking though has been decided in favour of the assessee in the group concern by the ld. CIT (Appeals), however, the Revenue is in appeal before the Tribunal therefore, he held that its revenue receipt and hence taxble. Moreover, the assessee itself has shown revenue receipt and credited in the profit and loss account and consistently treated as profit of the undertaking and the deduction under Section 80IB claim. He thus rejected the asses....
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....r set of facts and nature of subsidy has treated the incentive by way of central excise refund (generally called CENVAT credits) in relation to the Jammu unit as capital receipts not liable to tax. (i) ITA No. 5124/Del/2011 dated 29th June 2018 Montage Enterprises Pvt. Ltd. vs. DCIT (Paras 9 to 60) (ii) ITA No. 2199/Del/2009 dated 20th March 2019 Ultimate Flexipack Ltd. vs. DCIT. 12. Thus, we hold that the refund of CENVAT credit on the facts of the present case is capital subsidy in view of the principle laid down by the Hon'ble apex court and also the judgement of the Tribunal in the group concern of the assessee as cited above. 13. Consequently, ground No. 2 as raised by the Revenue is dismissed as infructuous as we have already held that it is a capital receipt and not exigible to tax. 14. Regarding issue raised vide Ground No. 7, that the aforesaid subsidy being capital in nature it will also not form part of the book profit u/s 115JB. Before us the Ld. Counsel for the assessee submitted that the CENVAT credit as received by the appellant under the incentive scheme for J&K as formulated by the Central Government and treated the same as a capital receipt not liable to ta....
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....ot be part of book profit under Section 115JB also. Consequently, ground No. 7 is also allowed. 16. Before us, the assessee has raised additional grounds in respect of Sales Tax subsidy amounting to Rs. 19,22,32,000/- by way of refund of Uttar Pradesh VAT under the Uttar Pradesh Industrial Policy, 1994 as capital receipt and also to be excluded from the computation of book profit under Section 115-JB of the Act. The additional grounds raised by the appellant for the sake of ready reference are reproduced hereunder:- "(1) It is contended that the sum of Rs. 19,13,32,000/- being VAT refund claimed under Uttar Pradesh VAT Act 2008 is a capital receipt being the amount of identical amount paid by the appellant and thus not exigible to tax. (2) It is contended that sum of Rs. 19,12,32,000/- being VAT refund under Uttar Pradesh VAT Act 2008 being the nature of capital receipt is not includible in the determination of book profits under Section 115-JB of the Income Tax Act, 1961." 17. Before us, the Ld. Counsel stated that the similar additional grounds were also raised by the appellant before the CIT (Appeals) in Assessment Years 2004-05 to 2009-10 and the CIT (Appeals), after cons....
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....gress in the agricultural sector and it contributes 21 per cent of the total fertilizer produced in the country. Owing to the lack of adequate infrastructure facilities, investment in the industrial sector remains lower than the expected level. However, new industry is undergoing a rapid transformation. " 20.2 The purpose and object of managing the incentive scheme have been described in the heading 'Preface' in following words: "The underlying principal of the new industrial policy is that industrial development is an integral component of agricultural and rural progress. The prime objective of this policy is to ensure creation of maximum employment opportunities and eradication of poverty." 20.3 The objective of the scheme has also been described under the head 'Objectives' and the relevant extract is as under: * Creation of employment opportunities. * Provision of special incentives to facilitate creation of employment opportunities in the private sector for scheduled castes/ scheduled tribes, other weaker sections and the minority communities. * Speedy industrial development by making optimum utilization of available natural resources and favourable circumstances. *....
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....SECTOR PARTICIPATION IN THE DEVELOPMENT OFINFRASTRUCTURAL FACILITIES A policy for encouraging private sector participation in providing top class infrastructural facilities has been adopted. Special emphasis will be laid on providing following infrastructural facilities with the help of private sector. * Development of Model Industrial Area * Power generation and distribution * Development of Telecommunication facilities * Development of Air transport * Express highways , By-pass and bridge construction * Setting up of inland Container depot/Container freight station * Development of technology park DEVELOPMENT OF MODEL INDUSTRIAL AREA AT FOLLOWINGPLACES IN THE FIRST PHASE. It is proposed to take up the development of large model industrial Area at following places in the first place: 1. Ghaziabad 2. Akbarpur (Kanpur Dehat) 3. Gorakhpur The following places are also proposed to provide facilities for industrial development with the help of private sector. 1. Ghaziabad 2. Bulandshahr 3. Meerut 4. Muzaffarnagar 5. Saharanpur 6. Mathura 7. Aligarh 8. Moradabad 9. Bareilly 10. Shahhahanpur 11. Akbarpur (Kanpur Dehat) 12. Etawah 13. Gora....
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.... is also important apart from the development of such area. To fulfil this objective, industrial area maintenance authority will be constituted in each Industrial area. UPSIDC and Industries department shall provide assistance as members of the authority. This authority shall be self-financed and will be generating income by levying tax and fees. The Authority shall also undertake the task of development of facilities and the expansion of the area. Sanction of maps, control of housing activity and prevention of unauthorized construction and its removal shall be within the purview of the Authority. The authority will also be authorized to undertake the task of distribution of electricity. POSITIVE CHANGE IN FUNCTIONING OF THE ADMINISTRATION The State Government is committed to develop new work culture for the purpose of industrial development in the changing economic scenario. In this context, special emphasis will be laid on the following: o Positive Outlook o Friendly and Cooperative attitude o Transparency in administration o Quick decision o Rationalization of procedures o Timely sanctions o Effective coordination o Time bound disposal of problems o Informat....
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....mittee will deliberate upon the issue pertaining to industrial policy and the problems faced by industrialists. It will make recommendations on the basis of such deliberations. TRADE TAX FACILITIES/INCENTIVES Trade Tax in place of Sales Tax After the initiative taken to abolish octroi in 1990 in keeping with the commitments, the State Government has done away with the exploitative and complicated character of the Sales Tax and in its place has introduced a practical and convenient Trade Tax. Consequently, approximately 95 percent of the traders would be benefitted. A variety of relaxations in registration, tax assessment and submission of returns have been introduced and the number of forms has also been reduced from nine to four. An arrangement has also been made to ensure that all the forms are made available for the entire year to the traders at one time. The definition of capital Investment has also been rationalized under the Trade Tax Exemption Scheme. Fundamental changes have been brought about in the working of check posts and mobile squads. Rationalization of Trade Tax Structure Trade Tax structure shall be examined from time to time for the purpose of its rationalizat....
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....f Section 4A of the Act was introduced in the Trade Tax Act and the relevant extract of Section 4A of the Trade Tax Act is as under: "Section 4-A - Exemption from trade tax in certain cases (1) Notwithstanding anything contained in this Act, where the State Government is of the opinion that it is necessary so to do for increasing the production of any goods or for promoting the development of any industry in the State generally or in any district or parts of district in particular, it may on application or otherwise, in any particular cases or generally, by notification, declare that the turnover of sales in respect of such goods by the manufacturer thereof shall, during such period not exceeding fifteen years from such date on or after the date of starting production as may be specified by the State Government in such notification, which may be the date of the notification or a date prior or subsequent to the date of such notification, and where no date is so specified from the date of first sale by such manufacturer, if such sale takes place within six months from the date of starting production, and in any other case from the date following the expiration of six months from ....
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....ctioned electricity load in the manufacture of goods as distinct from the consumption in connection with the establishment of the factory or workshop. (2-B) If there is discontinuation of business, within the meaning of sub-section (1) of Section 18, of the manufacturer who was eligible for exemption from or reduction in the rate of tax under sub-section (1), whether such exemption from or reduction in rate of tax was already granted or not, and if he is succeeded by another manufacturer, by means of sale, licence, contract, lease, managing agency or in any other manner such successor manufacturer may, subject to the provisions of sub-section (3), apply to the officer competent to grant eligibility certificate under Clause (d) of subsection (2), within sixty days of such succession, for the grant, under this section, of exemption from or reduction in rate of tax for the unexpired portion of the period for which exemption from or reduction in the rate of tax was or could be granted to the former manufacturer: Provided that the aforesaid officer may, in its discretion and for adequate and sufficient reasons to be recorded in writing, entertain an application moved within six mont....
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....icy in terms of Section 4A of the Trade Tax Act shall remain continued. The relevant extract of Section 42 of UP VAT Act is as under: 42. Treatment of industrial units availing exemption or reduction in the rate of tax under erstwhile Act (1) No industrial unit,- (a) availing benefit of exemption from or reduction in the rate of tax under the erstwhile Act or under the Central Sales Tax Act, 1956 on the turnover of sales or purchase or both as the case may be, before the commencement of this Act; or (b) which is granted the benefit of exemption from or reduction in the rate of tax on the turnover of sale or purchase or both as the case may be, under the erstwhile Act or under the Central Sales Tax Act, 1956; shall be permitted to avail the benefit of exemption from, or reduction in the rate of, tax on the turnover of sale or purchase or both as the case may be, on or after the commencement of this Act. (2) The industrial unit availing the benefit of tax deferment under the erstwhile Act or under the Central Sales Tax Act, 1956 before the commencement of this Act or a unit which is granted facility of tax deferment under the erstwhile Act or under the Central Sales Tax Act....
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....rnover of sales under the erstwhile Act or the Central Sales Tax Act, 1956, shall be entitled for exemption by way of refund of net tax paid along with the return of tax period in prescribed manner and on fulfilling the conditions that,- (a) the unit shall hold valid registration certificate issued under this Act or under the Central Sales Tax Act, 1956, (b) the unit shall have a valid Certificate of Entitlement issued by the Commissioner, (c) the amount of refund shall not be more than an amount equal to net tax paid for relevant tax period, (d) the net tax payable has been deposited along with return of tax period in prescribed manner, (e) the refund shall be subject to the provisions of section 40 except that the amount shall not be adjusted against the admitted tax liability, (f) the facility of refund shall cease on the day when the amount or the period mentioned in the Certificate of Entitlement, whichever is earlier, (g) the tax payable on the turnover of sales of goods mentioned in the Certificate of Entitlement and which is manufactured in the industrial unit shall be deducted from the total amount mentioned or described in the Certificate of Entitlement, (....
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....lanation: "Earned Input Tax Credit" means the amount of admissible Input Tax Credit computed on the basis of data declared in the returns of tax period where industrial unit was availing benefit of exemption under the erstwhile Act. (5) (a) The amount found refundable shall be refunded within a period of 30 days from the last date of the month in which dealer files the return of relevant tax period. Where the return of tax period is not complete and dealer fulfils the requirement of return on a date later to the due date for filing of return of tax period, such date shall be deemed to be the date of filing of return of tax period." (b) The amount of refund shall be made in such manner as may be prescribed. (c) The industrial unit failing to deposit the net tax admittedly payable within prescribed time and in prescribed manner or deposits it after due date, the amount of interest leviable and penalty imposed if any, shall be adjusted and only the balance amount shall be refunded. (6) (a) The total amount of the refund shall be limited to the extent of the differential amount of the total eligible amount available for exemption or reduction in the rate of tax and the amount a....
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....them into the State by way of transfer other than sales, by manufacturer having his place of business in the State of Uttarakhand, (c) valid and genuine certificate issued by the Assessing Authority of the State of Uttarakhand is produced before the assessing authority of the State of Uttar Pradesh indicating therein that the amount has been reduced in the overall limit of exemption or reduction in the rate of tax available to the manufacturer. (13) Facility of refund of tax under sub section (12) shall be withdrawn, if the certificate referred to in clause (c) of subsection (12) is found false or fake and not issued by the relevant assessing authority of Uttarakhand (14) On scrutiny of accounts or subsequent investigation it is found that data furnished along with return of the tax period is found wrong or not reliable or based on no genuine material on record, without prejudice to the provisions of section 54, the excess amount refunded shall be deposited within 30days of notice received from the assessing authority along with interest at the rate of 15percent per annum with effect from the date of refund to the date of deposit, failing which the excess amount refunded shall ....
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....en in the light of the object for which various State Governments have been provided to attract investment in the nature or for other specified areas in order to boost industrialization for the investment in the interest of general public at large as well as to create employment. 24. Before us ld. Counsel submitted that in order to attract investment in the industries or other specified areas, various State Governments as well as the Central Government have launched various incentive schemes from time to time in order to boost the industrialization or the investment in a particular field or area in the interest of general public at large as well as to create employment opportunities. The courts have also examined the nature of such incentives as provided to the investors in various schemes from time to time and the courts have consistently held that the nature of incentives is linked with the purposes and objects for which the incentives have been provided under the scheme. If the purpose of incentive provided under a particular scheme is for attracting capital investment in the State and to generate employment opportunities, the incentive available to the investor assessee would ....
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.... in the case of Sahney Steel and Press Works Ltd. (supra). In that case, on behalf of the assessee, it was contended that the subsidy given was up to 10% of the capital investment calculated on the basis of the quantum of investment in capital and, therefore, receipt of such subsidy was on capital account and not on revenue account. It was also urged in that case that subsidy granted on the basis of refund of sales tax on raw materials, machinery and finished goods were also of capital nature as the object of granting refund of sales 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....
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....rinciple laid down by the Hon'ble apex court in Ponni Sugars & Chemicals (supra) held that subsidy granted by the West Bengal Government equivalent to 90% of the Sales Tax paid was also a capital receipt. Similar view has been taken by the Hon'ble Delhi High Court in the case of CIT Vs. Bougainvillea Multiplex Entertainment Centre Pvt. Ltd. 373 ITR 14 (Del). 29. Here also as noted above the object of the scheme under the Uttar Pradesh Industrial Policy and the Uttar Pradesh VAT Act, 2008 as per Section 42 provided that the benefit accrued to an assessee under the Section in terms of 4A of the Act as remained will continue and the assessee has to obtain fresh eligibility certificate which has been taken as assessee also had certificate dated 7th November, 2008, a copy of which has been placed at page 397 of the Paper book. The only difference between the earlier Uttar Pradesh Industrial Policy and the Uttar Pradesh VAT Act, the person eligible for incentives and were for availing exemption for payment of tax under the State Government and thereafter the State Government will issue the refund. For the year under consideration the assessee has placed on record relevant assessment pas....