TaxTMI 
TaxTMI 
2022 (1) TMI 922
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....1.11.2018 passed by the ld. CIT (Appeals), Rohtak of the Income-tax Act, 1961 (for short 'the Act') for the quantum of assessment passed under section 143(3) of the Income-tax Act, 1961 (for short 'the Act') for the Assessment Year 2003-04. 4. In the grounds of appeal, the assessee has taken the following grounds:- "1. That the Commissioner of Income Tax (Appeals) erred on facts and in law in not adjudicating on the claim for exemption of sales tax, entry tax and electricity duty subsidy amounting to Rs. 11,10,63,938 in the absence of previous such claim in the original or a revised return without appreciating the fact that the subject claim is legal in nature and has universal application in earlier as well as in the succeeding years. 2. That the Commissioner of Income Tax (Appeals) erred on facts and in law in upholding the action of the assessing officer in partly disallowing expenditure incurred on aircraft, to the extent of Rs. 1,10,607 alleging that the same was expended for non-business purposes. 3. That the Commissioner of Income Tax (Appeals) erred on facts and in law in setting aside the issue regarding disallowance of commission amounting to Rs. 6,55,809, paid t....
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....e case as culled out from the records :- 5.1 The assessee from the year 2000 onwards had setup new industrial units entailing an investment exceeding Rs. 1,000 crores at Raigarh, which is a backward and tribal area of the then State of Madhya Pradesh. The said units included, inter-alia, the following: * 1.5 lac Ton capacity Rotary Kiln for manufacturing sponge iron setup in 2000-01; * Captive Power Plant. * 5 lac Ton capacity Universal Beam/ Rail Mill setup in financial year 2003-04. The then Government of Madhya Pradesh, vide notifications dated 24.4.2000, exempted the assessee from payment of Central Sales tax and Entry tax involving investment of Rs. 1000 crores or more and from payment of Electricity duty vide notification dated 29.07.2000. Under the aforementioned scheme, the assessee availed exemption on account of sales tax, entry tax and electricity duty aggregating to Rs. 11,10,63,938. The said incentives/ subsidies were claimed as capital receipts by the assessee before the CIT(A) by filing application for admission of additional ground. Though the additional ground was admitted, the CIT(A), however, did not adjudicate the claim on merit relying on the decision o....
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....ellate Tribunal under section 254 of the Income-tax Act, 1961. There shall be no order as to costs." 6.3 Further, without prejudice to the aforesaid, he submitted that, alternatively, the aforesaid claim made by the assessee may be adjudicated on merits, by treating the same as a fresh claim made before this Hon'ble Bench of the Tribunal during the appeal proceedings. 6.4. Reliance, in this regard, was placed by the Ld. Counsel on the following decisions wherein the Courts and various Benches of the Tribunal have consistently held that there is no bar/ prohibition on the authority of an authority (other than the assessing officer) to consider fresh claim(s) made by the assessee: * CIT v. Jai Parabolic Springs Ltd.: 306 ITR 42 (Del. HC) * CIT v. Sam Global Securities Ltd: 360 ITR 682 (Del) * CIT v. Sain Processing & Wvg. Mills (P) Ltd.: 325 ITR 565 (Del) * CIT v. Ramco International: 332 ITR 306 (P&H) * CIT v. Pruthvi Brokers and Shareholders (P) Ltd.: 208 Taxman 498 (Bom.) * CIT v. Arvind Mills LTD: ITA No. 1407 of 2011 (Guj.) * CIT v. Aspentech India Pvt. Ltd.: ITA No. 1233/ 2011 (Del. HC) * JCIT v. Hero Honda Finlease Ltd.: 115 TTJ 752 (Del. ITAT) (Third Member....
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.... passed in respect of Exempt Entry Tax. Electricity Duty General Treatment: - Paid and charged off to revenue in power & fuel account. For Exempted Units: - No separate Accounting Entry was passed in respect of Exempt Entry Tax." 9. The purpose of grant of subsidy/incentive has been brought on record before us in the tabulation form to demonstrate that intention of State Government of Madhya Pradesh behind providing incentives to integrated steel plants and other mega industries was to promote industrialization of backward areas, development of state, generation of employment, objects in larger public interest: Date/ Period Particulars Remarks 03.06.1993 Government of Madhya Pradesh issued Notification No. A-3-14-92-ST-V(50) granting exemption of sales tax under State Act and Central Act to Rs. 1000 crore plus integrated Steel Plants. The notification was issued to attract fresh mega investments in steel plants in the State of Madhya Pradesh for industrialization, development of State and generation of employment as evident from the conditions laid down in the notification for claiming exemption. It is, at the outset, clarified that it is not at all the case of th....
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....ument for industrial development. i) Place Madhya Pradesh among the ranks of the industrially developed States. ii) Ensure balanced regional development by giving additional facilities in "No Industry" Development Blocks. iii) Accelerate the pace of industrial development in the State through greater utilization of the State's human and natural resources. iv) Create more direct and indirect employment opportunities v) Encourage entrepreneurship among members of Scheduled Castes, Scheduled Tribes, Other Backward Classes and those below the poverty line. vi) Encourage Women entrepreneurship. vii) Create special opportunities for the accelerated development of rural industries. viii) Create new opportunities for the development of the small sector." ix) Create new opportunities to attract new investments in the large and medium sector. x) Facilitate synergistic linkages between small scale units and large & medium enterprises. xi) Encourage hi-technology based industries. xii) Creation of special facilities, 100% Export Oriented Units. xiii) Encourage investment by Non-Resident Indians. xiv) Encourage the establishment of industries in the "th....
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....functioning of large and medium industries by catering to their needs of raw materials and intermediate goods. Large and medium industries can also benefit from the upgradation of skills in the tiny and small sector. Synergy from such linkages will contribute to industrial development in a measure far greater, than the sum of their individual efforts. The State Government will encourage the developing and strengthening of such linkages. .............. 7.20 A target for establishing four hundred new large and medium enterprises has been set for the next five years." Again the assessee seeks to refer to and rely upon this notification to emphasize that endeavor of the State Government of Madhya Pradesh behind providing tax incentive had always been promotion of industrialization in the State and generation of employment. It may also be clarified that the aforesaid policy was initially in force for a period of 5 years. Thereafter, the operation of the Policy was extended by a period of four years till 2003 [refer Preface to the subsequent Industrial Promotion Policy-2004] 06.10.1994 Pursuant to Industrial Policy and Action Plan, 1994, Government of Madhya Pradesh issued Not....
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.... of Madhya Pradesh; * Letter dated 08.06.1999 to Madhya Pradesh State Industrial Development Corporation submitting circular issued by Government of West Bengal in support of assessee's suggestion for implementation of incentives; * Letter dated 12.10.1999 to the Chief Minister for approval of incentive package. * Letters dated 1.11.99 and 26.11.99 to the State Government for relaxation of certain conditions of the existing notification dated 7.11.97. Considering the long term intention/ motive of the State Government relating to industrialization as expressed in the Industrial Policy and Action Plan, 1994, the assessee applied for creation of a special incentive package for the assessee to enable it to set up integrated steel plant in Raigarh district of Madhya Pradesh. These documents forms part of records of the Department/ assessing officer in as much as the same was relied upon by the CIT while passing order under section 263 of the Act for A.Y 2008-09 and the assessing officer while order consequential to the order of the CIT prior to making the impugned assessment order. Dec' 1999 to April 2000 ....
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....f grant of incentives to the assessee. Since the industrial units proposed to be set up by the assessee were not covered by earlier notifications, the appellant made repeated requests to the Government for considering and notifying the special incentives to incentivize huge investment in the backward areas. The request of the assessee was internally debated by the Government of Madhya Pradesh and finally the Council of Ministers in the meeting held on 03.02.2000 considered and approved the incentives to be given to the assessee. Pursuant to the aforesaid decision, directions were given to the concerned departments to draft suitable notifications for implementation of the decision. Later, specific notifications were issued on 24.04.2000 and 29.07.2000 in respect of sales tax, entry tax and electricity duty. The aforesaid documents/ correspondences establishes, beyond any doubt, that the purpose of granting incentive/ subsidy to the assessee was to achieve achievement industrialization and consequent development of the under-developed areas of the State, for employment generation, for development of ancillary industries/ business, etc., which are objects in larger public inte....
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....he assessee made investment of more than Rs. 1000 crores. 10. Thus, it has been submitted before us that the incentive/ subsidy was granted to the assessee to advance the larger public interest of ensuring development in the backward/ tribal areas of the then State of Madhya Pradesh and also to create employment opportunities. The purpose/ object of grant of subsidy for setting up of the new integrated steel plant by the assessee, was in larger public interest for development of the region/ State. Thus, applying the "purpose test", it was stated that it is clear that incentive/ subsidy availed by the appellant, is clearly in the nature of a capital receipt, not liable to tax. 11. Further, it was pointed out that in order to appreciate the facts, certain additional evidences have been furnished which was obtained by the assessee by way of RTI application in July 2014, which were in the form of letters/documents/notifications etc. which are already available with the AO and also in the public domain. Further, similar evidences have been filed before the Tribunal during the appellate proceedings for AY 2008-09 in the appeal u/s 263 and 143/263 of the Act which were admitted and cons....
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....y exempting the assessee from sales tax, entry tax and electricity duty in the public interest: * Notification dated 24th April, 2000 was issued in respect of Sales Tax under section 8(5) of the Central Sales Tax Act, 1956; * Notification dated 24th April, 2000 was issued in respect of Entry Tax under section 10 of the Entry Tax Act, 1976; * Notification dated 29th July, 2000 was issued in respect of Electricity Duty under section 3B of the Madhya Pradesh Electricity Duty Act, 1949. 17. We have considered the scheme and the objective of the subsidy. In the case of taxation of incentives/subsidy, what all needs to be examined is purpose test and the objects for which the said segments were notified by the State Government. Here, in this case, as noted from the incentive schemes, it was given to various industries for setting up necessary infrastructure in the backward areas of the State and not for enhancing the profitability of the eligible unit. Incentive received under the scheme by way of exemption from payment of certain taxes or duties was just a mode adopted to disburse the incentives by the State Government. The taxation of incentive/subsidy is determined by the pu....
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.... in respect of revenue items, the intent of the concession/rebate being the development of the rural economy and upliftment of backward areas, the same would, in our view, be in the nature of capital receipt not liable to tax. 21. It is pertinent to note that, a similar issue has been considered by the Special Bench of the Tribunal in the case of DCIT v. Reliance Industries Limited reported in 88 ITD 273 (Mum). In that case, the assessee Patalganga unit was eligible for the incentives announced by the Government of Maharashtra under its Scheme of year 1979, wherein the assessee was exempt from liability for payment of sales tax for a period of 5 years. The assessee claimed the sales tax exemption amount as capital receipt not liable to tax. The aforesaid claim was rejected both by the assessing officer and the CIT (Appeals) on the following grounds: * Under the scheme announced by the State Govt., the assessee was not required to charge any sales tax from its customers and to pay any purchase tax on its purchases. * No amount of subsidy either in cash or in kind had been given by the Government. * In the invoices, the assessee did not charge any amount separately under the h....
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....: "24. A close reading the Office Memorandum and the amendment introduced thereto with para No. 3 appearing in the Central Excise Notification Nos. 56 and 57 of 11-11- 2002, thus, makes it amply clear that the acceleration of development of industries in the State was contemplated with the object of generation of employment in the State of Jammu and Kashmir and the generation of employment, so contemplated, was not only casual or temporary; but was on the other hand, of permanent nature. 25. Considered thus, the paramount consideration of the Central Government in providing the incentives to the New Industrial Units and Substantial Expansion of the existing units, was the generation of employment through acceleration of industrial development, to deal with the social problem of unemployment in the State, additionally creating opportunities for self-employment, hence a purpose in Public Interest. 26. In this view of the matter, the incentives provided to the Industrial units, in terms of the New Industrial Policy, for accelerated Industrial development in the State, for creation of such industrial atmosphere and environment, which would provide additional Permanent source of....
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....se (supra) and Ponni Sugars & Chemicals Ltd.'s case (supra). 31. The finding of the Tribunal that the incentives were Revenue Receipt is, accordingly, set aside holding the incentives to be Capital Receipt in the hands of the assessees." 25. Most pertinently, appeal filed by the Revenue against the order of the Hon'ble High Court, vide order dated 19.04.2016, has been dismissed by the Hon'ble Supreme Court in Civil Appeal No. 10061 of 2011. 26. In view of the aforesaid legal position and since all the Notifications issued by the State Government for different reimbursements/ remissions, pursuant to the Scheme and in furtherance of the avowed objectives of the State Government in issuing the Scheme, the incentive/ benefit/ subsidy being made available, it has been stated that, it is clearly in the nature of capital receipt not liable to tax under the Act. Even if any concession/rebate is given in respect of revenue items, the intent of the concession/rebate being the development of the rural economy and upliftment of backward areas, the same would still be in the nature of capital receipt not liable to tax. 27. Before us, it has been pointed out that the aforesaid issue of t....
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....ts of Hon'ble High Courts and Hon'ble Supreme Court wherein similar issue has been decided in favour of the assessee. 31. First of all, the decision of Sawhney Steel (supra) has been misconstrued for the reasons that In para 49, the Tribunal agreed with the assessee's contention that the object of the industrial policy was to industrialize the State and utilize the human resources with an aim to increase employment for better utilization of human and State resources and also agreed that the industrial policy used taxation as an instrument for increasing employment and developing scenario linkages between different sectors. 32. The Tribunal, however, concluded despite accepting that the purpose behind disbursement of subsidy was, inter alia, industrialization of the State and generation of new employment opportunities, that the subsidy received was taxable revenue receipt, proceeding on an erroneous premise that on identical facts, the apex Court in Sahney Steel (supra) held similar subsidy/ incentive to be revenue receipt. 33. In fact, in the case of Sahney Steels (supra), the Court rejected the claim of the assessee that subsidy was granted to encourage setting up of new indus....
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.... of Ponni Sugar (supra) as noted by the Tribunal, while deciding the appeal of the assessee, first of all, in the case of Ponni Sugar, Hon'ble Apex Court did not hold that the subsidy received by the assessee to be a capital receipt solely on the ground that the amount received was to be utilized for repayment of loan. The fact that there was an obligation to utilize the subsidy for repayment of loan was referred to as an additional factor in support of the conclusion that the subsidy received was in the nature of capital receipt not liable to tax, on application of "the purpose test", i.e. the purpose for which subsidy is given. This is clearly evident from the discussion on the said issue on pages 399 to 401 of the judgment (306 ITR 392). 37. On perusal of the aforesaid, it will be noticed that in para 14, the Supreme Court, first considered the principles laid down by the Supreme Court in the case of Sahney Steel (supra). Thereafter, the Supreme Court discussed the decision of House of Lords in para 15 and subsequently, in para 16 referred to the fact that in the facts of that case there was also an obligation on the assessee to utilize the money for repayment of loan. The ulti....
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....6513-6514 0f 2012, judgement dated 7.12.2017 wherein Hon'ble Apex Court has upheld the judgment of Hon'ble Bombay High Court in case of CIT vs. Chaphalkar Brothers 351 ITR 309 wherein it has been held that the purpose for which the subsidy was given was the relevant factor and if the object of subsidy was to enable the assessee to set up new unit, then the receipt of the subsidy would be on capital account. The Hon'ble Court observed that, once the object of the subsidy was to industrialize the state and to generate employment in the state, (like the case here), the fact that the subsidy took particular form and the fact that it was granted only after the commencement of production would make no difference. These judgments in the case of Chaphalkar Brothers and the decision of Hon'ble Apex Court in the case of Balaji Alloys (supra) has been rendered subsequent to the decision of the Tribunal in AY 2004-05, therefore, the Tribunal did not give the benefit of these judgments. 42. In the case of Chaphalkar Brothers (supra), the Hon'ble Court has held that subsidy is not meant for repaying the loan taken for construction of multiplex could not be a ground to hold that the subsidy rece....
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....ore the CIT(A), Rohtak in separate appeals for the assessment years 2003-04 and 2004-05. In the order dated 18.08.2008 passed by the CIT(A) for the assessment year 2004-05, it was held that existence of the M/s. Shree Ganesh Steel Rolling Mills Pvt. Ltd., prima facie, cannot be disputed. However, since the assessing officer had referred to certain enquiries which were not confronted to the assessee, the CIT(A) directed the assessing officer to conduct further enquiries on the said issue, observing as under: "............. On a perusal of the additional evidence it has been found that the existence of M/s Shri Ganesh Rolling Mills, prima facie, cannot be disputed. However, since the AO has conducted physical enquiries, the nature and results of which have not been confronted to the assessee, the AO is directed to further conduct enquiries on this issue for which the assessee is being directed to co-operate in the proceedings; in case the AO is satisfied as to the existing of the concern that he should allow the commission claim of the assessee after examining whether the three conditions i.e. identity of the recipient, the services rendered by the recipient of the commission an....
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....section 115JB of the Act to the extent specified in section 80HHC even while computing 'book profits' 1.1 That the assessing officer failed to appreciate that the entire export profits are allowable as deduction while computing 'book profits' under section 115JB and the same are not required to be restricted to the extent specified in sub section (1B) of the section 80HHC of the Act. That the assessing officer failed to appreciate that the entire export profits are allowable as deduction while computing 'book profits' under section 115JB and the same are not required to be restricted to the extent specified in sub section (1B) of the section 80HHC of the Act." 57. The facts in brief are that the assessee filed return of income declaring Nil income under the normal provisions of the Act, after claiming deductions under section 80IA and 80IB of the Act. Tax was however, paid by the assessee on deemed income of Rs. 1,78,94,70,272 in accordance with the provisions of section 115JB of the Act. In the return of income, the assessee claimed deduction under section 80HHC to the extent specified in sub-section (1B) of that section, in respect of export profits allowable while computi....
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....rious allottees of the coal block, including the assessee, to pay an amount of Rs. 295 per metric ton of coal extracted as an additional levy in order to compensate the exchequer based on the assessment Report on Performance Audit of Allocation of Coal Blocks and Augmentation of Coal Production (Ministry of Coal), issued by Comptroller and Auditor General of India ("CAG"). 63. Pursuant to the order of the Hon'ble apex Court, the assessee paid Rs. 2000 crore (approx.) under protest during the financial year 2014-15. The assessee also filed review petition before the Hon'ble Supreme Court, which was dismissed vide order dated 28.01.2016. 64. The aforesaid amount of additional coal levy paid by the assessee includes an amount of Rs. 62,42,42,420 relating to coal extracted during the previous year relevant to assessment year 2003-04. Complete bifurcation of levy of coal quantified year wise based on the extraction done during various years is tabulated as under:- (Amount in Rs.) Financial Year Total Paid Charged-off to PL Account in FY 2014-15 and claimed deduction Paid under protest 1998-1999 10,825,025 6,007,380 4,817,645 1999-2000 230,294,700 146,705,565 83,589,135 2....
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....amount towards advertisement expense and claimed deduction of same. Facts revealed that said advertisement expense was for two upcoming projects of assessee which was held to be capitalized. The Tribunal was, however, pleased to direct the assessing office to allow the claim of such expenditure in the year in which the projects were completed. * Delhi Bench of the Tribunal in the case of CIT vs. HMA Udyog Ltd. (ITA No. 2230/Del/1999), following the order in the case of Perfect Equipments (supra), held that the expenditure is to be allowed in the year to which it pertains. * Reference may also be made to the decision of the Hon'ble Supreme Court in the case of Rama Bai v. CIT: 54 Taxman 496 wherein the, considering the accrual/ mercantile system, their Lordships held that interest on enhanced compensation for land compulsorily acquired under the Land Acquisition Act, 1894 could not be taken to have accrued on the date of the order of the Court granting enhanced compensation but has to be taken as having accrued year after year from the date of delivery of possession of lands till the date of such order. 67. After considering the submissions and perusal of the material placed on....
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.... rate of power for the purposes of computation of deduction under section 80IA of the Act in terms of sub-section (8) of that section instead of the price of Rs. 3.29/3.72 per unit adopted by the assessee as under: Rs. 3.29 per unit : rate adopted for Raipur unit Rs. 3.72 per unit : rate adopted from other captive units. 70.1 The CIT(A), however, considering the submissions of the assessee, deleted the aforesaid disallowance of deduction under section 80IA of the Act made by the assessing officer pursuant to which Department is in appeal before us. In this regard, it has been submitted that order of the CIT(A) is liable to be upheld for the following reasons: 71. The aforesaid power generating undertakings were set up by the assessee on a stand-alone basis and were capable of being operated independently. The power undertakings were set up to meet the power requirements of the manufacturing units looking at the scarcity of power, in order to ensure uninterrupted and un-fluctuated power supply, which was crucial for attaining operational efficiency. The power generated from the said undertakings was mainly consumed for captive purposes in the manufacturing operations of the a....
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....n terms of the provisions of the said section, without appreciating that said rate being imposed upon assessee by SEB cannot be said to be the market rate of electricity, in accordance with normal demand and supply conditions prevailing in the market. Further, the price charged by SEB from various industrial consumers, i.e. @ Rs. 3.29/3.72 per unit, being levied without any restrictions/ conditions, could reasonably be said to be the true reflective of the market price of electricity for the following reasons: 77. The sub-section (8) of section 80-IA of the Act clearly mandates that the price at which goods are to be transferred from one business of the assessee to another business should correspond to the market value of such goods for computing the profits of the eligible business. The expression 'market value' has been defined in Explanation to sub-section (8) to section 80-IA of the Act, as the price which such goods would ordinarily fetch when sold in the open market. 78. It was further submitted before us that in order to determine the market price of any goods or services, open market conditions must exist, i.e., there is willingness on the part of the buyer to purchase an....
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....en market. This is neither the rate at which electricity is sold by MPEB to the ultimate consumer and/or to the assessee. 82. The power is supplied by SEB to the assessee and other industrial users at the industrial rate of Rs. 3.29/3.72 per unit (as stated above). As against this, purchase rate of power was fixed at Rs. 2.32 per unit. 83. The rate fixed by the SEB, cannot, thus, be treated as the market price of power. The market price, as noted above, is the price determined by the market forces prevalent in the open market. The open market requires willing buyers and purchasers ready to trade at a price determined by the market forces. As against this, in the instant case, the price is determined and dictated by the Power Purchase agreement. The Power Purchase Agreement is entered into in terms of section 43 of the Electricity (Supply) Act, 1948. Section 43A further lays down the terms, conditions and tariff for sale of electricity by the power generating companies like the assessee. Sub-section (2) of section 43A provides that the tariff for sale of electricity to the Board shall be determined in accordance with certain specified norms and factors determined by the Central Go....
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.... provisions of sub-section (8) of section 80-IA of the Act. Accordingly, the order of the ld. CIT (A) is confirmed and the ground raised by the Revenue is dismissed. GROUNDS NO.2 & 3 88. Facts in brief are that in the return of income for relevant assessment year, the assessee had claimed depreciation of on the assets of the power generating undertaking, viz. Turbine and 220KV transmission lines, at the rates specified in Appendix 1 read with Rule 5(1) of the Income Tax Rules, 1962 (`the Rules'). The depreciation was claimed on the written down value of the assets. The assessing officer, however, allowed the depreciation of Straight Lime Method (SLM). Details are as under: (figure in Rs.) Depreciation on As per the assessee ('WDV' Method) As per the assessing officer (SLM Method) Disallowance made by the assessing officer Turbines 1,60,52,419 1,59,10,047 1,42,372 220 KV Transmission lines 2,36,30,757 49,81,364 1,86,49,393 The depreciation was claimed on the written down value of the assets in view of the position in law, which is stated as under. 89. In terms of clause (i) of sub-section (1) of section 32 of the Act, an undertaking engaged in generation of power i....
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....te/ percentage specified in Appendix (1A) of the Rules on the actual cost of the assets. Second proviso to sub-rule (1A) provides that the undertaking may instead of claiming depreciation under sub-rule (1A), claim depreciation under sub-rule (1) read with Appendix 1 to the Rules. Third proviso to sub-rule (1A) further provides that once the assessee exercises the option of claiming depreciation under sub-rule (1), the assessee would, in the subsequent years, be bound by the said option. In that case, the assessee would be bound to claim depreciation in all the subsequent years in accordance with sub-rule (1) of Rule 5 of the Rules. The assessee has to exercise the option of claiming depreciation under sub-rule (1) and not sub-rule (1A) in the first year. 91. The power generating undertaking of the assessee commenced operations in the previous year relevant to the assessment year 1999-00. In the assessment year 1999-00, the first year of the operation of the undertaking, the assessee exercised the option of not claiming depreciation at the rates specified in Appendix 1A. In the return of income for the said year, depreciation was calculated and claimed in accordance with sub-rule ....
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.... present case the assessee is bound by the option exercised in the initial assessment year and has, in any case, to claim depreciation only as per sub-rule (1) of Rule 5 of the Rules and there is no choice/ discretion or option left to the assessee to have claimed depreciation on any basis, other than on which depreciation was claimed in the initial year. Thus, the assessee is legally eligible/ entitled to claim depreciation under Rule 5(1) of the Rules since the option of claiming the depreciation under the said sub-rule was availed in the first year of the power generating undertaking. 95. Thus, it was submitted that the assessing officer erred in denying depreciation under sub-rule (1) of Rule 5 of the Rules as per WDV method. 96. The aforesaid issue otherwise, is now covered in favor of the assessee by the decision of the Delhi Bench of the Tribunal in the case of the assessee for the assessment year 2000-2001 in ITA No.3663/Del/2005. 97. To the same effect are the decisions of the Delhi Bench of the Tribunal in assessee's own case for assessment years 2001-02 and 2004-05, in Additional CIT v. Jindal Steel & Power Limited reported in 16 SOT 509 and ACIT v. Jindal Steel & Po....
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....DCIT: 304 ITR 167 (Mum. ITAT) * Prism Cement Limited v. JCIT: 285 ITR 43 (Mum. ITAT) 102. Hon'ble Bombay High Court in the case of Vodafone India Services Pvt. Ltd. v. ACIT reported in 368 ITR 1 has also held that money received on account of share capital is capital in nature not chargeable to tax. 103. In view of the aforesaid judgments, we do not find any infirmity in the order passed by the ld. CIT (A) in deleting the said addition holding that money received on account of shares is capital in nature and accordingly, the same is confirmed. Consequently, ground no.4 is determined against the Revenue. GROUND NO.5 104. Facts in brief are Under the scheme of restructuring, Raigarh and Raipur divisions of M/s. Jindal Strips Limited were demerged into the assessee company with effect from 2.4.1998. As a consequence of taking over the assets and liabilities of, inter alia, the Raipur Division, loan of Rs. 576.33 advanced by Jindal Strips Ltd to Jindal Holdings Ltd. devolved upon the assessee company. The loan advanced was originally interest bearing and provision for interest receivable was made by the assessee company during the financial year 1999-2000. Due to the adverse fin....
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....cs comprised of Share Premium Account only, which is an amount received on capital account; * There was no effective source of income of M/s Jindal Holdings Limited in order to enable it to service interest payment. Further, as a consequence of assessee not having charged any interest on the principal amount, the assessee was able to recover part of the principal amount from Jindal Holding Limited in March, 2005 and March, 2006, which was otherwise doubtful of recovery. 107. In the aforesaid circumstances, the disallowance of interest was clearly not justified. Further, Accounting Standard AS-9 on Effect of Uncertainties on Revenue Recognition, wherein it has been stated that where there is uncertainty regarding ultimate collection of, inter alia, interest, it may be appropriate to recognize revenue only when it is reasonably certain that ultimately collection will be made. 108. Taxation of the aforesaid amount is, contrary to the settled principle of taxation of real income and not any notional/ hypothetical income, as has been held in the following cases: * In Godhra Electricity Co. Ltd. v. CIT: 225 ITR 746 (SC), the assessee, an electricity supply company, unilaterally en....
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....of Income Tax (Appeals), Rohtak has grossly erred on facts and in the circumstances of the case and in law in not accepting the decision of the Special Bench of ITAT in the case of DCIT v. Reliance Industries Ltd. (2005) 273 ITR AT 16/88 ITD 273, whose facts are identical to that of the assessee company. 4. That the Commissioner of Income Tax (Appeals), Rohtak has grossly erred on facts and in the circumstances of the case and in law in not allowing the subsidy amounting to Rs. 76,80,01,382/- as capital receipt for the reason that the benefit of the subsidy part became operative only at the time of commencement of the production, therefore revenue receipt in defiance of the decision of the Hon'ble Supreme Court in the case of Ponni Sugars &Chemicals Ltd. v. CIT (2008) 174 Taxman 87 in which it was held that the point of the time when the subsidy is paid is not relevant. 5. That the Commissioner of Income Tax (Appeals), Rohtak has grossly erred on facts and in the circumstances of the case and in law in disallowing a sum of Rs. 5,65,575/- out of the expenditure on running and maintenance of aircrafts for alleged non business use. 6. That the Commissioner of Income Tax (Appeals....
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....as ESOP expenditure amortized equally over the vesting period. The details of such expenditure, which were duly submitted before the assessing officer/ CIT(A). 117. After considering the aforesaid facts and after hearing both the parties, we find that now the issue whether expenditure incurred in order to compensate employees in lieu of services rendered in the form of ESOP now stands covered by the decision of Hon'ble Delhi High Court in the case of CIT vs. Lemon Tree Hotels Limited in ITA 107/2015 dated 18.08.2015 and the decision of Special Bench of ITAT in the case of Biocon Limited reported in 144 ITD 21. This decision of the Tribunal has been affirmed by the Hon'ble Karnataka High Court vide order dated 11.11.2020 holding that employees' discount represents consideration of services rendered by the employees and hence it is a deductible business expenditure. There is no dispute that here in this case, it is an ascertainable liability since employees incurred obligation over the distinct period, notwithstanding the fact that exact amount as quantified at the time of exercising the options. Thus, following the aforesaid judgments, ESOP expenses are allowed and consequently, gr....
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....on Hospital and School as revenue Expenditure by relying the various judgments cited in the appellate order, without appreciating the facts that the said expenditure had resulted in creation of capital assets owned by the assessee. 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in deleting the addition of Rs. 9,91,30,721/- made by the AO by reducing the value of subsidy from the cost of assets for allowing depreciation. 3(a) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in appreciating the provision of Explanation 10 to section 43( 1) of the Income Tax Act; wherein "actual cost" means the actual cost of the assets 10 the assessee, reduced by that portion of the cost thereof, if any, a has been met directly or indirectly by any other person or authority. 4. Whether on the facts and in the circumstances of the case, the Ld. C1T( A) was right in deleting the disallowance of Rs.l,08,33,316/- made by the AO on account of depreciation by applying the Straight Line Method, without appreciating the provisions of section 32(l)(i) and Appendix 1 A of Income Tax Rules, 1962. 5. On the facts and in the circum....
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....nto Memorandum of Understanding (MOU) with the hospital as well as school owned by the charitable institution for special concession towards provision of medical facilities to the employees/ facilities of the assessee company. 127. Further vide resolution dated 26.05.2005 jointly signed by the assessee and Collector of Raigarh, committed itself towards further development of Raigarh city through time bound action plan for development of infrastructure. As part of that commitment also, during the relevant previous year the assessee constructed school auditorium. 128. The aforesaid initiative taken by the assessee to construct school auditorium as well as hospital also resulted in adding to the reputation/ goodwill of the company inasmuch as such expenditure helps the company in maintaining good relations with the local people of the State, which helps in smooth hassle free functioning of operations as well as sourcing good people from the local city. 129. In support of the aforesaid contentions, the assessee placed on record the following details/ documents:- (a) Memorandum of Understanding ('MOU') entered into between the assessee and JEWS. 130. On perusal of the MOU, it was ....
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....rporate social responsibility initiatives was wholly and exclusively for the purpose of business of the assessee and was an allowable deduction under section 37 of the Act. 134. Ld. DR on the other hand relied upon the order of the Assessing Officer and submitted that such an expenditure is nothing related to assessee's business and if at all then it is capital expenditure. 135. From the perusal of the aforesaid facts and on going through the order of the ld. CIT (A), we find that the expenses incurred are related to employees' welfare and for the purpose of employees and hence to be reckoned as expenditure incurred for the purpose of business. The assessee is carrying on the business/manufacturing activities in the backward and small city of Raigarh in the State of Chhattisgarh which does not have the requisite facilities and infrastructure to meet the regular/basic needs of the residents of that city including employees of the assessee company. The city of Raigarh also did not have any good school or hospital. Therefore, in order to attract qualified employees/technicians to work in such situation, the assessee is providing these facilities and created this infrastructure. Thus....
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....n, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee: Provided that where such subsidy or grant or reimbursement is of such nature that it can not be directly relatable to the asset acquired, so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee. ..........." 139. On perusal of the aforesaid, it is patently clear that only in a situation where subsidy received by the assessee is intended to meet the cost of an asset acquired by the assessee; such subsidy is required to be adjusted against the actual cost of the asset for the purposes of section 28 to 41 of the Act. 140. It was submitted that the provisions of aforesaid Explanation are attracted where the purpose behind the grant of subsidy by the Government is to meet the cost of asset, i.e. incentivize an assessee to purchase an asset or to make capital investment and not otherwis....
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.... payment, directly or indirectly, to meet any portion of the "actual cost" but intended as an incentive to entrepreneurs, its quantification determined at a percentage of the fixed capital cost. ........... 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." (emphasis supplied) 143. Though the aforesaid decision was rendered prior to the insertion of Explanation 10 in section 41(1), however, same principle would apply in the present case as subsidy was granted to the assessee to incentivize the industries in the backward areas to provide employment and such subsidy was not granted directly or indirectly for compensating the fixed assets, therefore, the same cannot be adjusted against the cost of assets. Accordingly, the order of the ld. CIT (A)is confirmed a....
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....Lease Finance Lease, in AS-19, is described as a lease that transfers substantially all the risks and rewards in respect of ownership of an asset; title may or may not be transferred under such lease. An operating lease, on the other hand, is described as a lease other than a finance lease. * The aforesaid Accounting Standard provides that under the finance lease, the lessee should recognize the asset in its books and should charge depreciation on the same. In the case of operating lease, the Accounting Standard provides that the lessee should recognize the lease payments as an expense in the profit and loss account and the lessor should recognize the asset given on lease and charge depreciation in respect of the same. 147. Thus it has been submitted that the aforesaid distinction between finance lease and operating lease is not recognized under the Act. 148. We are in tandem with the said submissions as under the provisions of the Act, depreciation is admissible under section 32 of the Act only to the `owner' of the asset. Lease charges paid for the use of the asset, without acquiring any ownership rights in the same, are allowable as revenue expenditure under section 37 of ....
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....e lessor. In fact the lessee/ assessee would be required to return back the equipments to the lessor, in case the lessee defaults in making any of the lease rent payment. 152. In view of the aforesaid, we hold that the assessing officer erred in making addition of Rs. 6,89,75,556. 153. Apart from that, it has been brought on record that since beginning of the lease agreement, i.e. assessment year 2005-06 onwards, the assessee had claiming deduction of lease rent and the same has been allowed in the assessments completed for assessment year 2005-06, 2007- 08 and 2008-09 under section 143(3) of the Act by the Assessing Officer. Since there being no change either in facts or in law in this regard, as compared to the earlier and subsequent years, the position accepted by the Department needs to be followed even on the principal of consistency. 154. Thus, in the present case also if the claim of lease rent has been allowed in the earlier and the subsequent year, but the same has been disallowed in the year under consideration, will lead to an absurd and anomalous situation, hence same is allowed. 155. In the result, the appeal filed by the Revenue for assessment year 2006-07 is dism....
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.... ITA NO.2230/DEL/2011 (AY 2007-08) FILED BY THE REVENUE 161. In the grounds of appeal, the Revenue has taken the following grounds of appeal :- "1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in restricting the claim of deduction made u/s 80IA of the Act, 1961 from Rs. 4148995760/- to Rs. 2698347031 by following his earlier order, without appreciating the additional facts and arguments brought on record by the AO for the first time in the assessment order, which is a subject matter of appeal. 1(a) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in holding that electricity rates charged by Chhattisgarh State Electricity Board from consumers constituted market price for the assessee also, when the later is not incurring any infrastructural expenditure on account of electricity transmission and distribution and had also not incurred any establishment cost in supplying power to its associates concerns or using the same for captive consumption. 2. Whether on the facts and in the circumstances of the case, the Ld. CITCA) was right in deleting the disallowance of Rs. 12345347/- made by the AO on accou....
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....ng the inter-connected additional ground on account of exemption from entry tax in respect of New Industrial Unit No.III as a revenue receipt. 4. That the Commissioner of Income Tax (Appeals), Rohtak has grossly erred on facts and in the circumstances of the case and in law in disallowing a sum of Rs. 7,82,241/- out of the expenditure on running and maintenance of aircrafts for alleged personal use of aircraft. 5. That the Commissioner of Income Tax (Appeals), Rohtak has grossly erred on facts and in the circumstances of the case and in law in confirming disallowance of proportionate value of discount of Rs. 12,79,24,400/- on stock options being offered under Stock Option Scheme (ESOS) as a part of employee compensation." GROUNDS NO.1, 2 & 3 166. Since we have already decided this issue in assessee's own case for AY 2003-04 in ground no.1, respectfully following the same, grounds no.1 to 3 taken by the assessee are allowed. GROUND NO.4 167. This issue is already decided by us in assessee's own case for AY 2003-04 in ground no.2 and respectfully following the same, ground no.4 taken by the assessee is allowed. GROUND NO.5 168. This issue has also been decided by us i....