TaxTMI 
TaxTMI 
2022 (12) TMI 1156
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....hat on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) (here-inafter referred to as 'Ld. CLT(Appeals) was not justified & grossly erred in confirming disallowance in respect of provision for leave encashment debited to Profit & Loss Account amounting to Rs.35,89,347/- in computing total income under the normal provisions of the Act. [Tax effect Rs.12,20,019] 2. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified & grossly erred in confirming the action of the A.O. in not allowing additional depreciation u/s 32(1)(iia) amounting to Rs.17,66,22,964/- in respect of new Plant & Machinery acquired and installed after 31.03.2005 but before 01.04.2009. [Tax effect Rs.6,00,34,145/-] 3. That the appellant craves leave to add, to amend, modify, rescind, supplement or alter any of the Grounds stated here-in-above, either before or at the time of hearing of this appeal." 3. During the course of hearing, the Learned Counsel for the Assessee did not press ground No.2. Therefore, the same is dismissed as not pressed. 4. The only ground remains for adjudication before us is that the Ld. CIT(A) was n....
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....easure is in sync with other deductions specified in Section 43B, which are also present and accrued liabilities. To wit, the liability in lieu of tax, duty, cess, bonus, commission etc. also arise in the present as per the mercantile system, but assessees used to defer payment thereof despite claiming deductions there against under the guise of mercantile system of accounting. Resultantly, irrespective of the category of liability, such deductions were regulated by law under the aegis of Section 43B, keeping in mind the peculiar exigencies of fiscal affairs and underlying concerns of public revenue. A priori, merely because a certain liability has been declared to be a present liability by the Court as per the prevailing enactment, it does not follow that legislature is denuded of its power to correct the mischief with prospective effect, including to create a new liability, exempt an existing liability, create a deduction or subject an existing deduction to new regulatory measures. Strictly speaking, the Court cannot venture into hypothetical spheres while adjudging constitutionality of a duly enacted provision and unfounded limitations cannot be read into the process of judicial....
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.... prejudice to the above grounds, whether the CIT(A) erred on facts and in law, directing the AO that the Sales Tax Incentive is not required to be deducted from the cost of assets, if the same is treated as capital receipts by the AO. ignoring the provisions of explanation 10 to section 43(1) of the Act. 2. (i) Whether the CIT(A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. 15,67,00,636/- stated to be collected by the assessee was capital in nature without any evidence placed on record to establish that the said amount was actually collected on account of excise duty. (ii) Without prejudice to the ground at (i) above, whether the CIT(A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs.15,67,00,636 collected by the assessee was not revenue in nature despite the fact that the same was collected by the assessee on goods which were exempted from levy of any duty as per the Central Excise Department's Notification No. 50/2002 -CE dated 10.06.2003. (iii) Whether the CIT(A) erred on facts and in the circumstances of the case and in law in holding that the excise duty o....
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....ansactions at Rs.1,30,85,426/- and disallowance of education cess on income tax and dividend distribution tax amounting to Rs.17,67,138/-. 9.1. On Grounds of appeal no.1(i) to 1(iv) of the revenue i.e., "Sales Tax Incentive under New Package Scheme of Incentives (PSI), 1993. [Rs.2,23,92734/-], the Learned Counsel for the Assessee drew the attention of the Bench with respect to the brief facts of the case are that the assessee company had set-up a manufacturing unit in backward area of Nashik, Maharashtra. The assessee company is having its manufacturing unit of Asbestos cement sheets and accessories at Lakhmapur, Nasik. The said unit at Lakhmapur was eligible for sales tax incentive as per the Government of Maharashtra resolution vie Industries, Energy and Labour Notification No.IDL/ 1088/6603/I&D-8 dated 30.09.1988 which was extended further w.e.f. 01.10.1993. Under the said scheme, the assessee company was not required to pay (i) Sales Tax "LST" and CST, additional sales tax, purchase tax, turnover tax payable on sale of finished products or purchase of material. Based on the said scheme, Sicom Ltd., the implementing agency has certified that the assessee company was eligible fo....
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.....1(11) of said 1993 Scheme gave the details of quantum of sales tax incentive which was to be calculated as percentage of fixed capital investment depending on the category of area in which the eligible unit was being set up. The Sales Tax incentive was envisaged only as an alternative to the cash disbursement and by its very nature to be available only after production commenced. Thus in effect, the subsidy in the form of Sales Tax incentive was not given to the appellant company for assisting it in carrying out the business operations. I therefore hold that Sales Tax Incentive availed by the appellant company was on capital account. The question that if a subsidy is on capital account then whether it has to be reduced from the cost of assets for allowing depreciation or not, also stands covered in the favour of the appellant company. In the case of Sasisri Extraction Ltd. Vs. ACIT (307 ITR AT. 127), it was contended that the subsidy granted under the scheme was to encourage entrepreneurs to establish industries and the mere fact that a specified percentage of the fixed capital cost was taken as the basis for determining the subsidy should not be mistaken as payment intended to su....
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....ifically intended to meet the cost of assets. In view thereof, it could not be held that the incentive received by the assessee under the Package Scheme of 1993 in the form of subsidy was covered under provisions of Explanation 10 to section 43(1) of the Act and consequently, the subsidy amount was not to be reduced from the cost of the assets". In the case of Inventaa Chemical Ltd. Vs. ACIT (42 SOT 249), the Hon'ble Hyderabad Tribunal held that the payment of subsidy was not related to the actual acquisition of assets and subsidy was granted on capital investment on kind, building and machinery, therefore it could not be reduced from the value of asset (WDV). Considering that the subsidy received by the appellant company in the present case was to promote/accelerate the development in backward areas of State of Maharashtra and the fact that disbursement was made on certain percentage of eligible investment, it did not imply that cost of assets to that extent had been met directly or indirectly by the State Government. In these facts and circumstances, the impugned addition made by the AO cannot be sustained as the Sales Tax Incentives were on capital account. Accordingly I ....
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....ocated in Bhagwanpur, Tehsil Roorkee, District Haridwar in Uttaranchal. The said Units are entitled to Excise Incentive under the Central Excise Notification No. 50/2003 -CE dated 10-06-2003 [Refer Page No. 263 -281 of FBI, since the same are situated in the specified backward area. Accordingly, the assessee availed Excise Duty Incentive amounting to Rs.15,67,00,636 and excluded the same in the Return of Income being capital receipt by relying on the Judgment of Hon'ble Supreme Court in the case of CIT vs. Ponni Sugars and Chemicals Ltd. (2008) 306 ITR 392 (SC). 14.1. However, the Learned A.O. noted that the claim of the assessee for Excise Duty Incentive is similar to Sales Tax Incentive claimed as capital receipt and hence denied the claim of Excise Duty Incentive following the reasoning given in respect of denial of claim for exclusion of Sales Tax Incentive. 14.2. Aggrieved by the order of the A.O. the assessee carried the matter in appeal before the Ld. CIT(A). The Ld. CIT(A) noted that Excise Duty Exemption availed by the assessee company was on capital account by relying on decision of Hon'ble Jammu & Kashmir High Court in the case of Shree Balaii Alloys vs.- CIT (2011) 51....
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....f the Ld. CIT(A) on this issue and dismiss the grounds of appeal no.2(i) to 2(v) of the Revenue. 17. With respect to grounds of appeal No.3 of the Revenue, the brief facts of the case are that during the previous year relevant to instant assessment year, the assessee company has debited an amount of Rs.3,62,93,426/- as loss on derivatives in the P/L account which includes mark to market loss of Rs.1,30,85,426/- in respect of the LIBOR hedging with ICICI Bank, Currency Swap Transaction with ICICI Bank and Currency Swap Transaction with Centurion Bank of Punjab [presently known as HDFC Bank]. With respect to LIBOR hedging with ICICI Bank for a CAP of 10% p.a. observed on 6 month USD LIBOR on the notional principal amount of USD 12 Million. For this arrangement, the assessee was required to pay premium @ 0.41 %p.a. semi-annually. The assessee is therefore protected against the risk of LIBOR going beyond 10% p.a. i.e. if the LIBOR crosses the level of 10% p.a., the excess over 10% shall be received by the assessee from the ICICI bank. 17.1. With respect to Currency swap transaction with ICICI Bank, whereby the assessee has notionally lent USD 6 Million and notionally borrowed JPY 707....
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....n respect of derivative transactions. The Learned Counsel for the Assessee drew the attention of the Bench Judgment of Hon'ble Apex court in the case of CITvs.- Woodward Governor India Pvt. Ltd. (2009) 312 ITR 254 (Sc) wherein the Hon'ble Court held that "loss" suffered by assessee on account of the exchange difference as on the date of the balance sheet is an item of allowable expenditure/s under section 37(1) of the I.T. Act, 1961 and an identical view was also taken by Apex Court in the case of ONGC Ltd. vs. CIT reported in (2010) 322 ITR 180 (SC). The Learned Counsel for the Assessee further submitted that the Mumbai Special Bench in the case DCIT vs. Bank of Bahrain and Kuwait reported in (2010) 132 TTT 505 (Mum.) (SB) has held that MTM losses in respect of forward foreign exchange contracts debited to profit and loss account is an allowable expenditure. The Learned Counsel for the Assessee further submitted that the derivate loss incurred by the assessee cannot be considered as speculative transactions as given in section 43(5) of the Act. The assessee has entered into derivative transactions in respect of foreign currency and there is no purchase or sale of any commodity....