TaxTMI 
TaxTMI 
2023 (1) TMI 970
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....ether the LdCIT(A) is justified in holding that the assessee is entitled to claim 10% additional depreciation in the year under consideration ignoring the second proviso to section 32(1) of the Act, which clearly suggests the intention of legislature to give such additional depreciation for the yearin which the assets were put to use, but not in any succeeding year. 3. On the facts and circumstances of the case and in law, whether theLd CIT(A) is justified in holding that the expenditure incurred by the assessee was a normal business expenditure towards sale of products and hence it is allowable as revenue expenditure ignoring the fact that the expenditure incurred towards obtaining "Certificate of Suitability (COS)" and filing of "Drug Master File (DMF)" are capital in nature as these expenses give enduring benefit to the business of the assessee spread over several years and therefore the Ld CIT(A) ought tohave held it as capital in nature. 4. On the facts and circumstances of the case and in law, whether theLd CIT(A) is justified in ignoring the ratio laid down by the Hon'ble Supreme Court in the case of BallimalNavi Kishore Vs CIT reported in 224 ITR 414 (SC); in allowi....
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.....f. 01.04.2016 which ultimately culminated into the taxing belt with the due insertion of sub-clause (xviii) in Section 2(24) of the IT Act, 1961 providing an inclusive definition of the expression 'income' under the tax law, which includes assistance in the form of a subsidy by the Central Government. 13. On the facts and circumstances of the case and in law, whether the Ld CIT(A) is justified in ignoring the fact that the consequential amendment in the statutory provisions calls for enforcing the very taxability of the subsidy or concessional grants received from the Government or any other constituted body. 14. On the facts and circumstances of the case and in law, whether theLdCIT(A) is justified in allowing the expenditure of education cess, whichhas been made in appellate stage by way of filing a letter, ignoring thefact that the assessee has never made the claim of deduction in the return of Income filed u/s 139 for the year under consideration. 15. On the facts and circumstances of the case and in law, whether the Ld CIT(A) is justified in allowing the expenditure of education cess paid as revenue expenditure ignoring the findings of the Assessing Officer in t....
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....ade investments on which it has earned exempt income. Accordingly, the assessee was asked to show cause as to why disallowance u/s14A r.w.r.8D should not be made. After considering the submission of the assessee, the AO computed the disallowance of Rs.31,65,557/- u/s 14A r.w.r. 8D(2)(ii) and disallowance of Rs.6,69,375/- u/s 14A r.w.r. 8D(2)(iii), aggregating to total disallowance of Rs.37,91,582/-. 6. In its appeal before the learned CIT(A), the assessee submitted that it has earned a dividend income of Rs.99,483/ during the year, which is exempt from tax. Further, the assessee submitted that it has suo moto made a disallowance of Rs.43,350/-, being the expenditure incurred in relation to earning such exempt income as required u/s 14A of the Act. The assessee also submitted that it has a total share capital of Rs.12.10 crore and general reserves of Rs.15.10 crore, which is much more than the average value of investment of Rs.13.38 crore as appearing in the balance sheet. The learned CIT(A) after considering the decision of the Co-ordinate Bench of the Tribunal in assessee's own case in preceding assessment years deleted the disallowance towards interest expenditure u/s 14A r.w.r.....
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....n the assessment year 2011-12. In response thereto, the assessee submitted that it had purchased machinery during the assessment year 2011-12. Since, the assessee has purchased new machinery, which was eligible for additional depreciation at 20% u/s 32(1)(iia) of the Act, after 01/10/2010, the assessee only claimed 10% of the additional depreciation in the assessment year 2011-12. The balance 10% of additional depreciation was claimed in the year under consideration. The AO vide order passed u/s 143(3) of the Act did not agree with the submission of the assessee and held that section 32(1)(iia) of the Act does not allow any carry forward of additional depreciation. Accordingly, additional depreciation to the extent of Rs.3,04,34,108/- was disallowed u/s 37(1) of the Act. 11. The learned CIT(A) vide impugned order allowed the appeal filed by the assessee on this issue by following the decision of the Co-ordinate Bench of the Tribunal in assessee's own case of preceding assessment years. Being aggrieved, the Revenue is in appeal before us. 12. During the hearing, the learned DR vehemently relied upon the order passed by the AO. On the contrary, the learned AR placed reliance upon t....
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....on allowed u/s.32(1)(iia) is a one-time benefit to encourage industrialisation and the relevant provisions has been construed reasonably and purposive without appreciating that the additional depreciation is allowed in the year of purchase and if in the year of purchase the assessee is eligible only for 50 per cent depreciation the balance 50 per cent cannot be carried forward for the subsequent year on the claim cannot be allowed in any other year ?" The Hon'ble Court after referring to the provisions of section 32(1) dealt with the Clause (iia) of the section and held as under: 7. Clause (iia) of section 32(1) of the Act, as it now stands, was substituted by the Finance Act, 2005, applicable with effect from April 1, 2006. Prior to that, a proviso to the said clause was there, which provided for the benefit to be given only to a new industrial undertaking, or only where a new industrial undertaking begins to manufacture or produce during any year previous to the relevant AY. 8. The aforesaid two conditions, i.e., the undertaking acquiring new plant and machinery should be a new industrial undertaking, or that it should be claimed in one year, have been done away by substitu....
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.... to make the provision meaningful while granting the additional allowance. We are in full agreement with such observations made by the Tribunal." 3.4.1. Respectfully, following the above judgment, we hold that the assessee was entitled to claim 10% additional depreciation during the year under appeal. Reversing the order of the FAA, we decide the second ground of appeal in favor of the assessee." 14. The learned DR could not show us any reason to deviate from the aforesaid decision and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following the order passed by the Co-ordinate Bench of the Tribunal in assessee's own case cited supra, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue, which has followed the judicial precedent in assessee's own case. As a result, ground no.2 raised in Revenue's appeal is dismissed. 15. The issue arising in grounds no.3 and 4, raised in Revenue's appeal, is pertaining to the allowance of expenditure incurred towards obtaining 'Certificate of Suitability' and filing of 'Drug Master File' ('DMF'). 16. The brief facts of the case pertaining to this issue are: During the ....
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....e Bench of the Tribunal in assessee's own case in ACIT Vs. Aarti Drugs Limited, in ITA No. 5526/MUM/2013, vide order dated 14/01/2015, for the assessment year 2009-10 decided a similar issue in favour of the assessee by observing as under: "7. We have carefully considered the rival submissions and perused the record. Admittedly the expenditure incurred is not preproduction expenditure. The assessee has been marketing products elsewhere and thus it can be said that the assessee is already in the business of manufacture and sale of drugs. To expand the business in certain countries it has to obtain certificate of suitability as per the FDA Regulations, which is a part of the process of sale of its products. Similar expenditure was considered by Hon'ble Gujarat High Court, wherein it was held that such payments should be considered in the revenue field. No decision of any other High Court, wherein contrary view taken, was placed before us by the Revenue. Having regard to the circumstances of the case, we respectfully follow the decision of Hon'ble Gujarat High Court and hold that the view taken by Hon'ble Gujarat High Court is in accordance with law. In the result, ground No.1 of th....
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....ed a provision for Bank charges. Subsequently the appellant recorded the bank charges in A.Y. 12-13 as and when it received the bank advices. The appellant has further stated that this was consistent with the accounting treatment followed regularly. The appellant has taken the plea that since bank charges have crystallized in the year under consideration, same ought to be allowed in this year. The appellant has relied on the case of Saurashtra Cement (1995) (213 ITR 523)(Gujrat) in support of the proposition that even though theexpenditure relates to prior period, if the liability has accrued during the year, then the expenditure has to be allowed as deduction. On similar facts, I find that the then CIT (Appeal) has adjudicated the issue in appellant's own case for AY 2009-10 (in appeal no CIT (A)-14/IT 98/Rg.6(1)/11-12 dated 28 05 2013). The operating part of the order is reproduced as under: "7.4 After taking into consideration, the reasons given by the Assessing Officer and submissions made by the Appellant, I am of the view that the liability for the aforesaid expenditure got crystallized during the current year, as the bank advices were received in the current year. Thus....
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.... received the debit advice from the bank. As and when the bank advices were received, the same was appropriately debited to the bank charges. The bank charges were received after the finalisation of the account for the year ending 31/03/2011. Therefore, as per the assessee, it could not record the exact bank charges in the assessment year 2011-12 and created a provision for bank charges. Further, the assessee recorded the bank charges in the assessment year under consideration when it receives the bank advices. Thus, as per the assessee, the liability was crystallised in the current year and therefore, should be allowed in the current year only. 28. We find that in Saurashtra Cement & Chemical Industries Ltd. Vs. CIT, [1995] 213 ITR 523 (Guj.), inter alia, the following issue came up for consideration before the Hon'ble Gujrat High Court: "5. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the expenditure of Rs. 39,823 was not allowable in the year in question on the ground that the liability has arisen in the years 1968-69 to 1973-74 ?" 29. While adjudicating the aforesaid issue, the Hon'ble Gujarat High Court held ....
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....terial has been brought on record by the Revenue to prove that the liability has also been crystallized in the preceding year. From the perusal of the order passed by the Co-ordinate Bench of the Tribunal in assessee's own case for the assessment year 2009-10 cited supra, we find that the Revenue though has raised other issues but did not challenge the order passed by the learned CIT(A) granting relief to the assessee on the similar issue. The Hon'ble Supreme Court in Radhasoami Satsang Vs. CIT, [1992] 193 ITR 321 (SC) held that while strictly speaking res judicata does not apply to Income-tax proceedings but where the fundamental aspect permeating through the different assessment years has been followed as the fact one way or the other and parties have allowed that position to be sustained by not challenging the order it would not at all be appropriate to allow the position to the change in the subsequent year. Thus, in view of the aforesaid findings, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue. As a result, ground no.5 raised in Revenue's appeal is dismissed. 31. The issue arising in grounds no.6-8, raised in Revenue's appeal, is pertain....
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....arned CIT(A) vide impugned order admitted the additional ground raised by the assessee following the decisions of the Hon'ble Jurisdictional High Court, wherein it has been held that CIT(A) being appellate authority can admit an additional ground, even though the same was not raised before the AO during the assessment proceedings. Insofar as the merit is concerned, the learned CIT(A) after considering the remand report of the AO, wherein no adverse inference was drawn as to the claim of the assessee u/s 80IA of the Act and following the decision of the Co-ordinate Bench of Tribunal in DCIT Vs. Deepak Fertilizers and Petrochemicals Corporation Ltd (ITA No.2116/MUM/2013 dated 30.01.2015) decided the issue in favour of the assessee and allowed the claim of deduction of Rs.3,81,99,425/0 u/s 80IA of the Act in respect of profits and gains derived from the generation of steam. Being aggrieved, the Revenue is in appeal before us. 35. During the hearing, the learned DR submitted that the assessee raised the fresh claim before the learned CIT(A) for the first time without making the claim in its return of income. The learned DR further submitted that the assessee also did not make any subm....
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.... on merits in remand proceedings, the Revenue cannot raise any grievance now in the present appeal before us. Insofar as the admissibility of the claim at the appellate state for the first time is concerned, we have already found the same to be in conformity with the judicial pronouncements as noted above. Therefore, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue. As a result, grounds no. 6-8 raised in Revenue's appeal are dismissed. 38. The issue arising grounds no. 9-13, raised in Revenue's appeal, in pertaining to the taxability of incentives received in terms of Foreign Trade Policy towards Focus Market Scheme ('FMS'), Focus Products Scheme ('FPS'), and Status Holder Incentives Scrip ('SHIS'). 39. The brief facts of the case pertaining to this issue are: The assessee in its original return of income treated the incentives received under the foreign trade policy as revenue receipt and accordingly included the same in the computation of total income. In the appellate proceedings before the learned CIT(A), the assessee by way of additional ground raised a claim that incentives received under the Foreign Trade Policy, towards FMS, FTS, and S....
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....3. We have considered the rival submissions and perused the material available on record. The assessee is a manufacturer of bulk drugs and also exports some of the products to various countries for which the government is providing certain subsidies under the Foreign Trade Policy. As noted above, the assessee initially, in its return of income, treated the subsidies received as Revenue receipts and offered the same to tax. However, before the learned CIT(A), the assessee filed additional grounds claiming that the subsidy received under the FPS, FMS, SHIS schemes are capital in nature and therefore cannot be included in the total income of the assessee. As noted elsewhere, the appellate authority can entertain a fresh claim made by the assessee, even if such a claim was not made in return of income or by way of a revised return of income. Thus, we find no infirmity in the impugned order admitting the additional ground filed by the assessee. 44. Further, we find that the learned CIT(A) analysed the objectives of subsidies received under the aforesaid schemes in para 14.10 of its order, as under: "14.10 The Government of India notified the Foreign Trade Policy, 2009-14 under Sectio....
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.... regard are as under: "14.11 Thus, on a plain reading of the relevant policy document of the Government of India, it is clear that the objective of the subsidy granted under FPS, FMS and SHIS is to increase the global market share, technology up gradation and employment generation in certain sectors. The object of the subsidy under these schemes was not to enable the assessee to run the business more profitably. The object was primarily to provide encouragement and support, which would create benefits of enduring nature, for the Industry as a whole in certain sectors of economy. It is pertinent to recall here that in the remand report, after examining the facts brought on record by the appellant, AO has also concluded that the salient objective of the FPS, FMS and SHIS subsidy under the Foreign Trade Policy is to increase percentage share of global trade by increasing competitiveness in select markets, technological upgradation andexpanding employment opportunity. In that view, I am of the considered opinion that, having regard to the 'purpose test' laid down by the Supreme Court in the aforementioned cases, the amounts received by the appellant during the year, under tho....