TaxTMI 
TaxTMI 
2023 (6) TMI 165
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....- being disallowance of claim of sales tax incentive. (ii) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in holding that Sales Tax was embedded in the Sales prices charged by the assessee and the same was in the nature of capital receipt. The Ld. CIT (A) ignored the fact that the assessee was legally required to collect Sales Tax on the Sales made, yet it had worked out the notional Sales Tax so collected and had claimed the same as capital receipts. (iii) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in relying on the decision of ITAT, Mumbai and the decision of Bombay High Court (ITA No. 1299 of 2008) in the case of Reliance Industries Limited, even though subsequent to the Departmental appeal against the Order of High Court, the issue has been remitted back to the Bombay High Court to decide afresh and the same is still pending for adjudication. (iv) Without 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 ....
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....ts and in the circumstances of the case and in law, in allowing weighted deduction for AY 2011-12 when the Agreement between the assessee company and the prescribed authority, as required under subsection 3 of Section 35(2AB) was for the period 01.04.2011 to 31.03.2012 and not for the AY under appeal. 5. (i) Whether the CIT (A) erred on the facts and in the circumstances of the case and In law, in directing the AO to exclude Sales Tax incentive and Excise Duty Exemption and profits on sale of assets, while computing the book profits u/s 11538 of the Act, without appreciating that they have not been specifically excluded in Explanation 1 to section 1153B of the Act. (ii) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO to exclude Sales Tax Incentive and Excise Duty Exemption and profits on sale of assets, while computing the book profits u/s 11538 of the Act despite the fact that no adjustment other than the ones mentioned in Sec.1153B is permissible as held by the Supreme Court in the case of Apollo Tyres Ltd.(255 ITR 273) 6.(i) Whether the CIT(A) erred on the facts and in the circumstances of the....
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....ee; foreign exchange fluctuation loss of Rs.34,13,340/- amortised in the books of account; weighted deductions claimed by the assessee under section 35(2AB) on in-house R&D to the tune of Rs.1,51,87,471/-; provision of leave encashment and also disallowed additional depreciation in second and subsequent years. The AO also added back in the computation of book profit under section 115JB of the Act an amount of Rs.39,33,77,814/- claimed by the assessee on account of sales tax incentives and excise duty incentive (Rs.7,01,07,115/- + Rs.25,39,40,496/- respectively). The AO also added back profit on sale of fixed assets in computing the book profit under section 115JB of the Act and thereby framed the assessment under section 143(3) of the Act. 4. The assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has partly allowed the appeal filed by the assessee. Feeling aggrieved with the impugned order passed by the Ld. CIT(A) the Revenue has come up before the Tribunal by way of filing the present appeal. 5. We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents....
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....e find no reason to interfere with the order of the Ld. CIT(A) on this issue and, therefore, we hold that the amount of incentive is not a revenue receipt, but, it is a capital receipt and, therefore, we direct the A.O. to delete the addition. The Revenue fails in its grounds of appeal Nos.1(i) to 1(iv) and, therefore, the grounds on this issue are dismissed." 8. When the issue in question has already been decided in favour of the assessee even in earlier years A.Y. 2003-04 as well as this issue has also been decided by the Special Bench of the Tribunal in case of DCIT vs. Reliance Industries Ltd. (2004) 88 ITD 273 (Mum.) wherein it is held that sales tax subsidy received under the package scheme incentives 1997 is for the purpose of industrial development of the backward districts as well as generation of employment, thus, establishing a direct nexus with the investment in fixed capital assets and as such a capital asset. 9. The Ld. D.R. for the Revenue has failed to bring on record any distinguishable facts qua the year under assessment vis-à-vis earlier years i.e. A.Y. 2010-11. We find no illegality or perversity in the impugned findings. Hence, grounds No.1(i) to1(....
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....ed to put forth any contrary decision, we confirm the order of the Ld. CIT(A) on this issue and dismiss the grounds of appeal no.2(i) to 2(v) of the Revenue." 12. So when the issue has already been decided in favour of the assessee by examining the objective of grant of excise duty incentive vide memorandum dated 07.01.2003 issued by Ministry of Garments & Industry, decision rendered by Hon'ble Jammu & Kashmir High Court in case of Shree Balaji Alloys vs. CIT (supra) which has been affirmed by the Hon'ble Supreme Court and decision rendered by Hon'ble Supreme Court in case of Ponni Sugars & Chemicals Ltd. (2008) 306 ITR 392 (SC), holding that excise duty refund granted with the object of social problem of unemployment in the state by accelerating the industrial development was a capital receipt, we find no illegality or perversity in the impugned findings returned by the Ld. CIT(A) holding receipt of excise duty by the assessee as capital in nature. So ground No.2(i) to 2(v) are determined against the Revenue. Ground No.3 13. The Ld. CIT(A) allowed the foreign exchange fluctuation loss on reinstatement of loan, otherwise disallowed by the AO on the ground that the assessee....
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....llant company withdrew the aforesaid additions since claim of foreign exchange fluctuation loss was not allowed in order u/s 143(3) for AY 2009-10. The issue under consideration is covered in the favour of the appellant company by the appellate order dated 16.10.2019 in appeal No. NSK/CIT(A)-3/139/2017-18 for AY 2010-11 wherein elaborate discussion was made in para-11 to hold that the appellant company should be allowed foreign exchange fluctuation loss since the department had taxed the foreign exchange fluctuation gain in the subsequent years. The Hon'ble ITAT had also allowed the appeal of the appellant company for AY 2009-10 vide its order dated 31.01.2018 in ITA No.3804 & 3849/Mum/2015 on this issue. On the same parity, the foreign exchange fluctuation gain de-capitalized in the books amounting to Rs.10,28,500/- is held to be taxable and the addition made to that extent is sustained. However the addition of Rs.34,13,340/- made by the AO on account of foreign exchange fluctuation loss amortized in books is deleted since his predecessor had already disallowed the whole amount while completing the assessment for AY 2009-10 and same has attained finality. These grounds of appe....
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..../2008/RD/459 dated 28.05.2008, had accorded its approval for renewal of recognition to the said facility till 31.03.2011. The said approval had subsequently been renewed till 31.03.2014. The main purpose of research & development (R & D) activities carried out by the appellant company was to improve the quality of its products, development of new products & processes to meet the requirements of growing house building needs, for optimum utilization of raw materials, process stability, reduction of cost of existing products/processes, technical support to the existing line of business, explore the possibility of utilization of cheaper raw materials, energy conservation, pollution control etc. The resultant benefit derived by the appellant company viz. cost reduction, import substitution, new products launched in both domestic & International markets was evident from the Director's Report as on 31.03.2011. The AO noticed that section 35(2AB) provided that certificate was to be obtained from the prescribed authority and the prescribed authority was the Secretary, Department of Science and Industrial Research. Further the assessee company had submitted the certificate which was issu....
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....nourable Pune ITAT in the case of Minilec India (P) Ltd. Vs. ACTT in ITA No.690/PUN/2015 dated 09.04.2018 wherein it was held that If recognition to facility given by prescribed authority which is mandate of section 35(2AH) is maintained, the assessee has to be accorded deduction under section 35(2AB). It was further held that non-receipt of Form No. 3CM is at best a procedural lapse and is not fatal for denial of claim of deduction under section 35(2AB) of the Act, it was further held that prescribed authority till 01.04.2016 has no authority to look into the nature and quantum of expenditure incurred by an assessee except in the first year to see investment in land and building and after recognition of the facility and approval by DSIR the Assessing Officer has to allow the claim of the assessee after verifying the same. It was further held that under the amended provisions of section 35(2AB) by Finance Act. 2015 w.c.f. 01.04.2016. besides maintaining separate accounts of the R&D facility, copy of audited accounts have to be submitted to the prescribed authority. However this will not apply to the earlier assessment years prior to 01.04.2016. Further the issue under consideration....
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....the appellant company has been allowed deduction u/s 35(2AB). These are therefore not being adjudicated by the undersigned." 17. As discussed by the Ld. CIT(A) identical issue was decided by the co-ordinate Bench of the Tribunal in case of Zeus Numerix Private Ltd. (supra) in favour of the assessee by holding that "it was never the case of the Revenue that the assessee was not carrying out scientific research. When the assessee has been carrying out the research and development as is evident from the approval accorded vide letter (supra) discussion in the preceding paras the same cannot be disallowed on hyper technical ground. 18. It is brought to the notice of the Bench that vide letter dated 28.05.2008 issued by DSIR available at page 370 of the paper book approval has been renewed to the assessee for in-house R&D unit(s) of assessee firm at Gat No.152, Lakhmapur, Taluka Dindori, Nashik upto 31.03.2011. Furthermore, as per letter dated 04.07.2012 available at page 376 of the paper book renewal of recognition to the in-house R&D unit(s) of the assessee have been accorded upto 31.03.2018. Similarly vide letter dated 04.07.2012 R&D facilities in in-house research and developme....
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....rected to exclude the above amounts while computing book profits u/s 115JB. Similarly the AO is directed to exclude profits of Rs.6,93,30,203/- on sale of fixed assets while computing book profits u/s 115JB. The capital receipts which do not have any element of income or profit embedded therein are neither chargeable to tax under the Income Tax Act nor can be included in the profit & loss account prepared under Part-II and Part-III of Schedule- VI of the Companies Act. The Hon'ble Supreme Court has held in the case of Indo Rama Synthetics (I) Ltd. Vs. CIT (330 ITR 363) that object of MAT provisions is to bring out the real profits of the company. The similar view was taken by the Hon'ble Mumbai ITAT in the case of Hitkari Fibres Ltd. Vs. JCIT (90 ITD 654). If the capital receipts are included in the computation of MAT, the object of introduction of section 115JA/115JB would be defeated. The above exclusion is also permissible in view of decision of Hon'ble Apex Court in the case of Apollo Tyres (255 ITR 273) wherein it was held that the AO has no powers to rework the book profits if the same have been computed in accordance with Part-Il and Part- III of Schedule VI of t....