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2023 (6) TMI 508
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....lowance of expenses which are adjudicated herein below. With the consent of both the parties the ITA No. 293/Asr/2015 and 417/Asr/2015 are taken as lead case for revenue & assessee respectively. ITA No.293/Asr/2015 2. The revenue has taken the following grounds: "1. Whether the Commissioner of Income Tax (Appeals), Jammu was right in law to allow deduction u/s 80IB of the Income Tax Act, 1961 on Central Excise Duty refund by relying upon the judgement of the Hon'ble High Court of J & K, in the case of M/s Shree Balaji Alloys & others & ignoring the ratio of the law on the issue as laid down in the case of Ponni Sugar & Sawhney Steel and Press Works Ltd. 2. Whether the Commissioner of Income Tax (Appeals), Jammu committed an error in law in not following the law as laid down by the Hon'ble Supreme Court in the case of Ponni Sugar & Sawhney Steel and Press Works Ltd, wherein similar receipts were held to be revenue in nature as the same had been made after the industries had been set up and not for purpose of setting up of the industries. 3. Whether in law, the Commissioner of Income Tax (Appeal), Jammu was right in not appreciating and applying the p....
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.... 2. That the learned Commissioner of Income Tax (Appeals) has erred in sustaining the disallowance of a sum of Rs. 11, 26, 386/- on account of other expenses being debited in the Profit & Loss Account and such disallowance is entirely misconceived, incorrect and has arbitrarily been made. 2.1 That the learned Commissioner of Income Tax (Appeals) has further erred in sustaining the aforesaid disallowance purely on assumptions, presumptions, surmises and conjectures and without any evidence or material to the contrary, and hence the addition made is unsustainable and liable to be deleted. 3. That the learned Commissioner of Income Tax (Appeals) has erred in setting - aside the issue of disallowance of a sum of Rs.10, 14, 174/- on account of deduction claimed under section 80IB (11 A) of the Act with respect to CA stores unit at Srinagar to the file of learned assessing officer, whereas after going through the evidences and having accepted that the appellant company has fulfilled the requisite conditions as envisaged under the Act, the said issue should have been decided by learned CIT (A) itself and thus, the set -aside to the file of AO is misconceived and....
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....R-2015 2002-03 YES 3 290-ASR-2015 2003-04 YES YES 4 291-ASR-2015 2004-05 YES 5 292-ASR-2015 2006-07 YES YES 6 293-ASR-2015 2007-08 YES YES 7 294-ASR-2015 2008-09 YES 8 255-ASR-2015 2008-09 YES 9 470-ASR-2015 2009-10 YES 10 471-ASR-2015 2010-11 YES 11 417-ASR-2015 2010-11 YES YES The assessee is a company and is engaged in business of manufacturing and trading of pesticides, juices and construction. The assessee has various business divisions. The brief description of the various divisions of the assessee is as under: i) Crop Protection Division - This division has three units (unit-1, unit-2 and unit-3) at Jammu. These three units are in the business of manufacturing of pesticides and other agro-chemical products. All three units are capable of manufacturing any of the pesticide produ....
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....r books which are kept in the record. On the other hand, the revenue had submitted a written submission with the orders of the Coordinate Bench before the ITAT which are kept in the record. 6. The ld. CIT DR vehemently argued and invited our attention to the issues related to 80IB. The ld. CIT DR placed the order of the Coordinate Bench in ITA 415/Asr/2009, AY-2005-06 date of order 27/06/2012The grievance of the revenue is that the assessee has received the Central Excise Refund which is accepted as nature of "capital receipt" but similar receipts were held to be revenue in nature as the same had been made after the industries had been set up and not for purpose of setting up of the industries.. The ld. CIT DR has pressed this issue and mentioned the relevant para no. 16 of order of ITAT Coordinate Bench which is reproduced as below: "16. We have heard the rival contentions and perused the facts of the case. We are of the considered view that the issue stands covered by the decision of the Hon'ble Jurisdictional High Court of Jammu & Kashmir, in the case of Shree Balaji Allows v. CIT and Another (2011) 333 ITR 335 (J & K) where it has been held that the Excise Duty ....
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....ed vide para -5 as above, this amount of Rs. 4,91,16,530/- on account excise duty refund is not considered separately for computation of deduction eligible to the assessee u/s 80IB of I. T. Act, as not derived from the Industrial Undertaking. I am satisfied that the assessee has furnished inaccurate particulars of income and has claimed wrong deduction u/s 80IB of the I.T. Act, 1961 to the above extent. Penalty proceedings u/s 271(1) (c) of the I.T. Act, 1961 are, therefore, initiated on this issue." 7. The ld. counsel for assessee filed the paper book which is kept in the record. The ld. Counsel also accepted the fact that the refund from Central Excise is a "capital receipt" and it is no question of tax in the hands of the assessee. 8. We heard the rival submission and perused the documents available in the record. The grievance of the AO related to Capital Subsidy/Central Excise Subsidy is that particular subsidy is a "capital receipt". It cannot be the part of the total income and also not be the part for calculation of deduction u/s 80IB of the Act. As the part of "capital receipt" is "it is not deriving from industrial undertaking", and not the part of the prof....
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....s vs CIT reported in 333 ITR 335, Hon'ble jurisdictional high court have duly considered and followed the law laid down in the aforesaidApex Court judgments, which has in turn been followed by ld. CIT(A). But in factual matrix the capital subsidy as capital receipt cannot be the part of the calculation of deduction U/s 80IB of the Act. 8.1. In our considered view the appeal of the revenue in Ground No-1 is allowed and Ground No-2 is dismissed. 9. Further, the ld. AO in his order observed that the subsidy of Central Excise which is reproduced here as below: 10. The revenue has agitated the ground -3 as the money received by the assessee on account of central excise was not supposed to be spent in particular manner or for the purpose of substantial expansion of the industry. The nature of subsidy is elaborately discussed by the ld. AO. But ld. CIT-DR was no able to bring any proper fact before the bench. The issue is first agitated before the bench. The ld. Counsel for assessee argued that the ground has no justification. In the result, the Ground no-3 of revenue is dismissed. ITA No. 294/Asr/2015 Claim of 80IB for Two Units. 11. The ld. CIT DR relied on the ord....
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....ter from the A.O. dated 24.12.2007 wherein it was inquired and was asked specific question to explain what would have been the position if the assessee had three different units registered and running from the same place where assessment in all the three units were made as one unit. From the perusal of the questionnaire and the reply, it is evident that if the assessee had three different units registered with Commercial Tax Department, it is only then three separate assessments for each unit were required to be done. However, when one unit is registered, there is no justification of three assessments are required to be made. From the perusal of record, we are of the view that nothing has been brought on record by the AO or by the Ld. CIT(A) or by the ld. counsel for the Revenue to show that the assessee was required separate registration for claiming deduction under section 80IB of the Act. 13.1 Section 6-A of the Jammu & Kashmir Sales Tax Act, 1962 provides for provisional registration of the business of any person who intends to establish a business in the State of Jammu & Kashmir for the purpose of manufacturing or producing goods. Under this Act, registration is requi....
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.... year, it cannot be re-examined in the succeeding assessment years. As regards the initiation of proceedings u/s 147 of the Act, it was stated when Unit-2 was set up in assessment year 2000-01, no such proceedings were initiated and the proceedings for the assessment year 2001-01 had attained finality, though it cannot be reopened on period of limitation as argued by the ld. counsel for the assessee under section 149 of the Act. As regards the 56 principles laid down by the various courts of law, the issue is with regard to formation of industrial undertaking has been examined in the initial assessment year and once the claim has been allowed especially under assessment u/s 143(3), the same cannot be denied in the succeeding assessment year without first recording of any adverse finding of the year of formation. There is no citation referred by the Ld. counsel for the Revenue to take a different view on the matter. Accordingly, we uphold the claim of the assessee u/s 80IB of the Act, which is in accordance with law." 12. We consider the order of both the revenue authorities and followed the observation of the Coordinate Bench. In our considered view, in this point, the appeal of....
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....ed back =Rs. 13,62,898/- Total excess depreciation claimed as above is disallowed on account of C.A. Stores, Srinagar and Kohinoor International Agro Products Tetra Division, Srinagar works out to (Rs. . 5,29,265 /- + Rs. 13,62,898/- i.e. Rs. 18,92,163/-. I am satisfied that the assessee has furnished inaccurate particulars of income on this account. Penalty proceedings u/s 271(1) (c) of the I.T. Act, 1961 are, therefore, initiated on this issue." 14. The ld. counsel for the assessee further argued and relied on the order of the ld. CIT(A) the relevant paragraph 15 of the CIT(A) order is extracted as below: "15 ISSUE 8: DISALLOWANCEOFDEPRECIATIONOFRS.18,92,163/- ANDRS. 3,10,253/- u/s 32 OF THE ACT. ( ASSESSMENT YEAR 2007-08 & 08-09) 15.1 The Hon'ble Tribunal vide its order dated 27.6.2012 has deleted the identical disallowance of depreciation, wherein it has been held as under: "22 We have heard the rival contentions and perused the facts of the case. This is not under dispute that the construction material in respect of CS Stores was utilized for construction of mezzanine floors which is, in fact, is a part of plant and machinery. Similarly, ....
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....al No. 26/10 & 157/09-10 in the case of M/S. FIL Industries Ltd. 7. Sheikh Baah, Srinagar for the assessment year 2007-08 and 2008-09 against the order of the AO u/s. 143(3) of the Income tax Act, dated 30/12/2009 and 13/12/2010. 12.2 On the above facts, the AO noted that performance bank guarantee for which, expenditure of Rs. 51,08,513/- has been incurred relates to financial year 2006-07 to financial year 2009-10. He therefore, held that out of amount of Rs. 51,08,513/-, only a sum of Rs. 12,77,128/- is allowed as relatable to the year under consideration and balance amount of Rs. 31,31,384/- is disallowed as not relatable to the year under consideration. The appellant has contended that there is no concept of deferred revenue expenditure and once the expenditure has been incurred, the said expenditure is allowable as deduction. In the judgment of the Hon'ble Delhi High Court in the case of CIT vs. Citi Financial Consumer Finance Ltd. 335 ITR 29. The facts were that in the assessment year 2001-02, the assessee company claimed an expenditure of Rs. 3.95 crores on account of advertisement and publicity expenses as revenue expenditure. The Assessing Officer was of the view....
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.... the year of issue of debentures, the payment is to secure the benefit over a number of years. There was a continuing benefit to the assessee of the company over the entire period and, therefore, the liability was to be spread over the period of debentures. 11. We are unable to persuade ourselves by the aforesaid submission of the learned counsel for the Revenue. An identical argument was taken by the Revenue in IFCI (supra). Explaining the ratio of the Supreme Court in Madras Industrial Investment Corporation Ltd. [1997] 225 ITR 802 (SC), the argument of the Revenue was rejected in the following manner : "The judgments on which reliance is placed by the learned counsel for the Revenue would be of no avail in the instant case. The learned counsel for the Revenue had strongly argued that matching concept is to be applied, as per which part of the expenditure had to be deferred and claimed in the subsequent years and, therefore, approach of the Assessing Officer was correct. However, this argument overlooks that even in Madras Industrial Investment Corporation Ltd. [1997] 225 ITR 802 (SC), on which the reliance was placed by Ms. Bansal, the general principle stated ....
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....r a number of years and allowed a proportionate deduction in the accounting year in question. Issuing debentures at a discount is another such instance where, although the assessee has incurred the liability to pay the discount in the year of issue of debentures, the payment is to secure a benefit over a number of years. There is a continuing benefit to the business of the company over the entire period. The liability should, therefore, be spread over the period of the debentures.' Thus, the first thing which is to be noticed is that though the entire expenditure was incurred in that year, it was the assessee who wanted the spread over. The court was conscious of the principle that normally revenue expenditure is to be allowed in the same year in which it is incurred, but at the instance of the assessee, who wanted spreading over, the court agreed to allow the assessee that benefit when it was found that there was a continuing benefit to the business of the company over the entire period." 12. This court, thus, explained in no uncertain terms that the normal rule accepted by the Supreme Court in the said judgment was that the expenditure is to be allowed ....
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....provisions contained in the Act [See-Kedamath Jute Manufacturing Co. Ltd. s. Commissioner of Income Tax Central, Calcutta, Tuticorin Alkali Chemicals & Fertlilizers Ltd., Madras vs. Commissioner of Income Tax, Madras, Sutlej Cotton Mills Ltd. vs. Commissioner of Income Tax, Calcutta and United Commercial Bank, Calcutta vs. Commissioner of Income Tax, WB-III, Calcutta] 20 At the most, an inference can be drawn that by showing this expenditure in a spread over manner in the books of accounts, the assessee had initially intended to make such an option. However, it abandoned the same before reaching the crucial stage, in as much as, in the income tax return filed by the assessee, it chose to claim the entire expenditure in the year in which it was spent/paid by invoking he provisions of section 36(l)(iii) of the Act. Once a return in that manner was filed, the AO was bound to carry out the assessment by applying the provisions of that Act and not to go beyond the said return. There is no estoppels against the Statute and the Act enables and entities the assessee to claim the entire expenditure in the manner it is claimed." 12.4 From the above judgment, it is crystal c....
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....ssessing Officer has in no manner whatsoever established that cost of an asset acquired by the assessee has been met directly or indirectly by the capital subsidy received by the appellant company. It is submitted that copy of the scheme has placed at page 317 to 322 of Paper Book II for AY 2009-10. It will be seen that the said scheme is for promotion of setting up of cold stores in the country to reduce post harvest losses. It will be further seen that subsidy so provided is only to promote setting up of the cold storages and is not a reimbursement or agreement to meet the cost of the asset acquired by the appellant company. This fact would be evident from clause (iv) of the Scheme which provides that assessee would be entitled to 25% of the back ended capital investment subsidy scheme. It will be seen that such subsidy is given irrespective of the actual cost incurred by the appellant company. In other words, subsidy so released has no connection with the actual cost incurred by the appellant company. It is submitted that even as per the sanction letter as available, the assessee has been sanctioned subsidy of Rs. 4.00.00.000/- in the new store and Rs, 10.00.000/- in the old sto....
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....ut was of capital nature. Accordingly, the first question is answered in favour of the assessee and against the Department." 1.9 It is submitted that the Hon'ble Apex Court has laid down the purpose test and if the purpose of the subsidy is not to meet the cost of the assets acquired by the assessee company, the purpose is to encourage the setting up of the cold storage by the appellant company. It is submitted that it has already established even by figures that actual cost incurred by the assessee has no connection with the subsidy received. In fact, amount of actual cost is never provided to the sanctioning authority for granting subsidy. It may be added here that all what has been provided to the sanctioning authority is only project cost and not the actual cost incurred by the appellant company. It is thus evident from the sanction letter and application furnished by the appellant company. A copy of the sanctioning letter and application letter placed at page 419 to 432 of of Paper Book. -II for AY 2009-10. In other words, the submission is that disallowance of depreciation of Rs. 23,16,393/- on the basis of invoking explanation 10 to section 43(1) of the Act is highl....
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....f determining the amount of subsidy to be given, cost of eligible investment was taken as the basis, though it was not specifically intended to subsidise the cost of the capital. Under the circumstances, the incentive in the form of subsidy could not be considered as a payment directly or indirectly to meet any portion of the actual cost and, thus, it fell outside the ken of the Explanation 10 to section 43(1). Therefore, for the purpose of computing depreciation allowable to the assessee. the subsidy amount could not be reduced from the cost of the capital asset. IPara 12] iv) 55 taxmann.com 33(Kol) Birla Corporation Ltd. vs. DC1T Section 43(1), read with Explanation 10 of the Income-tax Act, 1961 - Actual cost (Subsidy) - Assessment year 2007-08 - Assessee was engaged in business of production of cement, received sales tax subsidy under a scheme of Government -Whether sales tax incentive was capital in nature as very scheme under which subsidy was received was for incurring expenditure for installation of plant and machinery and for fixed capital investment - Held, yes - Whether further, said subsidy receipt should not be reduced from actual cost of fixed assets....
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....DR as to why he has treated this expense as bogus. The addition amount to Rs. 11,26,386/- is dismissed. The ground of the assessee is allowed. 21.3. In the result the appeal of the assessee, ground no. 2 to 2.1 are allowed ITA 417/Asr/2015- Ground-3 & 3.1 and Ground 4 & 4.1:- 22. The ld. Counsel argued that ground Nos. 3 to 3.1 with regards to deduction under section 80 IB of the Act of sum of Rs. 10,14,174/- with respect to CA stores and Ground Nos. 4 to 4.1 is with regards to claim of deduction under section 80 IB with respect to F & B division. 22.1 The ld. Counsel argued that ld. CIT (A) at pages 85 to 91 of his order, in principal agreed to the claim of deductions so claimed by the assessee - appellant, however, gave a finding that since AO has not made disallowance with regards to the same in order of assessment, as such, no relief can be claimed. However, a look at the ld. AO's order at page 5, would make it amply clear that adverse observations have been made by learned AO, and once learned CIT (A) in principle agreed to allow the said claim, the said observations so recorded by learned AO should have also been expunged. It is prayed accordingly from Hon'ble ITA....
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....e Claim of assessee u/s 80HHC of the Act. The ld. CIT-DR has relied on the order of the ld. AO. 24.1. The ld. Counsel relied on the order of the ld. CIT(A) which is reproduce as below: - "13. ISSUE 5 DISALLOWANCE OF CLAIM OF DEDUCTION u/s 80HHC OF THE ACT A.Y. Ground No. Amount (Rs.) 2003-04 4 36,54,798 13.1 The facts as emerging from record are that assessee company had declared net profit of Rs. 76,68,765/- in respect of meat export division. The profit and loss account of the aforesaid division is placed at pages 85A to 85F of Paper Book. The meat export division is engaged in export of meat. It is not disputed that no activity of purchase and sale of meat for the purpose of export is from any of the Units at Jammu. Even the AO in the remand reports dated 23.8.2011 and 20.2.2015 has not rebutted written submissions of the appellant. As such, there remains no justification to sustain the disallowance u/s 80HHC of the Act. Therefore, the same is deleted and the ground raised is thus allowed." 24.2. We heard the rival submission and considered the order of revenue. The order of the ld. CIT(A) is explanatory & in remand report also in favour....
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.... sustaining a disallowance of a sum of Rs. 1, 75, 000/- under section 40(a)(ia) of the Act on account of advertisement expenses. 4.1 That the learned Commissioner of Income has further failed to appreciate the basic fact that no disallowance is warranted of the expenditure incurred to the extent of expenditure paid u/s 40(a)(ia) of the Act, and as the entire sum of interest stood "paid" during the year thus, there was no sum remaining to be "payable" at the end of the financial year 2007-08 relevant to instant assessment year 2008-09 and as such, no disallowance is called for and the disallowance sos sustained deserves to be deleted. 5. That the learned Commissioner of Income Tax (Appeals) has grossly erred in passing the impugned order against assessee - appellant without providing any fair and proper and meaningful opportunity of being heard, thereby violating the principles of natural justice and thus such an order of assessment is vitiated both on fact and in law." 25.1. In this appeal the assessee has taken 5 grounds of appeal. From Ground no-1 to 3.1 were already adjudicated in favour of assessee. The Ground no. 2 & 2.1 of ITA No. 417/Asr/2015 is mutatis ....
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....nted to the industrial undertakings established in Jammu and Kashmir. The said incentive has been granted as an Industrial Assistance. Medium scale Industries are necessarily to be registered with Ministry of Commerce, Government of India Department of Secretariat for Industrial Assistance. The incentive that are required to be granted are granted once the industrial undertaking is established and any incentive that is being provides is being provided in accordance with the industrial assistance scheme provided for by the Govemment. Excise Duty Refund is also an aid and assistance to the promotion of Industrial Harmony in the Industrially Backward states. The word Industrial is an essential element with regard to the entitlement for this particular benefit in industrially backward states and industrial assistance. Thus the excise duty refund granted to the industries in Industrially backward states certainly an industrial incentive, thus income derived from Industrial undertaking which can be certainly differentiated from Duty draw back and other businesses incentives as such types of incentives are granted irrespective of thefact ....
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....the required incentives as well as an enabling environment for industrial development, improve availability of capital and increase market access to provide a fillip to the private investment in the state. 3. The matter has been carefully considered by the Government and it has been decided to provide the following package of incentives for the state of Jammu & Kashmir:- 3.1 Fiscal incentives to new industrial units and substantial expansion of existing units: i) New Industrial units and existing industrial units on their substantial expansion as defined, set up in growth centre, industrial infrastructure development centers (IIDCS) and other location like Industrial estates, parks, export processing zones, commercial estates, etc. as notified by the Central Government are entitled to 100% (hundred percent) excise duty exemption for a period of 10 years from the date of commencement commercial production. ii) All new industries in the notified location would be eligible for capital investment subsidy @ 15% of their investment in plant and machinery, subject to a ceiling of Rs. 30 lakhs. The existing units will be entitled to ....
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.... of Rs. 50 crore on the lines of North East Development Financial Corporation. This Corporation shall provide term loan, working capital and other Infrastructural support in the State of Jammu & Kashmir in the lines of NEDFI in the North East. ii) JKDFC would be designated as the Nodal Agency for routing the subsidies/incentives under various schemes notified under this policy. 3.5 The above concessions/subsidies shall be available to all new units/existing industrial units on their substantial expansion, in the notified industrial areas by the Central Government (Annexure_I) and thrust industries (Annexure II) irrespective of location. Explanation: i) The eligible areas for above concessions and thrust industries are as identified in Annexure-I & II respectively. ii) The notification regarding definition of substantial expansion of the existing units shall be issued separately. 3.6 Ineligible industries under the policy: Document 7 Cigarettes/cigars of tobacco, manufactured tobacco and substitutes, distillation/brewing of alcoholic drinks and manufacture of branded soft drinks and its concentrates are excluded for the purpos....
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.... which have commenced their commercial production on or after the 14th day of June 2002. (b) Industrial units existing before the 14th day of June 2002, but which have undertaken substantial expansion by way of increase in installed capacity by not less than twenty five per cent on or after 14th day of June 2002. The exemption contained in this notification shall apply to any of thesaid units for a period not exceeding ten years from the date of Document 10 publication of this notification in the Official Gazette or from the date of commencement of commercial production whichever is later. Notification No. 57/2003-C.E. (N.T.), dated 25-6-2003. In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944), the Central Government hereby makes the following rules to amend the CENVAT Credit Rules, 2002, namely:- 1. (1) These rules may be called the CENVAT Credit (Sixteenth Amendment) Rules, 2003. (2) They shall come into force on the date of their publication in the Official Gazette. 2. In the CENVAT Credit Rules, 2002, - (a) in rale 3, in sub-rule (3), for the third proviso, the following pro....