TaxTMI 
TaxTMI 
2016 (5) TMI 1603
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....lted milk food chocolates and allied products. It files return on 29-10-2007 admitting nil income after setting off unabsorbed depreciation of the earlier assessment years. The same was processed on 22-11-2007. The Assessing Officer took up scrutiny. He completed a regular assessment inter alia making disallowances/additions u/s. 14A r.w Rule 8D in the nature of interest amounting to Rs. 23,46,232/- as incurred relating to dividend income of Rs. 76,55,740/-. The same resulted in computation of taxable income amounting to Rs. 7,33,02,921/-. 4. The assessee preferred appeal. The CIT(A) held that the impugned assessment year is 2007-08 not eligible to Rule 8D application to be invoked from assessment year 2008-09 only as held by hon'ble Bombay high court Godrej Boyce case (2010) 328 ITR 81. He was of the view that the impugned section 14A disallowance has to be accordingly computed by adopting a reasonable method. He observed that the assessee had not placed on record any cash flow statement as well to prove investment of non-interest bearing funds only in tax free investments. This made the CIT(A) to confirm proportionate interest disallowance of Rs. 21,29,714/-. He would reduce adm....
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....provide for netting of interest expenses for the working of disallowance of expenditure on this point. But, the allowing netting of interest as such and accordingly working of disallowance u/s. 14A r.w. Rules 8D resulted in short disallowance of Rs. 11,79,439/-. 3. In view of the above facts & circumstances, I have reason to believe that the income chargeable to tax has escaped the assessment within the meaning of Sec. 147 of the Income-tax Act, 1961 for the assessment year 2007-08. I, therefore, issue notice u/s 148 of the Act for A.Y. 2007-08 to the assessee after obtaining necessary approval of the higher authority." 7. The assessee filed its objection petition against the above stated reopening. The Assessing Officer in his order dated 07-10- 2011 rejected these objections by passing a speaking order. This followed the impugned reassessment on 04-11-2011. The Assessing Officer concluded that the impugned interest disallowance is to be made on gross amount of Rs. 70,51,400/- instead of adopting netting formula. This resulted in enhanced Rule 8D(2)(ii) disallowance from Rs. 23,46,232/- to Rs. 35,25,710/- made earlier in regular assessment. 8. The assessee filed yet anoth....
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....o 1-4-99 and also in respect of grants received prior to 1-4-99 and thereby would apply from assessment year 1999- 00 irrespective of the year of acquisition of assets and year of disbursement of grant. The learned CIT(A) thus erred in denying benefit of depreciation in respect of value of grant/subsidy in respect of the assets acquired prior to A.Y. 1999-00 even though in respect of these very assets full depreciation is allowed in earlier years without deducting value of grant from actual cost or WDV of assets. It is submitted that it be so held now. 2.2 The action of learned CIT(A) in holding that subsidy is deductible from actual cost u/s 43(1) is patently incorrect and unjustified. Particularly when in the year under consideration, the appellant is claiming depreciation on WDV of assets which have already entered the block in the assessment years prior to Assessment Year 1999-2000. It is submitted that it be so held now and depreciation as claimed by the appellant be allowed. 3. The learned CIT(A) erred in confirming disallowance of Rs.1,50,00,000/-( Rupees one crore fifty lakhs)being contribution to ARDA (Anand Research Development Association) for Dairy Development(DD)....
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....e question in para-3 of the judgement as under:- "3. Moreover, it is an accepted position between the parties that the controversy involved in the present case stands concluded by a decision of this High Court in the case of Mahesana District Co-operative Milk Producers Union Ltd. vs. Commissioner of Income Tax, (2002) 258 ITR 780, whereby the question has been answered in favour of assessee and against the revenue." 5.3. The Hon'ble Gujarat High Court has decided the issue in the case of Mahesana District Co-operative Milk Producers Union Ltd. vs. CIT reported at (2002) 258 ITR 780 (Guj.) by holding as under:- "6. So far as the second question is concerned, one has to refer to the decision of the apex Court in CIT vs. P.J. Chemicals Ltd. (1994) 121 CTR (SC) 201 : (1994) 210 ITR 830 (SC) : TC 29R. 367. In that case, Government subsidy was intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries. The specified percentage of the fixed capital cost, which is the basis for determining the subsidy, being only a measure adopted under the scheme to quantify the financial aid, is not a payment, directly or indirectly to meet any portio....
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.... CIT(A) in his order has noted that AO has applied Explanation 10 to s. 43(1) in AY 2005-06 and not in assessment year prior to AY 1999-2000. Explanation 10 which has been introduced with effect from 1.4.1999 states that "where a portion of the asset acquired by the assessee has been met directly or indirectly by the Central Government or any other authority established under any law or by any other person, in the form of a subsidy or grant or reimbursement (by whatever name called), then, 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". Perusal of aforesaid Explanation it can be seen it has been introduced with effect from 1.4.1999. Further it does not refer to assets acquired after 1.4.1999 or grant/subsidy received after 1.4.1999 and therefore we are of the view that it has to be applied from AY 1999-2000 onwards irrespective of the year of acquisition of assets or the year of disbursement of grant. Seen in the light of the Explanation 10, it is an undisputed fact that the asset acquired by the assessee has been met from the grant received from NDDB and therefore the cost relatab....