TaxTMI 
TaxTMI 
2024 (3) TMI 658
X X X X Extracts X X X X
X X X X Extracts X X X X
....al income of Rs. 1693,93,81,100. The return filed by the assessee was selected for scrutiny and statutory notices under section 143(2) as well as section 142(1) were issued and served on the assessee. The Assessing Officer ("AO") vide order dated 28/12/2017 passed under section 143(3) of the Act assessed the total income of the assessee at Rs. 1973,66,56,516, under normal provisions of the Act, after making certain additions/disallowances. The learned CIT(A), vide impugned order, granted partial relief to the assessee. Being aggrieved, both the assessee as well as the Revenue are in appeal before us. ITA No.1673/Mum./2019 Assessee's Appeal - A.Y. 2015-16 3. In its appeal, the assessee has raised the following grounds:- "1. The Learned Commissioner of Income tax (Appeals) - 01, Mumbai, erred in applying rule 8D and confirming disallowance to the tune of Rs. 167.23 lacs. 2. The Learned Commissioner of Income tax (Appeals) - 01, Mumbai, erred in disallowing Rs. 54.06 Lacs being expenditure incurred for evaluation of various business opportunities considering it as capital in nature. 3. The Learned Commissioner of Income tax (Appeals) - 01, Mumbai, e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct has been deleted in the absence of any satisfaction being recorded by the AO. 7. On the other hand, the learned Departmental Representative ("learned DR") vehemently relied upon the order passed by the AO. 8. We have considered the submissions of both sides and perused the material available on record. Undisputedly, in the present case, the assessee earned a dividend income of Rs. 68.85 crore from domestic companies/mutual funds and also earned interest on tax-free bonds amounting to Rs. 1.79 crore, which has been claimed as exempt under section 10 of the Act. Further, there is also no dispute regarding the fact that the assessee while computing its taxable income suo-moto disallowed an amount of Rs. 23,96,476 as an expenditure incurred for earning the aforesaid exempt income. As per the assessee, the aforesaid suo-moto disallowance is based on the report obtained from the accountant, who after verifying assessee's books of accounts and relevant records has estimated the amount of disallowance. The working of aforesaid suo-moto disallowance made by the assessee, forms part of the paper book on page 331, as under: "Classe 21(h) Amount of deduction inadmisi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom the record that the AO disagreed with the correctness of the claim of expenditure made by the assessee and held that adequate interest and administrative expenses have not been disallowed for earning the exempt income. Accordingly, the AO proceeded to compute the disallowance of Rs. 1,51,24,084/- under section 14A read with Rule 8D of the Rules, after considering the suo-moto disallowance made by the assessee. 10. Before proceeding further, it is pertinent to note certain relevant provisions of the Act, which are necessary for adjudication of the issue at hand. Section 10 of the Act deals with income which does not form part of the total income of the assessee. Section 14A of the Act provides that no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. Further, section 14A(2) of the Act, reads as under: "(2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of Section 14A(2) and (3) read with Rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable." (emphasis supplied) 12. Therefore, the satisfaction as required to be recorded under the provisions of section 14A of the Act is not limited to merely disagreeing with the submission of the assessee and requires that the AO should also provide the basis for reaching such a conclusion, after having regard to the accounts of the assessee. However, as noted above, in the present case the AO merely proceeded to compute the disallowance under section 14A read with Rule 8D without examining the correctness of the claim of the assessee regarding expenditure incurred for earning the exempt income. It is evident from the record that the assessee's own funds, i.e. share capital and reserves & surplus, are Rs. 2487.78 crore, while investment in tax-free securities is only limited to Rs. 165.07 crore and therefore it can be presumed that the assessee had sufficient own funds for making the aforesaid investment i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e on application of the formula prescribed under rule 8D or in the best judgment of the Assessing Officer, what the law postulates is the requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of section 14A (2) and (3) read with rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable." Thus, Rule 8D of the Rules cannot be invoked where the suo moto disallowance made by the respondent assessee is not found to be satisfactory by the Assessing Officer having regard to the accounts of the assessee. In the absence of recording the aforesaid fact of non- satisfaction in terms of Section 14A(2) of the Act, invocation of Rule 8D is not permissible. (e) Therefore, in view of the above decision of the Apex Court, this question also does not give rise to any substantial question of law. Thus, not entertained." 14. Since, in the present case, no proper satisfaction has been recorded by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... i.e. home decor/home improvement and acquisition of overseas company. Accordingly, the AO held that such an expenditure is liable to be treated as capital expenditure and disallowed the amount of Rs. 54.06 lakh paid by the assessee to various professionals and consultants for the evaluation of various business opportunities. 14. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue by following the approach adopted by its predecessor in assessee's own case for the assessment years 2012-13 and 2014-15. Being aggrieved, the assessee is in appeal before us. 15. Having considered the submissions of both sides and perused the material available on record, we find while considering a similar issue, the coordinate bench of the Tribunal in assessee's own case in Asian Paints Ltd v/s ACIT, in ITA No. 269/Mum./2018, for the assessment year 2014-15, vide order dated 06/03/2024, after examining the engagement letters entered between the assessee and the consultants held that the entire expenditure incurred by the assessee cannot be disallowed and the disallowance should be restricted to the expenditure which has been incurred for evaluation o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y report for entry into the home improvement segment. As per the assessee, the expenses on exploratory exercise are incurred out of commercial expediency in as much as they are incurred to expand the existing business by exploring new markets, products, etc. 19. In order to determine whether the home improvement and decor segment is a new line of business or an extension of the existing business conducted by the assessee, it is pertinent to note that the assessee has claimed itself to be the largest manufacturer of paints and enamels in India and a market leader in the Indian paint industry. Further, from the perusal of the annual report of the assessee as well as submissions filed before the AO, we find that home improvement and decor were considered as one such area which offers tremendous growth opportunities by the assessee. Accordingly, the assessee amended its object clause in the Memorandum and Articles of Association on 17/12/2012. Further, it is also evident from the aforesaid documents that in January 2013, the assessee's board granted in-principle approval to enter into an arrangement with the promoters of the Sleek Group for acquiring a 51% stake in the Sleek G....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... from pages 2-30, we find that the consultant agreed to assist the assessee in developing a deep understanding of the furniture and furnishings category and develop the business strategy for roll-out. Further, the consultant agreed to assist the assessee in understanding how the capability platform proposed to be developed as part of this exercise can be leveraged for building the overall home improvement business. From the description of the furniture and furnishing, as provided in the aforesaid engagement letter, we find that the same includes beds, cupboards, sofas and seatings, tables, kids' furniture, wall shelves, furniture upholstery, and curtains. From the perusal of the description of the furniture and furnishings, in respect of which the assessee explored business opportunity with the help of the consultant, we are of the considered view that same constitutes a completely new line of business and the same is not an extension of the existing business of manufacturing of paints and enamels by the assessee. Accordingly, the expenditure incurred on exploring business opportunities in furniture and furnishings is held to be capital in nature. 18. Similarly, from t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....facturing and selling paints, other coatings and adhesives in Ethiopia. From the perusal of the annual report of the assessee, we find that in April 2014, the assessee's wholly owned subsidiary in Mauritius, Asian Paints (International) Ltd., signed an agreement with shareholders of Kadisco Chemical Industry PLC., Ethiopia to acquire, either directly or through its subsidiaries, 51% of its share capital. Therefore, from the documents available on record, it is evident that the impugned expenditure was incurred towards the process of acquisition of majority shareholding in Kadisco Chemical Industry PLC., Ethiopia, which is a capital transaction. In any case, the expenditure cannot be said to be in line with the existing business of the assessee of manufacturing paints and enamels or an extension of the existing line of business of the assessee, as the expenditure was incurred on pre-acquisition due diligence of the company which cannot be equated with market survey or preparing feasibility report for extension of the business. Accordingly, this expenditure is held to be capital in nature. 21. In view of our aforesaid findings, we are of the considered view that the entire e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owance of prior period expenditure. 18. We have considered the submissions of both sides and perused the material available on record. During the year under consideration, the assessee debited prior period expenses of Rs. 72,69,693 in the Profit and Loss account. Accordingly, during the assessment proceedings, the assessee was asked to justify the allowability of aforesaid prior period expenses. The AO did not agree with the submissions of the assessee and after perusing the breakup of prior period expenses noted that prior period expenses claimed by the assessee are on account of rectification of mistakes of earlier years. The AO further held that only such expenses which have been crystalised during the current year because of events not in the control of the assessee can be allowed as a deduction and no deduction of prior period expenses can be allowed in the computation of income of the assessee because the assessee did not make adequate efforts to reconcile the accounts in proper time. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue and held that in the year under consideration the assessee has claimed prior period expenses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ced as the provision for bad and doubtful debts is allowed only to the banking companies in compliance of section 36(1)(vii) and section 36(1)(viia) of the Act, in light of the guidelines of the Reserve Bank of India. However, in the present case, the provision is created on an estimated basis considering the percentage of the total value of receivables and moreover, the individual debtors' accounts have also not adjusted with the provision amount. The AO further held that as per section 36(1)(vii) of the Act, the amount should be written off in the accounts of the assessee as irrecoverable, however, the assessee has only made the provisions. Accordingly, the claim of provision for doubtful debts of Rs. 1,59,37,355 was disallowed and added to the total income of the assessee. 22. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue and held that for the provisions of section 36(1)(vii) to be applicable, it is essential that the amount of any bad debt or part thereof is written off as irrecoverable in the accounts of the assessee for the previous year in question. However, in the case of the assessee, it is seen that it has only c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ection may be issued for the bad debts to be allowed in the year in which it has been actually written off. We are of the considered view that the assessee's claim for allowance of bad debts written off can be considered in the appropriate year if the same is found to be in accordance with the law and thus no specific direction in this regard is required. Accordingly, ground no.4 raised in assessee's appeal is dismissed. 24. The issue arising in ground no.5, raised in assessee's appeal, pertains to the disallowance of expenditure incurred by the assessee on "Colour Idea Stores" by treating the same as capital expenditure. 25. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the assessment proceedings, upon perusal of the details furnished by the assessee, it was observed that the assessee has incurred an amount of Rs. 32,44,46,533 towards "Colour Idea Stores" and debited this expense in the Profit and Loss account under the head "Advertisement and Sales Promotion Expenses". Accordingly, the assessee was asked to justify the allowability of the expense as revenue expenditure. In response thereto, the assessee submitted that every ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... benefit of which is reaped by the company that owns such marketing intangibles. The learned CIT(A) further held that "Colour Idea Stores" is a different marketing intangible, which is a brand and concept that remains with the assessee, for lasting benefit to it. Accordingly, the CIT(A) came to the conclusion that the concept of "Colour Idea Stores" is to be treated as a marketing intangible, and expenses incurred for creating such intangible has to be treated as capital in nature. Being aggrieved, the assessee is in appeal before us. 28. We have considered the submissions of both sides and perused the material available on record. During the year under consideration, the assessee claimed expenditure incurred on "Colour Idea Stores" under the head advertisement on sales promotion expenses. In its annual report, the assessee has declared that during the financial year 2014-15, the count of "Colour Idea Stores" has increased to more than 200 with the record installation of 70 new stores. It is further stated that in-store colour consultancy is a key feature of these stores, which benefited more than 1,25,000 customers across these "Colour Idea Stores" during the year. As per the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gnated Shop Area constructed, designed, and decorated in accordance with and in the manner suggested by the assessee and its consultants/contractors, for which peaceful and vacant possession shall be also be handed over by the dealer. The dealer further agreed that it must neither use the Designated Shop Area in any other manner than as specified by the assessee nor any other products or display material shall be kept out at the Designated Shop Area unless specified by the assessee. Further, it was agreed that the dealer shall not be entitled to any special privileges, prerogatives, benefits, discounts, or rebates as compared to other dealers by virtue of this agreement nor the dealer shall charge in excess of the MRP declared by the assessee for the facilities provided to the customers and the Designated Story Area. At the outset, we are of the considered view that none of the clauses of the agreement lead to the conclusion that any fixed asset of enduring nature is created by incurring the aforesaid expenditure on "Colour Idea Stores". 30. The assessee is in the business of manufacturing paints and enamels and therefore in order to promote its brands and products, through a ne....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and the AO is directed to allow the same. Since the AO has granted the depreciation to the assessee by treating the expenditure as capital in nature, the same may be reversed in view of the aforementioned findings. As a result, ground no.5 raised in assessee's appeal is allowed. 31. During the hearing, the applications dated 16/03/2021 seeking admission of additional grounds of appeal were not pressed by the assessee. Accordingly, these applications are dismissed as not pressed. 32. In the result, the appeal by the assessee is partly allowed for statistical purposes. ITA No.2959/Mum./2019 Revenue's Appeal - A.Y. 2015-16 33. In its appeal, the Revenue has raised the following grounds:- 1. Whether, on the facts and in the circumstances of R the case and in law, the Ld. CIT(A) was right in directing the A.O. to verify the allowability of expenditure incurred u/s 35(2AB) without appreciating the fact that the expenditure was disallowed by DSIR (as per Certificate in Form No. 3CL) as the same was not incurred for R & D purpose? 2. Whether, on the facts and in the circumstances R of the case and in law, the ld. CIT (A) was right in restrictin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd reconciliation of the expenditure allowed by the DSIR with the deduction claimed in the computation of income. In response thereto, the assessee submitted that it has recognised R&D Unit at Turbhe (Navi Mumbai) and during the year claimed weighted deduction under section 35(2AB) of the Act with respect to expenditures incurred for R&D activities. The assessee furnished the copy of approval received from DSIR obtained in Form No.3CM during the assessment proceedings. The assessee also furnished a copy of the certificate of expenditure in Form No.3CL received from the DSIR. The assessee also provided a copy of the reconciliation between the amounts claimed in the return of income vis-a-vis the claim allowed by the DSIR. During the assessment proceedings, the assessee was also asked to show cause why the differential amount as per Form No.3CL be not disallowed, which was not allowed by the DSIR. In response thereto, the assessee submitted that except for the expenditure in the nature of land and building, all other expenditures incurred on scientific research will be eligible for the weighted deduction under section 35(2AB) of the Act. The assessee further submitted that all the ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....outside its in-house facilities while the Tribunal allowed the same. The Hon'ble Gujarat High Court upheld the decision of the Tribunal holding that merely because the prescribed authority segregated expenditure into two parts by itself could not be sufficient to deny the benefit to the assessee u/s 35(2AB). The issue involved the in the case of Cadila Health Care ltd. (supra) thus was entirely different and even the facts involved in the said case were different from the facts of the assessee's case in as much as the entire expenditure incurred by the assessee in that case on R & D was duly certified by the prescribed authority whereas in the case of the assessee, the same is not certified to be eligible R & D expenditure to the extent of Rs. 54.34 lakhs. 14. The le Counsel for the assessee has also relied on the decision of the Ahmedabad bench of ITAT in the case of ACIT vs Torrent Pharmaceuticals Ltd. in ITA No.3569/Ahd/2004 dated 13.11.2009 in support of the assessee's case on the issue under consideration. In the said case, weighted deduction claimed by the assessee u/s 35(2AB) on account of R & D expenditure was partly disallowed by the AO relying on the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he issue arising in ground no.2, raised in Revenue's appeal, pertains to disallowance under section 14A of the Act. In view of our findings rendered in assessee's appeal on a similar issue, ground no.2 raised in Revenue's appeal is dismissed. 41. The issue arising in ground no.3, raised in Revenue's appeal, pertains to the allowance of balance additional depreciation. 42. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the assessment proceedings, it was observed that the assessee has claimed additional depreciation @10% on the fixed assets acquired during the financial year 2013-14 amounting to Rs. 2,86,47,976 under section 32(1)(iia) of the Act. Accordingly, the assessee was asked to explain the allowability of additional depreciation so claimed. In response thereto, the assessee submitted that as per section 32(1)(iia) of the Act, the assessee is entitled to claim 20% additional depreciation on any new plant and machinery acquired after 31/03/2005. It was further submitted that as per the provision to section 32(ii)(b), if the assets are put to use for less than 180 days in the previous year, then the deduction in respect of d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssing officer rejected the claim of the assessee holding that there is no such provision to claim balance 10% additional depreciation in subsequent years for addition made in earlier year. In past year learned CIT -A who allowed the claim of the assessee following the decision of coordinate bench in Cosmo films Ltd 24 taxmann 189 and SIL Ltd 26 taxmann 78, The learned assessing officer did not followed order of the learned CIT - A in earlier year also and made disallowance of Rs 1,51,65,251/-. 037. On appeal before the learned CIT -A, he allowed the claim of the assessee based on his own decision for assessment year 2008- 2009 in case of the assessee. We find that the identical issue has been decided in favour of the assessee in the assessee's own case for assessment year 2009-10 in ITA number 2754/M/2014 and ITA number 4203/M/2014 by coordinate bench as Under:- "38. In ground No. 5, revenue has challenged the decision of learned Commissioner (Appeals) in allowing assessee's claim of additional depreciation. 39. Briefly the facts are, in course of assessment proceedings, the Assessing Officer noticed that the assessee has claimed carried over amou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any appeal before the bunal. In view of the above, we uphold the decision of Jeaned Commissioner (Appeals) on the issue. Ground raised is dismissed. 038. Therefore, respectfully following the decision of the coordinate bench in assessee's own case for assessment year 2009- 10, ground number 6 of the appeal is dismissed holding that the learned CIT appeal is correct in allowing additional depreciation at the rate of 10% for asset purchased in the earlier year amounting to Rs. 151,65,251/- 36. Since the issue is exactly similar and grounds as well as the facts are also identical, respectfully following the above decision in assessee's own case for the A.Y. 2010-11 and also following the principle of "Rule of consistency" we dismiss the ground raised by the revenue holding that Ld.CIT(A) is correct in allowing the additional depreciation at the rate of 10% for asset purchased in the earlier year. Ground raised by the revenue is dismissed." 45. We find that similar findings were rendered by the coordinate bench of the Tribunal in assessee's own case in the assessment years 2012-13, 201314 and 2014-15. We find that this issue is recurring in nature and has b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hile deciding a similar issue in favour of the assessee the coordinate bench of the Tribunal in assessee's own case in ACIT v/s Asian Paints Ltd., in ITA No. 4675/Mum/2015, for the assessment year 2010-11, vide order dated 23/02/2022, observed as under:- "041. It is also stated before us that the issue squarely covered in favour of the assessee for assessment year 2009 10 in ITA number 2754/M/2014 and ITA number 4203/M/2014 wherein the coordinate bench held as Under: - "43. In ground 6, the revenue has challenged deletion of disallowance of 1,610.45 lakhs on account of expenditure incurred on trip scheme. 44. Briefly the facts are, during the assessment proceedings, the Assessing Officer noticed that the assessee had debited an of amount 16,10,45,094/- towards expenditure incurred on account of trip scheme. Noticing this, he called upon the assessee to justify the claim. After verifying the details furnished by the assessee, the Assessing Officer observed that the amount was paid to SOTC for foreign trip of its dealers. Being of the view that the expenditure incurred was not for the purpose of assessee's business, he held the same as not allowable. Fu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nature of an incentive linked to quantum of purchases made by the dealer. Finally, he submitted, the assessee is claiming such deduction for past 20 years. Except the impugned assessment year, the expenditure has never been disallowed. Therefore, there is no reason to deviate in the impugned assessment year. 48. We have considered rival submissions and perused materials on record. As could be seen from the facts on record, to expand its business the assessee has devised a trip scheme wherein it organized foreign trips to its dealers and distributors based on achieving a specific target assigned by the assessee. On achieving such target, the dealer/distributor is entitled to undertake the trip organized by the assessee through SOTC. Thus, from the aforesaid facts it is very much clear that the entire trip scheme is for the purpose of expanding assessee's business by encouraging the dealers and distributors to achieve a specific target of purchase. Thus, the scheme is closely linked to assessee's business activity. It is also a fact that the assessee has not paid any amount to the dealers and distributors, but amount spent has been paid to SOTC for organizing the tri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d executed. However, for the year under consideration, the assessee partly waived the Royalty income receivable from two of its subsidiary companies situated in Bangladesh and Sri Lanka. During the assessment proceedings, the assessee submitted that it had an agreement with its indirect overseas subsidiaries in Bangladesh and Sri Lanka, according to which the assessee has to receive a Royalty of 3% of net sales of other units. However considering the financial position of the subsidiaries, the assessee agreed to waive part of the Royalty and therefore during the year has credited 1% of the Royalty amount to the Profit and Loss account instead of 3% as per the agreement. The assessee further submitted that under the Act as well as the Double Taxation Avoidance Agreement ("DTAA") entered with the aforesaid countries, the assessee is liable to pay tax only on the amount of Royalty received by it. The AO vide assessment order did not agree with the submissions of the assessee and by following the approach adopted in the assessment years 2011-12 to 2014-15 proceeded to make the addition of the balance Royalty, i.e. 2%, which was waived by the assessee. 53. The learned CIT(A), vide im....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y transfer pricing adjustment on account of the aforesaid international transaction. However, the AO, by placing reliance upon the findings of its predecessor in assessee's own case for the assessment year 2011-12, held that the legitimate right to receive corresponding income (Royalty) cannot be waived off through an arbitrary decision, particularly till such time as the original written and duly signed agreement is in place. Accordingly, the AO made the addition of the balance of 2% royalty waived off by the assessee as the income receivable in the hands of the assessee. Even though no adjustment was made by the TPO on account of the transaction of receipt of Royalty from the subsidiary companies in Bangladesh and Sri Lanka. 65. Before proceeding further, it is pertinent to note that as per section 5(1) of the Act in the case of a resident, the total income, inter-alia, includes all income from whatever sources derived which accrues or arises to him outside India during the year. As per the assessee, it is entitled to receive the Royalty from its overseas subsidiaries @3% on the net sales price of products sold by the overseas subsidiaries. Thus, the net sale price of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-13, the assessee has changed its practice and started claiming the same as allowable expenditure. It was further held that the assessee could not prove that the alleged advances were made in the ordinary course of the business and such advances written off cannot be treated at par with the bad debts written off. 58. The learned CIT(A), vide impugned order, allowed the appeal filed by the assessee on this issue by following the approach adopted in the assessment years 2012-13 and 2014-15. Being aggrieved, the Revenue is in appeal before us. 59. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal in assessee's own case cited supra, for the assessment year 2012-13, restored this issue to the file of the AO by observing as under:- "71. We have considered the submissions of both sides and perused the material available on record. As per the assessee, it has changed its practice from the assessment year 2012-13, where sundry balances written off is claimed as deduction, and sundry balances written back is offered for tax in its return of income. The assessee submitted that the expe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... AO also held that in this case subsidy granted is for running the business more efficiently and profitably. Accordingly, the AO made the addition of the subsidy of Rs. 108.93 crore received by the assessee. 63. The learned CIT(A), vide impugned order, by following the decision of the Hon'ble Supreme Court in CIT v/s Ponni Sugars and Chemicals Ltd., [2008] 306 ITR 392 (SC) allowed the ground raised by the assessee on this issue and held that the subsidy received by the assessee is capital in nature. Being aggrieved, the Revenue is in appeal before us. 64. Having considered the submissions of both sides and perused the material available on record, we find that while deciding a similar issue pertaining to the taxability of subsidy received by the assessee under Package Scheme of Incentives, 2007 of the Government of Maharashtra, the coordinate bench of the Tribunal vide order dated 05/03/2024 passed in assessee's own case in ACIT v/s Asian Paints Ltd., in ITA No.841/Mum./2018, for the assessment year 2013-14 held that the subsidy received by the assessee is capital in nature as the incentives/subsidy granted was only to encourage the setting up of industries in the less develo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ugars and Chemicals Ltd. (supra) and Sahney Steel & Press Works Ltd. v. CIT [1997] 228 ITR 253 (SC), observed as under:- "6. .....We are unable to accept this stand. In the case of in Sahney Steel & Press Works Ltd. v. CIT [1997] 228 ITR 253/94 Taxman 368 (SC) and in Ponni Sugars & Chemical Ltd.'s. case (supra), the honourable Supreme Court has emphasized that the character of receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. The purpose test has to be applied. The point of time at which the subsidy is given is not relevant. The source is immaterial. The form of subsidy is immaterial. The main condition and with which the court should be concerned is that the incentive must be utilized by the assessee to set up a new unit or for substantial expansion of the existing unit. If the object of the subsidy scheme is to enable the assessee to run the business more profitably then the receipt is on the revenue account. On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit then the receipt of subsidy was on the capital account. 7. We....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., we find no infirmity in the impugned order passed by the learned CIT(A) on this issue in treating the subsidies as capital in nature. As a result, ground no.10, raised in Revenue's appeal is dismissed." 65. Since in the year under consideration, the assessee received the impugned subsidy under under Package Scheme of Incentives, 2007 of the Government of Maharashtra, therefore, respectfully following the decision rendered in assessee's own case cited supra, we find no infirmity in the impugned order on this issue in treating the subsidies as capital in nature. As a result, ground no.7 raised in Revenue's appeal is dismissed. 66. The issue arising in ground no.8, raised in Revenue's appeal, pertains to the deletion of the addition of the electricity grant received from the Government of Haryana. 67. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the year under consideration, the assessee credited a sum of Rs. 13 lakh in its Profit and Loss account as electricity grants receivable from the Government of Haryana but the same was not considered as taxable. During the assessment proceedings, the assessee was asked the reason fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ness more profitably. The relevant findings of the coordinate bench, in the aforesaid decision, are as under:- "61. We have considered the submissions of both sides and perused the material available on record. From the perusal of the Industrial Policy, 2005 of the Government of Haryana, forming part of the paper book from pages 224256, we find that the key objective of the Industrial Policy was, inter-alia, to reestablish the industry as a key driver of economic growth and to facilitate spatial dispersal of economic activities particularly in economically and socially backward regions of the State. Under the aforesaid Industrial Policy, incentives and privileges were provided by way of exemption from electricity duty, preferential allotment of land for the IT industry, continuous-uninterrupted power supply for the IT industry, relaxation in floor area regulation, rebate on registration and transfer of property charges, etc. We find that vide letter dated 20/07/2007, forming part of the paper book on page 257, the assessee was granted the following special package of incentives/concessions for setting up a project at Industrial Model Township, Rohtak for the manufacturing ....