TaxTMI 
TaxTMI 
2024 (6) TMI 866
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....ingly, for the sake of convenience and brevity, we dispose of these appeals by this consolidated order. 2. Before we advert to the grounds taken in the appeals and the cross objections, it would first be relevant to cull out the basic facts of the case and effect of law in brief in respect of the relevant AYs before us. Search u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") was conducted against the Ruchi Soya Group, on 29-01- 2013 thereby triggering Section 153A of the Act. Prior to the date of search, the income-tax assessment under section (hereinafter referred to as "u/s.") 143(3) of the Act for AY 2010-11 was pending and therefore this assessment abated as a consequence of the search conducted on 29-01-2013. With regard to AY 2012-13, it was pointed out that the time limit for issuance of notice u/s 143(2) of the Act had not expired and therefore even this AY was an abated one. Hence, both the AYs before us are abated assessments. 3. We first take up the Revenue's appeal in ITA No. 1172/Mum/2023 for AY 2010-11. Ground Nos. 1 to 3 raised by the Revenue read as follows:- 1. "On the facts and in the circumstances of the case and in law, t....
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.... by the AO on merits. Hence, these grounds raised by the Revenue are found to be infructuous and are therefore dismissed. 4. Ground Nos. 4 & 5 of the Revenue's appeal being interlinked are taken up together, which are as follows: 4. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the addition of Rs. 1,49,48,313/- in respect of notional interest could not be made by the Assessing Officer, as it was not based on incriminating material found during the course of search, " 5. "On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in deleting the addition of Rs. 1,49,48,313/- in respect of notional interest made by the Assessing Officer, without appreciating the fact that the decision of CIT us. Continental Warehousing Corporation (Nhava Sheva) Ltd (2015) & the decision in the case of All Cargo Global Logistics have not been accepted by the department and an SLP has been filed in the Supreme Court in both the cases decided by the High Court vide ITXA 1969 of 2013 ie. Continental Warehousing Corporation as well as All Cargo Logistics vide Appeal Civil 8546 of 2015 and SIP Civil 5254-5265 of 201....
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....06-07 and 2007-08, wherein similar disallowance of interest had been upheld. 4.3 Per contra, the Ld. AR submitted that the AO had proceeded on incorrect assumption of fact that these advances given to the brokers remained outstanding during the year. He invited our attention to the audited financials of the assessee to show that there was no balance outstanding in the name of these brokers and hence the question of disallowing proportionate interest towards such non-existing advances did not arise. The Ld. AR further showed us that these advances had been assigned to M/s Nova Trading Pvt. Ltd. way back in AY 2008- 09. He pointed out that the assessee was having a running account with M/s Nova Trading Pvt. Ltd. and therefore these advances receivable were transferred in satisfaction of the dues payable to M/s Nova Trading Pvt. Ltd. by mutual consent. Hence, according to him, when there was no outstanding sum receivable from these brokers during the entire FY 2009-10 and moreover the audited books of accounts had not been rejected by the AO, the Ld. CIT(A) had rightly deleted the disallowance of notional interest made by the AO qua these non- existent advances. The Ld. AR alternat....
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....advance, in respect of which interest has been disallowed, is no longer outstanding in the books of the appellant, the other grounds (i.e. ground No. 2 to 5) on the merits of the disallowance become academic in nature and are dismissed as infructuous." 4.5. The reliance placed by the Revenue on the appellate orders passed in assessee's own case in AYs 2006-07 & 2007-08 are found to be factually distinguishable. In those years, the advances given to the three brokers were very much alive and outstanding in the books of the assessee and therefore the authorities were justified in enquiring into the nature and purpose of these advances and to ascertain whether any interest paid on the borrowings were attributable to such outstanding advances. In the present case before us however, the fundamental fact itself is not present viz., there is no amount outstanding as receivable from these three brokers in the books of accounts for the AY 2010-11. For the aforesaid reasons, we find that the Ld. CIT(A) had rightly held that the impugned disallowance made by the AO following the orders for AYs 2006-07 & 2007-08 was factually erroneous. 4.6 In view of our above findings therefore, we see....
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....the Group to which the assessee belonged, was engaging in a systematic pattern of evading taxes by incurring losses in its other companies and that a distinctive pattern was noted which showed that sundry creditors were matched with sundry debtors plus loans plus advances plus investments by them. This according to the AO implied that the turnover achieved by such other companies was bogus. Referring to these observations, the AO held that, the assessee, in the present case, had sold a commodity at a price higher than the original purchase price, and then re-purchased it back at a lower price. This according to him implied that the purchases were inflated. The AO accordingly disallowed the inflated payments for purchases quantified at Rs. 139,18,84,449/- and added the same to the total income. It was brought to our notice that certain transactions valuing Rs. 50,87,27,103/- had been considered more than once, which had since been subsequently rectified by the AO by way of an order u/s 154 of the Act and therefore the disputed addition before us stands reduced to Rs. 88,31,57,396/-. Being aggrieved by the order of the AO, the assessee preferred an appeal before the Ld. CIT(A), who i....
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....hi Soya Group in the course of search to justify the impugned disallowance made by the AO. In this regard, we note that the said disclosure was made in the hands of two different entities namely, M/s Spectra Realities Pvt. Ltd. and M/s Soya Marketing Pvt. Ltd. and therefore the said disclosure was of no relevance to the case of the assessee. It is noted that the Ld. CIT(A) had examined the said disclosure and found that even the issue on which the disclosure was made, was unrelated, and did not pertain to these purchase transactions of edible oil by the assessee. The relevant findings recorded by the Ld. CIT(A) in this regard are as follows: "8.4.3. The A.O. has also referred to incriminating documents found in the course of search on 29.01.2013 on the basis of which disclosure of additional income of Rs. 100 crores was made in the hands of various associate concerns ie Spectra Realities Pvt Ltd and Soya Marketing Pvt It. However, in those transactions non- genuine losses were booked by trading in gold commodities to wipe out the abnormal profit resulting From trade in guar- gum/gum sheet. The disclosure of additional income was also based on seized documents relating to b....
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.... before ITAT, since ITAT has jurisdiction to consider new and/or additional claims/deductions subsequently claims/deductions/subsequently which was not claimed in return of income &/or before the Ld. AO &/or before the Hon'ble CIT(A)." 6.1 Before us, the Ld. CIT, DR for the Revenue objected to the admission of these claims, as according to him, the assessee could not lodge such new claims in the proceedings being conducted u/s 153A of the Act. Per contra, the Ld. AR contended that, the assessee is entitled to make fresh claim u/s 153A of the Act in relation to abated assessments. He submitted that, Section 153A of the Act mandates that, the assessments or re-assessments pending on the date of initiation of search would stand abated and return of income filed by the person qua such abated assessment year would be construed to be a return of income under Section 139 of the Act. Therefore, in view of the second proviso to Section 153A of the said Act, once the assessment got abated, it meant that it was open for both the parties, i.e. the assessee as well as the Revenue to make new claims for allowance or to make disallowance, as the case may be. Hence, according to him, the provis....
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....de/finalized in the case of the assessee in such a situation. We find that this particular issue has been decided in favour of the assessee by the Hon'ble Bombay High Court held in the case of B.G. Shirke Construction Technology P Ltd (supra), wherein it was held as under :- "8. The grievance of the Revenue before us is that the impugned order is unsustainable as it is a passed in the face of the Apex Court Order in Goetze (India) Ltd. (supra). It is submitted that the impugned order could not have held that the claim for deduction could be entertained by the Assessing Officer in the absence of the same finding a place either in return of income or in the revised return of income. It is further submitted that in view of the decision of the Apex Court in CIT v. Sun Engineering Works (P.) Ltd. [1992] 198 ITR 297/64 Taxman 442 a re-assessment consequent to re-opening of the assessment cannot lead to reduction of income which had been originally assessed to tax. In the above view, it is submitted that the impugned order of the Tribunal is not justified and admission of the appeal is warranted. ...... 10. The reliance on the decision of the Apex Court in S....
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....e return filed u/s 153A of the Act was required to be treated as return of income filed u/s 139(1) of the Act. The relevant findings of the Hon'ble High Court are noted to be as under: "8.1 In other words, section 153-A(1) provides that where a person is subjected to a search under section 132 or his books of accounts, etc. are requisitioned under section 132-A after 31-5- 2003, the assessing officer is mandated to issue notice to such person to furnish return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. Such returns of income shall be treated to be returns of income furnished under section 139. Once returns are furnished, income is to be assessed or re- assessed for the six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Thus, once section 153-A(1) is invoked, assessment for 6 assessment years immediately preceding the assessment year in which search is conducted or requisition is made becomes open to assessment or r....
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.... the date of initiation of search or making of requisition, those assessment or re-assessment proceedings shall abate. In other words, pending assessment or re- assessment proceedings on the date of initiation of search or making of requisition shall abate. 8.5 That brings us to the crucial expression, which is 'abate'. The ordinary dictionary meaning of the word 'abate', as per Concise Oxford English Dictionary, Indian Edition, is to reduce or remove (a nuisance). Derivative of abate is abatement. In Black's Law Dictionary, Eighth Edition, 'abatement' has been defined to mean an act of eliminating or nullifying; the suspension or defeat of a pending action for a reason unrelated to the merits of the claim. In Supreme Court on Words and Phrases (1950-2008), "abating" has been defined to mean "an extinguishment of the very right of action itself"; to "abate", as applied to an action, is to cease, terminate, or come to an end prematurely. 9. Therefore, from a critical analysis of the provisions contained in section 153-A(1) of the Act more particularly the key expressions as referred to above, it is evident that assessments or re-assessme....
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....ect of allowing of the assessee's appeal in paragraph -14 of the order under challenge dated 28-9- 2016, which reads thus : "14. From the above discussion and precedence, the scheme of assessment u/s. 153A of the Act in case of search, the AO shall issue notice to searched person requiring him to furnish within such period as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b) of sub-section (1) of section 153A and clause (b) postulates assessment or reassessment of the total income of six years immediately preceding the assessment year relevant to the previous year in which such search is conducted. The first proviso mandates that the AO shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso postulates that the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in sub-section (1) is pending on the date of initiation of the search u/s. 132 of the Act shall abate. In the present case before us, however, though the ....
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....ly clear that the assessee is entitled to lodge new claims in the abated assessments u/s 153A of the Act. As noted earlier, the provisions of the Act, which would be otherwise applicable in case of return filed under Section 139(1) of the Act, would also continue to apply in case of return filed under Section 153A of the Act. Hence, ordinarily under the regular provisions, the assessee is legally permitted to raise additional claims before Appellate Authorities, which were not claimed in the return filed u/s 139 of the Act. For this, gainful reference may be made to the decision of the jurisdictional Hon'ble Bombay High Court in the case of Pruthvi Brokers & Shareholder (349 ITR 336). In the decided case, it was held that an assessee is allowed to raise additional & new claims before Appellate Authorities, although not claimed in the return filed u/s 139 of the Act. Having regard to the decisions of B.G. Shirke Construction Technology P Ltd (supra) & JSW Steel Ltd (supra), the same analogy would be applicable with equal force in the proceedings u/s 153A of the Act for abated assessments as well. We accordingly hold that the assessee is entitled to raise additional claim/s in th....
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.... relied upon the decisions of this Tribunal at Mumbai in the cases of M/s Vinati Organics Ltd. vs ACIT (ITA No. 1859/Mum/2021) and DCIT vs Aarti Drugs (ITA No. 2503/Mum/2021). The Ld. AR further contended that since these incentives were in the nature of capital receipt, they should be excluded while computing book profit u/s 115JB of the Act as well. In this regard, he relied on the decision of the Hon'ble jurisdictional High Court in the case of CIT vs Harinagar Sugar Mills Ltd. (Appeal No. 1132 of 2014) and Hon'ble Calcutta High court in the case of PCIT vs Ankit Metal and Power Ltd. (416 ITR 591). Per contra, the Ld. CIT, DR argued that this claim was not admissible at this stage. 8.3 We have considered the rival submissions of both the parties. From the facts as already discussed in the foregoing, it is noted that the FPS and VKGUY Schemes, in terms of which the subsidy was granted, was with the object to enhance the Indian export potential in the international market and generate employment opportunities. It was not granted to meet any cost of expenditure incurred by the assessee to make the exports. We note that the Hon'ble Rajasthan High Court in the case of PCIT vs Niti....
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....ound filed by the assessee. 44. Further, we find that the learned CIT(A) analyzed 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 Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 vide notification No 1 (RE-2012)/2009-14 dated 05.06.2012. The Policy contains a Chapter on Special Focus Initiatives, wherein the objective of special focus incentives given for various sectors (FMS and FPS) is specified as under: "(a) with a view to continuously increasing our percentage share of global trade and expanding employment opportunities, certain special focus initiatives have been identified/continued for Market Diversification, Technological Upgradation, Support to status holders, Agriculture, Handlooms, Handicraft, Gems & Jewellery, Leather, Marine, Electronics and IT Hardware manufacturing Industries, Green products, Exports of products from North- East, Sports Goods and Toys sectors Government of India shall make concerted efforts to promote exports in these sectors by specific sectoral strategies that shall b....
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....de 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 those Schemes as subsidy should be treated as capital receipt in its hands, not includible in the total income." 47. We find that the subsidy granted under the FMS scheme came up for consideration before the Hon'ble Rajasthan High Court in PCIT Vs. Nitin Spinners Ltd. (2020) 116 Taxmann.com 26 (Raj.), wherein the Hon'ble High Court observed as under: .... 48. We further find that the Hon'ble Supreme Court dismissed the Revenue's Special Leave Petition in PCIT Vs. Nitin Spinners Ltd., [2021] 283 Taxman 2(SC), against the aforesaid decision of the Hon'ble Rajasthan High Court. Thus, when the objective of the aforesaid subsidies has been admitted to be to encourage industries by providing industrial growth, technological upgradation, and development, we find no infirmity in the impugned order passed by the learned....
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....t." 8.7 It is noted that the Hon'ble Calcutta High Court in the case of PCIT vs Ankit Metal and Power Ltd. (supra) has also held that, the subsidies which are in the nature of capital receipt, cannot be deemed as income, for the purposes of computing book profit u/s 115JB of the Act. The relevant observations of the Hon'ble High Court are as follows: "26. Now the second issue which requires adjudication is as to whether the aforesaid incentive subsidies received by the assessee from the Government of West Bengal under the schemes in question are to be included for the purpose of computation of book profit under section 115JB of the Income-tax Act, 1961 as contended by the revenue by relying on the decision in the case of Appollo Tyres Ltd. (supra). 27. In this case since we have already held that in relevant assessment year 2010-11 the incentives 'Interest subsidy' and 'Power subsidy' is a 'capital receipt' and does not fall within the definition of 'Income' under section 2(24) of Income-tax Act, 1961 and when a receipt is not on in the character of income it cannot form part of the book profit under section 115JB of the Act,....
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....i) Whether on the facts and in the circumstances of the case the learned Tribunal erred in law in accepting the claim of deduction by the assessee towards 'Interest subsidy' and 'Power subsidy' under the aforesaid schemes by filing revised computation instead of revised return before the assessing officer for exclusion of the aforesaid receipts from the book profit under section 115 JB on the ground that the said subsidies do not constitute income under section 2(24) of the Income-tax Act, 1961?." 8.10 The Hon'ble High Court answered the question in negative and in favour of the assessee by observing as under: "28. The third issue involve in the instant appeal which requires adjudication is whether the action of Tribunal entertaining/allowing the claim which was made by the assessee before the Assessing Officer by filing a revised computation instead of filing a revised return since the time to file the revised return was lapsed, for claiming to treat the incentive subsidies in question as capital receipts instead of revenue receipts as claimed in original return. The Assessing Officer had denied this claim. Revenue has attacked the order of the trib....
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....e. 9. The additional ground Nos. 2 & 3 are as follows: 2. On the facts and circumstances of the case, the respondent wishes to claim that no disallowance u/s 14A r.w rule 8D should be made in computing book profit u/s 115JB of the Act. 3. On the facts and circumstances of the case, the respondent wishes to lodge claim that disallowance of expenses u/s 14A should be restricted to exempt income in computing tax liability under the normal provision & u/s 115JB of the Act. 9.1 In these grounds, the appellant has contested the correctness of the suo moto disallowance of Rs. 65,00,000/- made u/s 14A of the Act in the return of income. The assessee has brought to our notice that, the dividend income earned during the year was Rs. 62,70,016/- and has accordingly pleaded that the disallowance made u/s 14A of the Act ought to be restricted to the extent of exempt income. The assessee has accordingly sought that, the excess disallowance of Rs. 2,29,984/- (Rs.65,00,000 - Rs. 62,70,016) made by them u/s 14A of the Act ought to be deleted. The assessee has further prayed that no disallowance u/s 14A read with Rule 8D was not warranted while computing book profit u/s 115JB....
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....e Scheme, as approved by the Hon'ble High Court, not prescribed this accounting treatment, the bad debts and advances written off would have to be routed through the Profit & Loss Account. The relevant Note given by the auditor is extracted below: "Without qualifying our opinion, attention is drawn to Note 5 of Schedule 20 relating to the Scheme of Arrangement and Arrangement between Mac Oil Palm Limited and the Company and their respective shareholders sanctioned by the Hon'ble High Court of Mumbai, in pursuance of which : .... (ii) An amount of Rs. 5,193.54 lac has been adjusted to General Reserve as per details given below: Particulars Amount (Rs. in lac) Bad Debt written off 569.65 Provision for Doubtful Debts 1,433.96 Advances written off 2630.30 Provision for Doubtful Advances 193.42 Expenses on amalgamation 26.12 Additional depreciation on revaluation of fixed assets 1,991.35 Less: Current Tax and Deferred Tax 1,651.26 TOTAL 5,193.54 10.2 The Ld. AR also brought to our notice the Note Nos. 5(d)(vii) & 5(e)(i) of Schedule 20 of the Notes appended to the annual financial statements for t....
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....ent, as approved by the Hon'ble High Court, prescribed the accounting treatment of adjusting the same against General Reserve, that such entries were passed in this manner in the books of accounts. It is noted that, Section 115JB of the Act is a code in itself to compute the book profit with reference to the book results reported in the Profit & Loss Account and Balance Sheet, read with the Notes to Accounts. The Notes to Accounts are integral part of the financial statements as they explain the figures reported in the Profit & Loss Account and Balance Sheet. The provisions of Section 115JB provides that, the starting point for computation of book profit is the 'Net Profit' as per the Profit & Loss Account, prepared in accordance with Part II of Schedule VI to the Companies Act, 1956. Where the Profit & Loss Account is not strictly drawn up in accordance with Part II of Schedule VI of Companies Act, 1956, the necessary adjustments is to be first made to bring the Net Profit in line with the relevant provisions of the Companies Act and thereafter, the adjustment prescribed in Explanation 1 to Section 115JB is to be carried out. For this, we may gainfully refer to the decision of the....
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....e printed balance sheet is for the benefit of the shareholders as it will not reflect the true state of affairs and that cannot be made the basis for levying tax under the Act. This is precisely what the Tribunal has held. Neither under the Companies Act nor under the Income-tax Act, this concept of deferred expenditure is recognized. That is a pathology used by the chartered accountants to show to the shareholders that the company has made profit though it has not earned profits. In other words, it is nothing but a window dressing and the authority should not be misled or guided by this balance sheet which is prepared to satisfy the shareholders. It is the profit and loss account prepared on the basis of the books of accounts as contemplated in Part 11 of Schedule VI which should form and assist to find out what is the profit earned and on that profit, tax is levied." 10.8 Useful reference may also be made to the decision of this Tribunal at Pune in the case of K.K. Nag Limited Vs Addl. CIT (52 SOT 281). In the decided case, the assessee is noted to have created an incremental provision towards leave encashment, which was not debited to the Profit & Loss Account but was disclos....
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....ount, though disclosed in the Notes appended to the accounts. Accordingly, this additional ground of the assessee stands allowed. 11. The Additional Ground No. 5 raised by the assessee reads as under: 5. On the facts and circumstances of the case, the respondent wishes to claim VAT/Excise Refund/Remission received under different state scheme as capital receipt in computing tax liability under the normal provision & u/s 115JB of the Act. 11.1 In this additional ground, the assessee is seeking exclusion of capital subsidy of Rs. 26,22,78,114/- from computation of income under normal provisions as well as book profit u/s 115JB of the Act, which was not made in the return of income. From the facts placed before us, it is noted that, the assessee was in receipt of excise & VAT subsidy under different State Schemes. 11.2 The assessee submitted that it had set-up new manufacturing units in Gwalior, Indore and Mangalia in the State of Madhya Pradesh. In terms of the Notifications issued by the Directorate of Industries, M.P., the assessee was entitled to VAT exemption on the goods sold from these Units. The assessee invited our attention to the copies of the Eligibility ....
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....ve sector, joint sector as also companies/undertakings owned or managed by the State Government." 11.4 The assessee had also received subsidy for setting up these new industrial units from the Central Government vide their Notification No. 39/2001 dated 31.07.2001 by way of refund of excise duty. On perusal of the Notification dated 31.07.2001, it is noted that this subsidy was available only to the new industrial units set up by an assessee. The relevant extract of the notification is as under: "The exemption contained in this notification shall be subject to the followijg conditions namely, (i) It shall apply only to new industrial units, that is to say, units which are set up on or after the date of publication of this notification in the Official Gazette, but not later than the 31st day of July 2003." 11.5 The object of the above Industrial Schemes is therefore noted to be for encouraging the setting up of new industrial units pursuant to which subsidy in form of VAT exemption/excise duty refund was granted to the assessee. 11.6 In view of the above facts, it was the plea of the ld. AR that the incentive in the form of excise duty refund and sales tax....
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....n cinema theatres has fallen considerably and hardly any new theatres have been started in the recent past, the concept of a Complete Family Entertainment Centre, more popularly known as Multiplex Theatre Complex, has emerged. These complexes offer various entertainment facilities for the entire family as a whole. It was noticed that these complexes are highly capital intensive and their gestation period is quite long and therefore, they need Government support in the form of incentives qua entertainment duty. It was also added that government with a view to commemorate the birth centenary of late Shri V. Shantaram decided to grant concession in entertainment duty to Multiplex Theatre Complexes to promote construction of new cinema houses in the State. The aforesaid object is clear and unequivocal. The object of the grant of the subsidy was in order that persons come forward to construct Multiplex Theatre Complexes, the idea being that exemption from entertainment duty for a period of three years and partial remission for a period of two years should go towards helping the industry to set up such highly capital intensive entertainment centers. This being the case, it is difficult t....
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.... Welspun Steel Ltd (264 Taxman 252). In the decided case also, the Hon'ble Court held that, where the incentive under the Industrial Scheme is given only to new units and units which have undergone an expansion, then the real purpose of such incentive has to be seen as a capital subsidy and therefore should be regarded as a capital receipt and not a revenue receipt. The relevant findings of the Hon'ble High Court are noted to be as follows :- "6. Having heard the learned Counsel for the parties on this question, we notice that, the Government of Gujarat Sales Tax Incentive Scheme was envisaged to promote large scale investments in the Kutch District since on account of devastating earth-quake, development of the district had suffered. The Scheme envisaged that, the same was confined only with the Kutch District. Similar, being the purpose and philosophy of the Government of India, while granting excise duty exemption, we may not separately take note of the back-ground thereof. In view of these facts, the question arises is - whether the Tribunal was justified in holding that Sales Tax and Excise duty exemption enjoyed by the assessee under the said subsidy scheme, was not ....
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....mputing book profit u/s 115JB of the Act, as already held in Paras 8.6 & 8.7 above, since these subsidies have been held to be in the nature of capital receipt, the same cannot be added to arrive at the book profit u/s 115JB of the Act. Following the ratio laid down in the decisions of Harinagar Sugar Mills Ltd (supra) and Ankit Metal and Power Ltd. (supra), the AO is directed to exclude the subsidies received by the assessee for setting up new industries, by way of refund of excise duty and remission of VAT/sales tax, from the computation of book profit u/s 115JB of the Act. 11.11 However, since the relevant facts and figures have not been examined by the lower authorities, we deem it fit to set aside this issue back to the AO for the limited purpose of verifying the details & figures placed before us. The AO shall accordingly quantify and exclude the subsidies received by way of refund of excise duty and remission of VAT/sales tax under the Industrial Schemes, which have been held to be capital receipt, both while computing income under the normal provisions as well as book profit u/s 115JB of the Act. Needless to say, the AO shall provide an opportunity of hearing to the asse....
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....ng question of law: "2. Whether on the facts and in the circumstances of the case and in law, Tribunal was justified in confirming the decision of the Commissioner of Income Tax (Appeals) holding that interest under section 234B and section 234C of the Act was not chargeable with respect to tax liability determined under minimum alternate tax (MAT)?" 12.4 The relevant findings of the Hon'ble High Court as noted by us are as under: "32. This brings us to the second question which deals with charging of interest under sections 234B and 234C when income is taxable under section 115JB of the Act. 33. We have already noticed that Assessing Officer computed book profit of Rs. 2,44,63,94,360.00 in order section 115JB of the Act while passing the assessment order and charged interest thereon amongst others under sections 234B and 234C of the Act. 34. CIT (Appeals) relied upon the decision of the Karnataka High Court in Kwality Biscuits Limited (supra) in holding that interest under sections 234B and 234C of the Act is not chargeable where the tax liability has been determined in terms of the book profit calculated under section 115JB of the Act. 35. Before the Tribunal....
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....depositing advance tax on MAT in view of the decision in Kwality Biscuits Limited (supra). In this context, Tribunal held that contention of Revenue that charging of interest under sections 234B and 234C is mandatory would not be germane in deciding the controversy in as much as the levy can be said to be mandatory only if its payment is attracted per se as per the prevailing legal position. Therefore, Tribunal affirmed the decision of the CIT (Appeals). 41. In Kwality Biscuits Limited (supra) one of the questions for consideration before the Karnataka High Court was whether in an assessment year where the assessee's income is computed by invoking the provisions of section 115J of the Act interest under sections 234B and 234C were leviable? Karnataka High Court referred to the requirements of sections 234B and 234C and also the scheme of section 115J whereafter it was held that since the entire exercise of computing income or book profit could be done only at the end of the financial year, provisions of sections 207, 208, 209 or 210 (dealing with liability to pay advance tax) cannot be made applicable. Until and unless the accounts are audited and the balance-sheet is ....
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.... after taking note of the decisions of the Hon'ble Supreme Court in the cases of Kwality Biscuits Ltd. (supra) and Rolta India Ltd. (supra), has held as under: "5. We have considered the rival submissions as well as relevant material on record. There is no dispute regarding the fact that during the assessment years under consideration the settled law on the point was the decision of the hon'ble Supreme Court in the case of Kwality Biscuits Ltd. (supra) as well as a number of other decisions including the decisions of the hon'ble jurisdictional High Court in the case of Snowcem India Ltd. (supra) and in the case of CIT v. Natural Gems Ltd. [2010] 327 ITR 269 (Bom) wherein it has been held that no advance minimum alternate tax was payable by the company. Therefore, the assessee had no reason to believe or foresee a subsequent decision fastening the liability of payment of advance tax. Even otherwise the decision in the case of Rolta India Ltd. (supra) is a subsequent decision and therefore, the impossibilities at the relevant point of time cannot be thrust upon the assessee. In the facts and circumstances as discussed above no fault can be found with the assessee in ....
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....es to inflate the turnover. 13.1 This ground relates to the Ld. CIT(A)'s action of deleting the disallowance made by the AO on account of inflation of purchases. After considering the rival submissions, it is observed that the issue involved in this ground is similar to the Ground No. 6 of Revenue's appeal in A.Y. 2010-11. Following our conclusion drawn in A.Y. 2010-11, we dismiss this ground of the Revenue. 14. Ground Nos. 2 to 4 of the Revenue's appeal reads as under :- 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance of addition towards alleged unaccounted profit earned in physical trading guar gum and guar seed in JV with Betul Group. 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was erred in appreciate the provision of section 132(4A) wherein it is stated that where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may presumed that the contents of such books of account and other documents are true. ....
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....xplain the contents of this worksheet. To this, the assessee is noted to have relied on the statement of Shri RC Gupta from whose possession this worksheet was found. The assessee accordingly reiterated that, this loose paper contained estimates/ projections and was therefore required to be disregarded. The assessee further showed that they had not done any business in guar futures in FYs 2010-11 to 2012-13, which proved that the workings regarding future trading in guar were only estimates. As far as the workings for physical trading was concerned, the assessee explained that the sheet did not contain any details as to which period it related to and also clarified that they had no joint venture with the Betul Group. The assessee further brought to the notice of the AO that the assessee had derived profit of Rs. 839 crores approx. from physical trading of guar during the year, which was accounted and offered to tax and much more than the notings mentioned in this working sheet. According to the assessee therefore, viewed from any angle, the workings found mentioned on this worksheet could not be viewed adversely. 14.3 The AO however is noted to have rejected the explanations put....
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....up in FY 2011-12, and they had engaged in physical trading of guar gum and guar seeds, which had resulted in huge profits to both and they had not offered the same to tax. This worksheet, according to the AO, was therefore a summary of the transactions already taken place and hence made the impugned addition in the hands of the assessee. Being aggrieved by the above order of the AO, the assessee had preferred an appeal before the Ld. CIT(A), who was pleased to delete the same. Aggrieved by this action of the Ld. CIT(A), the Revenue is now in appeal before us. 14.5 The Ld. CIT, DR appearing for the Revenue vehemently supported the above findings of the AO. He argued that, the contents of the seized documents clearly showed that it was a summary of actual transactions taken place and not estimates/projections as claimed by the assessee. He laid much emphasis on the existing relationship between the assessee and Betul Group, which according to him corroborated the inference of the AO, that there was a joint venture between them outside the books. He also referred to the AO's findings that certain other entities of the Ruchi Soya Group had been found to be indulged in trading outsid....
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....ve been already provided to your goodself and the same is on record." 14.6 Having perused the foregoing, it is noted that, the AO had chosen to selectively read the statement of Shri R C Gupta, which would suit his needs for making addition in the relevant AY 2012-13. We however are unable to countenance such action of the AO. According to us, the statement of Shri R C Gupta has to be read as a whole and not in part. The Revenue cannot pick and choose one line from his statement to allege that the notings in this working sheet pertains to FY 2011-12, whereas if his statement is read in totality, it is evident that he had nowhere admitted to the same. Hence, the action of the AO inferring the notings found in this working sheet to be pertaining to FY 2011-12 is found to be without any cogent basis. 14.7 It is further noted that the Ld. CIT(A) had analysed the worksheet in question and thereafter found that this worksheet was a dumb document and that the notings therein did not suggest that the profits mentioned therein was the undisclosed income of the joint venture between assessee and Betul Group. The Ld. CIT(A) particularly took note of the fact that, there were separate wo....
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.... the words used like 'Ruchi has realized more than Betul', working of recent physical sale, 'profit in Betul books', 'profit in Ruchi books' etc. However, Shri R.C. Gupta from whose cabin the said document was found has stated that - (i) the working sheet reflects commodity transactions of estimated profits in future trading and physical trading, (il) He was not aware of the figures mentioned in future trading. (i) the sheet was provided by Mr. Jigar Shah of M/s. Betul Oil Ltd(BOL) during F.Y.2011-12 and was undated, so they were not able to explain the basis of preparing the said sheet, (iv) the figures of physical trading are mentioned approximately and no period, date or year has been mentioned, (V) JV books means proposed joint venture which could not be materialised. Statement of Shri Jigar Shah was also recorded u/s. 131 of the Act, wherein he has submitted that he had not handed over the paper found in the drawer of Shri R.C.Gupta. 13.3.3. Although section 132(4A) and section 292C provide that the documents found in the possession of a person in the course of a search u/s. 132 or survey u/s. 133A, it may be presumed that such document belong ....
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.... proving so. The only material which the Revenue is noted to have referred to, was the emails exchanged between employees of Ruchi Group and Betul Group, to allege existence of a joint venture. We note that, the Ld. CIT(A) had analysed these emails and recorded a finding of fact that none of these emails contained anything incriminating nor did it suggest any JV between the assessee and Betul Group as wrongly alleged by the AO. The relevant findings of the Ld. CIT(A), as taken note by us, is as follows:- 13.3.3...... Further, the summary of profits in the said worksheet is stated to be of JV (Joint Venture) with Ruchi Soya Industries Ltd (RSIL) and Betul as partners. If the said notings are to be taken at face value then such income can be assessed in the hands of the joint venture, as a separate assessee in the status of AOP, as per the definition of 'person' in section 2(31) of the I.T. Act and not in the case of the appellant. 13.3.4. The A.O. has also referred to the seized documents containing e-mails which show that the concerns of RSIL and BOL are having transactions relating to guar gum/guar seeds and there is a mention of two transactions relating....
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....ubstantiate their case that the working sheet, which was explained to be estimates/projections by the person from whose possession it was found, was actually a summary of transactions taken place in a joint venture between assessee and Betul Group. 14.10 At the time of hearing, the Ld. CIT, DR had also relied upon the AO's observations regarding the shareholding of Betul Group of companies in the assessee, which according to him, suggested that there was a joint venture relationship between the two groups. The Ld. AR in this regard pointed out that, the assessee is a publicly listed company having several shareholders and therefore, merely because Betul Group held shares in the assessee company, it would not ipso facto lead to a conclusion that there was a joint venture between the assessee and Betul Group. Having considered the foregoing, we find this contention raised by the Revenue to be indecisive and irrelevant to the issue before us. Likewise, the Revenue's reference to the settlement application filed by other group entities of the assessee is also found to be frivolous and irrelevant, as they do not relate to the assessee or refer to this working sheet in question. 14....
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....#39;ble Karnataka High Court in CIT vs. Biocon Ltd. (121 taxmann.com 351), wherein it has been held that the ESOP expenditure is allowable to the assessee under section 37(1) of the Act. It is noted that, similar view has been expressed by the Hon'ble Madras High Court in the case of CIT vs. PVP Ventures Ltd. (211 Taxman 554). Respectfully following the same, we hold that the Ld. CIT(A) had erred in confirming the disallowance of Rs. 2,57,78,489/- made on account of ESOP expenses and the AO is directed to delete the same. Accordingly, this ground of the assessee stands allowed. 16. Ground No. 1.2 of the assessee reads as follows :- 1.2. That on the facts and in the circumstances of the case the Ld. CIT(A) is unjustified in confirming disallowance of Rs. 53,67,95,036/- being loss on account of fluctuation in rate of exchange treating it as capital expenditure. 16.1 Briefly stated, the facts of the case are that, the assessee had borrowed foreign currency loans, which were utilised to acquire fixed assets that were put to use in earlier year/s. Till AY 2011-12, the foreign exchange loss incurred on such loans were debited to the Profit & Loss Account. It was brough....
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....ities were swayed by the entries passed in the books of accounts and accordingly held the foreign exchange loss to be capital in nature. According to the Ld. AR, the entries passed in the books of accounts were not decisive for ascertaining the allowability of the claim and thus urged that the impugned disallowance be deleted. Per contra, the Ld. CIT, DR vehemently supported the order of lower authorities. 16.3 We have heard the rival submissions and perused the relevant provisions of law. The question that arises for our consideration is that whether loss on account of foreign exchange fluctuation loss incurred in relation to foreign currency loans taken for acquisition of fixed assets should be allowed as revenue expenditure or not. On perusal of the provisions of Section 43(1) of the Act, which defines the term 'actual cost' as the actual cost incurred for acquiring the capital asset by the assessee, reduced by that portion of cost of capital asset that has been met directly or indirectly by any other person or authority. This Section is noted to have several Explanations as well. However, on perusal of the same, it is noted that nowhere does this Section specify that any gai....
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....en on same set of facts and circumstances, the Revenue, in the earlier AY 2010-11, did not draw any adverse inference on this issue, then in absence of any change in position of law, we uphold the claim of the assessee claiming deduction for the foreign exchange loss, while computing total income in the return of income. Useful reference in this regard may be made to the following observations made by the Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT (193 ITR 321). "where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and the parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year." 16.6 Before us, the Ld. CIT DR had argued that the assessee's entries in the books of accounts capitalizing the foreign exchange loss incurred to the cost of assets denoted that the said loss was capital in nature. The Ld. AR had pointed out to us that, AS-11 notified by ICAI, as amended in 2003, provided that the foreign exchange loss arising out of foreign currency fluctuations in resp....
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....urt in ITA No. 985 of 2017 16.8 For the above reasons therefore, we hold that the lower authorities had erred in disallowing the claim for deduction of foreign exchange loss and thus, the AO is directed to delete the impugned disallowance. This ground is therefore allowed. 17. The assessee has further raised additional grounds in this appeal. These grounds are noted to be legal in nature and are therefore admitted for adjudication. 18. The Additional Ground No. 1.3 reads as under :- "1.3 That on the facts and in the circumstances of the case the CIT(A) ought to have considered Rs 72,57,04,219/- export incentive granted under foreign trade policy as focus product scheme (FPS) Vishes Krishi and Gram Udyog Yojana (VKGUV) as capita receipt in the computation of total income under the normal provisions of the Act as well as in computing the book profit u/s 115JB of the Act." 18.1 This additional ground relates to the claim for treatment of incentives received under FPS & VKGUY Schemes of the Foreign Trade Policy as capital receipt and therefore not liable to tax, both while computing income under normal provisions and book profit u/s 115JB of the Act. After consider....
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....the issue involved in this ground is similar to the Additional Ground No. 4 taken by this assessee in the Cross Objections for the earlier AY 2010-11. Following our conclusion drawn in A.Y. 2010-11, we direct the AO to allow the deduction for the same, while working out book profit u/s 115JB of the Act. Hence, this additional ground stands allowed. 21. The Additional Ground No. 1.7 reads as under :- "1.7. That on the facts and in the circumstances of the case the CIT(A) ought to have considered the nature of Rs 7,86,66,431/- VAT/Excise refund/Remission as capital receipt in nature instead of revenue under the normal provisions of the Act as well as in computing the book profit u/s 115JB of the Act." 21.1 This additional ground relates to the claim for treatment of subsidies received under the Industrial Schemes for setting up new industries, as capital receipt, and therefore not liable to tax both while computing income under normal provisions and book profit u/s 115JB of the Act. After considering the rival submissions, it is observed that the issue involved in this ground is similar to the Additional Ground No. 5 taken by this assessee in the Cross Objections for t....