TaxTMI 
TaxTMI 
2025 (6) TMI 132
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee is a resident corporate entity engaged in manufacturing and trading activities. For the assessment year under dispute, assessee had filed its return of income on 30.10.2007, declaring income of Rs. 1920,40,47,165/-. Subsequently, assessee filed its revised return of income on 17.03.2009, declaring income of Rs. 1923,71,32,402/-. In course of assessment proceeding, the Assessing Officer (AO) noticed that the assessee had claimed depreciation on let out office premises. He further observed that the rent received from such let out office premises was offered to tax under the head 'income from house property'. He further noticed that, though, the assessee had reduced the Written Down Value (WDV) of the let-out premises from the value of block of assets, however, in course of assessment proceeding, the assessee claimed that it is entitled to depreciation on the entire block of assets without reducing WDV of the let out premises. In support of such contention, assessee furnished a detailed note supported by judicial precedents. The Assessing Officer, however, did not accept assessee's claim. He observed that while computing 'income from house property', the assessee has claimed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ax under the head "Income from House Property", after claiming a deduction under section 24 of the Act. The AO, vide assessment order, worked out the disallowable depreciation in respect of the aforesaid property while allowing deduction claimed under section 24 of the Act. 24. Before proceeding further, it is pertinent to note certain provisions of the Act that are relevant to the issue at hand. The term "block of assets" is defined in section 2(11) of the Act, as under:- "block of assets" means a group of assets falling within a class of assets comprising- (a) tangible assets, being buildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights, trade-marks, licences, franchises or any other business or commercial rights of similar nature, in respect of which the same percentage of depreciation is prescribed;" 25. Further, the relevant provisions of section 32, reads as under:- ―Depreciation 32.(1) In respect of depreciation of- (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, fr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... any previous year relevant to the assessment year commencing on or after the 1st day of April, 1989, the written down value of that block of assets in the immediately preceding previous year as reduced by the depreciation actually allowed in respect of that block of assets in relation to the said preceding previous year and as further adjusted by the increase or the reduction referred to in item (i). 27. It is the plea of the assessee that since the property was acquired in the assessment year 1987-88 and forms part of the block of assets, therefore, the lower authorities have erred in carving out the depreciation for this property and disallowing the same. Since the assessee is the owner of the property from the assessment year 1987- 88 and the same was also used as one of its office premises in preceding years, therefore, we are of the view that the conditions laid down in section 32 of ownership of the asset and usage for the purpose of business are satisfied in the present case. We find that the only basis on which the AO/learned CIT(A) disallowed the depreciation is that the assessee has rented out the property during the year and offered the income under the head "I....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... significant and contemporaneous development, which needs to be noticed is that the Legislature has also deleted the provision for allowing terminal depreciation in respect of each asset, which was previously allowable under section 32(1) (iii) and also taxing of balancing charge under section 41(2) in the year of sale. Instead of these two provisions, now whatever is the sale-proceed of sale of any depreciable asset, it has to be reduced from the block of assets. This amendment was made because now the assessees are not required to maintain particulars of each asset separately and in the absence of such particular, it cannot be ascertained whether on sale of any asset, there was any profit liable to be taxed under section 41(2) or terminal loss allowable under section 32(1) (iii) . This amendment also strengthen the claim that now only detail for "block of assets" has to be maintained and not separately for each asset. 33. Having regard to this legislative intent contained in the aforesaid amendment, it is difficult to accept the submission of the learned counsel for the Revenue that for allowing the depreciation, user of each and every asset is essential even when a part....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ling of return of income, however, now the issue is settled against the assessee by virtue of the decision of the Hon'ble Supreme Court in the case of Checkmate Services P. Ltd vs Commissioner of Income Tax 143 taxmann.com 178 (SC). 13. Learned Departmental Representative (DR) agreed with the submissions of the assessee. 14. Thus, in view of the ratio laid down by the Hon'ble Supreme Court in the case of Checkmate Services P. Ltd (Supra), we uphold the disallowance made by the AO and sustained by learned First Appellate Authority. This ground is dismissed. 15. In Ground No.5, assessee has contested the addition of Rs. 6,14,717/- being surplus arising out of prepayment of sales tax loan. 16. Briefly, the facts are, in course of assessment proceeding, while verifying the computation of income filed by the assessee, the AO noticed that in Note No. 19, the assessee has stated that surplus arising on prepayment of sales tax loan amounting to Rs.6,14,717/- is in the nature of capital receipt hence not chargeable to tax. Noticing this, the AO called upon the assessee to justify the claim and also to explain why such surplus should not be treated as revenue in nature. In respon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....plus on payment of sales tax loan being a capital receipt in nature. According to the Commissioner, the surplus amount of loan amounting to Rs. 34.35 Crores taxable u/s.41(1) of the Act because the loan liability which is in the nature of sales tax liability is only a trading liability and not capital in nature, therefore, the remission on such liability cannot be 8 ITA 3104/Mum/08 treated as a capital receipt. The Assessing Officer has treated the receipt as capital receipt. The Special Bench of ITAT in the case of M/s. Suzler India Limited (supra) in similar set of facts has held that section 41(1) has no application. In the case of Malabar Industrial Co. Ltd. (supra), the Hon'ble Supreme Court observed as under : "A bare reading of section 263 of the Income Tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f revenue or where two views are possible and the ITO has taken one view, if the Commissioner does not agree, it cannot be treated as erroneous or prejudicial to the interest of revenue unless the view taken by the A.O. is unsustainable in law." In the present case, in our opinion, the view taken by the A.O. is one of the possible view and it is not a case to invoke section 263 of the Act. It is not even revenue's case that Assessing Officer not applied the mind with regard to taxability on account of remission of liability, but all that it is contended before us is Assessing Officer reached incorrect conclusion. However, not only that the Assessing Officer had formed a possible view of the matter but also the view so formed by him in the light of the Special Bench decision in the case of Sulzer India Limited (supra) which is binding precedent for us reflects correct legal position. In view of the facts and circumstances of the case and also following the aforesaid decisions of the Hon'ble Supreme Court, we set aside the order passed by the Commissioner u/s.263 and restore the order of the Assessing Officer." 20. Respectfully following the decision of the Coordi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not form part of profit derived from the undertaking, the Assessing Officer disallowed assessee's claim. Such disallowance was also confirmed by the First Appellate Authority. 28. Before us, learned counsel appearing for the assessee submitted that issue is squarely covered in favour of the assessee in its own case in earlier assessment years. He submitted, in A.Ys. 2004-05 and 2005-06, while giving effect to the order of the Tribunal, the Assessing Officer has allowed claim of deduction u/s.80IA of the Act in respect of rental income. 29. The learned D.R. agreed with the submission of the assessee. 30. Having considered rival submissions and perused the materials on record. We find that the coordinate Bench has decided the issue in favour of the assessee in Assessment Year 2002-03. Whereas, in Assessment Years 2004-05 and 2005-06, issue was restored back to the Assessing Officer for verification. While giving effect to the order of the Tribunal, the Assessing Officer has allowed assessee's claim. 31. Considering the above, we direct the Assessing Officer to allow assessee's claim of deduction u/s.80IA of the Act in respect of rental income. This ground is allowed. 3....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Assessee Bank received interest on refund of taxes paid. It also paid interest on the taxes which were payable. The Assessee sought to set off the interest paid against the interest received and offered the net interest received to tax. We do not see that such findings of the Tribunal are vitiated in law. All that the Tribunal has done earlier and now is that in the case of this Assessee simply because the exercise carried out by it does not result in loss of revenue and there could not be any prohibition for the same, allowed it. That is how the Assessing Officer's order is set aside. We do not see how any larger controversy or question arises for our consideration. Mr.Pinto would refer to Section 57 of the Income Tax Act, 1961 in that regard and submit that this course would be adopted by other Assessees as well and in that event the order passed by this Court would come in the way of the Revenue in investigating and probing such exercise by other Assessees. 4. We do not see how this order can be cited as precedent inasmuch as the Assessee before the Tribunal and before us paid interest to the Income Tax Department amounting to Rs. 10,26,906/-. The Assessee claimed t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....R 166 (SC) and T. R. F. Ltd. v. CIT (2010) 323 ITR 397 (SC). 40. In view of aforesaid, we are inclined to allow the ground in favour of the assessee. 41. In so far as Ground No.10 is concerned, learned counsel appearing for the assessee did not press it. Accordingly, ground is dismissed as not pressed. 42. Besides the main grounds, the assessee has raised three more additional grounds. Since, the additional grounds do not require investigation into fresh facts and can be decided based on facts and material available on record. We admit them. 43. The additional Ground No.1 is on the issue of taxability of dividend received of Rs. 4,47,43,736/- from Alexandria Carbon Black Company incorporated and registered in Egypt. It is the case of the assessee that prior to amendment to Section 90 of the Act by Finance Act, 2003 dated 01.04.2004, as per the meaning of the term "may be taxed" would mean that only the source country has the right to tax income earned in such country and the resident country does not have any taxing rights. Thus, it was pleaded by the assessee that the dividend received from the Egyptian Company is taxable in source country i.e. Egypt. Notably, in asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the coordinate bench of the Tribunal in DCIT v/s M/s Grasim Industries Ltd (successor to Aditya Birla Novo Ltd.), ITAs No. 84/Mum./2023 and 356/Mum./2023, vide order dated 12/06/2023, observed as under:- "06. We have carefully considered the rival contention and perused the orders of the lower authorities as well as the decision of the coordinate bench. During the course of hearing before the coordinate bench in ITA number 2525/M/2014 for assessment year 2009-10, assessee raised an additional ground stating that interest subsidy received under technology upgradation fund scheme amounting to Rs. 83,426,992/- is revenue receipt. The coordinate bench as per paragraph number 12 of that decision remanded back this issue to the file of the learned assessing officer for de novo adjudication in accordance with the law. This decision was arrived at by in the earlier years also this issue was remanded back to the file of the learned assessing officer. Therefore based on this the learned AO proceeded to examine the claim of the assessee that whether the interest subsidy received under technology upgradation fund scheme is revenue receipt or capital receipt. It is also to be noted t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubsidy as Revenue in nature. We find that the Hon'ble Rajasthan High Court in the case of PCIT vs. Nitin Spinners Ltd.(supra) examined the scheme in the light of various decisions and held the subsidy under TUF scheme as capital in nature. Similar view has been taken by the Hon'ble Calcutta High Court in the case of CIT vs.Gloster Jute Mills Ltd.(supra). Thus, in view of above judgements of Hon'ble High Courts, we see no infirmity in the findings of CIT(A). The same are upheld and ground No.11 of the appeal is dismissed. 41. In the result, appeal of the Revenue is partly allowed for statistical purpose.‖ 07. Therefore in view of the above decision of the coordinate bench the issue is squarely covered in favour of the assessee wherein it has been held that interest subsidy received under technology upgradation fund scheme, though credited in the net off against the interest expenditure in the books of account is still capital in nature and therefore not chargeable to tax. Further the argument of the learned departmental representative has also been negated about the applicability of explanation 10 to section 43 (1) of the act by the decision of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....planation-3, the term 'tax' as contemplated u/s. 40(a)(ii) of the Act includes cess and surcharge, by whatever name called. Therefore, education cess, partakes the character of tax, which is on profits or gains of business. Merely, because tax is taken as a quantifiable measure to determine the quantum of education cess, it cannot be said that education cess is not a tax on profits of business. Once, as per the provisions of the Act, tax includes cess and surcharge, it directly relates to the profits or gains because the quantum of tax liability is ultimately determined on the profits or gains of business. Therefore, in our view assessee's contention that education cess is not a tax on profits and gains of business or profession is without merit. In any case of the matter, the Coordinate Bench, in assessees's own case in AY 2005-06 (Supra), rejected identical claim made by the assessee through an additional ground. Consistent with the view taken therein, we dismiss the ground raised by the assessee. This ground is dismissed. 55. In the result, the appeal is partly allowed. ITA No. 6307/Mum/2010 (A.Y. 2007-08) Revenue's appeal 56. In Ground No.1, Revenue has challenged dele....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of assessment proceeding, the AO noticed that under the head miscellaneous expenses, the assessee had claimed expenses of Rs. 19,08,941/-. On further verification, we found that the payments were made towards contribution to various local organizations located in and around the areas where the plant / office of the company is situated. Holding that such payment did not came within the purview of Section 37(1) of the Act, the AO disallowed the claim. While deciding the issue, learned First Appellate Authority allowed assessee's claim. 63. We have considered rival submissions and perused the materials on record. It is a common point between the parties that the issue has been consistently decided in favour of the assessee by the Tribunal in past assessment years. 64. Having perused the materials on record, we find that from AY 1988-89 onwards identical issue has been decided in favour of the assessee not only by the Tribunal but even by the Hon'ble High Court. In fact in the latest order passed for AY 2005-06. The Tribunal has decided the issue in favour of the assessee. 65. Respectfully following the consistent view of Hon'ble Jurisdictional High Court and coordinate Benc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ears. 75. Having perused the material on record, we find that the issue first time came up for consideration before the Tribunal in assessees's own case in AY 1976-77. While deciding the issue, the Tribunal allowed assessee's claim. Subsequently, the Tribunal reiterated the same view in AYs 1976-77 in AYs 2001-02, 2002-03, 2003-04, 2004-05 and 2005-06. Learned counsel further brought to our notice that up to AY 2002-03, the Department has accepted the decision of the Tribunal. 76. Be that as it may, respectfully following the consistent view of the Tribunal in assessee's own case, we uphold the decision. Ground is dismissed. 77. In Ground No.5, the Department has raised the issue of taxability of sales tax subsidy as revenue. 78. Briefly the facts are, in course of assessment proceeding, the AO noticed that in the year under consideration, the assessee had received an amount of Rs. 83,76,01,203/- towards sales tax subsidy under sales tax exemption scheme and industrial policy resolution. Whereas, the assessee has not offered such receipt to tax by treating it as capital in nature. The AO, while rejecting the assessee's claim, held that the receipt from account of sales ....