TaxTMI 
TaxTMI 
2023 (1) TMI 1482
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....cts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting an amount of Rs. 40,46,14,914/- being addition made on account of under valuation of closing stock of alchol & molasses without appreciating the fact that the assessee failed to furnish any evidence in respect of valuation of closing stock and also the basis of valuation. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing assessee's appeal by placing reliance on the decision of the Hon'ble Bombay High Court in the case of Gopal Purohit (336 ITR 287), without appreciating the fact that the facts of the case relied upon are distinguishable from the facts of the assessee's case In the case of Gopal Purohit, the assessee was engaged in the activity of sale and purchase of shares for a long period and has treated non delivery based transaction as business activity and delivery based transaction as investment activity However, in the present case, the assessee is involved in one business activity. 4. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the Assessing Officer be restored. ....
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.... of by products were less than the value of opening stock. On query, the assessee explained that the valuation of closing stock of molasses and alcohol were valued at lower rate as against opening stock mainly due to the fact that the net realizable value of molasses has been come down over the year due to a drastic fall in the realizable value of molasses. Similarly, the prices of alcohol were also affected due to the fall in raw material/molasses prices. The AO has not agreed with the submission of the assessee and stated that assessee has offered general reasons. The A.O was of the view that assessee has completely failed to bring out the correct valuation of closing stock of these by-products and considered that valuation at opening stock was more reasonable therefore valued the such closing stock at the rate of opening stock. Therefore, difference in closing stock of alcohol & molasses to the amount of Rs. 40,46,14,914/- was added to the total income of the assessee . 7. Assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) deleted the addition made by the Assessing Officer. 8. Heard both the sides and perused the material on record. The ld. CIT(A) held that fo....
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....Rule 8D is not applicable to the assessment year 2006-07. The assessee explained that there was no expenditure which had a direct proximate nexus with the earning of exempt income and the assessee had earned the dividend income only from its investment made in Bajaj Auto Ltd., and Mukand Ltd. which were in the nature of long term group investment and did not require any day to day monitoring. We have also considered the decision of Hon'ble Bombay High Court in the case of CIT Vs. Godrej Agrovet Ltd. Vs. ACIT vide ITA No. 934 of 2011 wherein disallowance expenditure for A.Y. 2005-06 restricted to the extent of 2% of the exempt income. Similarly, ITAT, Mumbai in the case of Dy. Director of Income Tax (International Taxation), Mumbai, Vs. State Bank of Mauritius Ltd., ITA No. 2456/Mum/2006, dated 03.10.2012 also restricted such disallowance pertained to assessment year 200405 at 2% of the exempt income. Looking to the above facts, finding and non application of Rule 8D to the year under consideration we direct the A.O to restrict the disallowance to the extent of 2% of the exempt income shown by the assessee pertaining to assessment year 2007-08, therefore, the ground of appeal of the....
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....e nature. 15. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee reiterating the facts reported by the assessing officer. 16. During the course of appellate proceedings before us the ld. Counsel referred page no .125 to 127 of the paper book pertaining to policy of the Uttar Pradesh Government for promotion of sugar industries, 2004 which was launched in order to speed up industrial development and to attract private sector investment in Sugarcane Development and Sugar Industry by establishing of sugar mills in the state by private Sector. He also referred page No. 128 pertaining to the object of the New Sugar Industry Promotion Policy 2004. By referring the different pages of the policy the ld. Counsel referred that as per clause No. 6 of the policy by establishing new sugar mills there will be increase in the capital also there will be increase in the revenue of the state in the next few years. For this purpose state will have to provide economic concessions special packages to industrialists for initial few years. Hence, a well planned sugar industry promotion policy is required which attract industrialists from pri....
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....cial incentives will be considered for a period of 10 years from the date of establishment over and above the facilities provide: 1. Entry Tax on sugar 2. VAT on Molasses 2. Administrative charge on Molasses 4. Stamp duty & Registration fees on land 5. Purchase tax on cane (Exemption/Reimbursement 6. Reimbursement of Transportation cost (Cane/Sugar) 7. Reimbursement of society Commission 7. Reimbursement of State Cess (Excise Share) The scheme and benefit received were given in the submission made by the assessee during the course of assessment are reproduced as under: "BHL made a capital investment in excess of Rs. 500 crores for commissioning various new sugar plants, distilleries and co-generation plants at several location in the state of UP and commenced production before 31' March, 2008. In terms of the Policy and Notifications issued therein, BHL was granted Eligibility Certificate for five years vide letter dater dated 31' October 2005 on investing in excess of Rs. 350 crores under first stage The eligibility was extended upto ten years on investing in excess of Rs. 500 crores under second sage vide letter dated 31 J....
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....al receipts not eligible to tax and accordingly, ought to be excluded from the total In this connection on behalf of BHL, we wish to make the following submissions:- The Government of UP introduced the now Sugar Industry Promotion Policy, 2004, inter alia, with the avowed objective of promotion of establishment of new sugar factories in the private sector to speed up industrialkation of the State. The preamble to the Policy states the proposed objectives as follows. "to attract private investment in the field of the Cane Development and sugar industry by establishing sugar mills in private sector to augment the industrial Development in the State. Under the Polig, now sugar factories are given incentives. The period/ quantum of various concessions/ incentives have been linked to the amount of fresh investment made for the establishment of the new sugar mill, although the incentives are to be disbursed after the establishment of the unit. The salient fatures of the background note to the polig are reproduced hereunder- "Why new Sugar Industa Promotion Polity needed? The total number of sugar factories working in the State is 101 having a ....
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....efore, UP is the only State when' by increasing the drawal percentage of sugarcane, the increased demand for sugar in the country can be met. Keeping in view the State's limited financial resources, the sick condition of the mills belonging to the Corporation, stagnation in the mills of the Co-operative sector and the inability of the mills in the private sector to completely utilize the sugarcane produced, the need is being felt for encouraging the private sector to invest funds for setting up sugar mills which are of global standards, having sugarcane crushing capacity of 5000 TCD or more. In order to meet the domestic consumption of sugar at 6% GDP growth rate, it would be required to set up mills having approximately one lakh tonne per day capacity and thus create additional capacity. The requirement of sugarcane for this increased capacity can be met by increasing the current drawal percentage of sugarcane from 5 to 7% It must also be clarified that at which ever place a new sugar mill is set up the sugarcane area of that place increases as a result of which there is no possibility of difficulty in sugarcane supply for the increased capacity. In view of the ab....
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....ed with respect to the purpose for which the subsidy is given. In other words in such cases one has to apply purpose test. The point of time at which the subsidy is paid is not relevant. The form of subsidy is immaterial. In the case of Everest Industries Ltd. Vs. Joint CIT (2018)19 taxman.com 330 (Mumbai Tribunal) held that sale tax incentive received by the assessee was considered as capital receipt by the A.O same was not required to be reduced from cost of assets for purpose of computing depreciation. In the case of CIT Vs. Shri Balaji Alloys & Other (2016) 181 CTR (SC) 459 held that excise refund and interest subsidy received by the assessee in pursuance of incentive announced and sanctioned by the Government of India is capital receipt. In the case of Shri Balaji Alloys Vs. CIT (2011) 198 taxman.com 122 (Jammu & Kashmir), it is held that amount of excise refund and interest subsidy received by industrial unit in pursuance of incentives announced in terms of new industrial policy for accelerated industrial development in the State of J & K would be capital receipt in the hands of such Industrial Unit. In the case of CIT Kolhapur Vs. Chaphlekar Brothers Pvt. Ltd. (2017) 88 t....
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....al provision of the act ought to be allowed for the purpose of computation of book profit u/s 115JB of the Act. On the other hand, the ld. D.R supported the order of ld. CIT(A). 22. Heard both the sides and perused the material on record. The assessee has claimed deduction in respect of the reserves for construction of molasses storage tanks in the computation of book profit u/s 115JB of the Act. It is also submitted that expenditure allowed under normal provision of the Act also to be allowed for the purpose of computation of book profit u/s 115JB of the Act. In this regard, we have perused the judicial pronouncements relied upon by the ld. Counsel in the case of CIT Vs. New Horizon Sugar Mills Pvt. Ltd. (2000) 269 ITR 397 (SC) the Hon'ble Supreme Court held that amount set apart towards molasses storage reserve fund is to be excluded from assessee's total income. The Hon'ble jurisdictional High Court of Bombay in the case of Somaiya Organo & Chemical Ltd. Vs. CIT (2017) 79 taxman.com 431 (Bom) held that amount transferred out of profit of loss account to storage fund for molasses and alcohol account to meet the statutory requirement was an admissible deduction in working out b....
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....herefore, for deciding this issue on merit we restore this matter to the file of the A.O for deciding after verification of the claim of the assessee in accordance with provision of Sec. 115JB as referred supra. Therefore this ground of appeal of the assessee is allowed for statistical purposes. Additional Ground No. 1: Claim of excluding notional gain on foreign exchange fluctuation on receipt of external commercial borrowings (ECB) & foreign currency convertible bonds (FCCB) Rs. 7,64,80,000/-: 25. In this regard, the ld. Counsel submitted that during F.Y. relevant to the year under consideration gain on foreign exchange fluctuation amounting to Rs. 7,64,80,000/- arose on account of restatement of ECB and FCCB which had been credited to the profit and loss account. He submitted that the borrowing in the nature of ECB & FCCB were utilized for the purpose of acquiring fixed assets, therefore, the notional gain on foreign exchange fluctuation on restatement of aforesaid loans ought to be excluded while computing the total income. The ld. D.R has contended that no such issue has been brought before the A.O and ld. CIT(A) during the course of assessment and appellate proceedings ....