TaxTMI 
TaxTMI 
2024 (8) TMI 1579
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.... fact of the case are discussed while adjudicating the ground of appeal filed by the revenue and assessee respectively as follows: ITA 3714/Mum/2013 (Appeal filed by the Assessee) Ground No. 1: Disallowance u/s 14A in respect of expenditure attributable earning exempt income: 3. During the course of assessment, the assessing officer noticed that assessee has shown dividend income of Rs. 19,77,752/- and long term capital gain exempt u/s 10(38) of the Act to the amount of Rs. 8,31,83,323/-. The assessing officer had computed disallowance in accordance with Rule 8D of Income Tax Rules, 1962 to the amount of Rs. 29,24,72,987/- and after reducing the suo moto disallowance of Rs. 10,00,000/- made by the assessee, the ld. AO further added the disallowance of Rs. 29,34,72,987/- to the total income of the assessee. 4. The assessee filed appeal before the ld. CIT(A). The ld. CIT(A) has restricted the disallowance to the extent of Rs. 10,74,43,886/- comprising disallowance of Rs. 90,280,440/- under rule 8D(ii) and disallowance of Rs. 171,73,446/- as per rule 8D(iii) of the Act. 5. During the course of appellate proceedings before us, the ld. Counsel submitted that on similar issue and ....
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....laid down. In our view too, the CIT (A) has rightly deleted the addition made on account of interest expenditure as the assessee had sufficient interest free surplus fund to make the investment and the ITAT has rightly deleted the disallowance made by the AO u/s 14A r.w Rule 8D. Consequently we hold that the interest expenditure cannot be disallowed u/s 14A r.w. Rule 8D(2)(ii) under any circumstances. 15. In assessee's case from the perusal of the findings as extracted earlier it is clear that the AO before rejecting the suo-moto disallowance has not given any specific error in the computation of suo-moto disallowance but has made a general observation that certain indirect expenses ought to have been incurred by the assessee. We further notice that the AO has not brought anything on record to factually state that the computation of disallowance made by the assessee is not correct. Therefore, the enhanced disallowance made without recording satisfaction cannot be sustained Therefore considering the facts and circumstances of the case and the decision of the jurisdictional High Court, we hold that the disallowance made u/s 14A should be restricted to the suo-moto disallowance ....
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....evelopment and growth of sugar industry in the State of Uttar Pradesh as per the copy of policy placed in the paper book from page no. 125 to 226. Under the object of the New Sugar Industry Policy, 2004 it is stated that from the sugar industry of Uttar Pradesh revenue of more than Rs. 400 crores is earned by State and Central Government through purchase tax and excise duty. This industry lead to social and economic development of the area in which the industry is located by establishing new sugar mills. There will be increased in the capital and there will be also increased in the revenue for the state in few years. Capital of Rs. 2000 crores is required for setting up mills in private sector with capacity of 1 lakh tcd. For this purpose state will have to provide economic concession special packages to industrialists for few years. Hence, the well planned Sugar Industry Promotion Policy is required which attract industrialists from private sector to set up sugar industry in the state. In the New Industries Policy 2004 for capital subsidy, following special incentives will be considered for a period of 10 years from the date of establishment over and above the facilities provide: ....
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....lowed as a deduction while computing then total income. 1. The receipt of the 10% capital subsidy and exemption of registration charges and stamp duty as mentioned in A' above ought not to be reduced from the cost of assets under section 43(1) of the Act. 2. The following notional amount of incentives referred in 'B' above are in the nature of capital receipts and ought to be reduced while computing the total income. Incentives Rs. Exemption from payment of UP7T9nowvvat) and CST on sale of molasses 1,901,637 Zero rate of Administrative Charges on molasses produced by such units 30,215,867 Exemption from payment of entry tax on sale of non leg sugar produced by such 36,852,585 Total 68,970,08 4. The incentives in the form of exemptions and reimbursements referred to in 'C' above amounting to Rs. 560,779,698 are in the nature of capital 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 ne....
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....on would be approximately 120.75 crores Due to the increase in the country's per capital average consumption of sugar, till 2010-11, 276.02 lakh tonnes of sugar would be needed for internal consumption. For the target of taking the State's contribution in the country's sugar production from 28.06% in the year 2002-03 to 30% in the year 2010-11, in the State approximately 75 lakh tonne sugar would have to be produced. It is estimated that there would be substantial increase in the country's average per capita consumption of sugar and in order to satisfy this increase demand the country's two big sugar producing States up and Maharashtra would have to come forward Since in Maharashtra the percentage utilization of sugarcane for producing sugar is at the maximum possible, therefore, 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 t....
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....s extended up to 10 years of investing in excess of Rs. 500 crores under 2nd stage. Therefore various benefit under the policy were availed by the assessee as discussed supra in this order. After referring the various clause of the new industry policy the assessee submitted that the various incentives given under the policy were in the nature of capital receipts. The assessee submitted that incentives granted under the policy were in the nature of the capital receipts. In this regard, we have perused the various judicial pronouncements referred by the counsel in the case of CIT Vs. Ponni Sugar & Chemical Ltd. (2008) 174 taxman 87 (SC) it is held that the test is 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. 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 ....
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....e find this recurring issue is squarely covered by the earlier decision of the ITAT in the case of the assessee itself as discussed above therefore following the decision of ITAT this ground of appeal of the assessee is allowed. Ground no. 4: Claim of deduction of expenditure u/s 115JB in respect of reserves of construction of molasses storage tanks: 15. The ld. CIT(A) held that deduction of reserve for molasses tank will not be allowable after referring the decision of CIT(A) for A.Y. 2007-08 in assessee's case relying upon the decision of Hon'ble Supreme Court in the case of CIT vs Ambur Cooperative Sugar Mills Ltd. (269 ITR 398) (SC). During the course of appellate proceedings before us, the ld. Counsel contended that similar issue on identical fact has been decided by the ITAT, Mumbai in favour of the assessee vide ITA No. 5058/M/2012 for A.Y. 2007-08. We have perused the above referred decision of the ITAT and the relevant extract of the decision as reproduced as under: "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 ....
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....sing Officer to exclude the aforesaid amount while computing book profit u/s 115JB of the Act. Therefore, this ground of appeal of the assessee is allowed. 16. We find this is recurring issue based on similar facts, therefore following the decision of the ITAT of earlier year in the case of the assessee as discussed above this ground of appeal is allowed. Ground no. 3: Adding an amount to the extent of Rs. 10,74,43,886/- in respect of disallowance u/s 14A while computing the book profit u/s 115JB of the Act: 17. The ld. CIT(A) at para 10.7 of his order directed the assessing officer to compute the book profit u/s 115JB of the Act by adding the disallowance made u/s 14A of the Act while making computation of book profit. 18. Heard both the sides and perused the material on record, we find that ITAT Special Bench in the case of ACIT vs Vireet Investment Pvt. Ltd. (ITAT, Delhi) (Special Bench) 82 taxman.com 415 held that disallowance made u/s 14A is not to be added while computing book profit u/s 115JB of the Act. Therefore, following the decision of ITAT Special Bench as referred above, this ground of appeal is allowed. Additional ground of appeal: Incentive received under the ....
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....ecision of the Hon'ble Bombay High Court in the case of Swiss Re Services India (P) Ltd. (2023) 156 taxmann.com 56 (Bombay) on the proposition that club entrance fees would be a revenue expenditure because it had been incurred wholly and exclusively for the purpose of business and not toward capital account but for the smooth running of business. Considering the above facts and findings, we do not find any reason to interfere in the decision of ld. CIT(A), therefore, this ground of revenue is dismissed. Ground No. 4: Allowing the relief of Rs. 79,11,26,251/- by holding that the gain on revaluation of FCCB and ECB is capital in nature: 24. The ld. CIT(A) held that provision of foreign exchange gain written back aggregating to Rs. 79,11,26,251/- was on account of capital expenditure and the same to be excluded while computing the total income. 25. Heard both the sides and perused the material on record. We find that similar issue on identical fact has been restored to the file of assessing officer by the ITAT Mumbai in the appeal of the assessee for A.Y. 2007-08 vide ITA No. 5058/M/2012. Similarly, we restore this issue to the file of assessing office for deciding the same after ....