TaxTMI 
TaxTMI 
2025 (6) TMI 1903
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....e is a resident corporate entity engaged in manufacturing and sale of sugar. For the assessment year under dispute, the assessee filed its return of income on 29.09.2009, declaring loss. Subsequently, the assessee filed a revised return of income on 25.03.2011, again, showing loss of Rs. 200,25,23,878/- and claimed TDS credit, not claimed in the original return of income. In course of assessment proceedings, the Assessing Officer (AO), while verifying the return of income and financial statements of the assessee, noticed that though the assessee in the year under consideration has received an amount of Rs. 9,06,95,758/- towards subsidy/incentive under New Sugar Promotion Policy 2004 declared by the Government of Uttar Pradesh, however, the said receipt was not offered as income, claiming that it is in the nature of 'capital receipt', hence, not liable to tax. The A.O. did not agree with the claim of the assessee. After issuing a show cause notice, requiring the assessee to explain as to why the receipt should not be treated as 'revenue in nature', the A.O. completed the assessment, treating the subsidy as 'income of the assessee. Though the assessee contested the aforesaid addition....
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....ernment of Uttar Pradesh in the year 2004 for the development 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 es....
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.... by BHL that the various incentives envisaged under the Policy are in the nature of the capital receipts and accordingly. not liable to tax. It is further submitted that the following incentives ought to be allowed 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 Exemption from payment of UP7T9nowvvat) and CST on sale of molasses Rs. 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 ex....
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.... able to get adequate price for their produce, on the other hand, contribution to the programmes for the development of the rural areas and wolfare of the common people is mostly negligible. Demand and supply of sugar in the country by 2010-11 It is estimate that in the year 2010-11 the country's total population 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....
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....rural development and increase in revenues of the Government. 6. Generation of employment opportunities." "19. In terms of the New Promotion Policy of Sugar Industry of Uttar Pradesh Government the assesse company was granted eligibility certificate for 5 years vide letter dated 31.10.2005 on investing in excess of Rs. 350 crores under first stage. The eligibility was 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 assesse as discussed supra in this order. After referring the various clause of the new industry policy the assesse submitted that the various incentives given under the policy were in the nature of capital receipts. The assesse 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 assesse has to be determined with respect to the purpose for which the subsidy is given. In oth....
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....er the New Sugar Industry Promotion Policy 2004 for the purpose of development and growth of sugar industry in the state and same has to be considered as capital in nature. Therefore, after considering the facts and judicial findings on the issue as discussed supra, we find the decision of ld. CIT(A) is not justified therefore the ground of appeal of the assesse is allowed. 14. We 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. 8. Facts being identical, respectfully following the consistent view expressed by the co-ordinate benches, we hold that the subsidy/incentive received under The New Sugar Promotion Policy, 2004 of the Government of Uttar Pradesh, being in the nature of capital receipt, is not taxable. Hence, this ground is decided in favour of the assessee. 9. In ground no.2, the assessee has raised the issue of addition of an amount of Rs. 7,18,682/- on account of non-reconciliation of ITS details. 10. Briefly, the facts are, in course of the assessment proceeding, the A.O. notice....
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....oes not appear in the name of the assessee. The A.O. is directed to factually verify this fact and delete the addition. Insofar as the rest of the transactions alleged to have been entered into with Standard Chartered Bank, Fort, Mumbai and American Express Bank Ltd., it is the duty of the A.O. to make proper enquiry to ascertain whether the transactions actually relate to the assessee or not. In case the transactions do not relate to the assessee, the additions made have to be deleted. This ground is allowed for statistical purpose. 15. In the result, the appeal is partly allowed. ITA No. 788/Mum/2016 - assessee's appeal for A.Y. 2010-11 16. In this appeal, the assessee has raised a solitary ground in the memorandum of appeal. However, vide letter dated 07.06.2021, the assessee has raised the following additional ground: 1. On the facts and in the circumstances of the case and in law, the appellant prays that if the incentives received under the New SugarIndustry Promotion Policy are held to be in nature of capital receipt, then, the same ought to be reduced while computing the book profit under section 115JB. 17. Insofar as the main ground is concerned, it is....
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....ute the disallowance, following the methodology of Rule 8D(2). While doing so, he disallowed interest expenses amounting to Rs. 4,39,15,076/- under Rule 8D(2)(ii) and administrative expenses of Rs. 3,87,85,317/- under Rule 8D(2)(iii), total disallowance aggregating to Rs. 8,27,0,393/-. After reducing the suo motu disallowance made by the assessee, the A.O. made a net disallowance of Rs. 8,17,00,393/-. The assessee contested the afore-said disallowance before learned first appellate authority. 24. After considering the submissions of the assessee in the context of facts and materials on record, learned first appellate authority observed that while rejecting the suo motu disallowance made by the assessee, the A.O. has not recorded a valid satisfaction in terms of section 14A(2) of the Act, as to why the disallowance made by the assessee is incorrect having regard to its accounts. The learned first appellate authority further held that when the assessee had mixed kitty of interest bearing and interest free fund, no disallowance of interest expenses under Rule 8D(2)(ii) could have been made. In the aforesaid premises, he deleted the disallowance made by the A.O. 25. We have consi....
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....as restored the issue to the A.O. for fresh adjudication, after verifying the materials on record. The observations of the Tribunal in A.Y. 2009-10 (supra) are as under: 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 verification/examination of the material as directed by the ITAT for A.Y. 2007-08. Therefore, this ground of appeal is allowed for statistical purposes. 31. Consistent with the view taken by the co-ordinate benches in respect of identical issue, in earlier assessment years, we deem it appropriate to restore the issue to A.O. to maintain consistency. This ground is allowed for statistical purpose. 32. In ground no. 4, the Revenue has raised the issue....
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....ier part of the order, we have allowed assessee's claim. Consistent with the view taken therein, we allow the additional ground. 42. In the result, the appeal is allowed. ITA No. 7251/Mum/2017 - Revenue's appeal for A.Y. 2012-13 43. In ground nos. 1 to 4, the Revenue has challenged the deletion of disallowance made u/s. 14A read with Rule 8D. The issue raised in these grounds are identical to similar issues raised in ground nos. 1 & 2 in ITA No. 764/Mum/2016 decided by us in the earlier part of the order. Consistent with the view taken therein, we dismiss the grounds raised, while upholding the decision of the first appellate authority. 44. In ground no. 5, the Revenue has challenged the deletion of addition of Rs. 75.56 crores on account of gain on foreign exchange fluctuation in respect of FCCBs. While deciding similar ground, being ground no. 3 in ITA No. 764/Mum/2016 decided by us in the earlier part of the order, the issue has been restored back to the A.O. To maintain consistency, we restore the issue to the A.O. This ground is allowed for statistical purpose. 45. In ground nos. 6, 7 & 8, the Revenue has challenged the deletion of addition of Rs. 1,39,75,493/- ....
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....or depreciation in the value of foreign currency held by it, on conversion into another currency, such profit or loss would ordinarily be trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading aspect or as part of circulating capital embarked in the business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature. The ratio of this judgment is also followed by Hon'ble ITAT Mumbai in Dai-ichi Karkaria Ltd. Vs. Dcit, (2007)106ITD453(Mum.). Similar view has been held by Hon'ble High Court at Calcutta in ITA no. 233 of 2009, CIT vs SDB Infrastructure Pvt. Ltd. in respect of transfer of capital asset resulting in gains due to foreign exchange fluctuation. The gain has to be treated as capital receipt. 5.5.4 In view of the discussion above and in adherence of ratios of judgements relied upon, this ground of appeal is allowed. 48. Having carefully gone through the observations of learned first appellate authority, we do not find any infirmity. As rightly observed by learned first appellate authority, the value of shares held in Braz....