TaxTMI 
TaxTMI 
2026 (9) TMI 1616
X X X X Extracts X X X X
X X X X Extracts X X X X
....g disposed of vide this common order for the sake of convenience. 2. We will first take up the appeal of the Assessee as well as of the Revenue for the A.Y. 2017-18. ITA Nos. 190/Ahd/2022 (A) 3. The assessee has taken the following grounds in this appeal: 1. The learned Commissioner of Income Tax (Appeals) erred in law and on facts has confirmed the additions of Rs.1,13,17,93,000/- on account of Capital Grants & Subsidies and Consumers' Contribution on the ground that the appellant should transfer 15% of the total Grants/subsidies/consumer contribution received during the year as against 5. 28% offered by the appellant. The learned Commissioner (Appeals) erred in law and on facts in not considering that the facts of the year under consideration were totally different from that of all the earlier years where similar additions were made. 2. The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the additions of Rs.6,14,06,000/- out of the interest expenditure treating the same as attributable to the Capital Work in Progress over and above the interest already capitalized by the appellant. 3. The le....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see's own case for the A.Ys.2014-15, 2015-16 & 2018-19 to the file of AO vide order in ITA No. 372 to 374/Ahd/2022, dated 07.02.2024. He, therefore, requested that in accordance with the decision of the Tribunal in the other years, this issue requires to be set aside to the file of the AO for fresh adjudication in accordance with the direction given in those years. 6. Per contra, Shri Sher Singh, the Ld. CIT-DR had no objection if the matter was set aside to the file of the AO. 7. We have considered the rival submissions. It is found that this is a recurring issue and the additions made by the AO on this issue was set aside by the order of Co-ordinate bench of this Tribunal to the file of the AO for fresh adjudication. The uniform rate of 15% adopted by the Revenue was not found justified, since as per provision of section 43(1) of the Act the capital grant was required to be reduced from the Cost/WDV of the relevant asset and thereafter depreciation was required to be calculated. The AO had made the disallowance on the presumption that depreciation on all the assets to which capital grant pertained was allowable at the rate of 15% only, whereas different rate of depreciation....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cost but are granted as an inclusive of rural economically backward unviable areas. Assessee received subsidies on different schemes viz. Rural Electrification and Tribal area Electrification and the assets cannot be bifurcated into Rural/Tribal area etc. 17.1 There is no dispute to the fact that the grants received from the Government are capital in nature but they have not been given specifically for acquiring a particular asset. In such situation provision of section 43(1) Explanation 10 of the Act squarely applies for the treatment of such capital grant. Relevant provisions of section 43(1) of the Act read as under :- 43. In sections 28 to 41 and in this section, unless the context otherwise requires (1) "actual cost" means the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met96 directly or indirectly by any other person or authority: [Provided that where the actual cost of an asset, being a motor car which is acquired by the assessee after the 31st day of March, 1967, [but before the 1st day of March, 1975,] and is used otherwise than in a business of running it on hire for tourists, exceeds twenty....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... subsidy or reimbursement or Grant the same proportion as such asset bears to all the assets in respect of which or with reference to which such grant or subsidy or reimbursement is received shall no be included in the actual cost of that assets to the assessee. 4.3 In view of the clear provisions of the Act as stated supra and the assessee himself have admitted that the subsidy and grant received are towards Capital assets, the assessee should have reduced the same from the Capital asset to arrive at the actual cost. However the assessee has failed to do so and also not furnished the details of fixed assets in respect of which the subsidy and grants have been received. Hence and inference is drawn that the Govt. grants/subsidy and consumers' contribution are relatable to fixed assets of plant & machinery. The assessee has claimed depreciation on Plant & Machinery as under: 17.3 We further observe that similar type of issue came up before the Tribunal in the case of GETCL(supra) which was adjudicated by the Coordinate Bench by observing as follows :- 20. We find that in the instant case, the CIT{A) held that excess depreciation claimed on account of c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ical purposes." 8. Respectfully following the decision taken by the Co-ordinate bench of this Tribunal on this issue, we deem it proper to remand this issue to the file of the AO with a direction to re-adjudicate the same after verifying the proportionate amount of grant relating to different assets and thereafter pass the order accordingly. The ground taken by the assessee is allowed for statistical purpose. Ground No. 2 : Capitalisation of interest to Capital Work In Progress 9. The AO found from balance sheet (Note-3 of Financial Statement) that the assessee had capitalised interest of Rs. 693.80 lakhs at the rate of 15% of capital work in progress (CWIP), whereas till the preceding year the rate of such capitalisation was 25%. According to the AO, the interest expense to be capitalised on CWIP of Rs. 5231.47 lakhs at the rate 25% was Rs. 1307.86 lakhs. As the assessee had capitalised an amount of Rs. 693.80 lakhs only, the balance amount of Rs. 614.06 lakhs was added to the income of the assessee, which was upheld by the Ld. CIT(A). The Ld. AR of the assessee submitted that the entire basis of the addition made by the AO was factually incorrect as the assessee had neit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....yed during the year vis-à-vis the method employed in the immediately preceding year. Further the interest capitalised by the assessee to CWIP was not disputed by the assessee in the preceding as well as in the subsequent years. The addition made by the AO is thus found to be based on incorrect facts. Therefore, the addition of Rs. 614.06 lakhs made by the AO on account of capitalisation of interest to CWIP is deleted. The ground taken by the assessee is allowed. 12. Ground No. - 3 - This ground pertained to treating the income from sale of scrap and misc. receipts as income from other sources instead of business income. This ground was not pressed by the Ld. AR in the course of hearing, as the relief on this issue was allowed by the Ld. CIT(A) and the ground was wrongly raised. Hence, the ground is dismissed. Ground No. - 4 : Government Subsidy Advance 13. The AO had noticed that assessee had shown "Subsidy/Grants received in advance" amounting to Rs. 4157.90 lakhs under the head "current year liabilities". As the nature of this subsidy was not explained by the assessee, the AO had held this amount as revenue receipt and added to income. The Ld. CIT(A) while upholdi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 3. White LED Bulb 8 Watts: 5 Nos. 4. DC Fan, 24 Watts: 1 no. 5. Mobile Charge Point: 1 no. 6. 20 Watts Plug for small TV: 1 no. The scheme was to be implemented by four Electricity State Distribution Companies and the target for each distribution company was to be fixed by Gujarat Urja Vikas Nigam Limited. The solar home light system was to be owned by the beneficiary who had to pay only 10% of the estimated cost. 17. The Ld. CIT(A) after carefully examining the various clauses of the terms & conditions of Government resolution, had given the following finding: From a perusal of the above Government Resolution, it is evident that the above amount is like a contractual/revenue receipt from the Gujarat Government to execute solar electricity units for eligible people residing in inaccessible areas. Therefore, it is clear that the impugned receipts are revenue in nature. However, the expenses claimed by the appellant related to this receipt, has to be allowed as expenditure by the AO. Moreover, the appellant has not substantiated why these receipts have been treated as advances by the appellant, raising the concern that the appellant might cl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and advance. The Revenue has treated this interest income as income from other source, whereas as per the assessee the loan given to its staff and employees was in the interest of carrying on its business and, therefore, interest on such loan was business income. This issue is no longer res integra. The Hon'ble Jurisdiction High Court in the case of Paschim Gujarat Vij Company Limited (supra) has held that the interest income received from staff loans and advances was directly related to the business of the assessee. The relevant portion of the judgment is reproduced below: "12. Heard learned advocates for both the sides. In case of Gujarat Urja Vikas Nigam Ltd. (supra), this Court has held as under: "13. With regard to question No.2[d], the Assessing Officer noticed that as per Schedule 14, the assessee has shown other income consisting of interest on loan and advances, incentives from CPSU, etc. The Assessing Officer was of the view that this income was to be assessed as income from other sources instead of business income shown by the assessee. 14. On appeal, the CIT(A) as well as the Tribunal held that the interest income is required to be treated as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Jurisdictional High Court. More particularly, when the CIT and the Tribunal in case of the Guiarat Urja Vikas Nigam Ltd v. DCIT have held that interest income on staff loans is required to be treated as 'business income' instead of 'income from other sources' which is confirmed by this court in the aforesaid Tax Appeal. 9. In case of Gujarat Energy Transmission Corporation Ltd supra) in ITA No. 633/2013, the Coordinate Bench of the Tribunal, after considering the decision of this Court, has held that the interest on staff loans and advances are part of the 'business income' only. In such circumstances, the decision of the co-ordinate Bench of the Tribunal as well as this court were binding upon the Tribunal resulting into the mistake apparent on record." 14. In view of the above view taken by this Court, we do not find any merit in this Appeal as no question of law much less any substantial question of law can be said to have arisen in the impugned order passed by the Tribunal so far as the proposed questions of law are concerned. The Appeal therefore, being devoid of any merit is accordingly dismissed. 22. Respectfully following the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....7,90,000/- to book profits u/s 115JB of the 1.T. Act towards subsidy/grants received in advance, without appreciating that the assessee had not prepared its statement of profit and loss in accordance with section 115)B(2), and failed to comply with the provisions of the Companies Act and Accounting Standards, and failed to furnish information and necessary supporting evidences and also did not furnish any justification and the AO was therefore, justified in computing the book profits in accordance with section 115)B(2) of the Act and making the addition. 1.5. That on the facts and circumstances of the case and in law, the Ld CIT(A) erred in deleting the additions to book profit u/s 115JB of the IT. Act by merely relying on the decision of CIT(A) in another sister concern and without examining the facts of the case, and without considering the facts that the assessee had not prepared its statement of profit and loss in accordance with section 115JB(2) of the Act, and the additions were justified when the book profits was computed by the AO in accordance with provisions of section 115JB(2) of the 1.T.Act 1.6. That on the facts and circumstances of the case and in la....
X X X X Extracts X X X X
X X X X Extracts X X X X
....No. 367/Ahd/2022 dated 07.02.2024 for the A.Y. 2014-15, the addition made to the book profit in respect of Government grants/subsidies is also set aside to the file of the AO for fresh adjudication, after allowing an opportunity of being heard to the assessee. The grounds taken by the Revenue are allowed for statistical purpose. 27. Ground No. 1.4 to 1.6 pertain to deleting the addition for subsidies in advance of Rs. 41,57,90,000/- while computing the book profit u/s. 115JB of the Act. According to the Ld. AR, the subsidy was capital in nature and, therefore, not liable to adjustment while computing the book profit. While deciding the appeal of the assessee, we have held that subsidy/grant of Rs. 415.970 lakhs received by the assessee was a revenue receipt. However, all the addition confirmed in appeal cannot be automatically treated as part of book profit. The book profit has to be computed in accordance with the Explanation to section 115JB(2) of the Act, whereby the profits as shown in the P&L account are required to be increased and also reduced by certain items. While completing the assessment, the AO has not mentioned under which clause of Explanation-1 to section 115JB(2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....staff loans and advances. amounting to Rs.3,85,94,000/- treating the same as income from other sources. 3.0. The learned Commissioner of Income Tax (Appeals), NFAC has erred in law and on facts in confirming the action of the Assessing Officer in treating the balance miscellaneous receipts of Rs.5,41,34,269/- (out of total miscellaneous receipts of Rs.23,95.50,000/) a "Income from Other Sources instead of "Business Income", even though such receipt are intrinsically connected with the business operations of the appellant. 4.0. The appellant craves leave to add to, alter, delete or modify any of the above ground of appeal either before or at the time of hearing of this appeal. 31. Ground No. 1 pertains to addition of Rs. 29,12,72,722/- on account of capital grants of subsidies and is identical to Ground No. 1 as adjudicated in ITA No. 190/Ahd/2022 for A.Y. 2017-18. The decision taken on this issue in ITA No. 190/Ahd/2022 is applicable mutatis mutandis to this year as well. Accordingly, the ground of the assessee is treated as allowed for statistical purpose. 32. Ground No. 1.1 pertains to addition of Rs. 55,98,59,000/- to the book profit in respect of disallo....