2015 (7) TMI 1183 - AT - Income Tax

Disallowance on account of Molasses Reserve Fund - whether Molasses Reserve Fund is in the nature of provision and it is not an actual liability and provision for contingent liability is not allowable as deduction? - Held that - The first appellate authority followed the order of the coordinate bench of the Tribunal in the assessee s own case for the asstt. year 1995-96 and allowed the claim of the assesseE. We find no infirmity in the same. Thus this ground of the revenue is dismissed. Disallowance treating the capital subsidy received from Central Government as revenue receipt - whether interest was neither actually incurred nor was there any liability on the assessee to incur the same - Held that - The first appellate authority at page 20 para 10 considered this issue. He followed the decision of the coordinate bench of the Tribunal in the assessee s own case for the assessment year 1990-91 and allowed the claim of the assessee. We also observed that the decision of the Tribunal was upheld by the Jurisdictional High Court . Hence we dismiss this ground of the revenue. Deletion on account of depreciation on discarded assets u/s 32 - Held that - First appellate authority applied the judgment of the Jurisdictional High Court in the case of CIT vs. Oswal Agromills Ltd. 2010 (12) TMI 947 - Delhi High Court and CIT vs. Yamaha Motors India Pvt. Ltd. 2009 (8) TMI 27 - DELHI HIGH COURT and allowed the claim of the assessee. No contrary decisions are brought to our notice by the Ld. - Decided against revenue

Summary

Issues:
1. Disallowance of Molasses Reserve Fund
2. Treatment of capital subsidy as revenue receipt
3. Disallowance of depreciation on discarded assets

Analysis:

1. Molasses Reserve Fund Disallowance:
The appeal by the revenue was against the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of Rs. 1,45,985 on account of Molasses Reserve Fund. The Tribunal upheld the decision of the first appellate authority, which followed the order of a coordinate bench in the assessee's own case for a previous assessment year. It was noted that Molasses Reserve Fund is in the nature of a provision and not an actual liability, and provision for contingent liability is not allowable as a deduction. Therefore, the Tribunal dismissed this ground of the revenue.

2. Capital Subsidy Treatment:
The second issue pertained to the disallowance of Rs. 8,13,912, treating the capital subsidy received from the Central Government as a revenue receipt. The Tribunal found that the first appellate authority had considered this issue and followed a decision of a coordinate bench in the assessee's previous case, which was upheld by the Jurisdictional High Court. Since there was no actual liability incurred for the interest, the claim of the assessee was allowed. Consequently, the Tribunal dismissed this ground of the revenue.

3. Depreciation on Discarded Assets:
Regarding the disallowance of Rs. 5,60,973 on account of depreciation on discarded assets under section 32 of the Income Tax Act, 1961, the Tribunal noted that the first appellate authority relied on judgments of the Jurisdictional High Court in similar cases and allowed the claim of the assessee. No contradictory decisions were presented by the revenue. Therefore, the Tribunal upheld the order of the first appellate authority and dismissed this ground of the appeal.

In conclusion, the Tribunal dismissed the revenue's appeal, upholding the decisions of the first appellate authority on all three grounds. The judgment was pronounced on 17th July 2015.