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2015 (7) TMI 559 - AT - Income TaxTreatment to vyaj badla income - as interest income or short term capital gains - Held that - The reasons given in the assessment order for this issue and the submissions made on behalf of the appellant are similar to those arising in other appeals of the cases of the same group. In all such cases the modus operandi is almost similar. CIT(A) has not erred in confirming vyaj badla income as interest income instead of short term capital gain. - Decided against assessee. Depreciation disallowance on sales tax incentive - CIT(A) deleted disallowance - Held that - CIT(A) has followed the tribunal s order in for assessment year 2002-03 holding that the incentive provided is in the form of sales tax exemption and not towards meeting the cost of any particular asset. A co-ordinate bench holds that the requisite conditions of Sec. 43(1) Explanation-10 are nowhere satisfied. It has observed that a subsidy or an incentive is in capital field, but at the same time it may not be asset specific. It has accordingly been held that the impugned subsidy or incentive cannot be taken into account for reducing the cost of assets. It has been finally concluded that such a cost of asset can only be reduced by a subsidy or grant which is to meet directly or indirectly the cost of assets in question. Revenue fails to point out any distinction on facts or law. We find that the tribunal s earlier order relates to the very subsidy schemes (supra). It has also been held that the authorities below have wrongly treated the same to be revenue receipt as in the impugned assessment year as well. We adopt consistency in these circumstances and affirm the CIT(A) findings under challenge - Decided against revenue. Deduction u/s.80HH and 80IA on exchange rate difference (Mandali Division) - CIT(A) allowed claim - Held that - As held in Priyanka Gems case 2014 (3) TMI 938 - GUJARAT HIGH COURT such an income is directly related to assessee s export business and it could not be been removed beyond the first degree. The Revenue fails to point out from the case record that the assessee s force in exchange gains fluctuation are not connected to its export activities. We affirm the CIT(A) findings in these facts - Decided against revenue. Disallowance of section 80HHC and 80IA deduction regarding interest on debtors (Mandali Division) - CIT(A) allowed claim - Held that - Once the assessee s interest in question has arisen from trade debtors, the same could not have been disallowed for the purpose of impugned deduction u/ss. 80HHC and 80IA of the Act. - Decided against revenue. Exclusion of sales tax and excise duty while working out section 80HHC deduction - Held that - he case file reveals that a co-ordinate bench of the tribunal in assessee s case for assessment year 2002-03 has relied on the judgment of hon ble apex court in CIT vs. Lakshmi Machine Works, 2007 (4) TMI 202 - SUPREME Court holding that excise duty and sales tax do not involve any element of turnover and hence, they have to be excluded. The Revenue fails to point out any distinction on facts involved in the impugned assessment year vis- -vis those in assessment year 2002-03.- Decided against revenue. Interest on fixed deposits, loans, interest expenditure and reduction of expenses from the insurance claim for the purpose of deductions claimed u/ss. 80HH, 80HHC and 80IA - Held that - Considering the the decision of hon ble jurisdictional high court in 2014 (10) TMI 396 - GUJARAT HIGH COURT and also Commissioner of Income Tax -Ahmedabad-III Versus Nirma Ltd. 2014 (10) TMI 388 - GUJARAT HIGH COURT in its own case directing the authorities below to adopt netting formula i.e. the total receipts minus the expenditure incurred in relation thereto for the purpose of excluding it from the deduction claimed u/s.80HH or 80I in the light of the hon ble apex court decision reported as ACG Associated Capsules P. Ltd. vs. CIT (2012 (2) TMI 101 - SUPREME COURT OF INDIA ), direct the Assessing Officer to adopt netting formula qua assessee s grounds Decided in favour of assessee for statistical purpose Disallowance of depreciation on wooden structures - Held that - There is no dispute between the parties that the relevant invoices stood issued in the name of assessee s group concern. The assessee fails to prove existence of any agreement with its group concern to first purchase the wooden structure in its name, install it and thereafter get the same reimbursed. It also fails to provide installation details thereof despite clear findings of both the lower authorities. We reiterate that the present is second round of proceedings upto the tribunal. Thus, we hold that the assessee s claim in question has been rightly disallowed by both the lower authorities for want of necessary factual evidence - Decided against assessee. Disallowance of expenditure of soda ash project and LAB project - Held that - Assessee has not placed on record the tribunal s earlier order holding that the expenditure in question has not been incurred in expansion of the already existing units of business. We observe in these facts that earlier observations of the ld. co-ordinate bench have attained finality. The assessee s paper book does not contain any cogent evidence to rebut the same. We find no reason to take a different view on facts in this consequential round of litigation. . However, an alternative contention at this stage is also raised that if the impugned expenditure is held to be capital in nature, it is entitled for consequential depreciation relief. We find that this plea requires examination at the Assessing Officer s behest in facts of the case. - Decided partly in favour of assessee for statistical purposes. Depreciation relief on soda ash project and LAB END Project - Held that - The Assessing Officer s order is silent on the impugned depreciation claimed. This is not the Revenue s case in appellate order that the assessee has not put its assets in question in ready to use condition even if its commercial production has not commenced. We quote the case law of hon ble Delhi high court in CIT vs. Integrated Technologies Ltd. 2011 (12) TMI 48 - DELHI HIGH COURT in these facts holding that it is not necessary to actually put to use the plant and machinery in question but such a depreciation claim is allowable even if the assets in question are kept ready for being used in the business concern. The Revenue fails to point out any judicial precedent to the contrary - Decided in favour of assessee
Issues Involved:
1. Validity of Notice and Re-assessment under Section 148 and 147 of the Income Tax Act. 2. Classification of Vyaj Badla Income as Interest Income or Short-Term Capital Gains. 3. Charging of Interest under Sections 234A, 234B, 234C, and 234D of the Income Tax Act. 4. Depreciation Disallowance on Sales Tax Incentive. 5. Deduction under Sections 80HH and 80IA on Exchange Rate Difference and Interest on Debtors. 6. Exclusion of Sales Tax and Excise Duty while computing Section 80HHC Deduction. 7. Nature of Sales Tax Subsidy (Capital Receipt or Revenue Receipt). 8. Disallowance of Depreciation on Wooden Structures. 9. Disallowance of Expenditure on Soda Ash and LAB Projects. 10. Depreciation on Assets used during Project Construction. Detailed Analysis: 1. Validity of Notice and Re-assessment under Section 148 and 147 of the Income Tax Act: The assessee's grounds challenging the validity of the reopening were dismissed as not pressed. The tribunal affirmed the CIT(A)'s order, confirming the Assessing Officer's action in treating vyaj badla income as interest income instead of short-term capital gains. 2. Classification of Vyaj Badla Income as Interest Income or Short-Term Capital Gains: The assessee's appeal against the CIT(A) order confirming the Assessing Officer's action was dismissed. The tribunal upheld the CIT(A)'s reliance on a similar case involving the assessee's group concern, where vyaj badla transactions were treated as finance transactions and the income arising therefrom taxed as interest income. 3. Charging of Interest under Sections 234A, 234B, 234C, and 234D of the Income Tax Act: The tribunal noted that the charging of interest under Sections 234A, 234B, and 234C is consequential to the main proceedings. The additional ground regarding interest under Section 234D was rejected as it was not part of the original assessment order or demand notice. 4. Depreciation Disallowance on Sales Tax Incentive: The Revenue's appeal against the CIT(A) order deleting depreciation disallowance on sales tax incentive was dismissed. The tribunal upheld the CIT(A)'s reliance on a previous tribunal order, which held that the incentive provided was in the form of sales tax exemption and not towards meeting the cost of any particular asset, thus not satisfying the conditions of Section 43(1) Explanation-10. 5. Deduction under Sections 80HH and 80IA on Exchange Rate Difference and Interest on Debtors: The tribunal affirmed the CIT(A)'s order allowing deduction on exchange rate difference and interest on debtors, relying on the jurisdictional high court's decision in Priyanka Gems vs. ACIT, which held that such income is directly related to the assessee's export business. 6. Exclusion of Sales Tax and Excise Duty while computing Section 80HHC Deduction: The tribunal upheld the CIT(A)'s order directing the exclusion of sales tax and excise duty while computing Section 80HHC deduction, following the Supreme Court judgment in CIT vs. Lakshmi Machine Works, which held that these do not involve any element of turnover. 7. Nature of Sales Tax Subsidy (Capital Receipt or Revenue Receipt): The tribunal affirmed the CIT(A)'s finding that sales tax subsidy is a capital receipt, following the reasoning that such subsidies are provided to meet the cost of assets indirectly. 8. Disallowance of Depreciation on Wooden Structures: The tribunal upheld the disallowance of depreciation on wooden structures, agreeing with the lower authorities that the purchase bills were not in the assessee's name and installation details were not provided. 9. Disallowance of Expenditure on Soda Ash and LAB Projects: The tribunal confirmed the disallowance of expenditure on soda ash and LAB projects, noting that the expenditure was related to the purchase and installation of plant and machinery, which should be capitalized. However, it allowed the assessee's alternative plea for depreciation on the capitalized expenditure. 10. Depreciation on Assets used during Project Construction: The tribunal allowed the assessee's claim for depreciation on assets used during project construction, citing the Delhi High Court decision in CIT vs. Integrated Technologies Ltd., which held that depreciation is allowable even if the assets are kept ready for use in the business. Conclusion: - Assessee's appeals ITA Nos. 4135/A/2007 and 1440/Ahd/2011 were dismissed. - Assessee's appeals ITA Nos. 1173/Ahd/2011 & 1441/Ahd/2011 were dismissed as infructuous. - Assessee's appeal ITA No. 1442/Ahd/2011 was partly allowed. - Revenue's appeals ITA Nos. 1388 & 1389/Ahd/2011 were dismissed.
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