2008 (3) TMI 762 - AT - Income Tax

2020 (7) TMI 149 - AT

Issues Involved:
1. Treatment of Sales Tax Subsidy as Capital or Revenue Receipts.
2. Disallowance of Depreciation on Building Not Registered in Assessee's Name.
3. Disallowance of Depreciation on Power Lines Not Owned by Assessee.
4. Reduction of Synchronization Charges from Profits for Deduction u/s 80-IA.
5. Addition of Provision for Doubtful Debts for Computing Book Profit for MAT.
6. Non-Reduction of Book Profits by Amount of Profit from Export Business u/s 80 HHC.
7. Direction to Reduce Cost of Acquisition of Assets u/s 43(1).

Summary:

1. Treatment of Sales Tax Subsidy as Capital or Revenue Receipts:
The issue pertains to whether the Sales Tax Subsidy of Rs. 61,86,51,505/- should be treated as capital receipts or revenue receipts. The CIT(A) deleted the addition made by the Assessing Officer, treating it as capital receipts based on earlier ITAT orders in the assessee's own case. The Tribunal upheld the CIT(A)'s decision, referencing the Special Bench decision in DCIT Vs. Reliance Industries Ltd. (2004) 88 ITD 273, concluding the issue against the department.

2. Disallowance of Depreciation on Building Not Registered in Assessee's Name:
The assessee claimed depreciation on assets not registered in its name. The CIT(A) allowed the claim, following the ITAT's decisions in the assessee's own case for earlier years and the Supreme Court rulings in Poddar Cement Ltd. 226 ITR 625 and Mysore Minerals Ltd. 239 ITR 775. The Tribunal found no error in CIT(A)'s decision and upheld it.

3. Disallowance of Depreciation on Power Lines Not Owned by Assessee:
The AO disallowed depreciation of Rs. 8,06,020/- on power lines not owned by the assessee. The CIT(A) upheld the disallowance, referencing ITAT's earlier decision. The Tribunal, following the same rationale, upheld the CIT(A)'s order, noting the ownership of power lines vested with U.P. State Electricity Board.

4. Reduction of Synchronization Charges from Profits for Deduction u/s 80-IA:
The AO reduced synchronization charges from profits for computing deduction u/s 80-IA, considering it an ascertained liability. The CIT(A) upheld this view. The Tribunal agreed, stating the liability had crystallized during the relevant year, and directed the AO to verify the debit to the P&L A/c.

5. Addition of Provision for Doubtful Debts for Computing Book Profit for MAT:
The AO added Rs. 2,17,512/- for provision of doubtful debts while computing book profit for MAT. The CIT(A) deleted the addition, and the Tribunal upheld this decision, referencing its earlier order which found such provisions based on actual ascertained liability.

6. Non-Reduction of Book Profits by Amount of Profit from Export Business u/s 80 HHC:
The AO did not reduce Rs. 37,21,57,582/- from book profits, claimed under section 80 HHC. The CIT(A) upheld this action. The Tribunal found no infirmity in CIT(A)'s order, following the Mumbai High Court's decision in ACIT Vs. Ajanta Pharma Ltd. (2008) 21 SOT 101 (Mum.).

7. Direction to Reduce Cost of Acquisition of Assets u/s 43(1):
The CIT(A) directed the AO to reduce the cost of acquisition of assets by the amount of subsidy received. The Tribunal, referencing the Visakhapatnam Bench's decision in Sasisri Extractions Ltd. Vs. ACIT (2008) 307 ITR 127 (AT) and the Supreme Court's decision in CIT Vs. P.J. Chemicals Ltd. (1994) 210 ITR 830 (SC), concluded that the sales-tax subsidy received by the assessee cannot be treated as a subsidy for the asset employed. Therefore, the CIT(A)'s direction was not justified, and the ground was allowed in favor of the assessee.

Conclusion:
The revenue's appeal was dismissed, and the assessee's appeal was partly allowed. The order was pronounced in open court on 28-8-2009.

← Previous Next →