2013 (6) TMI 921 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 14,65,000/- u/s 68 of the IT Act.
2. Disallowance of Rs. 2,53,124/- out of depreciation on plant and machinery.

Summary:

1. Addition of Rs. 14,65,000/- u/s 68 of the IT Act:
The assessee challenged the addition of Rs. 14,65,000/- made by the AO u/s 68 of the IT Act, which was share application money received from 30 agriculturists. The AO contended that the assessee failed to prove the identity and creditworthiness of the agriculturists. The CIT(A) upheld the AO's decision, despite the assessee providing various documents like share applications, identity proofs, affidavits, and income certificates. The ITAT, however, found that the assessee had sufficiently discharged the burden of proof by providing comprehensive details and documents supporting the identity and creditworthiness of the share applicants. The ITAT referred to several judicial precedents, including the Supreme Court's decision in CIT vs. Lovely Exports (P) Ltd., which held that if the share application money is received from identified shareholders, it cannot be regarded as undisclosed income of the assessee company. Consequently, the ITAT deleted the addition of Rs. 14,65,000/-.

2. Disallowance of Rs. 2,53,124/- out of depreciation on plant and machinery:
The AO reduced the value of subsidy from the cost of plant and machinery, resulting in a disallowance of Rs. 2,53,124/- from the depreciation claimed by the assessee. The assessee argued that the subsidy received from NABARD was not at its disposal and was to be adjusted only upon the completion of the project. The CIT(A) did not accept this contention. The ITAT noted that the matter required reconsideration, as the subsidy was not final and related to the total project cost, not just specific assets. The ITAT directed the AO to verify the scheme and determine the accrual of the subsidy upon the project's completion. Therefore, the ITAT set aside the orders of the authorities below and restored the issue to the AO for re-examination.

Conclusion:
The appeal of the assessee was partly allowed, with the addition of Rs. 14,65,000/- being deleted and the issue of disallowance of Rs. 2,53,124/- being remanded back to the AO for reconsideration.