9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (7) TMI 937 - AT - Income TaxSubsidy received by the assessee from Government of West Bengal under Incentive Scheme 1999 taxability - revenue or capital receipt - MAT computation - Held that - Subsidy receipt is a capital receipt is not taxable under normal provision of Act. Though it is a capital receipt is not liable for consideration under book profit under MAT proceedings u/s 115JB of the Act. Order of the CIT(A) is set aside. The additional ground Nos. 1 and 2 raised by the assessee are allowed. Allowance of expenses made on account deferred revenue expenditure - Held that - As relying in the guidance note issued by the Institute of Chartered Accountant of India on treatment of expenditure during construction period where it was recommended that the indirect expenditure incurred during the construction period should be capitalized as part of indirect construction cost to the extent to which the expenditure is indirectly related to construction or if incidental thereto. Thus delete the addition made on account of deferred expenditure. Ground nos. 1(a) and (b) raised by the assessee are allowed. Directing the AO to compute the disallowance @ 1% for the purpose of section 14A - Held that - we find that the CIT(A) by placing reliance on the decisions of ITAT Kolkata in the case of Civil Engineers Enterprises Pvt. Ltd 2010 (8) TMI 975 - ITAT KOLKATA directed the AO to disallow 1% of dividend income at ₹ 18,14,470/-. Therefore we find no infirmity in the order of CIT(A) . Ground no.2 raised by the assessee is dismissed. Deletion of disallowance made on account of loss for re-statement of foreign exchange confirmed 0 issue is covered by the consolidated order in favour of the assessee in its own case 2016 (5) TMI 479 - ITAT KOLKATA addition made on account of freight charges - Held that - the reason given by the AO for the disallowance is not tenable as the AO has not pointed out any reasonable reasons for the same. There is no doubt that the assessee had made short recovery from the customers but the reasons for the same were duly explained by the assessee. Accordingly the Ld. CIT(A) has given the relief to the assessee and on this point of view Ld. DR has not brought anything on record contrary to the findings of the Ld CIT(A). see assessee in its own case 2016 (5) TMI 479 - ITAT KOLKATA
Issues Involved:
1. Nature of incentives received under the West Bengal Incentive Scheme 1999. 2. Deduction on account of deferred revenue expenditure. 3. Disallowance under section 14A of the Income Tax Act. 4. Deduction under section 35D of the Income Tax Act. 5. Loss for re-statement of foreign exchange. 6. Addition on account of freight charges. Detailed Analysis: 1. Nature of Incentives Received under the West Bengal Incentive Scheme 1999: The primary issue was whether the incentives received by the assessee under the West Bengal Incentive Scheme 1999 were capital or revenue in nature. The Tribunal referenced the decision in the case of DCIT vs South Asian Petrochem Ltd, which established that the subsidy received was a capital receipt and not taxable. The Tribunal noted that the incentive was provided to promote industries and was not related to the operational cost of the company. It was determined that the subsidy was given for establishing a new industrial unit, thus qualifying as a capital receipt. This was supported by judgments from the Hon'ble jurisdictional High Court in CIT Vs. Rasoi Limited and the Hon'ble Supreme Court in CIT vs Ponni Sugars and Chemicals Limited. Consequently, the Tribunal held that the subsidy was not taxable under normal provisions or under MAT proceedings u/s 115JB of the Income-tax Act. 2. Deduction on Account of Deferred Revenue Expenditure: The assessee claimed a deduction for deferred revenue expenditure, which the Assessing Officer (AO) disallowed, stating there was no provision in the Act for such a deduction. The Tribunal referenced its earlier decision in the assessee’s own case for A.Y. 2005-06, where it was held that such expenses incurred prior to the commencement of business should be capitalized with the fixed assets and depreciation allowed accordingly. The Tribunal reiterated that these expenses should be included in the actual cost of the assets for allowing depreciation under section 32 of the Income Tax Act. 3. Disallowance under Section 14A of the Income Tax Act: The AO made a disallowance under section 14A, which the CIT(A) directed to be computed at 1% of the exempt dividend income. The Tribunal confirmed this approach, referencing its decision in the assessee's case for A.Y. 2005-06, where it was established that Rule 8D was not applicable for the assessment year in question and that a reasonable disallowance could be 1% of the dividend income. 4. Deduction under Section 35D of the Income Tax Act: The AO allowed a deduction of ?6.50 million under section 35D, which was confirmed by the CIT(A). The Tribunal found no error in this allowance and dismissed the revenue’s ground as misconceived. 5. Loss for Re-statement of Foreign Exchange: The AO disallowed the loss on foreign exchange revaluation, considering it notional. The CIT(A) allowed the deduction, stating it was in line with Accounting Standard 11 and the mercantile system of accounting. The Tribunal upheld this view, referencing the Hon'ble Delhi High Court’s decision in CIT vs Woodward Governor India Private Limited, which supported recognizing such exchange differences as income or expenses in the period they arise. 6. Addition on Account of Freight Charges: The AO disallowed freight expenses, considering them receivables. The CIT(A) allowed the deduction, noting that the expenses were incurred for business purposes and were not disputed in quantum by the AO. The Tribunal upheld this decision, noting that the freight expenses were necessary for business operations and should be allowed. Conclusion: The Tribunal allowed the assessee's appeal in part, confirming the capital nature of the subsidy, allowing deferred revenue expenditure to be capitalized, and restricting disallowance under section 14A to 1% of dividend income. The revenue's appeal was dismissed, upholding the CIT(A)'s decisions on deductions under section 35D, foreign exchange loss, and freight charges.
|
