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2020 (5) TMI 45 - AT - Income TaxNature of expenditure - Expenses relating to technical know-how - Revenue or capital expenditure - HELD THAT - An identical issue having similar facts has already been adjudicated by this Bench of ITAT in assessee s own case 2019 (6) TMI 655 - ITAT CHANDIGARH wherein rightly allowed the assessee s appeal following the order of the I .T.A.T. in assessee s own case for assessment year 2009-10. We therefore find no reason to interfere in the order of the Ld.CIT(A) holding the technical knowhow expenses as revenue in nature. Sales tax subsidy received by the assessee by virtue of scheme of Punjab Government has already been decided by the I .T.A.T. in the case of the assessee itself in the preceding years 2019 (6) TMI 655 - ITAT CHANDIGARH holding the same to be capital in nature and with no distinguishing facts having been brought to our notice by the Ld. DR Characterization of Income - Electricity duty exemption - revenue receipt OR Capital receipt - HELD THAT - In the present case it is not in dispute that the assessee in view of Industrial Policy 2003 of the State Government of Punjab became eligible for claiming the electricity duty exemption - claim of the assessee was that the said entitlement although accrued but had not been received during the year under consideration, as the case of the assessee was to be examined by a separate Empowered Committee constituted by the State Government. Claim of the assessee that due to pendency of verification of compliance of eligibility condition the assessee had not even filed its claim before the Department for benefit of exemption. The said claims of the assessee are not rebutted by bringing cogent material on record, therefore the electricity duty exemption entitlement although booked in the books of accounts on estimate basis was rightly reduced from the taxable income while filing the Income Tax Return. Assessee was eligible for the incentive on the basis of Industrial Policy 2003 of Government of Punjab on account of expansion of the existing unit and it shall be received by the assessee by way of adjustment in electricity bills of future consumption. Assessee had not received any benefit by way of adjustment or reimbursement for the year under consideration, so it was a hypothetical income which may or may not materialize to its money value. Therefore, the addition made by the A.O. and sustained by the Ld. CIT(A) was not justified, accordingly the same is deleted. Assessee appeal allowed.
Issues Involved:
1. Treatment of expenses on technical know-how as revenue or capital expenditure. 2. Treatment of sales tax subsidy as capital or revenue receipts. 3. Treatment of electricity duty exemption as capital or revenue receipts. Issue-wise Detailed Analysis: 1. Treatment of Expenses on Technical Know-How: The Department contested the CIT(A)'s decision to treat technical know-how expenses as revenue expenditure rather than capital expenditure. The Assessee argued that this issue had been previously decided in their favor by the ITAT for earlier assessment years. The ITAT noted that similar facts had been adjudicated in the Assessee's favor in ITA No. 756/Chd/2018 for A.Y. 2011-12, where it was held that the expenses were revenue in nature. The ITAT found no distinguishing facts in the current appeal and upheld the CIT(A)'s decision, dismissing the Department's grounds. 2. Treatment of Sales Tax Subsidy: The Department challenged the CIT(A)'s decision to treat sales tax subsidy as capital receipts. The Assessee argued that this issue was also covered in their favor by the ITAT's decision in ITA No. 756/Chd/2018. The ITAT referred to its earlier decision, which held that the sales tax subsidy under the Punjab Industrial Policies was capital in nature. The ITAT found no new facts presented by the Department and upheld the CIT(A)'s decision, dismissing the Department's grounds. 3. Treatment of Electricity Duty Exemption: The Assessee contested the CIT(A)'s decision to treat electricity duty exemption as revenue receipts. The Assessee argued that the exemption was a capital receipt under the Industrial Policy 2003 of Punjab, aimed at promoting industrial growth and expansion. The ITAT noted that the Assessee had booked the entitlement on an accrual basis but had not received it, as the eligibility was still under consideration by the empowered committee. The ITAT referred to the Supreme Court's decision in CIT Vs. Ponni Sugars and Chemicals Ltd., which applied the "purpose test" to determine the nature of subsidies. The ITAT found that the electricity duty exemption was intended to promote industrial expansion and was thus a capital receipt. The ITAT deleted the addition made by the A.O. and sustained by the CIT(A). Conclusion: The ITAT dismissed the Department's appeal and allowed the Assessee's appeal, holding that: - Technical know-how expenses were revenue in nature. - Sales tax subsidy was a capital receipt. - Electricity duty exemption was a capital receipt.
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