2010 (8) TMI 51 - HC - Income Tax

Application of section 40A(5) Section 40A(5)(a) versus 40A(5)(c) Deduction u/s 80J nature of excess amount collected subject to decision of HC, revenue or capital Depreciation on Building - Held that - provision of section 40A(5)(c) is applicable and section 40A(5)(a) is not applicable in view of decision of Apex court in CIT Vs. Continental Construction Ltd. (2008 -TMI - 5637 - SUPREME Court) - If the assessee has been allowed the benefit of Section 80J in the last three preceding years, there is no reason to deny the same for the instant assessment year - in those cases where the interim orders are passed permitting the assessee to recover excess amount than the amount fixed by the government for levy sugar without any condition of refund etc., such receipt of these amounts would be treated as revenue receipt. - but excess price charged by the assessee, while the writ petition was still pending, would not be treated as a revenue receipt in the hands of the assessee company, in as much as, the excess receipt was contingent upon the success in the writ petition filed by the assessee. - part of the structure is also known as building. assessee is entitled to take benefit of initial depreciation

Summary

Issues:
1. Interpretation of Section 40A(5)(c) and First Proviso to Section 40A(5)(a) of the Income Tax Act.
2. Claim for deduction under Section 80J of the Income Tax Act for a new industrial unit.
3. Treatment of excess price realized on sale of levy sugar as revenue receipt.
4. Entitlement to initial depreciation under Section 32(1)(iv) of the Income Tax Act.

Issue 1:
The first issue involved the interpretation of Section 40A(5)(c) and the First Proviso to Section 40A(5)(a) of the Income Tax Act. The court referenced the judgment in CIT Vs. Continental Construction Ltd. to support the assessee's position. The judgment favored the assessee, ruling against the revenue.

Issue 2:
The second issue revolved around the claim for deduction under Section 80J of the Income Tax Act for a new industrial unit. The court considered the history of the claim, previous tribunal decisions, and the entitlement of the assessee to the deduction for five years. The court ruled in favor of the assessee based on previous allowances and the continuity of the deduction.

Issue 3:
The third issue dealt with the treatment of excess price realized on the sale of levy sugar as a revenue receipt. The court examined a similar case from a previous assessment year and the conditional nature of the excess amount received. Citing relevant judgments, including K.C.P. Ltd. Vs. CIT, the court differentiated between conditional and unconditional receipts. The court ruled in favor of the assessee, considering the contingent nature of the excess amount.

Issue 4:
The fourth issue involved the entitlement to initial depreciation under Section 32(1)(iv) of the Income Tax Act. The court analyzed the definition of "building" and its common interpretation. Considering the purpose of the provision to incentivize businesses for housing low-income employees, the court concluded that the assessee was entitled to the initial depreciation. The court ruled in favor of the assessee, emphasizing the social responsibility aspect of providing such accommodations.

In conclusion, the judgment addressed various complex issues related to income tax provisions and deductions, interpreting relevant sections of the Income Tax Act and considering precedents to deliver rulings in favor of the assessee across all issues discussed.