9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (2) TMI 501 - AT - Income TaxNature of receipt - Grant received from government - capital or revenue receipt - Held that - Unspent grant received by the assessee from the Government as on 31/03/2012 cannot be brought to tax as revenue receipt. Addition on account of sundry credits - Held that - CIT(A) has deleted the addition based on the assurance given by the assessee that reconciliation of the outstanding sundry creditors would be completed and unenforceable credits of sundry creditors would be offered to tax. In the interest of justice and equity, we are of the view that the Assessing Officer should be granted an opportunity to examine the reconciliation statement of sundry creditors filed by the assessee. Therefore, this issue is restored to the files of the Assessing Officer. Addition made on account of interest accrued on treasury savings deposits - accrual of interest - assessee was following the mercantile system of accounting - Held that - CIT(A) had only directed the Assessing Officer to verify whether interest accrued on treasury savings deposits is offered to tax on the basis of mercantile system of accounting. We do not find any infirmity in the finding of the CIT(A) and confirm the same. It is ordered accordingly.
Issues Involved:
1. Whether the unspent balance of grants-in-aid received from the Government should be taxed as revenue receipts. 2. Whether the addition of sundry creditors should be deleted. 3. Whether the addition of interest accrued on treasury savings deposits should be deleted. Issue-wise Detailed Analysis: 1. Whether the unspent balance of grants-in-aid received from the Government should be taxed as revenue receipts: ITA No. 474/Coch/2016 (AY 2012-13): The primary issue was whether the unspent balance of ?41,61,30,489 received as grants-in-aid should be taxed as revenue receipts. The assessee, a Government company engaged in production and distribution of frozen semen, received grants from the Central and State Governments for specific projects. The Assessing Officer (AO) treated the unspent grants as revenue receipts, arguing they were not earmarked for capital expenditure. The CIT(A) disagreed, ruling that the grants were for specific purposes and should be treated as capital receipts. The Tribunal upheld the CIT(A)'s decision, emphasizing that the grants were for enduring benefits and specific projects, thus not taxable as revenue receipts. The Tribunal referenced several judicial pronouncements supporting this view, including cases from the Hon'ble Supreme Court and High Courts, which consistently held that such grants are capital receipts when intended for specific purposes and not for day-to-day business operations. ITA No. 484/Coch/2016 (AY 2003-04): The same issue arose for the assessment year 2003-04, where the AO added the unspent balance of grants as revenue receipts. The CIT(A) deleted the addition, and the Tribunal upheld this decision, reiterating the reasoning and judicial precedents discussed in ITA No. 474/Coch/2016. ITA No. 485/Coch/2016 (AY 2007-08): Again, for the assessment year 2007-08, the AO added the unspent balance of grants as revenue receipts. The CIT(A) deleted this addition, and the Tribunal upheld the CIT(A)'s decision, consistent with its earlier rulings. 2. Whether the addition of sundry creditors should be deleted: ITA No. 484/Coch/2016 (AY 2003-04): The AO added ?12,35,813 as sundry creditors, arguing these were old balances not legally enforceable. The CIT(A) deleted the addition, noting that unexplained sundry creditors from previous years cannot be added unless they are crystallized or disowned in the current year. The CIT(A) directed the assessee to complete reconciliation and report any unenforceable credits. The Tribunal restored this issue to the AO for verification, emphasizing the need for a thorough examination of the reconciliation statement. 3. Whether the addition of interest accrued on treasury savings deposits should be deleted: ITA No. 485/Coch/2016 (AY 2007-08): The AO added ?37,85,470 as interest accrued on treasury savings deposits, arguing that under the mercantile system of accounting, the interest should be taxed. The CIT(A) deleted the addition, stating that the interest accrued during the year was already accounted for, preventing double addition. The CIT(A) directed the AO to verify the interest account. The Tribunal upheld this decision, finding no infirmity in the CIT(A)'s directive for verification. Conclusion: - ITA No. 474/Coch/2016: Appeal dismissed. - ITA No. 484/Coch/2016: Partly allowed for statistical purposes. - ITA No. 485/Coch/2016: Appeal dismissed.
|
