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TMI Blog2014 (1) TMI 1695X X X X Extracts X X X X X X X X Extracts X X X X ..... he same. The impugned amount is not an income of the assessee and was erroneously shown by it in the return of income. We uphold the same. - Decided in favour of assessee. Disallowance of depreciation - reducing the amount of special capital incentive received by the assessee from the Govt. of Maharashtra - CIT(A) delewted the addition - Held that:- CIT(A) granted the relief to the assessee by observing that the subsidy was not given for any specific purpose of meeting any portion of cost of the assets, therefore, could not be reduced from W.D.V. Similar view was taken by ITAT in assessee’s own case for A.Y. 2002-03 and 2003-04. Accordingly, the CIT(A) was justified in deleting the addition made on account of depreciation. The same needs no interference from our side. We uphold the same. - Decided in favour of assessee. - ITA No. 2454/PN/2012 - - - Dated:- 31-1-2014 - SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER For the Appellant: Shri P.L. Pathade For the Respondent: Shri C.H. Naniwadekar ORDER PER SHAILENDRA KUMAR YADAV, J.M: This appeal has been filed by the revenue against the order of Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,351/- instead of ₹ 5,25,45,080/-. Thus, the Assessing Officer was rightly directed to adopt the return of income at ₹ 5,25,45,080/-. This reasoned factual finding of CIT(A) needs no interference from our side. We uphold the same. 4. Second issue is with regard to disallowance of ₹ 29,198/- made by the Assessing Officer by applying Rule 8D r.w.s. 14A. In appeal, the stand of the assessee has been that the assessee has invested ₹ 40,95,000/- in mutual funds. The same has been made out of non-interest bearing funds. The assessee had earned 30,918/- as dividend on mutual fund which was exempted u/s 10(35) of the Act. The attention was drawn to the balance sheet of assessee for A.Y. 2008-09 inter alia stated that the capital account of the partners is showing balance of ₹ 10,55,18,632/- as on 31.03.2008 and balance of ₹ 7,48,97,341/- as on 31.03.2007. Further, the profits of the firm for the F.Y. 2007-08 was ₹ 5.23 crore. Thus, the investment in mutual funds were made from profits generated and the interest free funds available with the firm. Further, the investment in mutual funds have been done in AY 2008-09 whereas borrowed funds were av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard to the treatment of income of ₹ 19,56,465/- on account of sales tax deferral claimed as capital in nature. 5.1 In appeal before CIT(A), it was argued on behalf of the assessee and vide letter dated 07.09.2012 contended as under: The appellant was entitled to avail sales tax incentive by way of sales tax deferral benefit as per 1983 Package Scheme of Incentive of Government of Maharashtra. The appellant had liability of ₹ 39,62,775/- on account of deferred sales tax as on 31/03/2007 which is shown under the heading Sales Tax Deferral Loan . As per the 4th proviso to section 38(4) of the Bombay Sales Tax Act, 1959 read with Rule 3 ID of the Bombay Sales Tax Rules, 1959, the appellant had an option to prepay the deferred sales taxes at net present value. The proviso also stated that such prepayment would amount to discharge of deferred tax liability. Thus, it is specifically mentioned that deferred tax is fully paid and not remitted or waived. The appellant has exercised the option and had repaid the deferred tax liability at net present value (NPV) of ₹ 20,06,310/- (copy of challans enclosed at page nos. 63 to 76). The difference of ₹ 19,56,465 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Maharashtra. The same is debited to the sales tax deferral loan account and is supported by the challans. The difference of ₹ 39,62,775/- and ₹ 20,06,309/- = ₹ 19,56,466/- partakes the character of a capital receipt. Therefore, what the assessee was required to repay after 10 years in five equal annual installments, the same was repaid by the assessee as N.P.V. is future value of the sum of ₹ 39,62,775/-. Therefore, there is no material to show that there has been any remission or cessation of liability by the Govt. of Maharashtra. Hence, the provisions of section 41(1) do not apply on the facts of this case. This view is fully supported by the Special Bench decision dated 10/11/2010 of Hon'ble ITAT E Bench, Mumbai in I.T.A. No.2944/MUM/2007 reported in (2010) 42 SOT 457 (MUM.) (S.B.). On these facts and the circumstances and the decision of law, the difference of ₹ 19,56,465/- between the liability amount and the paid amount was a capital receipt which was erroneously shown by the assessee as a revenue receipt. However, during the assessment proceedings, the assessee vide letter dated 23/12/2010 (supra) requested the AO not to treat the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) reported in 229 ITR 383 (SC). In view of the above, we direct the Assessing Officer treat the aforesaid receipt of ₹ 2,53,730/- as capital receipt which was received by him as per the order of the Hon'ble High Court . Similar view has been taken by the jurisdictional Tribunal in the case of Mrs. Meena Bipin Batavia in I.T.A. No.ll39/PN/2008 vide their order dated 31/05/2010 in which the Hon'ble Tribunal has held that in a case where excess profit has been shown by an assessee in the return of income and such profit is otherwise not taxable in accordance with the principles of law, deduction in respect of such excess profit was held to be allowable in the appellate proceedings. Therefore, in that case the Hon'ble Tribunal allowed reduction from the return of income by ₹ 1,64,410/- as claimed by the assessee in that case. 8.6.3 It is settled law that merely because the assessee under wrong understanding of law offers amount to tax, the same will not be a reason, to tax the said amount unless it is lawful to tax the same. This view is fortified in the following judicial citations:- 73 Taxman 437(Cal); 130 Taxman 500 (Cal.) and 262 ITR 638 (Cal.). Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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