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TMI Blog2016 (5) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer for a fresh inquiry. In view of the above discussion, we do not deal into the arguments of merit in respect of claim of the assessee with the observation that same shall dealt in the appeal arising against the consequent assessment and thus, the grounds raised challenging the action u/s 263 of the Act on the issue of sales tax exemption/subsidy are dismissed. Difference under the head provision for “gratuity” between outstanding as per balance sheet and audit report - Held that:- Assessment order was erroneous and prejudicial to the interest of revenue in respect of omission to make an admitted disallowance of ₹ 88 lacs on account of provision for gratuity u/s 40A(7) read with section 43B of the Act. Thus action u/s 263 revising an order of assessment is held to be in accordance with law. Claim of additional deprecation on computer software - Held that:- It is held that here too there was no enquiry on the part of the AO in respect of claim of additional depreciation and therefore the CIT was justified to conclude that AO failed to carry out necessary and proper enquiry in respect of claim made by the appellant company. Even before us the learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the year under consideration, total amount of both exemptions of the Entry Tax and the Electricity Duty of ₹ 48,39,36,937/- was reduced out of profit of the business at the stage of computation of income by the assessee, Thus we hold that the change in treatment alone cannot be a ground to contend that a sum otherwise taxable as income is not taxable or is a capital receipt and therefore following the aforesaid orders of the Tribunal in the case of assessee itself (supra), we sustain the addition made by the Assessing Officer and confirmed by the CIT(A) and grounds raised by the assessee are dismissed. Disallowance of additional depreciation claimed in respect of computer software ‘Primavera' - Held that:- It is apparent that installation of computers in the office cannot be made a basis to deny the claim of deprecation provided such office can on facts be taken as an “industrial premises” for the purpose of depreciation. In the instant case the finding of fact recorded both by CIT(A) and AO is that “primavera” is not actually installed within any manufacturing machinery and is a web based tool for top management for review etc. and planner/scheduler. It is a tool lik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .03.2013 passed by the learned Commissioner of Income-tax, ('CIT') under section 263 of the Income-tax Act, 1961 ('the Act') holding the assessment order dated 27.12.2010 to be erroneous and prejudicial to interests of revenue on certain issues, is beyond jurisdiction, bad in law and void ab initio. 1.1 That the CIT erred on facts and in law in exercising reversionary powers under section 263 of the Act in respect of certain issues, without appreciating that the twin conditions of that section viz., assessment order being erroneous as well as prejudicial to the interests of the Revenue, were not satisfied in the appellant's case. 1.2 That the CIT erred on facts and in law in setting aside the assessment order on certain issues allegedly on the ground that the assessing officer did not conduct necessary and proper enquiries/ verification and did not apply correct position of law, which is outside the scope of revisionary jurisdiction under section 263 of the Act. l.3 That the CIT erred on facts and in law in setting aside the assessment order, without arriving at any conclusive finding on merits as to how the assessment order was erroneous as we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and in law in holding that the aforesaid computer software was only office equipment and does not qualify as 'plant and machinery, for being eligible for additional depreciation. The appellant craves leave to add, alter, amend or vary from the aforesaid grounds of appeal at or before the time of hearing. 3. The facts in brief are that the assessee company was engaged in generation of power and manufacturing of sponge iron products during the previous year relevant to the assessment year under consideration. For the year under consideration, the assessee filed its return of income electrically on 29.09.2008, declaring income of ₹ 766,99,04,200/- under normal provisions of the Act, after availing of various deductions under the provisions of the Act. The case was selected for scrutiny and notice under Section 143(2) of the Act was issued on 28.03.2009. Subsequently, on 29.03.2010, the assessee filed revised return of income reducing income under normal provisions of the Act to ₹ 766,72,79,900/- . In the case of the assessee, the tax on the book profit under section 115JB of the Act was higher than the tax under normal provisions of the Act, and therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest of revenue. All the above grounds revolve around the legality of proceedings under section 263 of the Act. Further, in Ground 2, it has been specifically contended that the CIT erred on facts and in law in holding that the order passed by the assessing officer was erroneous and prejudicial to the interest of the revenue on account of the following: i) Allowing reduction of sales tax incentive/ subsidy amounting to ₹ 81.5 crores from the taxable income by treating the same to be non- taxable, being in the nature of capital receipt; ii) Allowance of additional depreciation of ₹ 5,91,106 on computer software 'Primavera'. 6. So far as the taxability of sales tax subsidy is concerned the relevant facts are that in the financial year 2000-01, the assessee company was granted an exemption from Central Sales Tax (CST) vide notifications of even no. dated 24th April, 2000 in respect of sale of goods manufactured/ by-products etc. from its new industrial unit(s) established in the state of Madhya Pradesh, with a commitment of capital investment in fixed assets exceeding ₹ 100 crores over a period of five years commencing from 1st April, 2000. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipt. The aforesaid decision of the Tribunal has been followed by the Tribunal in assessment year 2002-03 2004-05 in ITA No. 368/Del/2001 and 136/Del/2000 respectively vide order dated 06.03.2014. 7. During the proceedings under 263 of the Act before the CIT, on the issue of the sales tax subsidy, the assessee vide its letter dated 17.12.2013 submitted that the order was not erroneous and prejudicial to the interest of the revenue as sales tax subsidy was claimed and allowed in accordance with the purpose test held by the Hon ble Supreme court in the case of Ponni Sugar and Chemical Limited v CIT, 306 ITR 392. Further the assessee submitted that the judgment in the case of Abhishek Industries Ltd. 286 ITR 1 (P H) was not applicable as the Hon ble Court was not having benefit of the judgment of the Hon ble Supreme court in the case of Ponni Sugar and Chemicals (supra). Further, the assessee submitted that the Hon ble Punjab Haryana High Court in the case of CIT v. Siyaram Garg (HUF), 237 CTR 321 has followed the judgment in the case of Ponni Sugar and Chemical Limited (supra) and subsidy received for setting up of industrial unit in backward area was held as capital receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, at the financial year end the profit of the assessee company was reduced by passing journal entry for appropriation of ₹ 81.59 crores as sales tax subsidy. iii) that the unit of the assessee was exempt from payment of sales tax and thus was not authorize to collect any amount of sales tax, however, the assessee assumed that within the total sales proceed, there was a component of sales tax subsidy, which was equivalent to the amount of exempted amount of sales tax, which would have been payable but for said exemption by the State Government, not paid. iii) that the assessee claimed the above sales tax exemption benefit as non-taxable capital subsidy but the assessee did not subtract the said amount from the cost of the capital asset, on which depreciation was claimed and thus the assessee took double benefit of something which was actually not received from the State Government; and iv) that the sales tax exemption was available to the assessee in earlier years also and the part of which was treated as sales tax subsidy, was not taken to the balance-sheet, but it was claimed as deduction at the time of computation of income and the Assessing Officer as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The claim of the assessee that the assessee company was granted sales tax exemption vide notification of even no. dated 24th April, 2000 , relying on the earlier notification of even numbers dated 3.6.1993 and Industrial Policy of 1994 of Govt. of Madhya Pradesh, was without any basis as there was no live link between the notification of 1993/Industrial Policy, 1994 and the notification of even number dated 24th April, 2000. There was no mention of any objects of granting exemption like development of backward areas or generation of employment etc in the notification under which the assess was granted exemption from payment of CST. iii) The benefit granted under the notification was more than the investment made by the company in the said unit. (iv) The Industrial Policy and notifications issued clearly mentioned that the scheme of state capital investment subsidy was in operation before the issue of notification in the case of the assessee and if the assessee had availed any benefit under the said scheme, the same was required to be refunded back. Thus the exemption granted was not part of any scheme of subsidy or Industrial Policy. 10. Furthermore CIT after analyzin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... projects, real time monitoring and information exchange with site on progress made etc. According to the CIT the software was not actually installed within any manufacturing machinery and it was independent office equipment which helped the assessee to manage the project in better ways. Thus, it was only office equipment and not eligible for additional depreciation available in respect of plant and machinery used in manufacturing activity. Thus, failure on the part of the Assessing Officer to consider this issue caused a prejudice to the Revenue according to the CIT. Aggrieved with the order of the CIT, the assessee filed an appeal before us. 13. At the time of hearing before us, the ld Authorized Representative of the assessee (in short AR ) referred to the application for admission of additional evidence in terms of Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963 containing certain documents/notification/correspondence between various departments of the State Government and the representatives of the assessee company. According to the ld. Authorized Representative, the said documents/notifications/correspondences were received recently by the assessee under the Rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 16. At the time of hearing, ld. Authorized Representative/ counsel for the assessee highlighted the legal position as held by various courts in respect of Section 263 of the Act. Referring to the judgment of Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT, reported in 243 ITR 83, the ld. Authorized Representative submitted that under Section 263 of the Act, the Commissioner can revise the order of the assessment only if the twin conditions i.e. the order is erroneous and the order is prejudicial to the interest of revenue, are satisfied cumulatively. The ld. AR also referred to the judgment of the Hon ble Apex Court in the case of CIT v. Max India Ltd. 295 ITR 282 in this regard. Further the ld. AR submitted that once the relevant details/documents are available on record and a view can be formed by the Assessing Officer on the basis of material available on record and it may not be necessary for the Assessing Officer to conduct the detailed inquiry. In support of the proposition, he relied on the judgment of the Hon ble Delhi High Court in the case of CIT Vs. Eicher India Ltd, 294 ITR 310 (Del.). Further, the ld. AR made a proposition that where on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of sales tax in the instant year. It was submitted that such a exemption was provided to the appellant for setting up new industrial unit in the backward area, to promote industrialization, create employment and therefore such an incentive was an capital receipt. As regards the complete disclosure of facts of sales tax subsidy/ incentive, it was submitted that such incentive was disclosed under the sub-head sales tax subsidy/capital reserve in schedule 2 to Reserves and Surplus of Balance sheet in compliance with Accounting Standard 12 i.e. accounting for government grants issued by Institute of Chartered Accountants of India (ICAI). The ld. AR further invited our attention to the notification issued by the Govt. of Madhya Pradesh to contend that the observation of the CIT that the sales tax subsidy was a revenue receipt was an erroneous observation. He emphasized that the scheme/notification were available only to industrial units and therefore any benefit/incentive was intended for the industrial and economic development of the state and therefore a capital receipt. He placed reliance on the judgment of the Apex Court in the case of VSSV Meenakshi Achi 60 ITR 253 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at subsidy was a capital receipt. It was submitted that in facts of the case there was no specific obligation in the scheme for utilization of subsidy but as a matter of fact that assessee had no other alternative but to utilize subsidy for repayment of secured borrowing. The learned AR emphasized that such an treatment has no application to regard the receipt as revenue receipt. It was further submitted that no doubt that in the case of the assessee in assessment year 2002-03, 2004-05 and 2005-06 in ITA Nos 368/D/2009, 3319/D/2008 and 168/D/2009 has vide separate orders held that the subsidy to be revenue receipt and appeals filed by assessee are pending before the Hon ble Jurisdictional High Court of Punjab Haryana yet since such a decision is contrary to the binding decision of Special Bench in the case of Reliance Industries (supra) therefore the same cannot be treated as binding precedent. He has further referred to various paragraphs of the order of Tribunal for the A.Y. 2004-05 to contend that such a conclusion was not in accordance with the decision of Special Bench. It was specifically submitted that the appeal filed by the Revenue against the order of Special Bench stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the order of assessment was framed with due application of mind and after considering all requisite information and explanation tendered and therefore such an order could not be regard as erroneous and prejudicial to the interest of revenue, so as to exercise jurisdiction u/s 263 of the Act. 19. Before us the ld counsel for the Revenue Sh. Ashok Manchanda alongwith ld. CIT DR Sh. Saroha pleaded that order in exercise of power u/s 263 of the Act was in accordance with law. It was submitted that major issue in this case revolves around the amount of ₹ 81.59 crores which the assessee claimed as capital receipt whereas by the Revenue s stands it is revenue receipt. It was contended by the ld. counsel of the Revenue that the facts of the various cases relied upon by the ld AR are different from the facts of the assessee and thus ratios of those cases were not applicable on the issue in dispute. It was further submitted that in the case of the assessee the sales tax exemption was merely in the nature of revenue receipt from an exemption granted by the Government and not in the nature of subsidy or incentive to be considered as Capital Receipts. As regards to disclosure of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt view would have been taken and thus the view of the CIT has not substituted the view of the Assessing Officer. The ld. counsel of the Revenue contended that there was no office note by the Assessing officer to justify change in stand. The revenue relied on the decision of the Tribunal in the case of NIIT Vs CIT reported at (2015) 60 taxmann.com 313 (Delhi), judgement of the High Court of Madras in the case of CIT vs Smt Laxmi Narayana reported at 157 ITR 816, judgment of High Court of Delhi in the case of CIT v. Goetz (India) Ltd. 361 ITR 505 and submitted that it was a case of no enquiry and due to these errors on the part of the Assessing Officer prejudice was caused to the Revenue and the CIT was fully justified in directing the AO to pass a fresh assessment order. He also relied on the following judgements in support of his contention that the AO has not applied his mind to the facts of the assessee and non application of mind has resulted in assessment order as erroneous as prejudicial to the Revenue: i) Malabar Industrial Co. ltd Vs CIT 243 ITR 83 (SC) ii) Gee Vee Enterprise Vs. Addl CIT 99 ITR 375 (Delhi) iii) K.A. Ramaswamy Chettiar v CIT 220 ITR 657 (Mad) iv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt. It was further contended that subsidy has been assigned a very narrow meaning as per Oxford Advanced learned Dictionary to include only cases where money is actually paid. It was also contended that disclosures made in tax audit report and other documents were not relevant. 21. So far as the second issue is concerned, it was submitted that there was difference of ₹ 1.81 crores under the head provision for gratuity . The Revenue contended that instead of disallowance of ₹ 49.41 lakhs entire amount of ₹ 1.92 crores ought to have been disallowed under section 40A(7) of the Act. It was further contended that appellant had not filed reconciliation and ledger account of gratuity in the assessment proceedings and had in fact concluded that there was prejudice to interest of revenue. The third issue i.e. claim of additional deprecation of ₹ 5,91,106/- on computer software Primavera , the Revenue relied upon the findings of the CIT to support the order u/s 263 of the Act. 22. The learned AR in his rejoinder submission contended that there was no change in the method of accounting (mercantile basis) requiring any specific disclosure in return of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al areas, employment generation, etc. i.e., objects in larger public interest. The learned AR also contended that decisions relied by the Revenue are not applicable. It was also contended that to determine the character of subsidy, purpose test has to be applied and form, mode, manner and time at which subsidy is granted is irrelevant. It was next contended that the CIT DR conveniently chose to ignore the definition of subsidy in the Black s Law Dictionary wherein much wider meaning has been given and has been stated that subsidy is usually in indirect form (tax breaks etc.). It was contended that assessee placed reliance on circular no. 9/2006 and various judicial precedents wherein it has been held that disclosures made in the audited accounts and tax audit report form integral part of the income tax return. As regards certain specific allegations of the Department, it was contended that the assessee has never claimed exemption under Notification dated 3.6.1993, the assessee relied on the Industrial Policy, 1994 and the specific discussion between the Council of Ministers for granting exemption to the assessee. It was submitted that industrial Policy 1994 was in force till 2003 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional depreciation is being claimed must be directly used for manufacturing purposes. 25. The learned AR thus contended that the impugned order passed by the CIT under section 263 was without jurisdiction and bad in law and additions/disallowances made in the consequential order u/s 143(3)/263 of the Act are illegal, unsustainable and call for being deleted. It was also contended that the penalty imposed on all the issues is illegal, unsustainable and calls for being deleted in toto. 26. We have heard the rival submissions and perused the material on record. The solitary issue involved in this appeal relates to assumption of jurisdiction u/s 263 of the Act. The Section 263 of the Act is headed Revision of orders prejudicial to Revenue and confers suo motu powers of revision on the CIT to take steps for annulment, modification, cancellation, etc. of an order of assessment under the circumstances indicated therein. The Section 263 of the Act provides as under: 263. (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue ; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. 28. Further judgment in the case of Gee Vee Enterprises 99 ITR 375 was also considered and it was noted that it has been held therein as under: The reason is obvious. The position and function of the Income-tax Officer is very different from that of a civil court. The statement made in a pleading proved by the minimum amount of evidence may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of the return which is apparently in order but calls for fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various authoritative pronouncements in this regard. There cannot be any quarrel with the legal propositions, as advanced by both the parties. It has consistently been held that if the AO's conclusion is arrived at after due application of mind on a particular issue, then the order cannot be said to be erroneous. 'Due application of mind' implies that if the assessee has merely responded to the AO's query and the AO, without proper verification of replies, accepts the same, then, it cannot be said to be a case of due application of mind. 28.1 Ld. Special counsel has rightly pointed out that the expression, 'inquiry', 'lack of inquiry' and 'inadequate inquiry', have not been defined and, therefore, when the action of the AO would be suggestive of lack of inquiry or inadequate inquiry, will depend upon the facts obtaining in a particular case. What emerges as a broad principle from the various decisions is that where the AO has reached a rational conclusion, based on his inquiries and material on record, the Commissioner should not start the matter afresh in a way as to question the manner of his conducting inquiries. It is not the provin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er inquiry then the same would come within the ambit of 'lack of enquiry' and not 'inadequate inquiry' . If a particular issue comes within the ambit of complete lack of inquiry then the order is to be considered as erroneous as well as prejudicial to the interests of revenue but if the case is of inadequate inquiry, then ld. CIT has to demonstrate that how the order was erroneous and prejudicial to the interests of revenue . This aspect we will take into consideration while deciding various issues on merits. In the result, this ground is disposed of accordingly. [Emphasis supplied] 33. Also Madras High Court in the case of K.A. Ramaswamy Chettiar v CIT 220 ITR 657 has held that when the ITO is expected to make an enquiry of a particular item of income and he does not make an enquiry as expected that would be a ground for the CIT to interfere with the order passed by the ITO since such an order passed by the ITO is erroneous and prejudicial to the interests of revenue. It has been held as under: In the case of Addl CIT v. Mukur Corpn. [1978] 111 ITR 312 (Guj.), it was held that in the present case it was obvious that the Income-tax Officer had committ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ass a reasoned order. The High Court was of the view that Tribunal could not have substituted its own reasoning which were required to be recorded by the Assessing Officer. According to the assessee all relevant aspects were placed for consideration and if the officer did not record reasons, assessee cannot be faulted. We do not think it necessary to interfere at this stage. It goes without saying that when the matter be taken up by the Assessing Officer on remand, it shall be his duty to take into account all the relevant aspects including the materials, if any, already placed by the assessee, and pass a reasoned order. 35. From the aforesaid it is now a trite principle of law that where there is lack of enquiry by the AO during the assessment proceedings then such an order would be subject to revisionary jurisdiction u/s 263 of the Act as such an order would be erroneous as well as prejudicial to the interest of Revenue. Thus the ideal situation is to find out that Assessing Officer has investigated an issue in a purposeful manner and discussion in respect of that issue should discern from the order itself. However, if no discussion is available in the order then it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d has held that the aforesaid issue was not examined during the assessment proceedings under section 143(3) by the Assessing Officer. It has been stated that there was one questionnaire issued by the Assessing Officer dated 1.2.2010 wherein the assessee was asked to explain treatment of sales tax, entry tax and electricity duty (claimed as capital receipt in computation of income) amounting to ₹ 48,39,36,937/- in the books of accounts of the assessee company and why the same should not be treated as revenue subsidy. The CIT in respect of the same has concluded as under: On careful examination, records revealed that the said amount of ₹ 48,39,36,937/- mentioned by the AO, in the above stated questionnaire is total sum of Entry Tax (Rs. 17,28,48,148/-) and Electricity Duty (Rs. 31,10,88,789/-). These amounts have been claimed by the assessee in computation of income as deduction. In the Assessment Order, the AO has dealt with these items and finally disallowed the deduction claimed by the assessee. However, the amount of ₹ 81.59 crores (purported Sales Tax Subsidy) has been shown in the Schedule - 2 (of the Balance Sheet), under the heading Reserves and surp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken a note of the submission of the appellant company. However it is not denied or argued that the questionnaire issued by the Assessing Officer did not include the quantum of sales tax subsidy of ₹ 81,58,94,102.33/- as reflected in the balance sheet of the appellant. The figures stated in the questionnaire was of ₹ 48,39,36,937/- comprised of sums of entry tax (Rs. 17,28,48,148/-) and electricity duty (Rs. 31,10,88,789/-) which had been claimed as deduction in computation of income, whereas amount of ₹ 81.59 crores has been shown in the schedule-2 under the heading reserves and surplus - sales tax subsidy / capital reserves by reducing the corresponding sum from the sales. 39. The Revenue has highlighted during the course of hearing that in the return of income for all assessment years from 2002-03 to 2007-08, the exemption amounts have been treated as part of its sale proceeds and have always been included in the gross revenue receipts and it was deducted only at the time of computation of income while preparing the return of income. However in the instant year, there was a marked departure whereby though the impugned amount of ₹ 81.59 crores on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He has remitted it to the file of the Assessing Officer for a fresh inquiry. In view of the above discussion, we do not deal into the arguments of merit in respect of claim of the assessee with the observation that same shall dealt in the appeal arising against the consequent assessment and thus, the grounds raised challenging the action u/s 263 of the Act on the issue of sales tax exemption/subsidy are dismissed. 41. So far as the second issue is concerned, the relevant facts are that there was a difference of ₹ 1.81 crores under the head provision for gratuity between outstanding as per balance sheet and audit report. The amount outstanding was ₹ 7.70 crore as per balance sheet as on 31.3.2008 and ₹ 5.89 crores as per tax audit report for section 43B of the Act (including amount of earlier years). 42. The aforesaid variation was attempted to explain on behalf of the assessee by stating that as per the audit report difference between provision as per balance sheet as on 31.3.2007 and as on 31.3.2008 was ₹ 1.92 crores (Rs. 7.70 crores ₹ 5.78 crores); whereas the assessee has disallowed ₹ 1,58,03,552/- u/s 43B as per Annexure O to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) Raipur ₹ 11,41,320/- As per Annexure M' (iii) (ii) Raigarh Rs.2,67,67,993/- (iv) Raipur ₹ 3,27,000/- Total (i)+(ii)+(iii)+(iv) Rs5,37,15,609/- If we add figures disallowance u/s 40A(7) in assessment year 2006-07 2007-08, as submitted by the assessee (as per reply dated 17.01.2013), (Rs.0.30 crore and 0.13 crore, respectively), we get the -figure of ₹ 5,78 crore which tallies with the figure as per balance-sheet. 44. The CIT having regard to the above has held as under: Therefore, assessee's explanation cannot be taken on face value. If the figures of last year could be reconciled by totaling of amounts given as per Tax Audit Report in respect of Section 43B and disallowances u/s 40A(7) (in that year as well as previous then, there is no reason as why figures of this year cannot be reconciled, in the similar way. It is seen from the reply of the assessee dated 17.01.2013 that the said figure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exchange with Site on progress made and cooperation / immediate action (s) to be taken, reporting and regular interaction / feedback with due updation on all project related activities at all involved locations, EPM solution was sort from possible solution provides - PRIMAVERA MICROSOFT. After detailed deliberation Primavera was more accepted to JSPK leam(s) and was found to be most prevalent in steel and power industries for similar projects as foreseen in our organisation. To illustrate the same, SAIL through recommendation from Price water house Coopers have Steel (Kalinganagar Project) have also chosen Primavera in all major companies - REL/Tata Power I NTPC NHPC have already commenced Primavera for project management. In summary, Primavera was found more adept and focused for providing our required solution compared to Microsoft offering one of their existing packages and the former having rich experience in successful implementation in our industry specific. Primavera Description No. of Login P6-Level 3 (web based user for top management for review etc. and site ufgradations 9 nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation. 34.7 AO has, however, failed to consider this issue. The failure on the part of the A.O. (of not considering this issue), a prejudice has been cast upon the revenue. 48. Having regard to the above, it is held that here too there was no enquiry on the part of the AO in respect of claim of additional depreciation and therefore the CIT was justified to conclude that AO failed to carry out necessary and proper enquiry in respect of claim made by the appellant company. Even before us the learned counsel for the assessee has not placed on record any evidence in the shape of reply so as to show and establish that the issue was duly examined by the Assessing officer. The reply dated 12.7.2010 before the AO as highlighted, is a general reply and does not in any manner show that necessary and proper enquiries were made viz-a-viz the claim of the appellant. Mere disclosure in the return of income or the financial statements above does not show or demonstrate that there was due application of mind by the AO. On the contrary complete explanation alongwith invoices had been placed on record for the first time during the revision proceedings and not in the assessment proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in disallowing ₹ 5,91,106/- on account of additional depreciation claimed by the appellant under section 32(1)(iia) of the Act in respect of computer software Primavera . 2.1 That the CIT(A) erred on facts and in confirming the aforesaid action of the assessing officer on an erroneous basis that the computer software did not constituted plant and machinery , not being a part of actual manufacturing activity, for being eligible for claiming additional depreciation under section 32(1)(iia) of the Act. 3 That the CIT(A) erred on facts and in law in confirming the addition of ₹ 49,41,850 on account of provision for gratuity. 3.1 That the CIT(A) erred on facts and in law in confirming the aforesaid action of the assessing officer without appreciating that the above amount was suo motu disallowed and added back by appellant in return of income for the relevant assessment year and therefore, addition thereof resulted in double addition of the same amount. 3.2 That the CIT(A) erred on facts and in law in alleging that the appellant failed to furnish reconciliation and failed to show that ₹ 49,41,850 had been added back in the computation of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Bench of the Tribunal in the case of Reliance Industries (supra) relying on the principles laid down by Supreme Court in the case of Sahney Steel Press Works Ltd. (supra) came to the conclusion that since the incentives were given for bringing about addition to necessary infrastructure in processing/developing the backward area, the same would be in the nature of capital receipt not liable to tax. Further reliance was placed on the judgment of Apex Court in the case of Ponni Sugars Chemicals (supra) and decision of Delhi Bench of the Tribunal in the case of the Bhushan Steel and Strips Ltd. vs. DCIT 91 TTJ 108 wherein the Tribunal held that the subsidy granted by the Government by way of sales tax was capital in nature. The appellant also placed reliance on the judgment of Jammu and Kashmir High Court in the case of M/s Shree Balaji Alloys (supra) wherein the Hon ble High Court decided similar issue in favour of the assessee by holding that the subsidy given for setting up of unit in the state of Jammu for employment generation was in the nature of a capital receipt, not liable to tax under the provisions of the Act 55. On consideration of the above reply the ACIT Hisar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for grants of such subsidy) by specified authority, under specifically notified scheme, on satisfaction of the said authority that specified conditions have been fulfilled. It was held that on the facts of the case the assessee has mixed the concepts of subsidy/incentive/facility and astray from the fact that whatever may be nomenclature , there should be receipt , either real or specifically covered under any of the deeming provisions of the Act, then only question of taxation (or otherwise) arise. It was specifically held that till assessment year 2007-08 (last assessment year) the assessee itself was treating the entire amount as part of profit and gains and there was no dispute that the entire money is income of the assessee since according to the assessee itself, (major) part of this money is falling within the definition of income , therefore, this money in entirely falls within the definition of income . 57. Apart from the above it has been concluded that the assessee could not produce any material to link the above notifications to any scheme of subsidy or incentive under which the case of the assessee is covered. It has been specifically held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany for the instant year. 59. The CIT(A) upheld the aforesaid addition and concluded as under: The AO has at great length, dealt with the issue of whether the subsidy should be treated as revenue receipts or capital receipts. He has, in paras 4.3.1 to para 24 (pages 29 to 96 of the assessment order) dealt with in great detail as to why the entire amount is being treated as revenue receipts. (This is not being reproduced here for the sake of brevity). Also, the Hon ble ITAT in its order in ITA no. 3254/D/2008 in the assessee s case of AY 2004-05 has treated the entire amount as revenue receipts by relying on the judgment of the Apex Court in Sawhney Steels and Press works. The Hon ble ITAT has in its order after a detailed analysis held that the facts and circumstances of the case are similar to that of Sawhney Steels and Press Works. The case laws submitted by the appellant in its favour were also not found to be applicable to this case. Therefore, respectfully following the judgment of the Hon ble ITAT for AY 2004-05 in the appellant s case (supra), I confirm the addition of ₹ 81,58,94,102/-. This ground of appeal is dismissed. 60. We have heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is only when the assessee had set up its industry and commenced production and various incentives were given for the limited period of five years. Therefore, the Hon'ble Court held that purpose of the State was to provide the newly set up industry helping hand for five years to enable them to be viable and competitive and it was further held that sales tax refund and the relief on account of water tax, land revenue as well as electricity charges were intended to enable the assessee to run the business more profitably. It was further held by Hon'ble Court that payments were made only after the industries have been set up and therefore payments were not made for the purpose of setting up of the industries but the package of incentives were given to the industry to run more profitably for a period of five years from the date of commencement of production. The Court further held that payments were nothing but supplementary trade receipts and assessee was free to use the money in its business entirely as it likes and was not obliged to spend the money for a particular purpose. It was further held that by no stretch of imagination the subsidy by way of refund of sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re cannot be said to be of capital receipt. The argument of Ld AR that the industrial policy of Madhya Pradesh Govt. had tried to use taxation as an instrument for increase in employment, developing scenario linkages between different sector is correct to the extent that State Govt. had used sales tax exemption as a policy to achieve these objectives and taxation of subsidy under Income Tax Act cannot be intended to be used for the same as this is not a state subject. The Ld AR had further argued that Hon'ble Supreme Court in the case of Ponni Sugars Chemicals Ltd. (supra) had overruled its own judgment in the case of Sahney Steel Press Works Ltd. (supra) which is not correct because in the latter case the amount of subsidy was not available to the assessee for use in any way as it liked but it was specifically paid to the assessee for repayment of outstanding loans. The benefits of the scheme had to b e utilized only for repayment of loans which were taken by the assessee to set up new unit or for substantial expansion of an existing unit. From the analysis of both judgments of Hon'ble Supreme Court it can be concluded that both judgments are not contrary to each other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Steel Strips Ltd. (supra). In this case the UP Govt. quantified the amount of subsidy relatable to capital invested and instead of paying in cash exempted the assessee from paying sales tax collected to the extent of quantified amount of subsidy. Therefore, the facts and circumstances of the present case are distinguishable. 54. Sham Lal Bansal (supra). The subsidy in this case was received by the assessee under the Technology Up-gradation Fund Scheme of Ministry of Textiles, Govt. of India. The subsidy was received for re-payment of loan taken for building, plant machinery etc. and therefore Hon'ble Court had rightly held it to be capital subsidy applying the Hon'ble Supreme Court's judgment in the Ponni Sugars Chemicals Ltd. (supra). 55. Maruti Suzuki of India Ltd. (supra). In this case the subsidy was also in the form of sales tax exemption and Hon'ble Tribunal had held the receipt to be capital receipt, keeping in view the provisions of section 28A of Haryana General Sales Tax Act, 1973 which is not the case in the present appeal. Moreover, the case was decided after taking into account the judgment in the Special Bench case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order by observing as under: 10. We have carefully considered the arguments of both the sides and perused the material placed before us. At the outset, we may mention that in the case of DLF Universal Ltd. (supra), Hon'ble Delhi High Court held as under:- It is not only a matter of judicial propriety but also a matter of judicial discipline that when one Bench of the Tribunal takes a view, another Bench on disagreement does not pass a contrary order but refers the matter to a larger bench for getting the matter resolved. 11. Fortunately, on this matter of judicial propriety, both the parties agreed that it is a matter of judicial propriety/judicial discipline that one Division Bench of the Tribunal should not take a contrary view to the view taken by another Division Bench. If at all one Division Bench is not able to follow the view of another Division Bench, then the only option left is to refer the matter to the Larger Bench. However, the dispute between the parties is that as per the assessee s counsel s contention, the ITAT, while passing the order for AY 2004-05, has violated the above settled principle of judicial propriety. But, the Revenue is of the opinion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self recognized, that the object with which the subsidy is given is decisive. It did recognize, following the distinction pointed out by the Supreme Court that if the subsidy is given for setting up or expansion of the industry in a backward area, it will be capital receipt, irrespective of the modality or the source of funds through or from which it is given and that if monies are given for assisting the assessee in carrying out the business operations only after, and conditional upon, the commencement of production, it will be revenue receipt. It was only for the purpose of bringing out that distinction, that the Tribunal had analysed the features of the Maharashtra Scheme of 1979 and had come to the conclusion that the subsidy given under the scheme had a direct nexus with the fixed capital investment and that it could not be said that the subsidy was given with the object of assisting or lending a helping hand to the assessee in its business operations. The Tribunal was, thus, aware of the distinction between the subsidy given with the object of setting up the industry and the subsidy given after the industry commences production and conditional upon the commencement of product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the assessee has referred to various decision of Hon ble High Courts as well as ITAT but it has nowhere been shown to us whether any other High Court or ITAT considered the incentive scheme of the Madhya Pradesh Government. In fact, if we go through the decision of Hon ble Apex Court in the case of Sahney Steel and Press Works Ltd. (supra), we find that the above appeal before the Hon ble Apex Court was against the decision of Hon ble Andhra Pradesh High Court. However, in the said decision at page 267, their Lordships discussed the decision of Hon ble Madhya Pradesh High Court in the case of CIT Vs. Dusad Industries [1986] 162 ITR 784. In the above decision, Hon ble Madhya Pradesh High Court has held the sales tax subsidy to be a revenue receipt after considering the incentive scheme of Madhya Pradesh Government. However, Hon ble Apex Court held that the view taken by Hon ble Madhya Pradesh High Court in the case of Dusad Industries (supra) was erroneous. The relevant observation of their Lordships reported at page 267 of 228 ITR reads as under:- The Madhya Pradesh High Court in the case of CIT v . Dusad Industries 162 ITR 734, dealt with a case where Government had fram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of ITAT in assessee s own case for AY 2004-05 hold that the amount of sales tax and other subsidies received by the assessee were revenue in nature. Accordingly, ground No.1 of the assessee s appeal is rejected 62. We find that the facts and circumstances of the present case are identical as the facts in the case of assessee for assessment year 2004-05, 2002-03 and 2005- 06, as the sales-tax exemption claimed is in pursuant to the same notification dated 24th April, 2000. No fresh fact(s) or decision(s) has been cited so as to pursue to us to arrive at a different conclusion. The additional evidences containing correspondence between state government and management of the company submitted by the assessee in support of the claim that the assessee was covered by the Industrial policy, also has not brought any new fact. It is pertinent to state here that that prior to the year under consideration, the assessee used to treat the Central Sales Tax exemption amount as part of trading receipt in its books of accounts and for the purpose of computing income as per income tax, the assessee used to reduce the amount of CST exemption amount along-with Entry Tax and Electricity Duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional deprecation of ₹ 5,91,106/- u/s 32(1)(iia) of the Act 65. Before CIT(A) the appellant contended that computer software primavera is multi project planning and control software, which is used on standalone basis for project and resource management. The primavera software is used by companies for online management of projects portfolio management solutions/decisions, for evaluation of risks and rewards associated with projects for determination of resource balance qua work on hand etc. It was submitted that computer software forms part of head computers in the asset list of appellant as per Appendix I read with Rule 5 of the Income Tax Rules, 1962. . It was also submitted that the head computers , per the said appendix, is sub-part of broad asset category, viz., plant and machinery . It was thus submitted that the computer software primavera constitutes plant and machinery, which is eligible for additional depreciation under the provisions of section 32(1)(iia) of the Act. Reliance was placed on the case of Gujarat High Court in the case of CIT v. Statronics and Enterprises (P) Ltd. (supra) and Allahabad High Court in the case of CIT v Radla Machinery Exports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remises for production of the data processors. The submission of the learned counsel is based on a narrow interpretation of the words office premises , which we are unable to concede.. 68. From the aforesaid it is apparent that installation of computers in the office cannot be made a basis to deny the claim of deprecation provided such office can on facts be taken as an industrial premises for the purpose of depreciation. In the instant case the finding of fact recorded both by CIT(A) and AO is that primavera is not actually installed within any manufacturing machinery and is a web based tool for top management for review etc. and planner/scheduler. It is a tool like any other office equipment which helps assessee s top management to manage project in a better way. It is not part of plant and machinery which is used in the process of manufacturing. Having regard to the above we do not find any merit in the claim of assessee and hence the grounds of the assessee are dismissed. 69. The Grounds 3 to 3.3 challenges the addition of ₹ 49,41,850/- on account of provision for gratuity. 70. The relevant facts are that an amount of ₹ 2,95,45,402/- pertain to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y 2007-08) 5,77,87,609 (B) Out of A paid during the year (as per Annexure N of the TAR. Ref. Annex 14-payment made on 5.1.2008) 1,03,34,161 (C) The balance of outstanding liability pertaining of earlier years included in the figure of liability as on 31.3.2008 (A)-(B) 4,74,53,448 (D) Total outstanding liability (of gratuity) as on 31.3.2008 as per B/s of FY 2007-08 7,69,98,850 (E) Total outstanding liability (of gratuity) pertaining to the current year included in the figure as on 31.3.2008 (D( - (C) 2,95,45,402 According to the AO as per such calculation, an amount of ₹ 2,95,45,402/- out of the current year provisions was outstanding which was liable for disallowance u/s 43. But, as per TAR only ₹ 1,58,03,552/- has been disallowed. Hence, a sum of ₹ 1,37,41,850/- (being the difference between the 2 figures) has been disallowed. The appellant has not been able to rebut this calculation especially the issue of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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