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TMI Blog2010 (8) TMI 1119X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of ₹ 3,23,73,278/- made by the A.O. on account of grant stated to be received by the assessee for purchase of capital asset which has been deleted by the ld. CIT(A). 3. The assessee in the present case is a company which is engaged in the business of manufacture and sale of automobile parts. The return of income for the year under consideration was filed by it on 31.10.05 declaring total income at 'nil'. From the tax audit report filed along with the said return, it was noticed by the A.O. that the amounts of ₹ 1,77,22,591/- and ₹ 1,55,50,687/- stated to be received by the assessee company as capital grant from its parent company have been adjusted against capital purchases and capital grant received in ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eding year. It was contended that keeping in view this treatment given by the assessee company whereby no depreciation on capital assets was claimed on the amount of grant, the said amount again could not be assessed as revenue receipt in its hands. Relying on the decision of Hon'ble Supreme Court in the case of CIT v. P.J. Chemicals Ltd. [1994] 210 ITR 830/76 Taxman 611, it was also contended by the assessee that the amount of grant received for the purchase of capital asset was not chargeable to tax in its hands being the capital assets. 4. The ld. CIT(A) found merit in the submissions made on behalf of the assessee before him on this issue and deleted the addition of ₹ 3,32,73,278/- made by the A.O. on account of amount of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indirectly by the Central Government or a State government or any authority established by law or any other person in the form of subsidy or reimbursement, that part shall not be included in the actual cost. The proviso to the Explanation provides for apportionment of subsidy when it is not relatable to particular assets. It may be stated here further that in a recent case of CIT v. Ponni Sugar and Chemicals Ltd. (2008) 174 Taxman 87 (SC) it was held that the object for which the subsidy is given determinates the nature of incentive subsidy. Where under the subsidy scheme, assessee, a sugar mill, was obliged to use the subsidy only for repayment of term loan undertaken by it for setting up of a new unit/expansion of the business, such recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee wherein the amount in question having been paid by the said company to the assessee company for purchase of capital assets was duly confirmed. She invited our attention to the copy of such letter placed at page No. 4 of the paper book and submitted that since the relevant details of payments made by the parent company to the assessee company were not specifically given therein, the assessee has obtained another confirmation letter dated 26.2.2010 from the parent company giving specifically all these relevant details. She invited our attention to the copy of the said letter placed at page No. 9 of the paper book and submitted that the same is being find as additional evidence along with an application seeking admission thereof. As rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for which the grant was received was a letter issued by the parent company. A copy of the said letter is placed at page No. 4 of the assessee's paper book and a perusal of the same shows that the relevant details of payments stated to be made to the assessee company as grant for purchase of capital assets are not given therein. During the course of hearing before us, the assessee has filed another letter dated 26.12.10 issued by the parent company giving these details as additional evidence and taking into consideration the relevancy of the said document, we have admitted the same as additional evidence. In this regard, the ld. D.R. has submitted that if the said letter is admitted as additional evidence, the A.O. may be given an oppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arguments of both the sides and also perused the relevant material on record. As regards ground No. 1, it is observed that an adhoc disallowance of ₹ 2,50,000/- was made by the A.O. and confirmed by the ld. CIT(A) out of miscellaneous expenses on the ground that there was a possibility of involvement of personal element in the said expenses. In the case of Sayaji Iron Engg. Co. v. CIT [2002] 253 ITR 749/121 Taxman 43 (Guj.), it was held by the Hon'ble Gujarat High Court that no disallowance on account of involvement of personal element in the expenses can be made in case of a company. Respectfully following the said decision of Hon'ble Gujarat High Court, we delete the disallowance made by the A.O. and confirmed by the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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