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TMI Blog2019 (6) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 2009-10. We therefore find no reason to interfere in the order of the Ld.CIT(A) holding the technical knowhow expenses as revenue in nature. Disallowance of prior period expenses - assessee was following the mercantile system of accounting - HELD THAT:- No reason to interfere in the order of the CIT(A), deleting the disallowance made of prior period expenses, since we find that the said expenses had been booked as per the established and consistent policy followed by the assessee .Further considering the fact that even prior period incomes have been booked, no purpose would be served, we find, by disallowing only prior period expenses since in that case, even prior period income would have to be reduced from the taxable profits of the assessee. MAT computation - deduction from the Book Profits u/s 115JB on account of sales tax subsidy being in the nature of capital receipt - HELD THAT:- As in the case of H.M Steels [ 2018 (11) TMI 1628 - ITAT CHANDIGARH] wherein identical issue has been dealt holding the VAT subsidy, being capital in nature, as not includible in the Book Profits u/s 115JB as taken note of the decision of Apollo Tyres [ 2002 (5) TMI 5 - SUPREME CO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law. Similarly, also, the amount levied by the Arbitral Tribunal on the assessee to compensate the respondent in a case filed by it to the Tribunal is, we hold, rightly held by the CIT(A) to be in the nature of penalty and thus disallowed u/s 37(1) - it is an undisputed fact that the order levying penalty/cost by the Tribunal was dated 17.2.2013. Therefore, we agree with the authorities below that the liability to pay the fine accrued in assessment year 2013-14 and, therefore, did not pertain to the impugned year at all. We agree with the Ld.CIT(A) that the amount of ₹ 77,000/- was in the nature of penalty paid by the assessee and further out of the above ₹ 75,000/- pertained to the earlier year and, therefore, for the aforesaid reasons, the said amount was not allowable to. Ground of appeal No.3 raised by the assessee is, therefore, dismissed. Disallowance of deduction of provision of warranty rejections - HELD THAT:- The factual findings of the lower authorities that the impugned provision of ₹ 56,162/- had not been reversed in the subsequent year by way of debt note received from a party on account of rejected material, has not been controverted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 in the case of the assessee itself and deleting the addition of ₹ 1,84,45,151/- holding the sales tax subsidy as capital receipt in nature. ii) Whether on the facts and in the circumstances of the case the decision of the Hon'ble Supreme Court in the case Ponni Sugar and Chemicals Ltd. and treating the sales tax subsidy as capital receipts in nature was wrongly followed despite the observation of the AO in the assessment order that the facts of the present case are distinguishable from that of Ponni Sugar and Chemicals Ltd. iii) Whether on the facts and in the circumstances of the case the fact that sale tax subsidy was given to existing unit and not for setting up new unit or expansion of the same was not considered. iv) Whether on the facts and in the circumstances of the case, the fact that the subsidy receipt after the commencement of production by the unit was not required to be treated as capital in nature was not considered. 3. The facts relating to the case are that from the Notes on Accounts of the assessee company, the A.O. noted that it had been granted exemption on sales tax under the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I have gone through the Hon'ble ITAT's order in the case of the appellant in ITA No. 897/Chd/2006, ITA No. 341/Chd/2007 ITA No. 756/Chd/2011 for A.Y 2003-04, A.Y 2004-05 and 2008-09 wherein the matter has been adjudicated as under: In these cases, the assessee have received Sales Tax Subsidy from Punjab Govt. under the scheme named 'Industrial Policy Investment Code, 1996'. We have gone through the said policy and found that the scheme though not verbatim as that of West Bengal or Gujarat Scheme, but the sum and substance of all these schemes are the same, therefore, relying on our finding gives in ITA no. 773/Chd/2012, we hold that the Sales Tax Subsidy received by the assessee is Capital in nature. As the addition made by the AO is covered by the order of the Hon'ble ITAT in favour of the appellant, the addition made on this account is deleted. 5. Before us, the Ld. DR vehemently supported the order of the A.O. though he fairly conceded that this issue had been decided in favour of the assessee by the I.T.A.T. in the case of the assessee itself in earlier years. 6. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tantial modernization and expansion of existing unit/technique and procedure of production and, therefore, was in the nature of intangible asset and of enduring nature. He further stated that the Department had challenged the order of the I.T.A.T. before the Hon'ble High Court in earlier years. Accordingly, the A.O. treated the technical know-how expenses incurred and claimed by the assessee as capital in nature and disallowed the same. 9. The Ld.CIT(A) allowed the assessee s appeal on finding that identical issue had been adjudicated by the CIT(A) in earlier years in favour of the assessee and appeal of the Revenue against the order of the CIT(A) had been dismissed by the I.T.A.T. vide its order dated 26.9.2013 for assessment year 2009-10. 10. Before us, the Ld. DR heavily relied upon the order of the A.O. though fairly conceded that identical issue had been decided in favour of the assessee in assessment year 2009-10 by the CIT(A), whose order had been upheld by the I.T.A.T. also. 11. In view of the findings of the CIT(A) that identical issue stands decided in favour of the assessee in assessment year 2009-10 by the I.T.A.T., wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders of the authorities below. The factual submissions made by the assessee that the prior period expenses were booked on account of late receipt of bills of units of the assessee located at faraway places and that even prior period incomes were also so booked by the assessee, has not been controverted by the Revenue. The assessee has contended that it was consistently booking such prior period expenses and income from year to year, and this has also not been controverted by the Revenue. 16. In view of the aforesaid facts, we do not find any reason to interfere in the order of the Ld.CIT(A), deleting the disallowance made of prior period expenses, since we find that the said expenses had been booked as per the established and consistent policy followed by the assessee .Further considering the fact that even prior period incomes have been booked, no purpose would be served, we find, by disallowing only prior period expenses since in that case, even prior period income would have to be reduced from the taxable profits of the assessee. In view of the above, ground of appeal No.vi raised by the Revenue is dismissed. In effect the appeal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al knowhow fees amounting to ₹ 36,27,859/- on the basis the decision of the Hon'ble ITAT dated 26.09.2013 for AY 2009-10. 22. It was common ground that the issue raised in the above grounds, pertaining to treatment of technical know how fees paid by the assessee whether revenue or capital in nature, was identical to ground Nos. v) raised in the Revenues appeal in ITA No.756/Chd/2018. 23. Our decision rendered therein at para 11 of our order above will therefore squarely apply to the above grounds also, following which we hold that the technical know how fees paid is revenue in nature and accordingly dismiss the ground No.v) raised by the Revenue. 24. Ground No.vi) raised by the Revenue reads as under: vi) Whether on the facts and in the circumstances of the case the CIT(A) was right in deleting the addition made on account of disallowances of prior period expenses amounting to ₹ 4,85,459/- ignoring the fact that the assessee was following the mercantile system of accounting. 25. It was common ground that the issue raised in the above grounds, pertaining to allowance of prior period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound of appeal:- That the amount VAT Deferment of ₹ 16,96,924/- may be excluded while computing book profits u/s 115JB as being the capital receipt and not iable to tax in view of the proposition laid down in the case of Shree Balaji Alloys Ors. 17. Though the Ld. DR has objected to taking of the additional ground at this stage, however, considering the facts and circumstances of the case and also considering the subsequent decisions of the Hon'ble Supreme Court in respect of nature and character of the subsidy received on VAT deferment as capital receipt , we deem it fit to admit this additional ground. 18. In the additional ground, the assessee has claimed that since the subsidy on account of VAT deferment is as capital receipt, the same is not liable to be taxed taking into considering while computing the book profit u/s 115JB of the Act. He in this respect has relied upon the decision of the Lucknow Bench of the Tribunal in the case of ACIT Vs. L.H. Sugar Factory Ltd and Anr in ITA Nos. 339, 417 418/LKW/2013, 518 53/LKW/569 CO No. 26 27/LKW/2013 order dated l9.2.2016. The relevant issue has been discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputing the book profit u/s 115JB of the Act. This additional ground of the assessee, is therefore, allowed. In the result, this appeal of the assessee is partly allowed. 30. The Ld. DR, on the other hand, relied upon the order of the CIT(A). 31. We have heard the rival contentions. The issue to be adjudicated is whether sales tax subsidy is to be reduced while computing the Book Profits for the purposes of levying Miminum Alternate Tax (MAT) as per the provisions of section 115JB of the Act. 32. We have gone through the order of the ITAT in the case of H.M Steels, cited by the Ld.Counsel for the assessee before us. We find that identical issue has been dealt with by the ITAT in the said case holding the VAT subsidy, being capital in nature, as not includible in the Book Profits u/s 115JB of the Act. The ITAT, while holding so has taken note of the decision of the Hon ble apex court in the case of Apollo Tyres (supra) as per which any adjustment to the Profit and Loss account prepared by the assessee was ruled out for the purposes of calculating the Book Profit amenable to tax. The ITAT held as per section 115JB th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e grounds, pertaining to treatment of sales tax subsidy received by the assessee whether revenue or capital in nature, was identical to ground Nos. i) to iv) raised in the Revenues appeal in ITA No.756/Chd/2018. Our decision rendered therein at para 6 of our order above will therefore squarely apply to the above grounds also, following which we hold that the sales tax subsidy is capital in nature and accordingly dismiss the grounds raised by the Revenue. In effect the appeal of the Revenue is dismissed. 37. Ground of appeal No.(v) raised by the Revenue reads as under v) Whether on the facts and in the circumstances of the case the CIT(A) was right in deleting the addition made on account of technical knowhow fees amounting to ₹ 1,25,75,000/- on the basis the decision of the Hon'ble ITAT dated 26.09.2013 for AY 2009-10. 38. It was common ground that the issue raised in the above grounds, pertaining to treatment of technical know how fees paid by the assessee whether revenue or capital in nature, was identical to ground Nos. v) raised in the Revenues appeal in ITA No.756/Chd/2018. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee contended that it had claimed deduction of bad debts on account of the following: i) ₹ 48,000/-advance given to Shri Santosh Dumbre. ii) ₹ 12,410/- advance against material written off. 45. The Ld. counsel for assessee contended that both the advances had been routed through trading account and had been shown under the head current assets as advance to vendor and as trade receivables respectively and hence was allowable as bad debts. 46. The Ld. DR, on the other hand pointed out that the impugned amounts were merely advances which had not been taken into account while computing the income of the assessee either in the impugned or any other previous year. He, therefore, contended that the write off of these amounts had been rightly disallowed since the basic conditions required to be fulfilled for claiming the same was that the debts should have been taken into account while computing the income, which has not been fulfilled in the present case. The Ld. DR heavily relied upon the findings of the lower authorities. 47. We have heard the rival contentions and perused the orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- related to penalty (challan) for sleeping driver, while ₹ 75,000/- was the cost awarded or levied on the assessee by Arbitral Tribunal to compensate the respondent, M/s Tata AIG General Insurance Company Ltd. The Ld. DR contended that surely the said expense was not incurred in the normal course of business and since the order of the Tribunal was to compensate the Insurance Company in terms of cost it was in the nature of fine ordered by it. Further the Ld. DR drew our attention to the fact that the order of the Tribunal levying fine was dated 17.2.2013 and accordingly the expense pertained to assessment year 2013-14 and to the impugned year. He accordingly, supported the orders of the authorities below. 52. We have heard the contentions of both the parties. We do not find any reason to interfere in the order of the CIT(A) in disallowing the penalty amounting to ₹ 77,000/-. The fact relating to the nature of the penalty, as pointed out by the Ld. DR before us, is not disputed. Thus ₹ 2000/- being penalty levied for sleeping driver, is clearly no allowable being in the nature of penalty for infringement of law. Similarly, also, the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omers, the provisions were nullified and reversed. The A.O. examined the contention made by the assessee and found that out of the total provisions created, provisions of only ₹ 10,29,207/- had been reversed by the assessee in the subsequent year. He, therefore, found that the balance amount of ₹ 56,162/- was only a provision and no actual expenditure had been incurred by the assessee and accordingly, disallowed the same. The Ld.CIT(A) upheld the disallowance made by the A.O. 55. Before us, the Ld. counsel for assessee reiterated the contentions made before the lower authorities. However, the Ld. DR relied upon the order of the CIT(A). 56. We have heard the rival contentions. We do not find any reason to interfere in the order of the Ld.CIT(A). The factual findings of the lower authorities that the impugned provision of ₹ 56,162/- had not been reversed in the subsequent year by way of debt note received from a party on account of rejected material, has not been controverted by the assessee before us. Therefore, as per the explanation of the assessee, also the said provisions did not relate to any rejected material received back by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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