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TMI Blog2019 (9) TMI 1062X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed assets acquired in view of observation that assets was not acquired before 31.03.2010 - HELD THAT:- As assessee submitted copies of the invoices towards purchase of fixed assets and contended that the machineries were received well before 31/03/2010. It is further submitted that the machineries were duly installed within 31/03/2010 as the same was in knock down condition. TheldCounsel further submitted that the A.O. misunderstood the facts that RC date mentioned on the face of the invoice as date of receipt. In fact the RC date is the date of receipt of invoice at Head office. It is evident from the details of addition to fixed assets that the concern machineries were received within 31st March, 2010. After considering and going through the submission along with supporting documents furnished, we are inclined to agree with the order of ld CIT(A). That being so, we decline to interfere with the order of Id. C.I T.(A) in deleting the aforesaid addition. His order on this addition is therefore, upheld and the grounds of appeal of the Revenue are dismissed. Addition towards interest subsidy received - HELD THAT:- As submitted that the annual accounts of the company are prep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Ground No. 1 raised by the Revenue relates to waiver of loan of ₹ 1,26,93,133/- 4. Brief facts qua the issue are that during the relevant previous year, the assessee company entered into one time settlement with Catholic Syrian Bank for write off its loan amounting to ₹ 193,62,653/- upon payment of ₹ 220 lacs out of the total outstanding loan and overdue interest on such loan of ₹ 413,62,653/-. The assessee furnished compromise proposal letter dated 03.12.2009 of the Catholic Syrian Bank. The Break-up of the amount of interest and loan written off during the previous year is as under- Interest ₹ 66,69,520 Principal of loan ₹ 126,93,133 Total ₹ 193,62,653 The assessee credited the amount of ₹ 193,62,653/-, written off, in the profit and loss account but claimed the same to be exempt from tax in its computation of income. During the scrutiny proceedings the assessee objected to the action of the AO for rejecting the clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the utilization of working capital loan. In this connection the assessee company had filed a detailed statement showing that the assessee company had acquired capital assets of ₹ 1885.24 lacs during the year ended 31st March, 2005 without obtaining any loan from any source. The ld Counsel pointed out that assessee had already submitted before the ld CIT(A), a chart showing utilization of fund for acquisition of Capital Assets visa- vis sources of fund for the last 6 years prepared on the basis of the Audited Annual Accounts. It is evident from the chart that the working capital had been utilized for the purpose of acquiring capital assets. Therefore, ld Counsel prayed the Bench not to treat the amount of loan waived as taxable and order of ld CIT(A) be upheld. 8. We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that the assessee company had total loan of ₹ 346.59 lacs comprising of cash credit facility of ₹ 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritten back ₹ 126.93 lacs upon one time settlement with Catholic Syrain Bank. The company had total loan of ₹ 346.59 lacs comprising of Cash Credit facilities of ₹ 244.90 lacs and Term Loan of Rs.l02.03 lacs from the Catholic Syrian Bank which is evident from the Annual Accounts for FY 2008-09 ( page 28 of the paperbook). A copy of Annual Report for the FY 2008-09 is furnished before the Bench ( pages 1-43 of the paperbook). In the course of the hearing before the AO, the assessee company submitted that the cash credit facility had been utilized by the company towards purchase of capital assets. The company had purchased capital assets of₹ 18.85 crores approx during the FY 2004-05. A detailed statement of acquisition of fixed assets is furnished before us ( page 44 of the paperbook). A copy of Annual Accounts for the FY 2004-05 is also furnished ( pages 45-55 of the paperbook), which shows that the capital asset amounting to ₹ 18.85 crores was acquired during the FY 2004-05 ( page 50 of the paperbook). Also on perusal ofthe annual accounts of the company, it can be seen that the company had not obtained any fresh term loan during the relevant financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. The first issue is the applicability of Section 28 (iv) of the IT Act in the present case. Before moving further, we deem it apposite to reproduce the relevant provision herein below:- '28. Profits and gains of business or profession.- The following income shall be chargeable to income-tax under the head Profits and gains of business profession ,- (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession; 13. On a plain reading of Section 28 (iv) of the IT Act, prima facie, it appears that for the applicability of the said provision, the income which can be taxed shall arise from the business or profession. Also, in order to invoke the provision of Section 28 (iv) of the IT Act, the benefit which is received has to be in some other form rather than in the shape of money. In the present case, it is a matter of record that the amount of ₹ 57,74,064/- is having received as cash receipt due to the waiver of loan. Therefore, the very first condition of Section 28 (iv) of the IT Act which says any benefit or perquisite arising from the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41 (1) of the IT Act and held that the Respondent had received amortization benefit. Amortization is an accounting term that refers to the process of allocating the cost of an asset over a period of time, hence, it is nothing else than depreciation. Depreciation is a reduction in the value of an asset over time, in particular, to wear and tear. Therefore, the deduction claimed by the Respondent in previous assessment years was due to the deprecation of the machine and not on the interest paid by it. 16. Moreover, the purchase effected from the Kaiser Jeep Corporation is in respect of plant, machinery and tooling equipments which are capital assets of the Respondent. It is important to note that the said purchase amount had not been debited to the trading account or to the profit or loss account in any of the assessment years. Here, we deem it proper to mention that there is difference between 'trading liability' and 'other liability'. Section 41 (1) of the IT Act particularly deals with the remission of trading liability. Whereas in the instant case, waiver of loan amounts to cessation of liability other than trading liability. Hence, we find no for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowed and added back to the total income of the Assessee company. Similarly, it was observed by AO that the company had purchased Serra Triplex CTC Tea processing machine costing ₹ 12,61,413/- for Tinkhar Tea Estate which was received on 1/4/2010. Therefore, AO was of the view that there is no question of the machinery being put to use on or before 31/03/2010. So 7.5% of ₹ 12,61,413/-i.e 94,606/-was also disallowed under this head and this way total addition made by AO under this head came to ₹ 43,313 + 94,606 = ₹ 137919/-. 13. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition made by the Assessing Officer. Aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us. 14. The ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity. On the other hand, the ld. Counsel for the assessee defended the order passed by the ld CIT(A). 15. We have heard both the parties and perus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same is not being repeated for the sake of brevity. On the other hand, the ld. Counsel for the assessee defended the order passed by the ld CIT(A). 21. We have heard both the parties and perused the material available on record. We note that during the relevant year, the assessee company received subsidy of ₹ 51,66,613/- against the subsidy receivable. The claim for interest subsidy was lodged and accounted for in earlier years. Interest subsidy received during the relevant assessment year was against claim of earlier years, which has already been taxed in the earlier years. However, the Ld. AO made addition of ₹ 51,66,613/- towards subsidy received during the relevant assessment year. (A copy of letter regarding clarification on central interest subsidy scheme is enclosed at pages 79-81 of the paperbook). We note that point no. L of note 1 of schedule 17 of the Annual accounts for AY 2010-11 relate to accounting policy of Government grant( page 93 of the paperbook) which is reproduced as under: [L] GOVERNMENT GRANTS: (i) Claims receivables are accounted for at the time of lodgement depending on the certainty of receipt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exchange fluctuations on export receivables and are net of trade discount. Export incentives are accountedfor as and when due. Thus by following mercantile system of accounting, the assessee company has already paid tax on subsidy received. Subsidy received cannot be taxed again as it will result into double taxation of income. We note that the assessee company has received interest subsidy in earlier year (AY 2006-07 2009-10) which is evident from the chart attached at page 98 of the paper book. However, the ld. Assessing Officer had not made any addition of interest subsidy received in these years as the amount was already taxed on mercantile basis in preceding years. (vide assessment order for these two years, enclosed at page 99-104 of the paper book). Therefore, the ld. Assessing Officer erred in having taken a contradictory stand in the matter and making addition of interest subsidy, which resulted into double taxation of same income. 22. At the cost of repetition we state that the assessee company received interest subsidy of ₹ 51,66,613/- against the subsidy receivable during the year. It is submitted that the annual accounts of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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