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TMI Blog2020 (7) TMI 567X X X X Extracts X X X X X X X X Extracts X X X X ..... ued that the disallowance may be restricted we, accordingly, restrict the disallowance and direct the AO to delete the remaining disallowance. Ground No.1 of the assessee s appeal stands partly allowed. Addition on account of interest on Income Tax Refund - HELD THAT:- AR has fairly accepted that this amount is taxable in the hands of the assessee. However, while dismissing this ground of the assessee s appeal, we direct that should the interest amount vary subsequently depending on the outcome of the appeals before the Hon ble High Court and the Hon ble Apex Court, the AO should substitute such varied amount as the case may be. Capital subsidy received during the relevant assessment year from the written down value of the respective block of assets - HELD THAT:- It is settled law that the taxation of subsidy, by whatever name called, is determined by the purpose for which the subsidy is granted and not the form/mode/manner in which the subsidy is received/disbursed. We find no reason to interfere with the findings CIT (A) on the issue that the impugned subsidy was a capital receipt. CIT (A) was not correct in directing the AO to reduce the amount of subsidy from the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the owner for its use in its business. - ITA No.2020/Del/2014, ITA No.1954/Del/2014 - - - Dated:- 22-7-2020 - Shri G.S. Pannu, Vice President And Shri Sudhanshu Srivastava, Judicial Member For the Appellant : M/s. Pramita M. Biswas, CIT-DR For the Respondent : Sh. Ajay Vohra, Sr. Adv., Sh. Neeraj Jain, Adv., Sh. Karan Jain, CA ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER: These are cross appeals by the Department and the assessee against order passed by the Ld. Commissioner of Income Tax (Appeals)-LTU, New Delhi, {the Ld. CIT(A)}, vide order dated 20.01.2014 pertaining to Assessment Year 2009-10. 2.0 The brief facts of the case are that the asseseee company is a manufacturer of vide range of food items covering beverages, baby food powders, chocolates and confectionery, culinary products, etc. The assessee filed its return of income declaring total income of ₹ 7,28,92,72,770/-. After initially processing the return u/s 143(1) of the Income tax Act, 1961 (hereinafter called the Act ), the case was selected for scrutiny. Since, during the year under consideration the assessee had entered into international transactions with its Associate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition of ₹ 61,01,74,000/- made on account of licence fee . 2. On the facts and circumstance of the case and in law, the Ld CIT (A) has erred in reducing the disallowance made u/s 14A from ₹ 39,25,411/- to ₹ 32,93,106/-. 3. On the facts and circumstance of the case and in law, the Ld CIT (A) has erred in deleting the disallowance of ₹ 1,39,152/- made by AO by restricting the claim of depreciation in respect of UPS from 60% to 15%. 4. On the facts and circumstance of the case and in law, the Ld. CIT (A) has erred in deleting the disallowance of ₹ 33,90,330/- made by AO by denying the claim of depreciation in respect of energy saving and pollution control equipment on the ground that it was not put to use. 5. On the facts and circumstances of the case and in law, the Ld CIT (A) has erred in directing to treat the subsidy as capital in nature thereby deleting the addition of Rs,.25,00,000/- 6. The appellate crave leave to add, alter, amend or vary the above ground of appeal at or before the time of hearing. Grounds raised by the assessee in ITA No.1954/Del/2014: 1. That CIT(A) erred on facts and in law in upholding the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance u/s 14A of the Act to the extent of ₹ 32,93,106/-. It was submitted by the Ld. AR that during the relevant assessment year, the assessee had received dividend income amounting to ₹ 4,31,86,107/- in respect of units held in various mutual funds which was claimed as exempt u/s 10(35) of the Act. It was further submitted that the assessee, vide letter dated 17.12.2012, filed during the course of assessment proceedings, had submitted that the disallowance could not have exceeded ₹ 8,34,934/- being the costs of its treasury operations which had been computed on the basis of the time spent by the treasury department in such activities and that the Assessing Officer had failed to point out any defect in such computation and had proceeded to disallow an amount of ₹ 39,25,411/- by applying Rule-8D of the Income Tax Rules, 1962 in a mechanical manner. It was submitted that the Assessing Officer could not have made the disallowance in absence of any nexus of expenditure and the exempt income being established and that further in absence of the Assessing Officer having recorded satisfaction the impugned disallowance u/s 14A read with Rule-8D was unwarranted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not to reimburse the costs of fixed assets, directly or indirectly, the subsidy was, therefore, not required to be reduced from the costs of capital assets acquired. Reliance was placed on numerous case laws wherein it has been held that if the purpose of incentive/subsidy is towards capital account, then notwithstanding the mode of computation of incentive/subsidy with reference to the investment in assets, Explanation-10 to section 43(1) of the Act would not be attracted. It was pleaded that the directions of the Ld. CIT (A) holding that the aforesaid subsidy was to be reduced from the actual cost of fixed assets and depreciation was to be allowed on actual cost so arrived at was not correct. 3.2.1 The Ld. AR, however, supported the order of the Ld. CIT (A) on the issue to the extent that the Ld. CIT (A) had held that the subsidy was capital in nature. 4.0 In response to the arguments of the Ld. AR with respect to the assessee s appeal, the Ld. CIT-DR submitted that as far as the disallowance u/s 14A was concerned, the Ld. CIT (A) had given a categorical finding in this regard and had given partial relief to the assessee already. It was submitted by the Ld. CIT-DR that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that Ground No.4 of Department s appeal challenging the disallowance of depreciation on energy saving and pollution controlling equipment had rightly been deleted by the Ld. CIT (A) as there were three certificates from the Chartered Engineers on record certifying that the equipment in question was energy saving and pollution control equipment. It was also submitted that if an asset is ready to be put to use, then deprecation has to be allowed in view of the numerous settled judicial precedents. 6.1 With respect to the license fee disallowed by the Assessing Officer but deleted by the Ld. CIT (A), reliance was placed on the order of the Ld. CIT (A) wherein the Ld. CIT (A) had decided the issue in assessee s favour by relying on the orders of the Hon ble High Court and the Tribunal. 6.2 Similarly with respect to Department s ground No.3 regarding depreciation on UPS, it was submitted that the issue was covered in favour of the assessee by the order of the Hon ble Jurisdictional High Court in the case of CIT vs. BSES Rajdhani Powers Ltd. in ITA 1226/2010. 7.0 We have heard the rival submissions and have also perused the material on record. We now take both the appeals for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. However, while dismissing this ground of the assessee s appeal, we direct that should the interest amount vary subsequently depending on the outcome of the appeals before the Hon ble High Court and the Hon ble Apex Court, the AO should substitute such varied amount as the case may be. 7.3 As far as ground No.3 of the assessee s appeal is concerned wherein the action of the Ld. CIT (A) in directing the Assessing Officer to reduce on proportionate basis the capital subsidy received during the relevant assessment year from the written down value of the respective block of assets is concerned, it is seen that it is connected with the ground No. 5 of the Department s appeal. It is also seen that the Ld. CIT (A) has adjudicated in assessee s appeal that the subsidy of ₹ 25 Lacs received under the State Investment Subsidy Scheme was capital receipt. The factual matrix pertaining to this controversy is that the assessee had, during the year ending 31.03.1997 relevant to assessment year 1997-98, set up a new unit in Bicholim in the State of Goa for manufacture of consumer food products namely noodles, tomato ketchup and other sauces, tomato based cooking sauces, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs on the investment made on the fixed capital investment after 01.10.1998 only; - one of the major requirement of the scheme was that the unit should employ at least 80% of the local employees. 7.3.2 The Ld. CIT (A) placed reliance on the following decisions while holding as aforesaid: - Ponni Sugar Chemicals Ltd. vs. CIT: 306 ITR 392 (SC) dated 16.09.2008 - Sahney Steel and Press Works Ltd. and Others v. CIT: 228 ITR 253 (SC) dated 19.09.1997 - CIT v. Ruby Rubber Works Ltd.: 178 ITR 181 (Kerala) dated 06.04.1989 [The said decision has been approved by the Supreme Court in the case of Kalpetta Estate Ltd. v. CIT: 221 ITR 601 (SC) dated 16.06.1996] 7.3.3 We note that it is settled law that the taxation of subsidy, by whatever name called, is determined by the purpose for which the subsidy is granted and not the form/mode/manner in which the subsidy is received/disbursed. Therefore, we find no reason to interfere with the findings of the Ld. CIT (A) on the issue that the impugned subsidy was a capital receipt. Thus Ground No.5 of the Department s appeal does not hold any substance and the same is dismissed. 7.3.4 Coming back to the assessee s connected G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment Years as under: Assessment Years Authority Passing Order Appeal No. Date of order 1997-98 ITAT ITA NO.4545/Del/2000 10.01.2005 1998-99 ITAT ITA NO.2239/Del/2002 10.01.2005 1999-00 ITAT ITA NO.2755/Del/2003 30.04.2007 2000-01 ITAT ITA NO.2714/Del/2004 15.06.2007 2001-02 ITAT ITA NO.1979/Del/2006 27.03.2009 2002-03 ITAT ITA NO.1980/Del/2006 27.03.2009 2003-04 ITAT ITA NO.1612/Del/2007 24.07.2009 2004-05 ITAT ITA NO.3096/Del/2007 24.07.2009 2005-06 ITAT ITA NO.319/Del/2010 22.03.2010 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was not put to use. It is seen that the Assessing Officer disallowed the claim of depreciation by alleging that the assessee has only established the factum of purchase of assets and not the condition of assests being put to use. The Assessing Officer further observed that comparative results were not submitted to establish that assets were energy saving and pollution control equipment. It is also seen that no adverse observation had been made by the Assessing Officer with respect to the purchase and installation of such assets. In addition to this, the assessee had also submitted certificates from Chartered Engineers to the effect that the assets purchased fall within the category of Air Pollution Control Equipment, Water Control Equipment, Energy Saving Devices and Renewable Energy Devices. These certificates submitted by the assessee have been taken note of by the Assessing Officer but have not been commented upon. It is not in dispute that the assets fall within the description of the assets referred to in the Income Tax Rules which contains the deprecation schedule. The only objection of the Assessing Officer seems to be that the assets had not been put to use and that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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