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TMI Blog2022 (1) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... down value of the assets, therefore we restore this issue to the file of the A.O for providing depreciation on the basis of written own value after verification and examination of the supporting details and information submitted by the assessee. Therefore this ground of appeal raised by the assessee is allowed for statistical purposes. Nature of income - subsidy amount received - revenue or capital receipt - assessee received subsidy from Government of Maharashtra which was claimed as exempt on the ground that the same was capital in nature - HELD THAT:- The object of the subsidy scheme was to enable the assessee to set up a new unit which was clearly in the nature of capital receipt. Had it been object of the assessee to run the business more profitably then the receipt was to be revenue in nature In the case of the assessee the project for various plastic product with large capacities was set up in notified backward area of Maharashtra in accordance with the package Scheme of Incentives-2001 of Maharashtra Government. The main object of the scheme was to intensifying and accelerate the process of dispersal of industries in the less developed region, coupled with the objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowable as revenue expenditure - Decided in favour of assessee. Bogus purchases - HELD THAT:- A.O has also not proved that there was no sales made against the aforesaid purchases. We are of the considered view that without disproving the aforesaid material evidences provided by the assessee it is not justified to disallow the entire purchases. In the light of the above fact and findings to meet the ends of justice. We consider it would be appropriate to restrict the addition @ 12.5% of such purchases.Therefore, this ground of appeal of the assessee is partly allowed. - ITA No. 7261/Mum/2014, ITA No. 5840/Mum/2019, ITA No. 2006/Mum/2017, ITA No. 4754/Mum/2014, ITA No. 7230/Mum/2014 - - - Dated:- 4-1-2022 - Shri Vikas Awasthy, Judicial Member And Shri Amarjit Singh, Accountant Member For the Appellant : Nitesh Joshi For the Respondent : Sanjeev Kashyap ORDER PER AMARJIT SINGH, AM: 4754/Mum/2014, A.Y 2009-10 The revenue has filed this appeal against the order of the CIT(A)-24, Mumbai and the revenue has pressed the ground of appeal No. 2 as under: 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not required any adjudication. The effective grounds of appeal Nos. 1 (a) and 4 are as under: 1.(a) The Ld. CIT(A) erred in law in not giving direction to the A.O to give consequential effect in assessment year under appeal in respect of claim of depreciation to the tune of ₹ 2,43,19,289/- while computing the taxable total income under the normal provisions of the Act after considering the outcome of appeals for the earlier assessment year. 4(a). The Ld. CIT(A) erred in law in upholding the action of the AO in rejecting the additional claim of the appellant that the industrial promotion subsidy (IPS) received amounting to ₹ 33,90,28,500/- is capital in nature on the ground that IPS is refund of VAT/CST and waiver of electricity duty and hence is revenue in nature. (c) The appellant submits that IPS subsidy has been granted for getting up of new units in backward areas with a view of intensifying and accelerating the process of dispersal of industries to the less developed region and with the object of generating employment opportunities in the state of Maharashtra particularly in backward areas and hence, be regarded as capital in nature and not eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in nature. During the course of assessment proceedings the A.O noticed that the Govt of Maharashtra has granted subsidy to the assessee company in terms of Package Scheme of Investment 2001 to set up project in the notified industrially backward districts of the state. The A.O stated that there was no nexus between the subsidy granted and the capital cost of the project therefore the subsidy amount was added to the total income of the assessee by treating the same as of the nature of revenue receipt. 2.5 Aggrieved, assessee has filed appeal before the Ld. CIT(A). The CIT(A) has rejected the appeal of the assessee, holding that nowhere in the scheme, it was mentioned that subsidy was pertained to the capital cost of the project. 2.6 During the course of appellate proceedings before us the Ld. Counsel contended that assessee has set up the project in the backward district of Maharashtra, Gadegaon Vill, Jalgoan Dist in accordance with the package scheme of 2001 of Maharashtra. It is further contended that the scheme provides for substantial incentives to the industries for setting up projects in notified backward districts of Maharashtra. It was further submitted that in acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23;ble Supreme Court held that since the object of incentive scheme was to encourage and development of multiple theatre complexes incentives would be capital in nature and not revenue receipt. In the case of LG Electronics India (supra) the Special Bench of ITAT Delhi held that the assessee‟s receipts from State Govt. to the extent of subsidy under package scheme of incentive, 2001 for accelerating flow of investments in industries in state, i.e for expansion of industries and also to create employment opportunities was not form of exemption from payment of taxes on increased turnover and from payment of electricity duty such subsidy receipts assumed character of capital receipt irrespective of forum in which it was disbursed. 2.9 In the light of the above facts and findings it is clear that in the case of the assessee the project for various plastic product with large capacities was set up in notified backward area of Maharashtra in accordance with the package Scheme of Incentives-2001 of Maharashtra Government. The main object of the scheme was to intensifying and accelerate the process of dispersal of industries in the less developed region, coupled with the object of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rders of the A.O. 3.6 We heard both the parties and perused the material available on record. During the course of assessment the A.O noticed that the assessee has earned huge dividend income to the amount of ₹ 3,38,12,925/- on which the assessee has not made any apportion of any expenses incurred for earning this exempt income. Therefore, after applying the provisions of Sec. 14A r.w.r 8D the A.O has made disallowance of ₹ 1,16,44,189/- and added to the total income of the assessee. The Ld. CIT(A) has deleted the addition except sustaining of ₹ 16,83,942/- under Rule 8D(iii) after considering that assessee has used its own interest free funds for making investment on which exempt income was earned. The ld. CIT(A) has sustained the aforesaid disallowance up to administrative expenses after taking into consideration the nature of investment activities of the assessee company which required administrative support to the manage of investment. We have taken into consideration the contention of Ld. Counsel that as per Sec. 14A(2) r.w.r 8D the A.O needs to record the satisfaction with correctness of the claim made by the A.O. We considered that recording of satisfact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of commission to Ganapati Distributors, however, examination of details filed during the course of assessment the A.O observed that aforesaid commission was paid by the assessee to 8 persons on the basis of letter from Ganapati Distributors. The A.O stated that these 8 persons have not rendered any services to the assessee to whom the commission was paid and the services were rendered only by M/s Ganapati Distributors. 3.10 Therefore the A.O has disallowed the commission paid by the assessee of ₹ 1, 32,99,714/- and added to the total income of the assessee. The assessee has filed the appeal before the CIT(A), the Ld. CIT(A) has dismissed the assessee‟s appeal holding that the assessee has not produced any evidences to substantiate the claim for rendering the services by all 8 persons. 3.11 During the course of appellate proceedings before us the Ld. Counsel for the assessee contended that the A.O has not asked the assessee to produce the additional evidences of rendering of services by the other 8 persons to whom the commissions were paid by the assessee. The Ld. Counsel has also filed the paper book comprising details and copies of documents filed before the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted the order of the lower authorities. 3.18 We have heard both the parties and perused the material available on record. During the financial year relevant to the assessment year under consideration the assessee has incurred expenditure to the extent of ₹ 1,22,59,924/- on concretization of tar road and claimed the expenditure as revenue expenditure. However, the A.O has treated the said expenditure as a capital expenditure and added to the total income of the assessee. It is undisputed fact that the assessee has not constructed any new road during the year and it has incurred the expenditure for concretization of the existing road for its maintenance. Therefore no new asset was brought into existence by the assessee and object of the said expenses was for proper maintenance of the existing road. We have also perused the judicial pronouncement referred by the Ld. Counsel in the case of Cemaux Ltd, (supra), wherein the Hon‟ble High court of Bombay has held that the assessee company incurred expenses on repairs of approach road and resurfacing of katcha roads inside its factory premises and the same was allowable as revenue expenditure. In the case of CIT Vs. Venkate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-. The A.O has treated these purchases as bogus purchases on the basis of information received from DGIT (Inv), Mumbai that the said party was listed in the Hawala parties. Aggrieved, assessee has filed an appeal before the Ld. CIT(A). The Ld. CIT(A) dismissed the appeal of the assessee. 4.4 During the course of appellate proceedings before us, the Ld. Counsel for the assessee contended that the assessee has submitted copies of bills for purchase of material, delivery challan for the supplying of purchased material placed at page No. 123 to 129 of the paper book. He has also submitted copies of bank statement and details of payments made through account payee cheque to the parties. He further contended that A.O has treated the purchases as bogus without considering the aforesaid documents and evidences. It was also submitted that by treating the M/s Heta Sales Corp Ltd as bogus party would not automatically amount to treat the transaction entered into by the assessee as also bogus. 4.5 On the other hand the LD. DR supported the order of the lower authority. 4.6 We heard both the sides and perused the material available on record. During the course of assessment the A.O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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