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TMI Blog2022 (6) TMI 1017X X X X Extracts X X X X X X X X Extracts X X X X ..... nce on account of Dies written off - DR stated that the Dies are part of plant and machinery and therefore, any loss on account of that is a capital loss and cannot be allowed as deduction as revenue expenditure - CIT-A deleted the addition - HELD THAT:- As raw material consumption has been reduced to the extent of ₹ 21,263,638/ . This is for the reason that every year assessee is making valuation of dies at the end of the year and resultant profit or loss compared to the valuation of earlier year, the same is credited or debited to raw material consumption account the profit and loss account. At the time of preparing the computation of total income, if valuation has gone down, it is debited to the profit and loss account (raw material consumed) and in the computation of total income, it is not claimed as deduction from business income. Similarly, if there is any increase in valuation, such increase is credited to the profit and loss account (raw material consumed) and thereby showing lower amount of raw material consumed, but at the time of computation of total income such credit is removed from the profit and loss account. This is so because the valuation increase/de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 21,36,252/- on account of provisions of section 36 (1)(iii) of the Income Tax Act, 1961. It is submitted that the Hon'ble CIT(A) has made such arbitrary disallowance without considering the facts and circumstances of the case and stating the arguments of the appellant are hypothetical in nature. It is therefore prayed that disallowance of interest of Rs. 21,36,252/- is unjustified, unwarranted and shall be deleted and necessary direction shall be given in this regard. 2. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) has erred in confirming the addition of Rs.1,32,07,000/- being amount received as Grant by treating the same as Business Income. It is submitted that the Hon'ble CIT(A) erred in treating the Grant as revenue in nature instead as capital in nature as treated by the appellant. It is therefore prayed that addition of Grant received of Rs. 1,32,07,000/- shall be deleted and necessary direction shall be given in this regard. 04. Revenue s ground of appeal in ITA No.7271/Mum/2018:- Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in deleting the disallowance of Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook profit under Section 115JB of the Act of the above subsidy and computed book profit of ₹ 486,81,823/- by making an addition of ₹ 132,07,000/- to the net profit as per profit and loss account of ₹ 3,54,74,823/- . 08. Assessee aggrieved with the same, preferred the appeal before the learned CIT (A). The learned CIT (A) a. Confirmed the disallowance of interest of ₹ 21,36,252/ . The assessee before learned CIT (A) submitted that it has its own fund of ₹ 27.38 crores, on which no interest is paid and further, interest free deposit for premises is given of ₹ 1,78,02,100/- for business purposes. The learned CIT (A) rejected the same holding that it is merely a hypothetical concept. b. Deleted disallowance of ₹ 2,12,63,638/- Dies written off, he held that the Dies are valued by the registered Government valuer and the resultant loss is debited to the Profit and Loss account. He further noted that there is no sale of Dies during the year and further, the same is not capital loss. He further noted that at the end of the year, assessee valued the Dies and resultant revenue loss or the profit is routed through Profit and Loss accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced at page number 2 of the paper book, clearly shows that raw material consumption in the net profit and loss as per profit and loss account amounting to ₹ 35,474,823/ , assessee has reduced the amount of dies written off amounting to ₹ 21,263,638. This has arisen because of the reason that in the raw material consumed by the assessee of ₹ 68,53,70,457/ assessee has credited of ₹ 2,12,63,638/ which is arising on valuation of dies.. Therefore, it is apparent that raw material consumption has been reduced to the extent of ₹ 21,263,638/ . This is for the reason that every year assessee is making valuation of dies at the end of the year and resultant profit or loss compared to the valuation of earlier year, the same is credited or debited to raw material consumption account the profit and loss account. At the time of preparing the computation of total income, if valuation has gone down, it is debited to the profit and loss account (raw material consumed) and in the computation of total income, it is not claimed as deduction from business income. Similarly, if there is any increase in valuation, such increase is credited to the profit and loss account (r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionate interest expenditure. The assessee objected to the same and stated that the deposit is refundable deposit given in earlier year against certain monthly outgo for use of business places in Mumbai and vadodara, which are placed with associated concerns owning the property. The learned assessing officer rejected the contention of the assessee and held that assessee has taken interest bearing loans and utilized it for giving as deposit for premises to its related party and no evidences accept board resolutions have been submitted which in no way proves that the assessee had actually utilize the premises of its sister concerns. Assessee even failed to furnish a list of its sister concerns with who is such deposits have been placed. Against this, assessee has taken huge loans on which it is paying interest, therefore, the learned assessing officer disallowed the interest expenditure of ₹ 2,136,252/ computing at the rate of 12% on advances of ₹ 178,02,100/ and held that this is a non-business expenditure which is disallowed u/s 36 (1) (III) of the act. The assessee challenged this disallowance before the learned CIT A stating that assessee has sufficient own funds a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how evidences in support of the above claim. Assessee submitted that government of Maharashtra has announced the package scheme of 2011 wherein the industrial units are eligible for grant in the form of subsidy. In accordance with the above scheme, the assessee company has carried out its expansion. Against the total investment of ₹ 1786 lakhs the State government has issued, two eligibility certificate of ₹ 517 lakhs and further of ₹ 557 lakhs. The computation of the above benefit is being refund of octroi duty paid on material purchased by the assessee and received at its factory in Nasik. As per the scheme, the assessee has received the grant of ₹ 132,07,000/ in financial year 2011 12 relevant to the impugned assessment year. In view of this, assessee submitted that the grant received by the assessee is a capital receipt and not chargeable to tax. The assessee also submitted the object of the scheme and stated that it is for industrialization of a particular region and therefore it is capital receipt. The learned assessing officer rejected the explanation of the assessee. The reasons of such rejection were that it is not a one-time subsidy granted by g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore payment of octroi and conclusively more shall be the subsidy received by the company. Further, the subsidy is paid on yearly basis. Accordingly, he held that by no stretch of imagination the above subsidy could be treated as a capital receipt. He further noted that assessee has not at all been able to produce any one decision wherein such a refund of octroi duty has been held to be non-taxable. Accordingly, he confirmed the action of the learned assessing officer. 020. The learned authorised representative referred to a detailed note on grant of subsidy placed at page number 87 of the paper book. He further referred to of the package scheme of 2007 placed at page number 94 108 of the paper book. He referred to page number 116 of the paper book to show that assessee has made an investment of ₹ 517.58 lakhs and based on that assessee has been granted the above subsidy. He further stated that the object of the scheme is to promote industrialization . Accordingly, the above subsidy is capital receipt in the nature. He further referred to several judicial precedents to support his case. He mainly relied on the decision of the honourable Supreme Court of India in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the aforesaid case has placed reliance on the decision in the case of Commissioner of Income Tax Vs. Reliance Industries Ltd. reported as 339 ITR 632, wherein subsidy sanctioned to the assessee under similar Package Scheme of Incentives, 1993 was held to be capital in nature. The Id. DR has failed to controvert the findings of Commissioner of Income Tax (Appeals). In the absence of any contrary material on record, we uphold the findings of First Appellate Authority in deleting the addition in respect of subsidy received by the assessee holding it to be capital in nature. Accordingly, the appeal of the Revenue is dismissed being devoid of any merit. 8. The ld. DR has failed to convert the findings given by the Tribunal in the said case. We do not find any infirmity in the impugned order. Accordingly, the same is confirmed and the appeal of Revenue is dismissed. 023. Therefore respectfully following the decision of the coordinate bench, we also hold that the subsidy received by the assessee in the form of octroi duty refund of ₹ 132,07,000/ is a capital receipt not chargeable to tax. Accordingly, we allow ground number 2 of the appeal of the assessee. 024. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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