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TMI Blog2023 (9) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... the utilization of SFIS credit in the various capital assets acquired or procurement of spare parts by the assessee i.e., the custom / excise duty credit claimed by the assessee assets wise and direct him to reduce the respective value from the cost of the assets recorded in the depreciation schedule. Also recalculate the depreciation for the year. Accordingly, reassess the taxable income of the assessee. Accordingly, we allow the Ground raised by the assessee as the SFIS is not a taxable income as held in the case of Container Corporation of India Ltd., [ 2022 (12) TMI 157 - ITAT DELHI] Duty credit entitlement should be reduced from cost of the capital assets to the extent utilized for payment of import duty - HELD THAT:- This issue is remitted back to Assessing Officer to recalculate the depreciation. In our view, the assessee has claimed the credit of SFIS as an income, the corresponding debit will be the cost charged to the capital assets. Therefore, the value of assets has to be readjusted. This ground of appeal is allowed for statistical purpose. Not considering that income to the extent of duty credit utilized, for corresponding custom duty on import of spare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idy in the cost of the assets. When the same is being directed to be modified as directed to Assessing Officer the Assessing Officer will verify the same and make the changes in the depreciation schedule and reduce the subsidy from the income declared by the assessee. When the same is reduced from the income, this income will no longer be an item of income in the Profit and Loss. As held in the Pushkar Chemicals Fertilizers Ltd. [ 2021 (8) TMI 982 - ITAT MUMBAI] the SFIS subsidy is capital in nature, it cannot form part of book profit. Since this issue is remitted to the file of the Assessing Officer, we remit this issue also to the file of AO to determine the book profit u/s. 115JB of the Act as per the direction in Ground Nos. 2 to 4. Deduction u/s 80IA - Income from scrap sale - as per DR income earned from scrap sales is not directly derived from undertaking - HELD THAT:- We observe that the list of scrap materials declared by the assessee shows that these are generated out of the maintenance of the Port. The scrap cannot be accumulated from outside, unless, the assessee has bought for the business. We noticed that the assessee is not in the business of scrap sales, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7;. 43,58,16,218/- as against ₹. 43,64,96,138/-. Accordingly, the amount of ₹. 43,58,16,218/- is set off in this year against the business income of the assessee. 6. Assessing Officer further with regard to Exclusion of other income from deduction u/s 80-IA(4) of the Act, noticed that during the previous year under consideration, the assessee has claimed an amount of ₹. 12,41,74,419/- as deduction u/s 80-IA(4) of the Act and he noticed that the assessee has included an amount of ₹. 14,73,02,000/- as a component of the deduction u/s 80-IA(4) of the Act. The assessee was asked to furnish the details of the 'other income and the justification of including the same, in its claim of deduction u/s 80-IA(4) of the Act. 7. In response assessee filed its submissions vide letter dated 13.12.2010 and submitted that the other income amounting to ₹. 10,11,87,000/- are eligible for deduction u/s. 80-IA of the Act. Assessing Officer has reproduced the submissions of the assessee in his Assessment Order at Page Nos. 2 3 of the Assessment Order for the sake of brevity the same are not reproduced. 8. After considering the submissions of the assessee, As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading liability by way of remission or cessation of thereof and hence it is not even chargeable to tax as per section 41(1), the duty credit entitlement received is not taxable and hence the same should be treated as capital receipt: Treating duty credit entitlement as income from other sources 7. Without prejudice to ground no 2 to 4 erred in confirming that the income earned by the Appellant from the duty credit entitlement is of revenue in nature and taxable under the head income from other sources instead of business income, Income from duty credit entitlement is business income 8. Without prejudice to the above grounds, erred in not appreciating that the income of duty credit entitlement is generated from business of managing, developing and maintaining the container terminal dock and the same is ought to be assessable as business income under section 28(b) of the Act, 9. erred in not considering that income to the extent of duty credit utilized, for corresponding custom duty on import of spares etc, is shown as expenses in profit loss account and is ultimately tax neutral and hence does not have any effect on the profit of the Appellant. Duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not capital. Further, the Ld. DR stated that the object and nature of the scheme has to be considered while deciding the said issue. The Ld. DR also contended that utilization of the incentive has not been established by the assessee and further distinguished the decision of the Coordinate Bench where in the present case the assessee has brought the impugned amount in the Profit and Loss Account. The Ld. DR submitted that if something is borne out of revenue the same has to be treated as revenue receipt and not capital receipt. Ld. DR relied on the order of the lower authorities. 14. Considered the rival submissions and material placed on record, we observed that similar issue was considered and adjudicated by the Coordinate Bench in the case of Container Corporation of India Ltd. v. DCIT (supra) and held that SFIS credit goes to reduce the cost of capital goods purchased by the Assessee and the SFIS credit given to the assessee can be utilized only against purchase of capital goods and to set off a portion of excise duty and customs duty only and do not constitute taxable income of the assessee as per the Clause (xviii) to section 2(24) of the Income Tax Act 1961. While hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases, obtained certificates from Excise / Customs authorities against provisional Invoices from vendors, and has purchased the said capital goods net of Excise / Customs duty, against SFIS credit. The capital goods as purchased have been brought into Assets at the net-of Excise / Customs value in the Balance Sheet. 13. Details of utilization of SFIS credit during the year are are examined. Documents in respect of 17 transactions of purchase, referencing the SFIS credit and its accounting are perused. The first 16 transactions are for purchase of rakes of 30 45 wagons, while last one is in respect of purchase of Slack less draw bar(SLDB), which is the joint between railway wagons. 14. Thus, the rake enters the Assessee s business and the Assessee s accounts as a fixed asset, and is capitalized at the cost of acquisition, i.e. Rs. 9,79,49,291/-. All that the SFIS credit has done therefore, is to reduce the value of a capital asset brought into the books, by the amount of excise duty thereof. Had the SFIS credit not been included, the Assessee would have paid the duty and added the same to the asset cost while capitalizing the same. There is therefore no element of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : ₹. 3,00,000/- Total Cost : ₹. 13,00,000/- 18. In recording the above transactions, the company may have two ways of recording, First Method, the company will record only the basic cost and not consider the customs duty and subsidy. Whereas, in the Second Method, the company will record the total cost including the customs duty and also record the subsidy separately as an other income. The assessee in this case, chose to record the transaction as per second method. 19. We observe that as per Explanation 10 to the section 43(1) of the Act, where a portion of the cost of an assets acquired by the assessee in the form of subsidy or grant or reimbursement (by whatever name called), then so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the assets. Therefore, in the given case, the assessee has recorded the SFIS benefit as the other income and included duty portion in the gross value of the capital assets. The legislature consciously prohibits the assessee not to record the duty or subsidy portion in the cost of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ously rounded off in the grounds of appeal at ₹. 3,27,000/-) is eligible for benefit of deduction under section 80IA of the Act. Ld. AR of the assessee submitted that assessee is engaged in one single activity i.e. of running of a Port and it has no other operations otherwise than running of a Port and has no other income otherwise than from running of the Port. Ld. AR of the assessee brought to our notice Page Nos. 82 to 84 of the Paper Book which is the details of break-up of the amount and each of the items show that they are of an operational nature and have a direct nexus with Port operations / activities of the assessee and are entitled to the benefit of deduction under section 80IA of the Act. 24. On the other hand, Ld. DR relied on the order of the lower authorities. 25. Considered the rival submissions and material placed on record, it is brought to our notice that assessee has earned other miscellaneous income of ₹. 3,27,468/- which are in the nature of duty credit entitlement, interest income, reversal of provision, small scarp sales. It is also submitted that assessee is engaged in one single activity i.e., running of a port. Therefore, assessee is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estments over the years in urea sector, this industry had no incentive to invest on modernization and for increasing efficiency. The industry had no incentive to focus on farmers leading to poor farm extension services. The policy was introduced to reduce the burden on subsidy outgo in the hands of the Government which increased exponentially over the years. This policy is introduced considering all the issues relating to agriculture productivity, balanced fertilization and growth of indigenous fertilizer industry, competitiveness among the fertilizer companies and to overcome the deficiency of concession scheme. Therefore, it is clear that this scheme is introduced with the object of passing the benefit to the farmers at the same time, there is no fresh investment and innovations were not coming to the industry due to low profitability in this industry. In order to attract the new investments, to increase the productivity and to reduce the manufacturing cost by bringing new innovation in the industry in order to achieve ultimate reduction in the price of the fertilizers. Therefore, the scheme was mainly to attract the investment in the industry and the purpose test is that the att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in nature, it cannot form part of book profit. Since this issue is remitted to the file of the Assessing Officer, we remit this issue also to the file of Assessing Officer to determine the book profit u/s. 115JB of the Act as per the direction in Ground Nos. 2 to 4. Accordingly, this ground also allowed for statistical purpose. 30. In the result, appeal filed by the assessee is allowed for statistical purpose. ITA.NO. 893/MUM/2013 (A.Y. 2008-09) REVENUE APPEAL 31. Revenue has raised following grounds in its appeal: 1. The order of the CIT(A) is opposed to law and facts of the case. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in failing to appreciate that the Income from scrap sales is not eligible for deduction u/s 80IA as the income earned from scrap sales is not directly derived from undertaking and therefore the receipt from sale of scrap sales cannot be taken into consideration for deduction u/s 80IA . 3. For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO restored . 32. At the time of hearing, Ld. DR submitted that I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .CIT(A) has considered this aspect and allowed the claim of the assessee as per law. Therefore, we do not see any reason to disturb the same. Accordingly, ground raised by the revenue is dismissed. 36. In the result, appeal filed by the revenue is dismissed. ASSESSMENT YEAR 2009-10 ITA.NO. 1119/MUM/2013 (A.Y: 2009-10) ASSESSEE APPEAL 37. Assessee has raised following grounds in its appeal: - 1. erred in upholding the addition of Rs 11,09,18,055 made by the AO to the total income of the Appellant, Income from Duty credit entitlement of Rs 11.03.15,000 received under the served from IndiaScheme ('duty credit entitlement') is capital receipt and not chargeable to tax: 2 erred in not appreciating the fact that receipt by way of duty credit entitlement is capital in nature and hence not liable to tax at all; 3. should have appreciated that the object of the scheme is to accelerate growth in export of services. so as to create a powerful and unique 'served from India' brand; 4. failed to appreciate that as per the scheme the duty credit entitlement could be utilized largely against the import of capital goods and spares in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt not taxable under Section 115.JB of the Act even if the receipt is incorrectly credit to the Profit Loss A/c 12. Without prejudice to the above grounds, erred in not appreciating that capital receipt in the form of duty credit entitlement though incorrectly credited to the Profit Loss A/c, shall not be considered while computing book profits under Section 115JB of the Act since it is a capital receipt, 13. Should have appreciated that as per Accounting Standard - 10, the duty credit should be reduced from the cost of assets and therefore to that extent, the amount of duty credit should have been reduced while computing the books profits as per section 115JB of the Act The Appellant craves to consider each of the above grounds of appeal without prejudice to each other and crave leave to add, alter, delete or modify all or any of the above grounds of appeal. 38. Both the counsels submitted that the facts relating to A.Y. 2008-09 are identical to the A.Y. 2009-10. Since facts and grounds of appeal raised by the assessee in this case are mutatis mutandis to the appeal filed by the assessee for the A.Y. 2008-09, therefore the decision taken in A.Y. 2008-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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