9911796707
TMI Blog2024 (2) TMI 1190X X X X Extracts X X X X X X X X Extracts X X X X ..... ling the appeals are condoned and admitted the appeals for adjudication. 3. First, we shall take the appeal No. 581/Chny/2021 for adjudication. Ground No. 1 is general in nature and requires no adjudication. 4. Ground No. 2 relates to deletion of addition made under section 40(a)(i) of the Act. The ld. Counsel for the assessee has submitted that the very same issue was subject matter in appeal before the Tribunal in earlier assessment year 2007-08 in ITA No. 2394/Chny/2017 & CO No. 188/Chny/2017 dated 29.10.2018. The issue has been remitted back to the Assessing Officer to examine MFN clause available in the protocol of Indo-Belgium DTAA as to whether the same shall override the specific provisions laid down under Article 12 and decide the issue afresh in accordance with law and prayed that the same order may be followed for the year under consideration. 4.1 On the other hand, the ld. DR has not raised any objection. 4.2 We have heard both the sides, perused the orders of authorities below. With regard to the issue of addition made under section 40(a)(i) of the Act, we find that this issue has been considered by the Coordinate Bench of the Tribunal for assessment year 2007-08 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia-Belgium Treaty, the restrictive definition of the term "fee for technical services" in the India-UK Treaty can be applied and by following various decisions as referred hereinabove, the ld. CIT(A) held that the payment made to SG Exprover cannot be considered to partake of the nature of "fees for technical services" and allowed the ground raised by the assessee without obtaining any comments from the Assessing Officer. Under the above facts and circumstances, we direct the Assessing Officer to examine the MFN clause available in the Protocol of Indo-Belgium DTAA as to whether the same shall override the specific provisions laid down under Article 12 and decide the issue afresh in accordance with law. Thus, the ground raised by the Revenue is allowed for statistical purposes. 4.3 Since the issue involved in this appeal is similar to that of the assessment year 2007-08 and in view of the above findings of the Tribunal, we direct the Assessing Officer to re-examine and decide the issue afresh in accordance law. Thus, the ground raised by the Revenue is allowed for statistical purposes. 5. The next ground raised in the appeal of the Revenue is that the ld. CIT(A) erred in direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disallowance made under section 14A of the Act r.w.s. Rule 8D. 6.1 We have heard the rival contentions and perused the case law relied upon the appellate order. By following the decision in the case of Beach Minerals Company P. Ltd. v. ACIT (supra), in assessee's own case for the assessment year 2007-08 in ITA No. 2096/Mds/2011 dated 13.07.2016, the Coordinate Benches of the Tribunal has held that the provisions of section 14A r.w.r. 8D cannot be applied while computing the book profits as per section 115JB of the Act. Moreover, in the case of ACIT v. Vireet Investment (P) Ltd. (supra), wherein, the Delhi Special Bench has categorically held at para 6.22 of its order that the computation under clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to the computation as contemplated under section 14A read with Rule 8D of the Income Tax Rules. Hence, we are of the opinion that the ld. CIT(A) has rightly directed the Assessing Officer to delete the addition made to book profits with respect to the disallowance made under section 14A r.w.s. Rule 8D. Thus, the ground raised by the Revenue is dismissed. 7. In the appeal in ITA No. 585/Chny/2021, the only issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e paid Investment Promotion Subsidy equivalent to the amount of Sales Tax paid during unutilized portion of the waiver period. In accordance with the above, the Government of Tamil Nadu through SIPCOT paid Investment Promotion Subsidy of Rs. 49,253,755 to the company in the month of November 2010. Copy of the order from the Joint Commissioner (CT), MOU Cell, Chennai determining the amount of Rs. 4,92,53,735/- as refund in accordance with G O (MS) No. 60 (CT and R) and (MS) No.80 is enclosed as Annexure I. In this connection, we wish to submit that the Input & Output VAT is not passed through the P&L Account but accounted as a Balance Sheet item. The company has neither debited the VAT in the P&L Account nor has claimed the VAT for income tax purposes. As per the scheme, the VAT amount paid has been refunded to the company and hence it is not chargeable to tax." 7.1 However, the Assessing Officer has not accepted the above reply of the assessee and observed that since the industrial unit of assessee in Tamilnadu was functioning for the last many years already at the time of this grant of subsidy, this subsidy was not granted for setting up of the business. Since purpose of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Shree Balaji Alloys [2017] 80 taxmann.com 239 (SC). He also relied on the following case law: 1. Banco Products (I) Ltd. v. DCIT 379 ITR 1 (Guj) 2. ACIT v. Genus Electrotech Limited in ITA No. 9513/Del/2019 & ors. 3. Sasisri Extractions Ltd. v. ACIT 119 TTJ 976 (Viz) 4. Indo Rama Synthetics (I) Ltd. v. ACIT 0 33 CCH 526 (Del - Trib) 5. PCIT v. M/s. Welspun Steels Ltd. 264 Taxman 252 (Bom) 6. PCIT v. Budge Budge Refineries Ltd. 139 Taxman.com 124 (Cal) 7.5 We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. The written submissions filed by the assessee before the ld. CIT(A) are reproduced as under: "4.1 During the previous year relevant to the above assessment year, the Appellant had received investment promotion subsidy amounting to Rs. 4,92,53,755/- from Govt. Of Tamil Nadu for investments made in the State. As the subsidy received was in the nature of promoter's contribution, the Appellant had added the same to Capital Reserves under the head Reserves & Surplus. However, the Assessing Officer disregarded the contentions of the Appellant and added the subsidy treating it as revenue receipt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o submit that the above subsidy was given as part of the mega investment scheme to encourage investment in the state. The subsidy is towards investment made and is capital in nature and hence the Appellant credited the same to the Reserves account in accordance with the Accounting Standards issued by the Institute of Chartered Accountants of India. 4.7 We also submit that the subsidy has been received towards the promoter's contribution i.e they have been given With reference to the investments made in the undertaking or in other words it is 'towards the capital outlay made by the Appellant and hence it has been directly credited to the shareholders' funds. The subsidy is not earned but represents incentive provided by the Government and hence it is inappropriate to treat is as revenue income. 4.8 At the outset we wish to submit that the Supreme Court in the case of CIT vs. Ponni Sugars & Chemicals Ltd 306 ITR 392 (SC), has held that where the scheme in question was linked directly to the setting up of a new unit or the expansion of an existing unit. In the above case, the Apex court observed that: "the source of payment or the form in which it the subsidy is paid or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar form and the fact that it was granted only after commencement of production would make no difference" 4.12 The Chennai Tribunal in the case of DCIT vs. Regen Powertech Limited [2016] 73 taxmann.com 370 relying on the above decisions of the Apex Court, held as under: 'We perused the Industrial Investment Promotion Policy referred at page 159 of the paper book which considered the incentives and subsidy provided to the units according to their investments criteria. Further, the facts that VAT subsidy is as per the order issued by the Government and further due to amendment to See. 2(24) (xviii) w.e.f. 01.04.2015 subsidy or a grant defined was made taxable under Income Tax. So, considering the apparent facts, provisions of law, industrial policy regulations, and rely on decision of Shree Balaji Alloys (supra), subsequently Hon'ble Supreme Court has upheld the decision in Civil Appeal No.10061/2011, dated 19.04.2016 by dismissing the Revenue appeal. We respectfully following the Supreme Court decision and direct the ld. Assessing Officer to delete the addition of VAT subsidy as being in the nature of Capital Receipt and it is to be treated accordingly and allow the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tech Limited [2016] 73 taxmann.com 370 is considered. Respectfully following the decision of the Apex Court in the case of Shree Balaji Alloys and the jurisdictional Tribunal decision in the case of DCIT v. Regen Powertech Limited [2016] 73 taxmann.com 370, the AO is directed to delete the addition of Rs. 4,92,53,755/-. Accordingly, this ground of appeal is allowed. 7.7 We find that the Hon'ble Supreme Court in the case of Shree Balaji Alloys (supra), by considering its own judgement in the case of CIT v. Ponni Sugars & Chemicals Ltd. (supra), dismissed the appeal of the Department and upheld the judgement of Hon'ble High Court of Jammu & Kashmir in the case of Shree Balaji Alloys & Others v. CIT, wherein, the Hon'ble High Court has held Excise refund and interest subsidy received by the assessee in pursuance to the incentives announced and sanctioned are capital receipts. 7.8 In view of the above judgement of the Hon'ble Supreme Court in the case of CIT v. Shree Balaji Alloys (supra), we find that the subsidy received by the assessee has close proximity with the industrial policy of the Government of Tamil Nadu as notified vide GO No. 43 and in addition, GO No. 80 also states t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
