Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2016 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (1) TMI 1461 - ITAT DELHIReopening of assessment u/s 147 - Characterization of income - treating the sale of additional quota of sugar in free market as revenue receipt against the assessee’s claim of capital receipt - HELD THAT:- The Hon’ble Supreme Court in CIT vs. Ponni Sugar and Chemicals Ltd. and Ors. [2008 (9) TMI 14 - SUPREME COURT] has held that the subsidy for setting up sugar mills, to be utilized for repayment of term loans undertaken for setting up new units/expansion of existing business, is a capital receipt and not chargeable to tax. Adverting to the facts of the instant case, we find that the assessee is covered under the Incentive scheme dated 10.3.1993 as it was set up in 7.3.1994. It is so borne out from the letter dated 10.7.2000 issued to the assessee by the Government of India, Ministry of Food, Directorate of Sugar, a copy of which is placed at page 175 of the paper book, giving licence and covering it under the Incentive scheme dated 10.3.1993. Pursuant to the requirement of submission of Utilization certificate from a Chartered Accountant, the assessee submitted such certificate, a copy of which is available at pages 38 and 39 of the paper book. Such certificate indicates repayment of interest on loan to the financial institutions to the tune of ₹ 2.65 crore against which the amount of subsidy is only a sum of ₹ 35.11 lac. This exhibits that the object of subsidy given to the assessee is setting up of sugar mill and the mode of discharge of subsidy is free sale of additional quota, which is meant to be utilized for the repayment of term loans taken from the financial institutions etc. In the instant case, the assessee has simply realized excess price in terms of Incentive scheme dated 10.3.1992 and there is no excess realization over and above the sanctioned realizable amount. Thus, it is manifest that the facts of the instant case are strictly governed by the judgment in the case of Ponni Sugar rather than KCP Ltd. We, therefore, overturn the impugned order on this issue. Disallowance of reserve fund for construction of Molasses Storage Tank which was credited to Reserve account after debiting the same to the Profit & Loss Account - HELD THAT:- The undisputed facts are that the assessee created Molasses reserve fund for construction of molasses storage tank by crediting a sum to this account in accordance with UP Sheera Niyantran Niyamavali. The Hon’ble Calcutta High Court in CIT vs. Upper Ganges Sugar Mills Ltd [1993 (2) TMI 22 - CALCUTTA HIGH COURT] has held that contribution towards Molasses Storage Fund is eligible for deduction as business expenditure. Similar view has been taken by the Hon’ble Madras High Court in certain decisions including CIT vs. Salem Cooperative Sugar Mills Ltd[1996 (9) TMI 40 - MADRAS HIGH COURT] - In view of several decisions taken note of by the ld. CIT(A) in the impugned order supporting the assessee’s contention, which have not been controverted by the ld. DR with any contrary decision, we are of the considered opinion that the ld. first appellate authority has taken an unimpeachable view on this issue. We, therefore, uphold the impugned order on this score. Disallowance of pre-operative expenses which were capitalized by the assessee - HELD THAT:- On a specific query, the ld. DR could not point out any direct addition made by the AO on account of the third reason and submitted that the disallowance was in support of such third reason. We are unable to find any rationale in making any disallowance for an expenditure which was admittedly capitalized by the assessee and no deduction was claimed by way of a debit to its Profit & Loss Account - AO himself has categorically noted in the assessment order that the pre-operative expenses were capitalized. Once the assessee has not claimed any deduction for a particular amount and capitalized the same, there can be no reason for making any disallowance of the such amount. In our considered opinion, the ld. CIT(A) was justified in deleting this addition. Excise duty (sugar), Cess duty (sugar) and Purchase tax unpaid - HELD THAT:- . AR has pointed out that the assessee had itself made disallowance of these three amounts in the computation of income, which was the reason for the AO in not making such addition. Thus all the four reasons taken note of by the AO before issuing notice u/s 148 are non-existent and, resultantly, there is no question of making any other addition. We, therefore, set aside the assessment order passed by the AO u/s 147 read with section 143(3) of the Act. As such, there is no need to discuss other additions made by the AO which have been upheld or deleted in the first appeal. As the AO is not competent to make any other addition in the instant case, all the additions so made are liable to be deleted. - Decided in favour of assessee.
|