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2016 (11) TMI 1721 - AT - Income TaxExclusion of subsidy from the deduction claimed u/s. 80IA - assessee has received subsidy from the State Government in respect of the Capital Assets acquired on or before 31.03.2003 - very purpose of sanction of capital subsidy was to meet the project cost to set up Solid Waste Disposal Project and complete the project - HELD THAT:- As relying on case MEGHALAYA STEELS LTD [2016 (3) TMI 375 - SUPREME COURT] the subsidy received from the State Government is nothing but the recoupment of the cost and hence eligible for the deduction u/s. 80IA of the Act. Common Grievance No. 1 is accordingly allowed. Exclusion of interest income from the deduction claimed u/s. 80IA - HELD THAT:- A perusal of the financial statements vis-à-vis the computation of income shows that the only head of income shown in the return is “profits and gains of business or profession”.A.O. has also proceeded by computing the assessed income taking the figure from “profits and gains of business or profession”. This means that the A.O. has admittedly accepted the miscellaneous income under head “profits and gains of business”. As explained that the appellant-company had set aside the amount for expenditures to be incurred for inherent cost relating to the maintenance of the pits. Therefore, the interest income has a direct nexus with the business activity of the assessee, therefore eligible for deduction u/s. 80IA. As in the case of Empire Pumps Pvt. Ltd. [2014 (11) TMI 563 - GUJARAT HIGH COURT] held that interest income is held to be eligible for deduction u/s. 80IA. Disallowance of provision for Pit Covering Expenses - assessee explained that the liability to incur expenditure on pit covering arises as soon as the pits were dug and the pits are required to be covered after each pit is completely filled as per guidelines issued by GPCB - A.O. denied the contention of the assessee on the ground that the pit is closed immediately and, therefore, the difference between the provision and the amount actually spent could not be explained properly - HELD THAT:- We direct the A.O. to allow the provision for pit covering expenses in totality. Computation of book profit u/s. 115JB - Hon’ble Supreme Court in the case of Appollo Tyres Ltd. [2002 (5) TMI 5 - SUPREME COURT] held that “while determining the “book profits” u/s.115J, the Assessing Officer could not recompute the profits in the profit and loss account by excluding provisions made for arrears of depreciation”. Assessing Officer has to accept the authenticity of the accounts with reference to the provisions of the Companies Act, which obligate the company to maintain its account in a manner provided by that Act and the same to be scrutinized and certified by statutory auditors and approved by the company in general meeting and thereafter to be filed before the Registrar of companies who has a statutory obligation also to examine and be satisfied that the accounts of the company are maintained in accordance with the recruitments of the Companies Act. Sub-section (1A) of section 115J does not empower the Assessing Officer to embark upon a fresh enquiry in regard to the entries made in the books of account of the company. Disallowance of Post Closure Expenses - HELD THAT:- As in the light of the stipulation of Gujarat Pollution Control Board and the Scientific Working we direct the A.O. to allow the post closure expenses. Common grievance is allowed. Disallowance of deduction u/s. 80IA on account of land and pit construction expenses - HELD THAT:- As the company is in the new line of business, there is no established practice of determining exact expenses incurred on the process of treatment of solid waste. Accordingly, in the beginning year, the company has estimated expenses in relation to the treatment of Solid Waste Management by applying available best parameters and accordingly charged of the expenses to Profit and Loss account of the respective years. Gradually, the company developed scientific method of estimation of expenses and accordingly the company has revised its working to arrive with the exact expenses. As the revised computation is scientific. We further find that the expenditures claimed in the earlier years were allowed by the revenue. Therefore, write back of the same has a direct nexus with the business activity of the assessee. Hence, the assessee is eligible for the deduction u/s. 80IA of the Act. Ground no. 1 is accordingly allowed.
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