TMI Blog2008 (3) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... tly from the cultivator and partly from the Government subsidy as per the schemes of the State Government and therefore subsidy is the part of the selling price and essentially has to be -treated as a trading receipt though the same is given to the cultivator but received by the assessee manufacturer/seller and is derived from the eligible undertaking. The learned CIT(A) is not justified in disallowing the claim of the assessee under s. 80JJA of the Act. Therefore the AO is directed to allow the claim under s. 80JJA of the Act. Thus ground No. 1 of the assessee is allowed. Disallowance on expenses - personal use of proprietor - HELD THAT:- The findings of the AO that there is a personal element in the expenses claimed in the absence of log book of cars, call registers of telephone and vouchers for car repairs, local conveyance, travelling and entertainment are not properly maintained and some vouchers are self-made. Non-business purpose in the expenses claimed in view of the deficiencies pointed out by the AO, cannot be ruled out. The disallowance appears to be on the higher and therefore the AO is directed to restrict the disallowance at 10 per cent of the expenses claimed. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed the action of the Assessing Officer by observing as under : I have considered the facts of the case and arguments taken by Sh. Gupta quite carefully. It is an undisputed fact that the sale value, as per invoice to the customer, does not include the subsidy received or receivable from the Agricultural Department. It is also factually noticed that neither in the sale invoice to the customer nor in the simultaneous sale invoice, there is any mention of part of the sale price receivable from the Agricultural Department. It is true that the Government of Rajasthan, as per its scheme with a view to popularise the use of bio-fertiliser, had floated a scheme to give subsidy to the manufacturer/seller so that, at the subsidised/reduced rate, such bio fertiliser may be made available to the ultimate grower /agriculturists. However, the language of section 80JJA is quite clear according to which such deduction has to be allowed only on such profit and gains, which are derived from the said specified business. Certainly, the receipt of subsidy from the Government of Rajasthan cannot be said as derived from the specified business. It may be stated as attributable to such business act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derived from the business of the bio-fertilisers and therefore was not entitled to deduction under section 80JJA of the Act to that extent. Learned counsel for the assessee argued that the explanation of the assessee in this regard was made through letters dated November 9, 2005 and November 14, 2005 (paper book 10-11) and also reproduced at pages 2 and 3 of the Assessing Officer. It was submitted that such a subsidy was in fact and in law not a subsidy to the manufacturer-seller but it was a subsidy to the cultivator. The Government of India and the Government of Rajasthan were interested in encouraging the use of bio-fertilisers more and more as against the chemical fertiliser and therefore a subsidy was given to the cultivator. Accordingly the realisation of the selling price, was partly from the cultivator and partly from the Government subsidy. A procedure was laid down by the State Government under which, the assessee had to receive a part of the sale price from the State Government. Thus, the subsidy was only a part of the selling price and hence was a trading receipt. Copies of the scheme of the Government of Rajasthan together with the certificate of Additional Director o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee cannot disentitle the claim of the assessee. The entries in the books of account are not decisive of the facts of the case and true character of the transaction and rights and obligations of the parties, as decided by the hon'ble Supreme Court in the cases of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 and Sutlej Cotton Mills Ltd. v. CIT [1979] 116 ITR 1. The intention of the assessee for getting the accounts audited under section 44AB when its total turnover including the subsidy was Rs. 58,25,430. 6. Learned counsel for the assessee Mr. Mahendra Gargieya, advocate, has produced the copies of the original bills for our perusal and has demonstrated that the assessee prepares two bills, i.e., one in the name of cultivator and other in the name of the State Government and both the bills are prepared separately. This is the part of the maximum retail price and no reduction is permitted by the State Government, as per the Government procedure and the requirement. On perusal of the bills, we are of the view that the entire amount received was nothing but the sales price which the assessee was entitled to realise as sales proceeds, i.e., the assessee reali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive that the schemes nowhere says that because of the subsidy, the sale price be reduced by the amount of subsidy and the assessee be restricted to sell the product only upto the permissible sales price. 9. We find substance in the arguments of the learned authorised representative that on a close reading of sub-section (1) of section 80-IA, it becomes palpable that the deduction is to be allowed on the profits and gains derived from any business of an industrial undertaking, it shows that the admissibility is with reference to profits and gains derived from any business of an industrial undertaking. Thus it becomes vivid that if the condition of industrial undertaking are satisfied, then the assessee becomes entitled to deduction in respect of profits of any business of such industrial undertaking. Any business may be that of manufacturing or processing or otherwise. More or less the same phraseology continues under section 80JJA as is under section 80-IA. At this juncture, it is pertinent to note that the Legislature has set the scope of deduction under section 80JJA by using the appropriate phraseology, when seen in contrast with that used in section 80HH/ section 80-I. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the consumption of bio-fertilizers as against chemical fertilizers. Once the underlying purpose of an enactment is served, there is no reason why the deduction should be restricted on one pretext or other. In CIT v. Krishna Copper and Steel Rolling Mills [1992] 193 ITR 281 (SC), which has held for a liberal and broader interpretation of an incentive provision under section 80J. Recently in CIT v. Baby Marine Exports [2007] 290 ITR 323, the court strongly advocated for a liberal interpretation at page 323 vide paragraph 31. It was held that section 80HHC was incorporated with the object of granting incentive to earners of foreign exchange. This court in Sea Pearl Industries v. CIT [2001] 247 ITR 578; [2001] 2 SCC 33 also observed that the object of section 80HHC is to grant incentive to earners of foreign exchange, in IPCA Laboratory Ltd. v. Deputy CIT [2004] 266 ITR 521 (SC) this court has taken the same view. This court in the said judgment observed that section 80HHC has been incorporated with a view to provide incentive to export houses and this section must receive liberal interpretation . Hence, deductions so claimed may be allowed. 10. On perusal of facts and decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Depreciation on car 57,645 20 % 11,529 5. Telephone expenses 47,417 20 % 9,483 6. Travelling expenses 79,043 20 % 15,809 7. Entertainment expenses 32,739 20 % 6,548 Hence, a sum of Rs. 59,393 out of the above expenses of Rs. 2,96,961 claimed in the profit and loss account is disallowed as element of per sonal use in these expenses cannot be ruled out in the absence of log book of cars and call registers of telephone. Further vouchers of car repairs, local conveyance, travelling and entertainment are not properly maintained some voucher related there expenses are self-made. I therefore add a sum of Rs. 59,393 to the income of the assessee. 13. The learned Commissioner of Income-tax (Appeals) confirmed the action of the Assessing Officer. 14. We have perused the facts of the case. The findings of the Assessing Officer that there is a personal elemen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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