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2013 (2) TMI 748 - AT - Income TaxDepreciation Calculation Method under Rule 5 (1A) - AO observed that in an assessment year the depreciation was allowable by following the straight line method while the assessee had claimed it on WDV method. The AO observed that there is no deviation in the facts or position in law, therefore, he disallowed the difference between the depreciation calculated under the straight line method and under WDV method. CIT had deleted the addition made by the AO HELD THAT:- As per second proviso to rule 5(1A) the assessee may instead of depreciation specified in appendix 1A his option be allowed depreciation under sub rule read with appendix 1A on WDV basis, if such option was exercised by the assessee before the due date for furnishing return of income u/s 139(1) of the Act for the assessment year or for the relevant to the previous year in which the assessee begin to generate power whichever is later. Disallowance of Commission charges - Fictitious Payee - The appellant had paid commission charges and the AO on the basis of earlier year disallowance had made the disallowance this year also on the basis of finding by AO that the payee was not in existence HELD THAT:- Payments were made in view of agreement which was duly furnished before AO and the terms and conditions of agreement duly spelt out the services to be rendered by payee and commission to be paid to it. The concern was registered with the Sales Tax Department and was liable to pay local taxes. Assessee had discharged its onus of proving regarding genuineness of transaction, identity of payee and services rendered by the payee. Therefore, payment was for legitimate business purposes - Decision in favour of Assessee. Disallowance of Aircraft Expenditure/ Non business Purposes - Assessee had taken air craft on lease and used it for some purpose. He claimed that such expenditure was made for business purposes. Thus, should be disallowed - HELD THAT:- Expenditure relatable to trips made for non business purposes could only be disallowed by the Department. The AO had specifically pointed out journeys undertaken by the assessee which were not for business purposes and assessee neither before the AO nor before Ld CIT(A) was able to produce any evidence to claim that air journeys were undertaken for business purposes. Thus, such expenditure can't be allowed - Decision against Assessee. Taxability of Subsidy - Revenue or Capital in Nature? - Subsidy was received by the assessee on account of exemption from sales tax, entry tax and electricity duty. AO held the nature of subsidy as revenue on the basis that subsidy in the form of non payment of sales tax, entry tax and electricity duty were production related incentives and none of the above items tantamount to acquisition of capital assets - HELD THAT:- We find that the decision in the case of SAHNEY STEEL AND PRESS WORKS LIMITED AND OTHERS VERSUS COMMISSIONER OF INCOME-TAX [1997 (9) TMI 3 - SUPREME COURT] fits into the facts of present case, where the basic tests to be applied for judging the character of subsidy and that test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. Therefore, refund of sales tax or relief of electricity charges cannot be treated as an aid to setting up of an industry of the assessee and therefore cannot be said to be of capital receipt. Thus, amount of subsidy is revenue in nature. Export Profit u/s 80HHC - Calculation of Tax Payable u/s 115JB - Additional ground was raised by assessee in view of judgement AJANTA PHARMA LTD. VERSUS COMMISSIONER OF INCOME TAX-9, MUMBAI [2010 (9) TMI 8 - SUPREME COURT], to claim full amount of export profit u/s 80HHC HELD THAT:- We find that Hon'ble Court in the case of Ajanta Pharma Ltd. v. CIT, has held that provisions of section 115JB was a self contained code and consequently book profit under that section has to be calculated after allowing 100% of export profit as calculated in accordance with formula given in sub section (3) of section 80HHC. Therefore, in the interest of justice, we admit the same and direct the Assessing Officer to recalculate the book profit u/s 115JB after allowing 100% of export profit as calculated in accordance with the provisions of section 80HHC - Matter Restored Back.
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