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2010 (12) TMI 955 - HC - Income TaxSubsidy received - ITAT deleted the addition by treating the Agro based subsidy received by the assessee as tax free capital receipt - assessee is engaged in manufacture of yarn - AO disallowed the claim of the assessee by holding that subsidy was granted on 27.1.1995 while operations of the assessee commenced on 16.11.1994 – Held that:- Subsidy was given for setting up of industrial unit in backward area of Haryana and was to be determined with reference to capital investment. In such a situation, the plea of the assessee was supported by the view taken by the Hon'ble Supreme Court in CIT v. Ponni Sugars and Chemicals Ltd. (2008 (9) TMI 14 - SUPREME COURT) which has been followed by the Tribunal Excess payment made to sister concern on account of purchases within the meaning of provisions of sec.40A(2) - addition on the ground that the assessee had paid higher rate to its sister concern while purchasing cotton and waste – Held that:- CIT(A) upheld the plea of the assessee that the payment was not higher than the normal rate. It was held that the goods purchased at lesser rate were of inferior quality, the details filed by the assessee showed that its sister concerns were being taxed at the same rate at which the assessee was being taxed, proving that there was no reason for the assessee to show higher rate purchases made by the assessee from its sister concerns. The assessee's sister concern had offered their income from such sales, which fact has not been disputed, AO erred in invoking the provisions of S.40A(2)and the CIT(A) has correctly deleted the disallowance, no substantial question of law arises, appeal is dismissed
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