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2013 (10) TMI 16 - HC - Income TaxAddition made for undervaluation of closing stock - change in method of accounting – Held that:- Changed method of accounting was more scientific and did not result any evasion of payment of tax. The question was considered and decided by the Madras High Court in CIT vs. Carborandum Universal Ltd [1983 (8) TMI 39 - MADRAS High Court] – Decided against the Revenue. Income of the assessee on account of incentives subsidy received – Subsidy received on free sale of sugar – Held that:- Reliance has been placed upon the judgment in the case of Commissioner of Income Tax v. Ponni Sugars and Chemicals Ltd [2008 (9) TMI 14 - SUPREME COURT] in which it was held in respect of same scheme namely the Sugar Incentive Scheme based on recommendation of Sampat Committee that where the object of the assistance under the subsidy scheme is to enable the assessee to set up a new unit or to expand an existing unit, then the receipt of the subsidy would be on capital account – In the present case, assesee was allowed additional free sale of sugar quota under the scheme for setting up or expanding the sugar unit. The benefit was given to the sugar mills to meet the capital outlay in setting up or expanding the sugar mills – Decided against the Revenue. Pre-operative trial run expenses, a revenue expense of capital expenditure – Held that:- Reliance has been placed upon the judgment in the case of CIT vs Kanoria General Dealers P. Ltd [1986 (1) TMI 86 - CALCUTTA High Court] – In the present case, pre-operation expenses have been detailed in the material produced before the AO, in respect to Co-Generation Plant, Rauzagaon; Oxalic Acid, Dhampur and thus the pre-operational expenses, were revenue expenses and not capital expenses. These expenses were actually claimed as revenue expenses in the computation with the return and were to be allowed as revenue expenses – Decided against the Revenue. Disallowance on account of convertible premium notes - Expenditure on Convertible Premium Notes (CPM) was spread over the period of life on CPM for six years. The year of payment was six years and on which the expenditure was incurred by paying maturity value – Held that:- Expenditure in this case spread over the period for which the discount has been paid – Reliance has been placed upon the judgment in Madras Industrial Investment Corpn. Ltd v. Commissioner of Income Tax [1997 (4) TMI 5 - SUPREME Court] is applicable and that the expenditure had to be spread out for a period of six years, and was not allowable in the years 1997-98 and 1998-99 alone – Decided in favor of Revenue. Expenses for technical know-how as revenue expenditure instead of capital expenditure – Held that:- In the present case the assessee is engaged in manufacture and sale of sugar. The Barabanki unit was set up in the same line of business from the funds borrowed by the company. There is no material to contend that the new unit was under different management or that there is no unity of control between the assessee in respect of business of manufacture and selling sugar and the business of manufacture and sale of sugar in the new unit at Barabanki – Decided against the Revenue.
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