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2014 (9) TMI 131 - AT - Income TaxDeduction on sales tax entitlement from windmill – Sales Tax Entitlement as Capital Receipt or Revenue Receipt - Held that:- Following the decision in M/s. Jivraj Tea & Industries Ltd. Versus The ACIT, Central Circle-2, Surat [2014 (1) TMI 234 - ITAT AHMEDABAD] - The scheme was framed as a part of Government's initiative to encourage modernization of existing industries in underdeveloped areas - The main purpose of the scheme was to accelerate the industrial development and to disperse industries to under-developed areas as well as to provide additional employment - The scheme was primarily concerned with the modernization of the existing industries - It was not a scheme either for development of new industries in specified areas, or for mere expansion of the existing production capacities of the industries - The main purpose of the resolution was to modernize industries, which ordinarily would come at a considerable cost, particularly when such industries were located in under-developed areas - The industries will find it difficult without Government's incentive to undertake large-scale modernization with the use of modern technology.the benefit, though computed in terms of the Sales Tax liability in the hands of the recipient, the same was not mean to give any benefit on day-to-day functioning of the business, or for making the industry more profitable - The principle aim of the scheme was to cover the capital outlay already made by the assessee in undertaking special modernization of its existing industry – the matter is remitted back for fresh adjudication – Decided in favour of assessee. Deduction u/s 80IA - Profits from electricity generation from wind mill – Held that:- Following the decision in M/s. Jivraj Tea & Industries Ltd. Versus The ACIT, Central Circle-2, Surat [2014 (1) TMI 234 - ITAT AHMEDABAD] - in all the appeals under consideration the initial year chosen by the assessee for claiming deduction is after 1-4-2000 when the amended provision of section 80IA was applicable - it is a non- obstante clause which overrides the other provisions of the Act and it is for the purpose of determining the quantum of deduction under section 80IA, for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year to be computed as if the eligible business is the only source of income - the fiction created is that the eligible business is the only source of income and the deduction would be allowed from the initial assessment year or any subsequent assessment year - losses incurred by the assessee were already set off and adjusted against the profits of the earlier years. The Tribunal has not erred in holding that there was no rectification possible u/s 80-I for reasons somewhat different from those which prevailed with the Tribunal - There was no carry forward of allowable deductions under the head depreciation or development rebate which needed to be absorbed against the income of the current year – re-computation of income for the purpose of computing permissible deduction u/s 80-I for the new industrial undertaking was not required in the present case - the assessee has not suffered any loss in the year - no brought forward loss or depreciation could be reduced for determining the amount in which the deduction is to be allowed u/s. 80IA of the Act – Decided in favour of assessee. Various expenses u/s 14A disallowed – Held that:- The assessee received exempt dividend income - The AO was of the opinion that expenditure incurred for earning the exempt dividend income was not allowable to the assessee and the assessee has not disallowed any expenditure towards the earning of the exempted dividend income, he by invoking the provisions of Section 14A computed expenditure attributable to the earning of exempt dividend income under Rule 8D of the Income-tax Rules and made disallowance for interest expenditure and administrative expenses – relying upon Commissioner of Income Tax II Versus Hitachi Home And Life Solutions (I) Ltd. [2013 (7) TMI 359 - GUJARAT HIGH COURT] - no disallowance towards interest expenditure incurred for earning exempt income can be made - disallowance u/s. 14A read with Rule 8D cannot exceed the exempt dividend income - the disallowance of administrative expenses is restricted to being the exempt dividend income earned by the assessee – Decided partly in favour of assessee. Disallowance u/s 40A(2)(a) – Held that:- The AO found that the assessee has purchased tea from outside parties at an average rate of 103.56/kg, whereas tea was purchased from related parties at an average rate of 127.67/kg - the AO added the difference amount paid by the assessee to related parties to the income of the assessee – relying upon M/s. Jivraj Tea & Industries Ltd. Versus The ACIT, Central Circle-2, Surat [2014 (1) TMI 234 - ITAT AHMEDABAD] - Decided against Revenue. Amount paid to sister concern disallowed u/s 40A(2)(b) – Held that:- Following the decision in M/s. Jivraj Tea & Industries Ltd. Versus The ACIT, Central Circle-2, Surat [2014 (1) TMI 234 - ITAT AHMEDABAD] - by comparing weekly average the CIT(A) found that the average price of the assessee from its associate concerns were lower than the average price of purchase from others - no material was brought on record by the Revenue to rebut the contention of the assessee that the tea which the assessee purchased from its sister concerns were in turn purchased by those sister concerns in auction from un-related parties and the price at which similar concerns sold those tea to the assessee were merely 2% higher than the auctioned price and the difference of 2% also includes actual expenses which sister concerns had to incur in the transactions - the disallowance was made on a wrong footing - the disallowance u/s 40(A)(2)(b) of the Act in its entirety – Decided in favour of assessee.
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