Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2023 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (4) TMI 1260 - AT - Income TaxCapital subsidy received from Haryana Govt. - Deduction from the cost of assets under Explanation 10 to section 43(1) - whether subsidy provided is not for acquiring the assets but for encouraging setting up of a new unit? - HELD THAT:- Hon’ble Supreme Court in P.J. Chemicals Ltd. [1994 (9) TMI 1 - SUPREME COURT] has laid down the guidelines /yardstick to find the answer to the vexed question of whether the subsidy received by an assessee is to be reduced from the actual cost of assets or not for the purpose of allowing depreciation. The cost of assets acquired by the assessee to set up new unit was met by it out of its own resources years before the subsidy was even sanctioned by the Govt. of Haryana on 29.11.2006. The subsidy was, therefore, neither used nor utilized for acquiring the assets. If that be so it cannot be said that the actual cost was directly or indirectly met by the grant of subsidy as alleged by the AO/CIT(A). The factual position is that the total amount of investment in plant and machinery made by the assessee for setting up new unit was only a measure for determining the amount of subsidy. Taking note of the amendment in Section 2(24) by insertion of clause (Xviii) w.e.f. 01.04.2016 by the Finance Act, 2015 the Tribunal held that the amendment is effective from AY 2016-17 and hence will not apply to a case prior thereto. Since the case at hand pertains to AY 2011-12, the above amended law will not apply to it. We observe that the Pr. CIT’s order u/s 264 in the case of the assessee pertaining to AY 2007-08 to 2010- 11 wherein he held that the subsidy was liable to be reduced from the cost of the assets in terms of Explanation to section 43 stands set aside by the decision of Hon’ble Delhi High Court SUNBEAM AUTO PRIVATE LIMITED [2017 (12) TMI 475 - DELHI HIGH COURT] We decide ground in favour of the assessee and hold that the impugned capital subsidy cannot be deducted from the cost of assets under Explanation 10 to section 43(1) of the Act. TDS u/s 195 - disallowance u/s 40(a)(i) - non deduction of TDS on ‘foreign commission’ - commission paid to the parties resident of USA for sale of its products - AO held that the services provided by the said parties fall within the purview of Fees for Technical Services (“FTS”) as per section 9(1)(vii) and Fees for Included Services (“FIS”) as per Article 12(4) of India-USA Double Taxation Avoidance Agreement (“India-USA DTAA”) - HELD THAT:- If the services are consumed without leaving anything tangible with the payer for use in future, it will not be ‘make available’ of the technical services notwithstanding the fact that its benefit flowed directly to the payer. In Mahindra and Mahindra Ltd. [2009 (4) TMI 207 - ITAT BOMBAY-H] it has been held that where the payer only obtained the benefit from the services, but did not get any technical knowledge experience or skill in its possession for future use, it cannot be said that technical know-how was made available. Before the Ld. AO/CIT(A) the assessee submitted that no information in the nature of technical, managerial or consultancy services had been provided by any of the two agents to the assessee. No such information has been brought on record by the Revenue. The assessee has been asserting that these foreign agents were appointed for arranging of export sales and recovery of payments on commission basis. The agreements only stipulate that the foreign agents who have the knowledge about the market will assist the assessee for making presentation to potential customer, fixing the rates and attending the complaints and any communication with the customers. No element of decision making was involved in the services rendered by the foreign agents. All decision making process in respect of sales rested with the assessee. In Panolfa Autoelektrik Ltd. [2014 (9) TMI 706 - DELHI HIGH COURT] held that commission paid by the assessee to its foreign agent for arranging of export sales and recovery of payment could not regarded as fees for technical services under section 9(1)(vii) of the Act. The decision (supra) squarely applies to the facts of the assessee’s case. Principle of consistency - Record shows that the assessee has been paying commission to these two agents under the same agreement since AY 2004-05 and the Ld. AO has consistently been allowing the payment of foreign commission in assessments framed under section 143(3) of the Act for AY 2005-06 to 2010- 11. It is only in the AY 2011-12 that a different stand on the same facts have been taken. We are conscious that the principle of estoppel and resjudicata do not have any application in income tax proceedings, since each assessment year is a separate unit. However, it is necessary that consistency should be maintained when the facts are not different. Thus disallowance u/s 40(a)(i) made by the Ld. AO and confirmed by the Ld. CIT(A) is not sustainable - Decided in favour of assessee.
|