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2019 (4) TMI 1285 - AT - Income TaxTaxability of sale tax subsidy/incentive - assessee had was not deposited and claimed the amount of incentive as a capital receipt, which was received in the form of sales tax remission from the West Bengal Government under the "West Bengal Incentive Scheme. 1999" - AO rejected the claim on the premise that the subsidy received was revenue in nature and taxable u/s. 28(iv) - AO observed that the remission of sales tax amounted to cessation of trading liability and hence the provisions of Section 41 also attracted - HELD THAT:- Subsidy/incentive was not given to the assessee for the purpose of assisting in carrying on business or trade by way of refund of sales tax nor was there any cessation of liability on account of payment of sales tax attracting the provisions of section 41(1) of the Act. We note that the method of calculation of incentive/subsidy is collection of sales tax but the purpose of giving the incentive was expansion of industries in the backward areas of the State of West Bengal. Since the assessee was not given the incentive for facilitating its business or trade, the amount received by the assessee on account of sales tax remission, was held to be capital in nature. - Decided against revenue Disallowance on expenditure of Repairs & Maintenance to the Plant & Machinery u/s.37(1) - provision of expenses as on end of FY - no bills and vouchers were produced - AO observed that he could not also verify whether Section 40(a)(ia) had any application - HELD THAT:- On 07.02.2014, the AO had required the assessee to furnish its explanation as to why the repairs expenses should not be disallowed on the ground of being capital in nature. It thus appeared that even by AO's own admission he had required the assessee to explain the nature of the expenditure i.e. whether capital or revenue. We note that nowhere the AO stated that he had required the assessee to produce original bills & vouchers but had required the assessee to explain the nature of expenditure, whether these are being revenue or capital. Hence, disallowance on adhoc basis without any cogent reasons is not justifiable We note that in the accounting parlance, unpaid expenditure for which liability has accrued is described as ‘provision’ under mercantile system of accounting. Copies of the bills produced by assessee during the assessment stage for verification also established that the amount shown as provision for repairs & maintenance related to services which were performed for and upto March 2010 and therefore under the mercantile system of accounting, the assessee was entitled to claim deduction since expenditure pertained to the previous year ending on 31.03.2010. Therefore, we note that there was no justification for the AO to disallow - Decided against revenue. Allowability of additional depreciation u/s 32(1 )(iia) - allegation that Assessee is not engaged in manufacturing activity in terms of section 2(29BA) - HELD THAT:- In the process of blending of butane & propane which is carried out in scientific manner with use and aid of sophisticated plant & machinery, transformation is brought about and entirely new product by the name LPG is obtained. The said object or product i.e. LPG is known to the trade and commerce by its separate distinctive commercial name and it has a different character and its end use is also different. Accordingly provisions of Section 2(29BA) of the Act and also the ratios laid down by the Supreme Court in several decisions, we have no hesitation in holding that the assessee was engaged in manufacture or production of an article or thing and therefore it was eligible for claiming additional depreciation u/s 32(1 )(iia) - Decided against revenue. TDS u/s 194I - Disallowance u/s. 40(a)(ia) - failure to deduct the tax on total payment on account of rent paid - HELD THAT:- Admittedly, the assessee had paid rent of ₹ 2,61,600/ in respect of a property at Gariahat Road (South), Kolkata which was owned by three persons equally. Since the property in question was owned by three persons jointly, in terms of Section 27 of the Act: the owners did not constitute an AOP but they had to be regarded as coowners of the house property, each having onethird defined share or rights in the property. Accordingly the assessee had paid rent of ₹ 87,204/ to each of the three coowners namely. Mr. N.R Dhar. Mrs. Ruby Dhar and Mr. Sandip Dhar respectively. We note that since the rent paid in respect of one property does not exceed ₹ 1,80,000/ annually, hence provisions of Section 1941 of the Act does not apply to the assesee under consideration, hence ld CIT(A) has rightly deleted the addition. - Decided against revenue.
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