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2022 (1) TMI 731 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - Mandation of recording of satisfaction - HELD THAT:- We find that the Assessing Officer has nowhere recorded his satisfaction as to why the assessee’s claim that no expenditure has been incurred for earning of exempt income especially when majority of dividend income has come from holding company and has mechanically proceeded to make the disallowance under Rule 8D(2)(iii). Now it is well settled proposition that recording of satisfaction as contemplated in Section 14A(2) of the Act is a condition precedent for determination of the amount of expenditure for earning the exempt income as formulated - See H.T. MEDIA LIMITED [2017 (8) TMI 962 - DELHI HIGH COURT] and MAXOPP INVESTMENT LTD. [2018 (3) TMI 805 - SUPREME COURT]. Since no satisfaction has been recorded by the Assessing Officer as per the mandate of section 14A (2), then no disallowance under Section 14A can be made and accordingly, disallowance worked out by the Assessing Officer under Rule 8D is deleted - Decided in favour of assessee Eligibility for deduction u/s 80-IB - nature of subsidy has treated the incentive by way of central excise refund (generally called CENVAT credits) in relation to the Jammu unit - HELD THAT:- The refund of CENVAT credit on the facts of the present case is capital subsidy in view of the principle laid down by the Hon’ble apex court in case of Shree Balaji Alloys [2016 (4) TMI 1161 - SC ORDER] and also the judgement of the Tribunal in the group concern of the assessee as cited Montage Enterprises Pvt. Ltd [2018 (7) TMI 209 - ITAT DELHI] and Ultimate Flexipack Ltd. [2019 (3) TMI 1298 - ITAT DELHI] MAT computation u/s 115JB - Since we have already held that the CENVAT credit, as received by the appellant, in accordance with the incentive scheme for J & K as formulated by the Central Government is a capital receipt not liable to tax, accordingly the same cannot be part of book profit under Section 115JB also Characterization of receipts - taxability of receipts - VAT subsidy being capital in nature - HELD THAT:- For the year under consideration the assessee has placed on record relevant assessment passed by the authorities under the Uttar Pradesh VAT Act, 2008 where the refund has been worked out at ₹ 19,12,31,759/- The nature of the incentive provided under the Uttar Pradesh Industrial Scheme by way of giving exemption was refund of VAT has to be seen with reference to the object and purposes for which Uttar Pradesh Industrial Scheme was framed. A perusal of the salient features as reproduced hereinabove it is quite evident that incentive under the Scheme has been provided for taxing capital investment and the State for the purpose of industrialization and setting up of new industries to generate more employment opportunities. The refund now VAT as given to the industrial undertakings only for the purpose of fulfilling the best industrialization of the State by establishment of new industries. Thus, incentive provided under the Uttar Pradesh Industrial Scheme is nothing, but capital subsidy not liable to be taxed - The VAT subsidy is a capital receipt and hence not liable for tax and it cannot be treated as revenue receipt liable for tax. Accordingly, the additional ground raised by the assessee is allowed.
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