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2023 (11) TMI 438 - AT - Income TaxDetermination of cost of Acquistion of assets - reduction of amount subsidy from cost - Nature of receipt - Entertainment tax collected and retained by assessee as incentive / subsidy given by state Governments on account of development of new Multiplexes in the state - capital or revenue receipt - HELD THAT:- The issue is squarely covered by the decision of the coordinate Bench A.Y. 2006-07 [2013 (8) TMI 548 - ITAT DELHI] as held that Entertainment tax subsidy was not given to meet the cost of any specific asset. Our view is further fortified by the coordinate Bench judgment in the case of Sasisri Extractions Ltd. [2008 (1) TMI 485 - ITAT VISAKHAPATNAM] in which case incentive subsidy received for setting up of new unit for manufacture of edible oils was held to be not meant to directly or Indirectly reduce the cost of any asset was linked with the capital , only because the amount of subsidy cost of assets. In view of case of Chemicals Ltd [2008 (9) TMI 14 - SUPREME COURT] ;Sasisri Extractions Ltd. [2008 (1) TMI 485 - ITAT VISAKHAPATNAM] and the department itself proposed that there was no obligation on assessee to utilize it for any specific purpose will not be hit by Explanation 10 to Sec. 43(1). We are, therefore, of the view that entertainment subsidy being for the promotion of cinema/ multiplex industry; only because the methodology adopted is to cap it to capital cost of assets will not mean to reduce the cost of asset directly or indirectly in terms of Explanation 10 to Sec. 43(1). This ground of the assessee is allowed. Nature of expenses - expenses on account of ESOP and ESPS schemes - whether is a contingent liability not allowable as revenue expenses? - HELD THAT:- We find that this issue was decided by the coordinate Bench against the assessee in [2013 (8) TMI 548 - ITAT DELHI] A.Y.2006-07 but when the matter was agitated before the Hon’ble High Court H.C set aside the issue in favour of the assessee in.. [2022 (8) TMI 1234 - DELHI HIGH COURT] held that assessee is of ESOPs is not a contingent liability but is an ascertained liability. entitled to claim deduction under the aforesaid provision if the expenditure has been incurred. The expression expenditure' will also include a loss and therefore, issuance of shares at a discount where the assessee absorbs the difference between the price at which it is issued and the market value of the shares would also be expenditure incurred for the purposes of section 37(1). Disallowance u/s.14A as per rule 8D - AO has disallowed considering all investments including those which do not yield any exempt income - HELD THAT:- We find that the assessee has computed the disallowance suo-moto as per rule 8D. On careful consideration we are of the considered view that rule 8D is not applicable for the year under consideration as held in the case of Godrez & Boyce Manufacturing Company [2017 (5) TMI 403 - SUPREME COURT] Only those investments need to be considered which give exempt income as held in the case of Caraf Builders and Constructions [2020 (1) TMI 135 - SC ORDER] , ACB India Ltd. Vs. ACIT [2015 (4) TMI 224 - DELHI HIGH COURT] - we direct the AO to delete the impugned disallowance. Disallowance of depreciation under normal provisions permitted to be adjusted in book profit u/s.115JB - HELD THAT:- As relying on Apollo Tyres [2002 (5) TMI 5 - SUPREME COURT] and Malayala Manorama Co. Ltd [2008 (4) TMI 20 - SUPREME COURT] we direct the AO not to consider the impugned disallowance of depreciation for the computation of book profit u/s. 115JB of the Act. Similar would be the fate of disallowances u/s. 14A read with rule 8D though we have deleted the same above.
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