2012 (7) TMI 406 - ITAT, DELHI

Treatment of sales tax subsidy - CIT(A) directed it to treat the sale tax subsidy as capital receipt - Held that:- Since the incentives were given for bringing about addition to necessary infrastructure in processing/developing the backward area, it would be in the nature of capital receipt not liable to tax - the purpose of granting sales tax incentive is clearly only to provide an incentive for establishment of new industries in the underdeveloped regions or to expand its existing units of the State of Maharashta. That the intention is not to increase the viability of the eligible units but to promote development of further industry and infrastructure in the region. That in the aforesaid circumstances, the exemption availed of by the assessee’s eligible units under the said notification would be a capital receipt not liable to tax.

Computation of depreciation allowance - assessee contested against reduction on proportionate basis from the written down value of the respective block of assets the sales tax subsidy received - Held that:- No linking of the subsidy received to the acquisition of asset. The subsidy in this case has been received for encouraging investment in backward area, even if computed with reference to cost of investment in fixed assets, will not be reduced from the cost of assets - the payment of subsidy is not related to the actual acquisition of assets and subsidy is granted on capital investment on land, building and machinery, then it cannot be reduced from the value of asset (WDV) - in favour of assessee.

Disallowance of software maintenance / software development expenses - Held that:- The expenditure on computer software was incurred with the view to increasing efficiency of the operations and maintenance of vital data, which was necessary for carrying on the business more efficiently. CIT(A) gave a finding that the amount involved has actually been paid towards monthly license user fee. It is neither a technology up-gradation nor a capital expenses which gives enduring benefit in subsequent years. That as per details and supporting documents provided by assessee, the said expenses are revenue in nature, hence were to be allowed fully - in favour of assessee.

Disallowance on account of brokerage and commission - Held that:- No infirmity in the finding given by the Ld. CIT(A) that the documents submitted by the assessee for the payments made to M/s Sidhi Vinayak Enterprises are bonafide and in the course of business and the disallowance made by the AO needs to be deleted - in favour of assessee.

Computing book profit u/s 115JB - CIT deleted addition on account of provisions for doubtful debts and advances being provisions for diminution in value of investment and being provisions for Gratuity - Held that:- As per sub clause (x) of clause (II) Schedule 15 of the accounts that provision for gratuity in this case has been made on the basis of actuarial valuation and the liability can be said to be ascertained, accordingly, no disallowance in this regard provision towards gratuity liability is ascertained and could not have been added back under clause (c) of Explanation u/s. 115JB - in favour of assessee.

Computing book profit under section 115JB - CIT directed the adjustment of the amount eligible for deduction under section 80HHC to be calculated after reducing unabsorbed depreciation from profits of business and not the amount of deduction calculated on the profit disclosed in the profit and loss account - Held that:- As decided in Ajanta Pharma Ltd.Vs CIT [2010 (9) TMI 8 (SC)]for computing book profit in terms of section 115JB, net profit as shown in the P&L account have to be reduced by the amount of profits eligible for deduction u/s. 80HHC and not by the amount of deduction u/s. 80HHC - in favour of assessee.

Charging interest u/s 234B, 234C and 234D - Held that:- The assessee in this case became liable for advance tax due to the retrospective amendment made by the Finance Act, 2008 - It was not possible for the assessee, at that time, to foresee the retrospective amendment, which was yet to be introduced in future, and accordingly adjust his advance tax liability. Therefore, by no stretch of imagination can it be held that, during the relevant previous year, there was any default on the part of the assessee in payment of advance tax - in favour of assessee.