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2017 (3) TMI 1051 - AT - Income TaxAddition on account on account of interest subsidy and excise refund - treated as capital receipt - Held that:- As decided in Shree Balaji Alloys Vs. Commissioner of Income Tax [2011 (1) TMI 394 - Jammu and Kashmir High Court] held that a close reading of the Office Memorandum and the amendments introduced thereto with para 3 of Central Excise Notification Nos. 56 and 57, dt. 11th Nov., 2002, makes it amply clear that the generation of employment so contemplated was not casual or temporary but of permanent nature and the paramount consideration of the Central Government in providing the incentives to new industrial units and substantial expansion of the existing units was generation of employment through acceleration of industrial development in public interest. Such incentives, designed to achieve a public purpose, cannot be construed as production or operational incentives for the benefit of assessees alone. It was further held that making of additional provision in the scheme that the incentives would be available to the eligible industrial units from the date of commencement of commercial production and that these are not to be allowed for creation of new assets cannot be viewed in isolation to treat the incentives as production incentives. Such provisions are intended to ensure that the incentives are made available only to the bona fide industrial units so that the larger public interest of eradicating unemployment is achieved. The Court finally concluded that the incentives received by way of excise duty refund and interest subsidy are capital receipts in the hands of the assessee and therefore not chargeable to tax. The ratio laid down in the aforesaid decision is squarely applicable to the very same subsidy received under the very same scheme of State of Jammu & Kashmir by the Assessee in the present case. We therefore find no grounds to interfere with the conclusions of the CIT(A). The grievance of the revenue in ground No.2 regarding the revised return of income is not valid and has rightly held by the CIT(A) the said revised return of income was valid u/s.139(5) of the Act and was acted upon by the AO. - Decided in favour of assessee Excluding the subsidies in question from computation of book profit u/s 115JB - Held that:- The admitted factual and legal position in the present case is that subsidies in question is not in the nature of income. Therefore they cannot be regarded as income even for the purpose of book profits u/s.115JB of the Act though credited in the profit and loss account and have to be excluded for arriving at the book profits u/s.115JB of the Act. We hold accordingly and confirm the order of the CIT(A) in this regard. In light of the aforesaid discussion, we are of the view that the subsidies in question should be excluded for the purpose of determination of book profits u/s.115JB of the Act. We hold accordingly and allow Gr.raised by the Assessee. Deduction under section 80IB - amount of Lab Subsidy credited to the Profit & Loss Account - Held that:- As can be seen from the grounds of appeal of the Assessee, the only grievance projected by the Assessee is that there should not be double exclusion of the sum of ₹ 1,50,036/- as the Assessee while computing eligible deduction u/s.80IB of the Act has already reduced this sum. We are of the view that it would be just and appropriate to direct the AO to consider the claim of the Assessee in this regard and if the contention of the Assessee is found correct, the AO shall give the required relief. Addition made u/s 14A - Held that:- Hon’ble ITAT Kolkata in the case of REI Agro Ltd. Vs. DCIT (2013 (9) TMI 156 - ITAT KOLKATA) has held that it is only the investments which yields dividend during the previous year that has to be considered while adopting the average value of investments for the purpose of Rule 8D(2)(ii) & (iii) of the Rules. In the light of the admitted factual position that the assessee had earned dividend income of only ₹ 8,440/- during the previous year, we are of the view that there can be no disallowance u/s 14A of the Act of any sum beyond ₹ 8,440/-. Accordingly the addition made u/s 14A of the Act is directed to be restricted to the extent of dividend income of ₹ 8,440/-.
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