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2020 (5) TMI 178 - AT - Income TaxCapital grant so received from the Central and State Government - absence of proper reconciliation of utilized grant and when utilized grant was more than 70% of capital cost - HELD THAT:- Capital grant is utilized for purchase of buses and other fixed assets for which it has been granted, the same would be in nature of capital grant and not chargeable to tax. Where the capital grant is utilised for meeting the operational expenditure of the assessee company, the AO is well within his right and jurisdiction to examine the taxability thereof as to why the same should not be treated as revenue receipt and brought to tax. In the present case, as we have noted above, the adequate information is not available on record and we therefore deem it appropriate to remand the matter back to the file of the AO to examine the same afresh after providing reasonable opportunity to the assessee company. Further, the Assessing Officer shall be at liberty to examine the claim of the depreciation on the assets so purchased out of the capital grant after considering the provisions of explanation 10 to section 43(1) of the Act. In the result, the ground of the appeal is allowed for statistical purposes. Disallowance u/s 40A(3) in respect of expenses being set off by RSRTC - HELD THAT:- Where there is a violation of terms of agreement entered into between RSRTC and the assessee company, the same is a subject matter of contractual dispute which has been highlighted by the auditors in their audit report and it is for the parties to the dispute and the appropriate authorities to take note of the same. How the same has effected the reporting of revenues in the financial statements and offering the same to tax in the return of income has not been stated at all by the AO. Therefore, where there is no finding by the Assessing officer that the revenue so collected has not been offered to tax, there cannot be any basis for making addition in this regard. As it is emerging from the records, RSRTC incurs the expenditure on behalf of the assessee company out of such revenue collection in cash and then, remits the balance amount to the assessee company. On the expenditure so incurred by RSRTC on behalf of the assessee company, the latter has submitted the details of TDS deducted and deposited. CIT(A) has returned a finding that “No cash payment in contravention of Section 40A(3) by the appellant has been brought on record by the AO. During the course of hearing, the ld DR has not brought on record anything which controverts such findings. Therefore, where no finding has been given by the Assessing officer in terms of any specific violation of provisions of section 40A(3) read with Rule 6DD, we donot see any infirmity in the action of the ld CIT(A) is deleting the said disallowance. Disallowance u/s 43B - Interest liability had not crystallized in the previous year relevant to A.Y. 2012-13 - HELD THAT:- What needs to be seen is whether the interest liability has crystallized during the year or not. Only where it is held that the interest liability has crystallized during the year, the interest expense can be claimed and thereafter, the question of applicability of section 43B arises for consideration. The provisions of section 43B are not in the nature of enabling provisions but are in the nature of disabiling provisions in the sense that firstly, it needs to be determined that the expense should pertain to the relevant financial year in respect of which the assessee has incurred the liability and thereafter, unless such liability is discharged by actual payment, such liability cannot be allowed but will not be allowed in the year of actual payment. In the instant case, the assessee company has not established that the liability towards the interest has crystallized during the year, hence, we donot see any infirmity in the findings of the ld CIT(A) and the same is hereby confirmed.
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