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TMI Blog2013 (2) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... owing the claim of Rs. 8,14,368/- as deduction under section 35(1)(iv) r.w.s. 35(2) of the Income Tax Act on scientific research, ignoring the findings of the Assessing Officer that no research work was carried out by the assessee. 3. At the threshold, we note that tax effect in this case is less than Rs. 3 lacs fixed by the CBDT for filing appeal before the tribunal. As per Instruction No. 3/2011 (F.No. 279/Misc./142/2007-ITJ) dated 09.02.2011 issued by the CBDT, the tax effect for filing appeal before the Appellate Tribunal should be more than Rs. 3 lakhs. The aforesaid instructions have been held to be applicable to all pending appeals by the Hon'ble Delhi High Court in the decisions in the cases:- (i) C.I.T. vs. M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the entire expenditure taxed as FBT cannot be taxed again by making the disallowance. The disallowance therefore needs to be struck down. ii) The Ld. Commissioner of Income Tax (A) has grossly erred in not considering the subsidy received during the year of Rs.75,000/- from the sate government against the purchase of generator in F.Y. 1996-97 as capital receipt and has further erred in directing the same to be reduced from the cost of specified asset to allow the depreciation, ignoring the judgmenet of the Hon'ble Supreme Court in C.I.T. vs. P.J. Chemicals Ltd. (1994) 121 CTR (SC) 201. The subsidy received is a non-taxable receipt in the hands of the assessee as claimed in the return and the claim of the assessee, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A), Ld. Commissioner of Income Tax (A) in the present assessment year restricted the disallowances as under:- S.No. Nature of expenditure Amount disallowed Disallowance confirmed Relief 1. Gifts and rewards 34,556/- Nil 34,556/- 2. Telephone expenses 80,000/- out of 8,63,691/- 20,000/- 60,000/- 3. Travelling expenses 1,00,000/- 20,000/- 80,000/- 4. Vehicle maintenance 1,20,000/- 20,000/- 1,00,000/- 7. Against the above additions, assessee has filed cross objection before us. 8. We have heard the rival contentions and perused the records. We find that impugned disallowances were made by the Assessing Officer on the ground that personal use of the facility cannot be ruled out. No specific defect showing that concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B. The receipt of subsidy from the state govt. has been claimed to be non-taxable and the same is not to be deducted from the cost of the assets to determine the 'actual cost' for the purposes of calculating the depreciation. In this regard we place reliance on the SC order in the case of C.I.T. vs. P.J. Chemicals Ltd. (1994) 121 CTR (SC) 201. Copy of the Supreme Court order is enclosed. The Supreme Court has held. "The expression actual cost needs to be interpreted liberally. The subsidy of the nature in question does not partake of the incidents which attract the conditions for their deductibility from actual cost. Government subsidy, it is not unreasonable to say, is an incentive not for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt is not reducing the cost of the generator set, it is duty bound to account for this receipt either income u/s. 41 or under the residuary head income from other sources in accordance the provision of section 56 of the I.T. Act. The Assessing Officer concluded that since the assessee has failed to offer this income therefore, the subsidy of Rs. 75000/-, was hereby added to the income of the assessee. 10. Upon assessee's appeal Ld. Commissioner of Income Tax (A) noted that the subsidy was a capital receipt and for purchase of the generator set, the same should go to reduce the cost of acquisition. He held that Assessing Officer is hereby directed to reduce Rs. 75000/- from the block assets (which included generator set) and allow depreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case law from the Apex court in the case of P.J. Chemicals (Supra) is also not applicable on the facts of the case. In the said case the subsidy was with reference to a percentage of capital cost, which is not the case here. 13.2 In the case of Ponni Sugar Mills and Chemicals (Supra) the Hon'ble Apex Court had held that it is the object for which subsidy is given, which determines the nature of incentive subsidy. 14. Examining the present case on the touchstone of above mentioned Apex court decision, we find that the subsidy in the case was granted by the State Government on the purchase of generator set. Hence, the same is capital subsidy and should go on to reduce the cost of asset. Hence, we do not find any infirmity in the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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