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2015 (7) TMI 2 - ITAT PUNE

2015 (7) TMI 2 - ITAT PUNE - TMI - Claim for deduction u/s.80I/80IA rejected - Held that:- As decided the issue against the assessee as reported in Dhariwal Industries Limited. Versus Additional Commissioner Of Income-tax, Range-1, Pune(2007 (8) TMI 410 - ITAT PUNE) holding that Gutkha and Pan Masala manufactured by the assessee company is a "tobacco preparation" within the meaning of Eleventh Schedule of the Income Tax Act. Therefore, the assessee is not entitled to deduction u/s.80I/80IA of th .....

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the instant scheme are in the course of carrying on its trade more profitably, therefore, in absence of any contrary material brought to our notice against the above finding of the Tribunal, we following the decision of the Coordinate Bench of the Tribunal, uphold the order of the CIT(A) upholding the action of the AO in treating the amount received on transfer of sales tax incentive as a revenue receipt. - Decided against assessee.

Re-computing the Book Profits u/s.115-JB - Held tha .....

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e purpose of computation of book profit u/s.115JB.

Depreciation on the related assets of Hyderabad unit - disallowance of claim on the ground that assessee has not used its Plant & machinery relating to Pan masala/Gutkha establishment at Hyderabad at all during the previous year relevant to the A.Y. 2004-05 - Held that:- In the instant case although the assets were not put to use due to restraint by State Govt. due to the notification which was subsequently held to be illegal by the H .....

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ITA No.1230/PN/2010, ITA No.1267/PN/2010 - Dated:- 29-5-2015 - Sushma Chowla, JM And R. K. Panda, AM,JJ. For the Appellant : Shri P J Pardiwala For the Respondent : Shri A K Modi ORDER Per R. K. Panda, AM ITA No.489/PN/2007 filed by the assessee is directed against the order dated 04-01-2007 of the CIT(A)-I, Pune relating to Assessment Year 2003-04. ITA No.1559 and 1560/PN/2007 filed by the assessee are directed against the common order dated 20-09-2007 of the CIT(A)-I, Pune relating to Assessm .....

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ing the assessee's claim for deduction u/s.80I/80IA. 3.1 Facts of the case, in brief, are that the assessee claimed deduction of ₹ 3,18,11,789/- u/s.80I of the I.T. Act, 1961 in respect of the profits and gains derived by its Baroda unit. This is the 10th year of claim for the Baroda unit. Similarly, the assessee claimed deduction of ₹ 4,04,96,585/- u/s.80IA of the I.T. Act in respect of the profits and gains derived by its Hyderabad unit. This is the 9th year of claim for the Hy .....

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cide the issue as to whether the assessee is entitled to deduction u/s.80I/80IA of the I.T. Act in respect of the profits and gains of its Baroda and Hyderabad unit. The Special Bench decided the issue against the assessee as reported in 111 ITD 379 (Pune) (SB) holding that Gutkha and Pan Masala manufactured by the assessee company is a "tobacco preparation" within the meaning of Eleventh Schedule of the Income Tax Act. Therefore, the assessee is not entitled to deduction u/s.80I/80IA .....

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eceipt. 4.1 Facts of the case, in brief, are that the assessee has set up wind mills in Maharashtra for generation of wind power. To promote companies to invest in the scheme the Maharashtra Government has offered incentive/benefit in the form of sales tax deferral/exemption against investments made in wind energy project. The assessee is entitled to this subsidy in view of Government of Maharasthra's Resolution No.1 NCP-1097/CR-57/NRG-7 dated 12-03-1998 and (2) NCP-1099/CR-202/Energy 7 date .....

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the investment made in the setting up of wind mills for 6 years provided the plant load factor of 12% is achieved in each eligible year of operation. In terms of the Government resolution, the assessee is further entitled to sales tax benefit or to transfer sales tax benefit to any other eligible party. During the year under consideration, the assessee has transferred the sales tax benefit for a total consideration of ₹ 7,28,71,527/-. Though the same has been included as "other incom .....

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s in the nature of capital receipt as the same was received by the assessee for setting up wind mills in the State of Maharashtra and had been given to promote investment in this sector. The resolution passed by the Government of Maharashtra was produced before the AO. The decision of the Hon'ble Supreme Court in the case of CIT Vs. P.J. Chemicals reported in 210 ITR 830, the decision of Mumbai Bench of the tribunal in the case of Reliance Industries Ltd. reported vide ITA No.7554/1989 for A .....

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l of the scheme shows that the incentive received by the assessee cannot be said to have been received on capital account. Under this scheme the Government of Maharashtra has offered 2 sets of incentives for setting up of wind mills in the State as per resolution No.NCP-1097/CR-57/NRG-7 dated 12-03-98. Clause 7 says that capital subsidy is being provided by the State Govt. @30% of the fixed capital investment subject to a maximum limit of ₹ 20 lakhs in the wind power plant. This incentive .....

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Moreover, such sales tax incentive is granted only when the wind mill is successfully run in the preceding year at the minimum plant load factor of 12%. Such different conditions for availing the sales tax incentive clearly establish that the dominant purpose of granting such incentive is operation of the wind mill and not setting up thereof alone. Even after achieving plant load factor of 12%, only 50% of the total incentive is available. In order to get full sales tax incentive, minimum plant .....

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ration of the concerned wind mills. 4.4 As regards the decision of the Special Bench of the Tribunal in the case of DCIT Vs. Reliance Industries Ltd. reported in 88 ITD 273 is concerned the AO noted that the Department has not accepted the decision. Further, in the said decision, the ITAT has not considered the fact that the assessee was separately entitled to capital subsidy as is the case of the assessee. Looking to the dominant purpose of the subsidy the AO held that the aforesaid receipt by .....

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d 01-10-99 were brought to the notice of the Ld.CIT(A). It was argued that the scheme as introduced in furtherance of the State Govt. policy to promote generation of energy through non conventional sources to supplement the ever increasing demand of electricity in the State. The scheme has been implemented to promote wind energy generation in the State. The benefit is linked with the quantum of qualifying investment made in the wind power project. The requirement of achieving a minimum 12% plant .....

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ht to the notice of the Ld.CIT(A) again to the proposition that the sales tax subsidy received is a capital receipt and not a revenue receipt. 4.6 However, the Ld.CIT(A) was also not satisfied with the arguments advanced by the assessee and upheld the action of the AO by observing as under : "3.3 I have carefully considered the submissions of the appellant and perused the materials on record. I have gone through the Resolution No.NCR 1097/CR-57/NRG-7 dated 12.03.1998 and Resolution No.NCP-1 .....

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rted in 228 ITR 253. The matrix of facts in the case of the appellant being identical to matrix of facts in the case of Sahani Steel and Press Works Ltd. before the Hon.Supreme Court, I am of the considered view that ratio decidendi of decision of Hon.Supreme Court in the case of Sahney Steel and Press Works Ltd. Is directly applicable to the facts of the appellant's case. In this regard following points are noteable : [1] As noted by Hon.Supreme Court in the case of Sahney Steel and Press W .....

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t load factor for atleast one year' - emphasis supplied. Thus, it is clear that like Scheme of Andhara Pradesh, the scheme of subsidy of Maharashtra Govt. also provides that subsidy is available only after production has not only started but continued for atleast one year with a minimum of plant load factor. [2] As per scheme of AndharaPradesh Govt. in the case of Sahaney Steel and Press Works Ltd. and Others Vs. CIT before Hon.Supreme Court, the availability of the incentives would be limit .....

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of six years, but it is available only if the plant has successfully operated every year with a minimum % plant load factor. This clearly shows that the subsidy is production related subsidy. [3] In case of Sahney Steel and Press Works Ltd., the Hon.Supreme Court noted that in the Scheme of Andhara Pradesh Govt. the important point to note is that all the incentives are production incentives, in the sense that the company will be entitled to these incentives only if at goes into production. It i .....

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of Sahney Steel and Press Works Ltd. before the Hon.Supreme Court. [4] The Hon. Supreme Court further held in the case of Sahney Steel and Press Works Ltd. and Others Vs. CIT that it is not the source from which the amount is paid to the assessee which is determinating factor of the question whether subsidy payments are of revenue or capital nature. The Hon. Supreme Court endorsed the view taken by Viscount Simon in Ostime's case that if payments in nature of subsidy from public funds are m .....

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s, it has to be treated as trade receipt. The Hon.Supreme Court held that the source of the fund is quite immaterial. The Hon. Supreme Court further held that for example if the scheme was that the assessee will be given refund of sales tax on purchase of machinery as well on raw materials to enable the assessee to acquire new plant and machinery for further extension of its manufacturing activity in a backward area, the entire subsidy must be held to be a capital receipt in the hands of the ass .....

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see in carrying out the business operation' which' is being given for a limited period of six years and it is conditional upon utilization of 12% plant load factor for a period of continuous six years. Thus, it is absolutely clear that matrix of facts in the case of the appellant and in the case of Sahney Steel and Press Works Ltd. and Others Vs. CIT is the same. [5] It may be mentioned that in the case of Sahney Steel and Press Works Ltd. before the Hon.Supreme Court, the Hon.Supreme Co .....

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an incentive for capital investment and not by way of addition of the profits of the assessee. This view of Hon.Madhya Pradesh High Court has been reversed by Hon. Supreme Court in the case of Sahney Steel and Press Works Ltd. and Others Vs. CIT, quoted supra. The Hon.Supreme Court commented upon the views of the Madhya Pradesh 'High court as under : "...... The Madhya Pradesh High Court however failed notice the significant fact that under the scheme framed by the Govt. no subsidy was .....

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s actually commenced, it has to be interpreted to mean that such subsidy was given as help not for setting up of the industry, but as assistance for the purpose of the trade. Therefore, such subsidies bear the character of revenue receipt and are chargeable to Income tax. [6] Since the factual matrix of the appellant's case is found to be identical with that in the case of Sahney Steel and Press Works Ltd. and Others Vs. CIT which was before the Hon. Supreme Court, it is not considered neces .....

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e given for the purpose of carrying on of the business of the assesses. Applying the test of Viscount Simon in the case of Ostime (1946) 14 ITR (Suppl) 45 (HL), it must be held that these subsidies are of revenue character and will have to be taxed accordingly." In case of the appellant also subsidies have been granted year after year only after setting up of new industry and commencement of production. Therefore as held by Hon.Supreme Court such subsidy is treated as assistance given for c .....

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the promotion of generation of energy through non conventional sources to supplement the ever increasing demand of electricity in the State enunciated its policy in January 1996. Since this policy could not attract the promoters and since the Government of India had issued certain guidelines regarding wind energy generation the Government in partial modification of its existing policy vide resolution dated 12-03-98 took certain decisions. The Ld. Counsel for the assessee referring to the said r .....

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g capital expenditure will be reimbursed by MEDA. 9. Sales Tax Benefits : Investments in plant and machinery, new building, land development, technical development and design in a wind power project would be considered as qualifying investment. Promoter shall be entitled to Sales Tax benefits upto the amount of qualifying investment. This benefit would be given in 6 equal instalments over a period of 6 years (1/6 of the qualifying investment amount every year) only under the condition that the p .....

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said resolution the Ld. Counsel for the assessee submitted that such sales tax benefit will be available for the promoters from the date of obtaining "entitlement certificate" for a period of continuous 6 years and for every year such benefit will be limited to 1/6th of the qualifying investment. If the assessee does not achieve the plant load factor of 12% in any one year then that year's sales tax benefit will get cancelled and that unit will have to lose sales tax benefit for th .....

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ing that period to change the name of the third party. Further amount of sales tax benefit is related to the qualifying investment and plant load factor. He submitted that in view of the above Government resolutions the assessee during the impugned assessment year transferred the sales tax benefit of ₹ 7,28,21,527/- to Telco and claimed the same as exempt from tax being capital receipt. He submitted that the AO as well as the CIT(A) following the decision of the Hon'ble Supreme Court i .....

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said decision after considering the decision in the case of Sahney Steel and Press Works Ltd. (Supra) has held that the character of the receipt of a subsidy in the hands of the assessee in a scheme has to be determined with respect to the purpose for which the subsidy is granted. In other words, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The sources is immaterial. If the object of the subsidy is to enable the assessee to run the business .....

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unit the subsidy received by the assessee was not in the course of a trade but was of a capital nature. Referring to the case of the assessee he submitted that the object of the scheme is to promote wind energy generation. Therefore, it is a capital receipt and cannot be treated as revenue in nature. 4.12 Referring to the decision of the Hon'ble Supreme Court in the case of Mepco Industries Ltd. Vs. CIT reported in 319 ITR 208 the Ld. Counsel for the assessee drew the attention of the Bench .....

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he Government was for repaying loans. He submitted that the Hon'ble Court noted that in the case of Mepco Industries Ltd., (Supra) the subsidy was for setting up industry in the backward area. It was accordingly held that in each case one has to examine the nature of subsidy. The judgment of the Hon'ble Supreme Court in the Sahney Steel and Press Works Ltd., (Supra) was on its own facts as also the judgment of the Hon'ble Supreme Court in the case of Ponni Sugars and Chemicals Ltd. c .....

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hat the case of Mepco Industries Ltd., was a change of opinion. Therefore, the Department has erred in invoking the provisions of section 154 of the I.T. Act. 4.13 Referring to the decision of the Hon'ble Gujarat High Court in the case of DCIT Vs. Inox Leisure Ltd., reported in 351 ITR 314 he submitted that the Hon'ble High Court in the said decision following the decisions of the Hon'ble Supreme Court in the case of Ponni Sugars and Chemicals Ltd.,(Supra) and Sahney Steel and Press .....

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ranted. In other words, one has to apply the purpose test. The point of time on which the subsidy is paid is not relevant. The source is immaterial. If the object of the subsidy is to enable the assessee to run the business more profitably then the receipt is on the revenue account. On the other hand, if the object of the assistance under the scheme is to enable the assessee to set up a new unit or expand the existing unit, then the receipt of subsidy would be on capital account. 4.14 Referring .....

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repaying the loan taken for construction of multiplexes cannot be a ground to hold that subsidy receipt was on revenue account because if the object of the scheme was to promote cinema houses by constructing multiplex theatres, then irrespective of the fact that the multiplexes have been constructed out of own funds or borrowed funds, the receipt of aforesaid would be on capital account. Accordingly, the order of the Tribunal holding the subsidy as capital income was upheld. The Ld. Counsel for .....

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amounting to ₹ 25 lakhs received by the predecessor in title of the assessee from the Govt. of Maharastra through the State Industrial Corporation of Maharashtra was capital receipt or a revenue receipt. The AO treated the same as revenue receipt. The CIT(A) allowed the claim of the assessee treating the same as capital receipt which was upheld by the ITAT. On further appeal by the Revenue, the Hon'ble High Court dismissed the appeal filed by the Revenue by observing as under : "5 .....

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the receipt of funds from the Government of Maharashtra, the predecessor-in-title of Assessee took bridge loan from the SICOM. Later on, that bridge loan was converted together with outstanding interest of ₹ 5 lacs into special capital incentive by the SICOM. That being in the nature of capital receipt, it was directly credited to the capital receipt reserve account. The Assessee claimed the receipt as a capital receipt. It is that stand of the Assessee which was not accepted by the Asses .....

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ion of Hon'ble Gujarat High Court in the case of CIT Vs. Birla VXL Ltd. reported in 215 taxmann 187 he submitted that the Hon'ble High Court in the said decision has held that sales tax waiver/deferment under scheme was granted by State Government to cover the capital outlay already made by the assessee in undertaking special modernization of its existing industry is capital in nature and thus not taxable. The Ld. Counsel for the assessee drew the attention of the Bench to the Headnote o .....

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eceipt-Tribunal confirmed action of CIT(A)-Held, character of subsidy in hands of recipient whether revenue or capital would have to be determined, having regard to purpose for which subsidy was given-Source of fund was immaterial-If purpose was to help assessee to set up its business or complete a project monies must be treated as having been received for capital purposes-But, if monies are given to assessee for assisting him in carrying out business operations and given after satisfaction of t .....

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to the decision of Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Siya Ram Garg (HUF) reported in 237 CTR 321 he submitted that the Hon'ble High Court in the said decision has held that subsidy received by the assessee for setting up agro based industrial unit in backward area which was determined with reference to capital investment is a capital receipt. 4.18 Referring to the decision of Hon'ble Jammu & Kashmir High Court in the case of Shree Balaji Alloys Vs. C .....

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e incentives were provided with the object of creating avenues for perpetual employment to eradicate the social problem of unemployment in the State by accelerated industrial development. It was accordingly held that the Excise duty refund, interest subsidy and insurance subsidy are capital receipt in nature. 4.19 Referring to the decision of the Amritsar Special Bench of the Tribunal in the case of Vinod Kumar Jain Vs. ITO reported in 140 ITD 1 (SB)(Amritsar) he submitted that the Special Bench .....

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me of which are subsequent to the decision in the case of Sahney Steel & Press Works Ltd., (Supra) the issue has to be decided in favour of the assessee. Referring to para 17 of the order of the Tribunal, the Ld. Counsel for the assessee submitted that the observations of the Tribunal are contrary to the decision of Hon'ble Bombay High Court in the case of M/s. Chhaphalkar Brothers reported in 351 ITR 309 which is a subsequent decision. He accordingly submitted that the amount received o .....

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the sale of the loom hours, the receipts by sale of the surplus loom hours were capital receipts and not income. 4.22 Referring to the decision of the Hon'ble Supreme Court in the case of CIT Vs. Ganapathi Raju Jogi reported in 200 ITR 612 he submitted that the Hon'ble Supreme Court in the said decision has held that route permits acquired on the basis of various factors and no amount paid for such route permit, then in that case consideration for sale of permit is not assessable to tax .....

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red some value because of various factors, namely, development of roads, passenger traffic, frequency of the buses, the value of the permit could not be evaluated as on the date of acquisition and in such a case the consideration in terms of money realised on its transfer could not be brought to tax as capital gains, the Department preferred an appeal to the Supreme Court. The Supreme Court dismissed the appeal." In view of the above 2 decisions, he submitted that the amount is capital in n .....

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ubsidy so received should go to reduce the cost of the asset. For the above proposition he relied on the decision of Hon'ble Supreme Court in the case of P.J. Chemicals reported in 210 ITR 830 and the decision of the Visakhapatnam Bench of the Tribunal in the case of Sasisri Extractors Ltd. Vs. ACIT reported in 307 ITR 127 (AT). 4.24 The Ld. Counsel for the assessee however referring to the clarification issued by CBDT vide letter dated 31-12-1998 a copy of which is placed at paper book page .....

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ned that in the scheme of Govt. of Maharashtra for wind energy entrepreneurs as well as tax exemption is there on the sale of other goods except by the windmill operator for a period of six years in equal installments and is restricted to total investment made. It is obvious that this incentives is not granted to meet directly or indirectly the cost of capital asset. Accordingly, it was stated that there is no justification for any apprehension that the sales tax incentive would go to reduce the .....

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1 for A.Y. 2003-04 and 2004-05 he submitted that the Tribunal after considering the decision of Hon'ble Supreme Court in the case of Sahney Steel and Press Works Ltd.,(Supra) Ponni Sugars and Chemicals Ltd. (Supra) has decided the issue against the assessee. Following the aforesaid decision the Pune Bench of the Tribunal in the case of various other decisions has decided the issue against the assessee. He submitted that wherever the amount is given for meeting fixed asset it has to go to red .....

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n backward areas. Referring to clause 7 of the scheme dated 12-03-1998 the Ld. Departmental Representative submitted that it was clearly mentioned that it is capital subsidy. The only condition was that the wind power plant has successfully operated for a minimum 12% plant load factor for atleast one year. He submitted that there are different types of incentives, some may be capital in nature and some may be revenue in nature. The intention for granting of such subsidy has to be seen. If the ve .....

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the Hon'ble Tribunal after considering the various decisions now relied on by the Ld. Counsel for the assessee has held that sales tax benefit/subsidy received by the assessee under power policy of the State Govt. as incentive for setting up of windmills in Maharashtra is revenue in nature. He submitted that in the case of sistern concern of the assessee for A.Y. 2003-04 and 2004-05, the Tribunal has already taken a view on the basis of decision of Hon'ble Supreme Court and has given a c .....

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Book filed on behalf of the assessee. We have also considered the various decisions cited before us. The only dispute to be decided in the impugned ground is regarding the taxability of the amount received on transfer of sales tax eligibility as capital or revenue in nature. We find the assessee in the instant case has set up windmills in Maharashtra for generation of wind power. During the impugned assessment year, the assessee has transferred the sales tax benefit for a total consideration of .....

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in nature. In appeal the Ld.CIT(A) apart from relying on the decision of Hon'ble Supreme Court in the case of Sahney Steel and Press Works Ltd. (Supra) relied on various other decisions and upheld the action of the AO. 6.1 It is the submission of the Ld. Counsel for the assessee that although the issue has been decided by the Tribunal in the case of the sister concern namely Rasiklal M. Dhariwal (HUF) for A.Y. 2003-04 and 2004-05, however, in view of the subsequent decisions the subsidies re .....

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the assessee, has decided the issue for A.Y. 2003-04 and 2004-05 by holding that the sales tax benefits received by the assessee under the instant scheme are in the course of carrying on its trade more profitably, therefore, such receipt cannot be characterised as capital in nature. The relevant observation of the Tribunal from para 8 reads as under : "8. We have carefully considered the rival contentions. In terms of the policy on wind power generation formulated by the Government of Mahar .....

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is an HUF which is, inter alia, engaged in a range of business activities viz. manufacture and sale of Manickchand Zarda, Pan Masala, construction activities, manufacturing of tiles etc. including generation and sale of power. In the course of its activities, the assessee company set up wind mills in the State of Maharashtra for generation of wind power. The Government of Maharashtra in terms of its policy on wind power generation granted various benefits, including sales-tax benefit. In terms o .....

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briefly touch upon the Resolution of the State Government dated 12.3.1998 (supra), the relevant portion of which is reproduced as under: "PREAMBLE The State Government has a policy to promote generation of energy through non-conventional sources to supplement the ever increasing demand of electricity in the State. It was found after a survey that there is an immense potential for generation of wind power in the State. Surveys conducted by MEDA in association with MNES, New Delhi and IITM, B .....

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eration policies of other State Governments and the problems being faced by promoters of wind energy generation were under active consideration of the State Government. RESOLUTION : In partial modification of its existing policy to promote wind energy generation, the State Government has taken following decisions to promote wind energy generation in the State:- (1) Tariff: Maharashtra State Electricity Board shall purchase energy generated from wind power plants at a rate of 225 paise per unit. .....

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rs. (2) Banking In line with the Central government policy, wind power developers would be given permission to bank the energy generated from wind power plants with MSEB. Banking can be done any time of the day and night. The energy balance at the end of one year shall not be taken into account next year. The balance of energy account will be settled between the MSEB and promoters at the end of the year as per the tariff applicable during that year. (3) Transmission Losses: MSEB shall bear the t .....

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0% of this expenditure from wind power project promoters and will give it to MSEB. Developers shall bear the cost of transmission lines from the sub-station to the project and all other related equipment. (6) Approach Roads: MEDA shall bear the cost of construction of roads to the project sites. MEDA would be entitle to Government grants for this expenditure. (7) Capital Subsidy : Wind Power Projects will be granted status of small scale industries. MEDA shall give a subsidy upto 30% or the fixe .....

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ualifying investment. Promoter shall be entitled to sales-tax benefits upto the amount of qualifying investment. This benefit would be given in 6 equal instalments over a period of 6 years (1/6 of the qualifying investment amount every year) only under the condition that the plant has successfully operated every year with a minimum of 12% Plant Load Factor. This benefit may also be available to any other company associated with the promoters. Detailed instructions about the modus operandi about .....

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wer in the State and different sites were selected by the Government for this purpose. It appears that the State Government had enunciated its policy of generation through non conventional sources in January 1996, which was not found attractive by the promoters. In terms of the said Resolution the Government modified its existing policy to promote wind energy generation by announcing certain concessions as incentives enumerated therein. Such incentives related to tariff structuring, banking of p .....

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s in relation to the sales-tax benefits available under the Scheme, it would be in the fitness of things that we may look at it in slight detail. The Scheme intended that investments in plant and machinery, new building, land development, technical development and design in a wind power project would constitute qualifying investment and a promoter shall be entitled to sales-tax benefits upto the amount of such qualifying investment. Such sales-tax benefit was to be given in six equal instalments .....

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amble: With a view to encourage installation of wind energy generator units, State Government has published a policy vide above mentioned Government Resolution. According to the said policy sales tax benefit is available, equivalent to the qualifying investment on wind energy generation projects. To avail the sales tax benefit a procedure has been laid down by the Finance Department vide Notification No. STA 1098/CR-45/Taxation 2, dated 24.8.1998 and Notification No VKN-1298/CR-33/Taxation-1 dat .....

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able sales tax benefit, Government has decided to simplify the procedure as follows: 1. The sales tax benefit will be available on electricity generating units in relation to achievement of plant load factor as follows: S.No. Plant Load Factor investment Sales tax benefit equivalent of 1//6th of qualifying With Bank Guarantee Without Bank Guarantee 1 12% 60% 50% 2 13% 70% 60% 3 14% 80% 70% 4 15% 90% 80% 5 16% 100% 90% 6 17% 100% 100% The sales tax benefit can be availed by all projects which are .....

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ideration and this percentage will be increased proportionately to 100%, and then the Plant Load Factor will be determined. For example, if transmission lines availability is 85%, then that years' average Plant Load Factor will be increased proportionately to correspond to 100% availability of transmission lines and the sales tax benefit will be increased proportionately. The availability of the transmission lines during the months from May to September of that financial year will be decided .....

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Any two years' sales tax benefit will not be allowed to deduct together to claim in one year. To avail the sales tax benefits the period will be counted for continuous 6 (six) years. The financial year period will be from 1st April to 31st March. 4. The facility of transferring the sales tax benefit to the third party The promoters of the project, if sell electricity to the third party, for such third party, transferring of sales tax benefit will be permitted. The promoters of the project ca .....

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efit. The "Entitlement Certificate" for units of third party will e certified by Commissioner of Sales tax. Amount of sales tax benefit is related to the wind energy generation and they are not related to the amount of electricity sold to the third party. After obtaining the "Entitlement Certificate" for sales tax benefit the promoters of the project can transfer to the third party to whom they have sold the electricity. Amount of sales tax benefit is related to the qualifyin .....

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ing year. However, if some promoters desire to avail this benefit in the current financial year immediately on commissioning of wind energy project, they can avail the benefit on the following conditions: a) Bank guarantee equivalent to qualifying investment will have to be given every year for availing sales tax benefit of following financial year. b) If the condition of plant load factor is not fulfilled, the bank guarantee amount will be forfeited at the end of the year. The forfeited amount .....

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ate" will be issued by Maharashtra energy Development Agency. 7. If the promoters do not abide by terms and conditions of Maharashtra Energy Development Agency and Sales tax Department, then the Director of Maharashtra Energy Development Agency and Commissioner of Sales Tax reserve the right to cancel the 'Entitlement Certificate" and the "Eligibility Certificate". 8. Sales tax benefit can be availed on the finished product as well as on the raw materials used and its pro .....

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, New Delhi will be eligible for sales tax benefit. The 'No Objection Certificate' will be issued by Maharashtra Energy Development Agency only after submission of undertaking from the concerned manufacturer and promoter that the machinery used for wind generation project is new. 11. There is no restriction for expansion of projects. However, capacity of the wind energy generator should be minimum 200 Kw 12. Procedure for availing the sales tax benefit will be applicable to all projects .....

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availed by all projects which are commissioned as well as connected to the transmission lines from two months after the date of publication of the said Resolution. It is also provided that the Sales-tax benefit is available on electricity generating units in relation to achievement of plant load factor. The procedural requirement also entails that the sales-tax benefit will be available for the promoters from the date of obtaining of "Entitlement Certificate" for a period of continuous .....

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ject were permitted to transfer sales-tax benefit to third party, if it sold electricity to such third party. Such transfer was subject to issuance of the Entitlement Certificate to be issued by the Commissioner of Sales-tax. The said Resolution also provided that the sales-tax benefit can be availed on the finished product as well as on the raw materials used. It is further notified by the State Government that the promoter will not be eligible for salestax benefit for use of second hand machin .....

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benefit amounting to ₹ 63,74,291/- pertaining to the year under consideration has been claimed as a capital receipt. Factually speaking, on the aspect of the assessee having received the said amount in terms of the Scheme of the State Government as sales-tax benefit under the aforesaid Government Resolutions, is not in dispute. 12. In order to examine the taxability of such amount, it would be appropriate to refer to the propositions based on the case laws referred to us. In the case of S .....

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years from the date of commencement of production and such concession was also available for subsequent expansion of 50% and above of the existing capacities, provided such expansion was located in a city or town or panchayat area other than that in which the existing unit was located. The Hon'ble Supreme Court noticed that the salient feature of the Scheme formulated by the Andhra Pradesh Government was that the incentives were not available unless and until production had commenced and tha .....

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were "given to encourage setting up of industries in the State of Andhra Pradesh by making the business of production and sale of goods in the State more profitable." The Hon'ble Supreme Court observed that the character of subsidy whether revenue or capital will have to be determined, having regard to the purpose for which the subsidy is given. The following observations are relevant: "If any subsidy is given, the character of the subsidy in the hands of the recipient - wheth .....

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ansion of its manufacturing capacity in a backward area, the entire subsidy must be held to be a capital receipt in the hands of the assessee. It will not be open to the Revenue to contend that the refund of sales tax paid on raw materials or finished products must be treated as revenue receipt in the hands of the assessee. In both the cases, the Government is paying out of public funds to the assessee for a definite purpose. If the purpose is to help the assessee to set up its business or compl .....

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n granted for production or for bringing into existence any new asset. The subsidies were granted year after year only after setting up of the new industry and commencement of production. Such a subsidy could only be treated as assistance given for the purpose of carrying on of the business of the assessee. Applying the test of Viscount Simon in the case of Ostime (1946) 14 ITR (Suppl) 45 (HL), it must be held that these subsidies are of revenue character and will have to be taxed accordingly.&q .....

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ith regard to the purpose for which the subsidy has been granted. The following discussion is important to notice: "On the facts of that case, it was held that the subsidy given was to meet recurring expenses. It was not for acquiring the capital asset. It was not to meet part of the cost. It was not granted for production of or bringing into existence any new asset. The subsidies in that case were granted year after year only 6 after setting up of the new industry and only after commenceme .....

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the fact that it has discussed and analysed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial .....

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able the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form or the mechanism through which the subsidy is given are irrelevant…………… One more aspect needs to be mentioned. In Sahney Steel and Press Works Ltd. this court found that the assessee was free to use the mon .....

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bove tests to the facts of the present case and keeping in mind the object behind the payment of the incentive subsidy, we are satisfied that such payment received by the assessee under the scheme was not in the course of a trade but was of capital nature." 14. Another decision relied upon by the appellant is in the case of Reliance Industries Ltd. (supra). In this case, the facts were that the Patalganga unit of the assessee was located in a notified backward area. The sales-tax liability .....

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on of industries for employment oriented units; and, providing local employment to SC/ST. The Tribunal observed that in order to decide the character of receipt the purpose of granting subsidy was relevant, while the mode of payment and the application of money for capital or revenue purposes was irrelevant. Therefore, as per the Special Bench the decisive factor was the objects with which the incentive was given and, therefore, such subsidy was held to be a capital receipt. The said decision ha .....

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has to be decided in the lights of the objects and purpose for which the scheme has been formulated by the State Government. It is quite clear that the point of time at which the subsidy is paid or the form of incentive granted under a Scheme are immaterial considerations. In a case where the subsidy/incentive under a Scheme is granted to encourage setting up of new industries the same is liable to be characterized as a capital receipt, while an incentive/subsidy granted in the course of trade .....

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ground of the fact that the earlier policy of the State Government on generation through non conventional sources in January, 1996 did not achieve the desired results. In the said policy, nine different incentives have been laid out, which have been extracted by us in earlier part of this order. The dispute before us is in relation to the sales-tax benefits. The Preamble of the policy itself reflects the area which is sought to be addressed by the policy which is "the problems being faced b .....

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t, technical development and design of wind products. According to the appellant, the incentive being linked to the qualifying investment shows that it is intended as a recoupment of the fixed cost already incurred by the assessee and, therefore, such incentives are to be regarded as capital in nature. In our considered opinion, such purpose, as articulated on behalf of the appellant is not emerging from the Scheme of the State Government. Rather, the emphasis on of the grant of sales-tax benefi .....

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ant is linked to achieving operational efficiencies and that too for only six continuous years. If a unit which is otherwise eligible for incentive, does not achieve the plant load factor of 12% or above, it would not be entitled to receive the sales tax benefit. Therefore, in our considered opinion, though the object of the Scheme is to promote generation of energy through non conventional sources but the same is sought to be achieved by the Government in the form of supporting the units to per .....

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scheme noted by the Hon'ble Supreme Court in the case of Sahney Steels (supra) wherein the assessee was found free to use the money in its business entirely as it liked. In the present case also, the assessee is not obliged to spend the money for any particular purpose. Thus, applying the purpose test to the facts of the present case and keeping in mind the objects behind the payment of incentive subsidy, we are satisfied that the sales-tax benefits received by the assessee under the instan .....

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urpose test. The point of time on which the subsidy is paid is not relevant. The source is immaterial. If the object of the subsidy is to enable the assessee to run the business more profitably, then the receipt is on revenue account. On the other hand if the object of the assistance under the subsidy scheme is to enable the assessee to set up a new unit or to extend an existing unit, then the receipt of the subsidy would be on capital account. Based on the above decision, the Tribunal in the ca .....

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evant observation of the Hon'ble Apex Court at placetum 7 at para 213 is material : "On the facts of the present case, we are of the view that the present case involves change of opinion. In this connection, it must be noted that Government grants different types of subsidies to the entrepreneurs. The subsidy in Sahney Steel and Press Works Ltd. [1997] 228 ITR 253 (SC) was an incentive subsidy linked to production. In fact, in Sahney Steel and Press Works Ltd. [1997] 228 ITR 253 (SC) (a .....

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we are concerned with power subsidy whereas in the case of CIT v. Ponni Sugars and Chemicals Ltd. reported in [2008] 306 ITR 392 , the subsidy given by the Government was for repaying loans. Therefore, in each case, one has to examine the nature of subsidy. This exercise cannot be undertaken under section 154 of the Act. There is one more reason why section 154 in the present case was not invokable by the Department. Originally, the Commissioner of Income-tax, while passing orders under section .....

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n has already analysed the scheme and has given a categorical finding that the sales tax benefits received by the assessee under the instant scheme are in the course of carrying on its trade more profitably, such receipt cannot be characterized as capital in nature. Therefore, in absence of any contrary material brought to our notice against the finding given by the Tribunal regarding the nature of the receipt, the above decision of Hon'ble Apex Court in case of Mepco Industries Ltd. (Supra) .....

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vestment or outlay already made by assessee. The Hon'ble High Court following the decision in the case of Ponny Sugars and Chemicals Ltd. (Supra) held that character of receipt of the subsidy has to be determined with respect to purpose for which subsidy was granted. Accordingly, it was treated as capital in nature. However, in the instant case it is not so. There is no such stipulation that it is for recouping or recovering a capital investment or outlay already made. The Tribunal has alrea .....

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case are different as already held. Therefore, the above decision also cannot help the assessee. 6.8 So far as the decision of the Hon'ble Bombay High Court in the case of Kirloskar Engines Ltd., (Supra) is concerned, here also, the predecessor-in-title was given the incentive so as to set up a new industry. The Hon'ble High Court in the said decision following the decision of the Hon'ble Supreme Court in the case of Ponni Sugars and Chemicals Ltd. (Supra) has emphasized that the cha .....

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idy scheme is to enable the assessee to run the business more profitably, then the receipt is on the revenue account. On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit, then the receipt of subsidy was on the capital account. Since in the case before Hon'ble Bombay High Court, the object was to enable the assessee to set up a new unit, it was held that the receipt is in the nature of capital. However, in the instant cas .....

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existing industry. It was therefore held that such subsidy is capital in nature and not taxable. However, in the instant case, it is not so. Therefore, this decision is also of no help to the assessee 6.10 So far as the decision of Hon'ble Punjab & Haryana High Court in the case of Siya Ram Garg (HUF) (Supra) is concerned, here also subsidy was received for setting up agro based industrial unit in backward area which was determined with reference to capital investment. It was accordingl .....

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loyment and create opportunities for self employment and the purpose in public interest and the issue was Excise duty refund and interest subsidy which was in pursuance of the new industrial policy introduced in the state of Jammu & Kashmir. The incentives were provided with the object of creating avenues for perpetual employment to eradicate the social problem of unemployment in the State by accelerated industrial development. Under these circumstances the Hon'ble High Court held that i .....

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various decisions have held that the character of the receipt of a subsidy in the hands of the assessee in a scheme has to be determined with respect to the purpose for which the subsidy is granted. Since the purpose test has already been analysed by the Tribunal in the case of the sister concern and it has been categorically held that the subsidy received by the assessee was in the course of carrying on its trade more profitably for which it cannot be held as capital receipt. 6.13 In view of t .....

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our notice against the above finding of the Tribunal, we following the decision of the Coordinate Bench of the Tribunal, uphold the order of the CIT(A) on this issue. The grounds raised by the assessee on this issue are accordingly dismissed. 7. Ground of appeal No.3 by the assessee reads as under : "3. In facts and circumstances of the case, the Commissioner of Income Tax (Appeals) has erred legally and factually in re-computing the Book Profits u/s.115-JB of the I.T. Act on the alleged re .....

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ect and ought not to have been re-computed." 7.1 Facts of the case, in brief, are that the original return of income declaring total income of ₹ 10,11,10,220/- was filed by the assessee on 27-11-2003. The same was processed u/s.143(1) on 31-03-2004 without any adjustments. Subsequently, the assessee filed the revised return on 02-07-2004 wherein the total income was shown at NIL. The return was also processed u/s.143(1) on 10-02-2005. Subsequently, the AO completed the assessment on 3 .....

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e assessee has not claimed benefit of section 72A of the Act while computing the book profits u/s.115JB of the Act. Accounts of the assessee have been revised as a result of merger of the companies and the resultant book profit has been reduced on account of accumulated book losses and depreciation of the merging companies. Therefore, no adjustment can be made on account of section 72A of the Act while computing book profits. For the above proposition the assessee relied on the decision of Hon&# .....

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annot be said to be within the purview of section 139(5) of the I.T. Act. He, therefore, held that the revised return filed by the assessee is nonest and therefore the AO had correctly ignored the return and computation of book profit enclosed along with it. Without prejudice to the above, the Ld.CIT(A) further held that for the purpose of profit u/s.115JB every assessee has to prepare its profit and loss account for the relevant previous year in accordance with the provisions of Part-II and Par .....

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sessee filed its return of income on 27-11-2003. The Hon'ble Bombay High Court approved the 2 scheme of amalgamation w.e.f. 31-03-2003 and the two other companies namely M/s. Manikchand Packing Private Limited and Dhariwal Electricals Pvt. Ltd. were merged with the assessee company. Accordingly, the assessee filed the revised return on 02-07-2004 and claimed that loss of the above 2 companies be allowed to be set off for normal computation as well as computation u/s.115JB. Referring to para .....

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se of Business as of 31st day of March, 2003" are to be treated as unabsorbed depreciation and unabsorbed accumulated losses of M/s. Dhariwal Industries Ltd. as on the "Appointed Date" itself and M/s. Dhariwal Industries Ltd. are considered as entitled to set off and / or carry forward the unabsorbed depreciation and unabsorbed accumulated losses of the transferor companies. Accordingly, the losses quantified in the assessment orders u/s. 143(3) for A.Y.2003-04 in the cases of M/s .....

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n of book profit u/s.115JB. Referring to para 5.3 of the order of the CIT(A) at page 28 he submitted that the findings of the Ld.CIT(A) are contrary. He has not disturbed the normal adjustment in the revised return. However, he upheld the action of the AO in rejecting the claim of loss of merging company to be set off against the income of the assessee company. Referring to the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Pruthvi Brokers and Shareholders Pvt. Ltd., report .....

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alance of the Profit and Loss Account appearing in the financial statements of the transferor company is aggregated with the corresponding balance appearing in the financial statements of the transferee company. Alternatively, it is transferred to the General Reserve, if any". He submitted that the above standard came into effect in respect of accounting period commencing on or after 01-04-1995 and is mandatory in nature. 7.7 Referring to para 4 of the said Accounting Standard the Ld. Couns .....

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reatment of such amalgamations should ensure that the resultant figures of assets, liabilities, capital and reserves more or less represent the sum of the relevant figures of the amalgamating companies. In the second category are those amalgamations which are in effect a mode by which one company acquires another company and, as a consequence, the shareholders of the company which is acquired normally do not continue to have a proportionate share in the equity of the combined company, or the bus .....

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order which read as under : "With effect from the Appointed Date and upon this Scheme becoming effective, the unabsorbed depreciation and unabsorbed accumulated losses of the Transferor Companies shall be treated as the unabsorbed depreciation and unabsorbed accumulated losses of the Transferee Company as on the Appointed Date and the Transferee Company shall be entitled to set off and/or carry forward the unabsorbed depreciation and unabsorbed accumulated losses of the Transferor Companies .....

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urther been held that even if the debt had been taken into account into in computing the income of the predecessor firm only and had subsequently been written off as irrecoverable in the accounts of the successor the successor would still have been entitled to deduction of the amount written off as bad debt. The Hon'ble Supreme Court held that it is not imperative that the assessee referred to in sub-clause (a) of section 36(2) must necessarily mean the identical assessee referred to in sub- .....

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of brought forward depreciation. Referring to page 31 of the paper book which contains the statement of total income he submitted that there is no mention of brought forward depreciation. He submitted that as per the order of High Court the appointed date is 31-03-2003. Therefore, since the assessee in the original return has not claimed such brought forward losses of the merging companies, therefore, the revised return filed by the assessee is nonest. The AO and the CIT(A) were fully justified .....

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er the normal provision and ₹ 16,20,43,718/- u/s.115JB of the I.T. Act. We find the assessee filed the revised return on 02-07-2004 declaring total income at NIL and book profit u/s.115JB was determined at ₹ 5,91,71,806/-. In the revised return the assessee set off the brought forward losses. The AO computed the book profit u/s.115JB at ₹ 16,20,55,646/- which was the original book profit computed by the assessee. Thus, he rejected the set off of brought forward losses of the me .....

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ssion of the Ld. Counsel for the assessee that when the AO allowed the unabsorbed depreciation and unabsorbed accumulated losses in the case of M/s. Manikchand Packing Pvt. Ltd. and M/s. Dhariwal Electricals Pvt. Ltd. as unabsorbed depreciation and unabsorbed accumulated loss of Dhariwal Industries Ltd. as on the "appointed date" itself and held that M/s. Dhariwal Industries Ltd. is entitled to set off the loss so computed in the case of the merging companies and quantified the loss in .....

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ame before the lower authorities. 7.12 We find considerable force in the submission of the Ld. Counsel for the assessee. As reproduced earlier in the preceding paragraphs the AO at para 4.1 of the order following the direction of the Hon'ble Bombay High Court held that the unabsorbed depreciation and unabsorbed accumulated losses in the cases of M/s. Manikchand Packaging Pvt. Ltd. and M/s. Dhariwal Electricals Pvt. Ltd. from the "Appointed Date", being "Close of Business as of .....

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off from the business profit computed in the case of M/s. Dhariwal Industries Ltd. Further, we find the Accounting Standard-14 relating to accounting of amalgamations states at clause 21 that in the case of an "amalgamation in the nature of merger" the balance of the profit and loss account appearing in the financial statements of the transferor company is aggregated with the corresponding balance appearing in the financial statements of the transferee company. Alternatively, it is tra .....

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r profession", shall be chargeable to income-tax. The profits and gains of a business are charged to income-tax. To compute the profits and gains so chargeable, s. 36 pro vides for allowing a number of deductions. Each of the deductions must relate to the business. If the same assessee was carrying on a business and he wrote off a debt relating to the business as irrecoverable, he would without doubt be entitled to a corresponding deduction under cl. (vii) of sub-s. (1) of s. 36 subject to .....

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o claim a deduction on that account, it seems difficult to accept that the same right should not be recognised in the transferee. It is merely an incident flowing from the transfer of the business, together with its assets and liabilities, from the previous owner to the transferee. It is a right which should, on a proper appreciation of all that is implied in the transfer of a business, be regarded as belonging to the new owner. Unless the language of the statute plainly and clearly compels a co .....

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income of the assessee for the assessment year 1963-64 when the interest income accruing thereon was taxed in the hands of the assessee. The interest was taxed as income because it represented an accretion accruing during the earlier year on money owed to the assessee by the debtor. The item constituted income because it represented interest on a loan. The nature of the income indicated the transaction from which it emerged. The transaction was the debt and that debt was taken into account in co .....

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which they took. It seems to us that even if the debt had been taken into account in computing the income of the predecessor firm only and had subsequently been written off as irrecoverable in the accounts of the assessee, the assessee would still have been entitled to a deduction of the amount written off as a bad debt. It is not imperative that the assessee referred to in sub-cl. (a) must necessarily mean the identical assessee referred to in sub-cl. (b). A successor to the pertinent interest .....

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siness loss and depreciation of Dhariwal Industries Ltd and the assessee is entitled to take into account the same for the purpose of computation of book profit u/s.115JB. 8. In view of the above discussion the ground of appeal No.3 by the assessee is allowed. 9. The assessee has taken an additional ground which reads as under : "In the alternative and without prejudice to ground no.1 in the appeal, if the sales tax incentive is regarded as a revenue receipt chargeable to tax, then, the App .....

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of the above submission by Ld. Counsel for the assessee, the additional ground is dismissed. 10. Identical additional grounds have been raised by the assessee in the remaining years. In view of the above discussion, the additional ground taken by the assessee in the remaining years are also dismissed. ITA No.1559/PN/2007 (By Assessee) (A.Y. 2004-05) : 11. Ground of appeal No. 1 by the assessee relates to the order of the CIT(A) in rejecting the claim of the assessee that amount received on trans .....

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of the case, the CIT(A) has erred legally and factually in upholding the disallowance of depreciation of Hyderabad unit of ₹ 18,98,807/- and incorrectly drawing conclusion that the assessee has "not used its Pan Masala (Gutka) plant & establishment at Hyderabad at all during the relevant previous year". The CIT(A) ought to have appreciated that once these assets have formed a part of total block of assets, they have lost their individual identity and for claim of depreciation .....

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laimed depreciation as per I.T. Act at ₹ 13,45,44,935/- in the computation of income. The AO noted that the assessee has not used it's Pan Masala/Gutkha plant & machinery establishment at Hyderabad unit at all during the previous year relevant to the assessment year under consideration. Therefore, depreciation on the related asset to the extent of ₹ 18,98,807/- was disallowed by the AO. 12.2 Before CIT(A) it was submitted that the assessee has set up a unit in Hyderabad for m .....

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d machinery at the Hyderabad unit is not used at all during the previous year. It was submitted that the AO disallowed depreciation in respect of some of the assets forming part of the block assets and allowed depreciation on the remaining block of assets. 12.3 It was submitted that the AO was not justified in disallowing the depreciation. The assts were acquired and put to use by the assessee in the earlier previous years and the same had entered into the block of assets in those years itself. .....

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e disallowed. 12.4 Alternatively it was argued that the stoppage of operations at the Hyderabad unit is a temporary one and the Hyderabad unit continues to be remained in a perfectly operative position except for manpower and plant and machinery and other facilities are available at the unit. Thus, the machinery and plant is ready to use. It was contended that depreciation is allowable even if the machine is kept ready to use at any moment and the actual user of the asset is not required. The de .....

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rd. On this issue there is a direct decision of the Hon'ble Bombay High Court in case of Dinesh Agarwal Vs. CIT & Another as reported in 267 ITR 768 wherein the Hon'ble High court has endorsed the view of the Hon'ble I.T.A.T. that the expression 'used' occurring in section 32(1) means 'actually used for the purpose of business'. As regards the case laws relied upon by the appellant, the case of Artic Vs. ACIT as reported in 68 ITD 462 is in the context of capital .....

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, denial of depreciation is held to be justified. Ground No. 2 of appeal for assessment year 2004-05 is held to have no merit and it fails. 3.4 The facts and legal position for assessment year 2005-06 in respect of ground of appeal No. 2 which relates to disallowance of depreciation by the learned Assessing Officer in respect of Hyderabad Unit remains the same. Accordingly, for assessment year 2005-06 also, the claim of the appellant is held to have no merit and accordingly, dismissed." 12. .....

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of the assessee by holding that such notification is invalid. The AO and the CIT(A) disallowed the claim of depreciation on the ground that the assessee has closed down its operations and the plant and machineries are not used during the year. 12.8 Relying on the decision of the Hon'ble Bombay High Court in the case of G.R. Shipping Ltd. vide ITA No.598/2009 order dated 28-07-2009 he submitted that the Hon'ble High Court following the decision of the Hon'ble Bombay High Court in the .....

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e block of assets. It suffered an accident on 06-03-2000 and sunk. Though the assessee retrieved the barge it did not get it repaired finding it uneconomical and therefore the same was sold as on where is basis for ₹ 55 lakhs in the month of May/June 2001. The assessee claimed depreciation on the barge for A.Y. 2001-02. The AO disallowed the claim of depreciation on the ground that the barge was not used for the purpose of the business during the whole year as it met with an accident and w .....

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f assets has to be considered. It was held that if a block of assets is owned by the assessee and used for the purpose of business depreciation will be allowed. The Tribunal after considering the decision of Hon'ble Bombay High Court in the case of Dinesh Kumar Gulabchand Agarwal Vs. CIT reported in 267 ITR 867 distinguished the same and held that the assessee has already used the asset for the purpose of business and it has already entered into block of assets. Accordingly, the claim of dep .....

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d. Counsel for the assessee drew the attention of the Bench to the following observation of the Hon'ble High Court : "It is not possible to find any legal infirmity in the aforesaid view adopted by the first appellate authority and confirmed by the Tribunal. In fact the assessment order itself reveals that it is not the case of the Assessing Officer that the assets were not put to use at all. Once the factory building is put to use it is not possible to restrict the depreciation on the .....

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tted by the Tribunal, the question referred for the opinion of this court, is answered in the affirmative, i.e., in favour of the assessee and against the Revenue. The reference stands disposed of accordingly with no order as to costs." He accordingly submitted that the CIT(A) was not justified in denying the claim of depreciation. 12.12 We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behal .....

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made by the Ld. Counsel for the assessee, we find although the plant was closed because of the notification of the Government of Andhra Pradesh vide Notification dated 19-02-2002, however, the assessee challenged the same before the Hon'ble Supreme Court who vide Civil Application No.4674/2004 order dated 02-08-2004 quashed the notification holding the same as bad in law, void, illegal and unenforceable. Therefore, under these circumstances the question that arise is as to whether the assess .....

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g was put to use it was not possible to restrict the depreciation on the building by stating that only a portion thereof had been put to use. It has further been held that in relation to block of assets it is not possible to segregate items falling within the block for the purpose of granting depreciation or restricting the claim thereof. Once it was found that the assets were used for business it was not necessary that all the items falling within the plant and machinery have to be simultaneous .....

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on the barge which had entered into block of asset but was not at all put to use for the purpose of business during the whole year as it met with an accident and was non operational. 12.14 In the instant case although the assets were not put to use due to restraint by State Govt. due to the notification which was subsequently held to be illegal by the Hon'ble Supreme Court, however, the assets were ready for use and it has already entered into the block of assets. Therefore, in view of the .....

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of ₹ 11,65,02,989/- are not liable for any tax being capital receipts 13.1 After hearing both the sides, we find the above ground is identical to ground of appeal No.2 in ITA No.489/PN/2007. We have already decided the issue and the ground raised by the assessee has been dismissed. Following the same reasoning this ground by the assessee is dismissed. 14. Ground of appeal No.2 by the assessee relates to disallowance of depreciation of ₹ 15,30,660/- on account of assets of Hyderabad u .....

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cting the claim of the assessee company that the amount of ₹ 11,05,60,540/- is a capital receipt not liable to tax.' 15.1 After hearing both the sides, we find the above ground is identical to ground of appeal No.2 in ITA No.489/PN/2007. We have already decided the issue and the ground raised by the assessee has been dismissed. Following the same reasonings this ground by the assessee is dismissed. 16. Ground of appeal No.2 by the assessee reads as under : "2. In facts and circums .....

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0 lakhs. The amount was received by the assessee during the year and as such had not been offered to tax. It was pointed out that this amount however was added by the AO to the total income while passing the order for A.Y. 2002-03 and reduced from the WDV of the block of assets despite the fact that assessee chose to offer the same to tax in the year of receipt. It was pointed out that while doing so, the AO had not followed accrual method of accounting. It was argued that in any case as this am .....

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perused the material available on record. The contention of the appellant is that the capital subsidy of ₹ 20 lakhs for the assessment year 2002-03 was already reduced from the WDV of the block of assets on accrual basis in that year and the same amount cannot be taxed once again for the year under consideration on receipt basis. It is seen that the matter in dispute for the assessment year 2002-03 was remitted back to the file of the CIT(A) vide order of the ITAT dated 22-04-2008. The cla .....

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this issue may be set aside to the file of CIT(A) for deciding the issue afresh. The Ld. Departmental Representative on the other hand had no objection for the same. In view of the fact that the appeal for A.Y. 2002-03 is still pending before the CIT(A), therefore, we, in the interest of justice, remit this issue to the file of the CIT(A) to adjudicate the issue after the appeal for A.Y. 2002-03. This ground by the assessee is accordingly allowed for statistical purposes. ITA No.1267/PN/2010 (By .....

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