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Nirma Industries Ltd. and others Versus ACIT, Central Circle-1 (1) , Ahmedabad and others

2015 (7) TMI 559 - ITAT AHMEDABAD

Treatment to vyaj badla income - as interest income or short term capital gains - Held that:- The reasons given in the assessment order for this issue and the submissions made on behalf of the appellant are similar to those arising in other appeals of the cases of the same group. In all such cases the modus operandi is almost similar. CIT(A) has not erred in confirming vyaj badla income as interest income instead of short term capital gain. - Decided against assessee.

Depreciation dis .....

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ecific. It has accordingly been held that the impugned subsidy or incentive cannot be taken into account for reducing the cost of assets. It has been finally concluded that such a cost of asset can only be reduced by a subsidy or grant which is to meet directly or indirectly the cost of assets in question. Revenue fails to point out any distinction on facts or law. We find that the tribunal’s earlier order relates to the very subsidy schemes (supra). It has also been held that the authorities be .....

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n removed beyond the first degree. The Revenue fails to point out from the case record that the assessee’s force in exchange gains fluctuation are not connected to its export activities. We affirm the CIT(A) findings in these facts - Decided against revenue.

Disallowance of section 80HHC and 80IA deduction regarding interest on debtors (Mandali Division) - CIT(A) allowed claim - Held that:- Once the assessee’s interest in question has arisen from trade debtors, the same could not have .....

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e any element of turnover and hence, they have to be excluded. The Revenue fails to point out any distinction on facts involved in the impugned assessment year vis-à-vis those in assessment year 2002-03.- Decided against revenue.

Interest on fixed deposits, loans, interest expenditure and reduction of expenses from the insurance claim for the purpose of deductions claimed u/ss. 80HH, 80HHC and 80IA - Held that:- Considering the the decision of hon’ble jurisdictional high court in [201 .....

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RT OF INDIA ), direct the Assessing Officer to adopt netting formula qua assessee’s grounds Decided in favour of assessee for statistical purpose

Disallowance of depreciation on wooden structures - Held that:- There is no dispute between the parties that the relevant invoices stood issued in the name of assessee’s group concern. The assessee fails to prove existence of any agreement with its group concern to first purchase the wooden structure in its name, install it and thereafter ge .....

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on record the tribunal’s earlier order holding that the expenditure in question has not been incurred in expansion of the already existing units of business. We observe in these facts that earlier observations of the ld. co-ordinate bench have attained finality. The assessee’s paper book does not contain any cogent evidence to rebut the same. We find no reason to take a different view on facts in this consequential round of litigation. . However, an alternative contention at this stage is also .....

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rder that the assessee has not put its assets in question in ready to use condition even if its commercial production has not commenced. We quote the case law of hon’ble Delhi high court in CIT vs. Integrated Technologies Ltd. [2011 (12) TMI 48 - DELHI HIGH COURT ] in these facts holding that it is not necessary to actually put to use the plant and machinery in question but such a depreciation claim is allowable even if the assets in question are kept ready for being used in the business concern .....

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0/Ahd/2011 in A.Y. 1998-99 against the order of CIT (A)-II, Ahmedabad dated 1-3-2011in proceedings u/s. 143(3) r.w.s. 254 of the Income Tax Act,1961 hereafter the Act . The assessment year 1999-2000 involves two sets of cross appeals filed by the Revenue and assessee i.e. ITA No.1388 & 1389/Ahd/2011 and 1441 & 1442/Ahd/2011against two separate orders; both dated 1-3-2011of the CIT (Appeals)-II, Ahmedabad in proceedings u/s.143(3) r.w.s. 147 and 143(3) r.w.s. 254 of the Act; respectively. .....

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ssment Year 2000-01 3. This appeal raises following grounds: 1. In law and in facts and circumstances of the Appellant's case, the learned Commissioner of Income-tax (Appeals) has grossly erred in points of law and facts. 2. In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in confirming issue of Notice u/s.148 of I.T. Act. 3.In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in confirm .....

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y assessed under the head capita] gain as well as interest income, which is not permissible under the Act. 6. In law and in facts and circumstances of the Appellant's case, the learned Commissioner of Income-tax (Appeals) has grossly erred in holding that levy of interest u/ss. 234A, 234B and 234C of I.T. Act is consequential. 7. In law and in the facts and circumstances of the Appellant's case, the learned Commissioner of Income-tax (Appeals) has grossly erred in rejecting Appellant' .....

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5 challenge the CIT(A) order confirming the Assessing Officer s action in treating vyaj badla income of ₹ 41,43,543/- as interest income instead of short term capital gains. There is no dispute about facts and figures. The assessee had set off the aforesaid amount of short term capital gains against carried forward capital losses of assessment year 1996-97. The Assessing Officer issued a section 148 notice dated 30.7.2004 seeking to treat the same as interest income. The assessee intealia .....

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ontention as under: 4. Ground No.5 relates to the taxing of vyaj badala income of ₹ 41,43,543/- as interest income and not as capital gain as shown by the appellant. The reasons given in the assessment order for this issue and the submissions made on behalf of the appellant are similar to those arising in other appeals of the cases of the same group. In all such cases the modus operandi is almost similar. In one of the cases namely Kisan Discretionary Family Trust in Appeal No.CIT(A) XII/C .....

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his issue. This ground of appeal is, therefore, dismissed. 5. In ground No.6 it is submitted by the appellant that the income of ₹ 41,43,543/- is already included in the returned income as short term capital gain and now it is being assessed as interest income and thus it amounts to taxing the same income twice. On consideration of the facts of the appellant's case, I find that as observed in the reasons recorded for reassessment, though the appellant had shown this income as short ter .....

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apital loss will not be adjusted as shown in the return and will be carried forward for subsequent year. The A.O. is, therefore, directed to modify his computation to the above extent. 7. Heard rival contentions and perused the case file. We put a specific query to the assessee about the final outcome of the issue in its group concerns case. It replies in negative and does not point out any distinction on facts or law. We affirm the CIT(A) finding under challenge in these circumstances. The asse .....

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ional ground challenging the Assessing Officer s action in charging interest u/s.234D of the Act. The same is reiterated in the course of hearing as well. Case law of (2014) 369 ITR 635 (All.) titled as CIT vs. Jagan and Co. is also quoted in support. We have given our thoughtful consideration. The Assessing Officer s order in question dated 24.3.2006. assessee s grounds of appeal before the lower appellate authority, the CIT(A) order under challenge as well as the demand notice dated 24.3.2006 .....

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to the CIT s Section 263 order under challenge, it does not wish to press the instant appeal. The Revenue does not raise any objection. We accept the assessee s above stated submission and dismiss the instant appeal as not pressed. 12. Assessee s appeal ITA 1173/Ahd/2011 is dismissed as having been rendered infructuous. Revenue s appeal ITA 1388/Ahd/2011 with Assessee s cross appeal no.1441/Ahd/2011 Assessment Year 1999-00 13. The Revenue s sole substantive grievance in its appeal is against CIT .....

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vnagar. The state government issued the relevant subsidy schemes dated 26.7.1991 and 11.9.1995; respectively. The former one provided sales tax exemption to the tune of 90% on the fixed capital investment in land, new building, other construction on plant/machinery for a period of 14 years from the date of commencement of the commercial production. The latter one envisaged the same benefits to the tune of 80% of the fixed capital assets. Per Assessing Officer, these schemes indirectly met cost o .....

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ts cost by reiterating the above stated statutory provision. This resulted in the impugned disallowance of ₹ 1,49,43,270/-. 15. The assessee preferred appeal. It challenged validity of the reopening in question as well as the Assessing Officer s action on merits. The CIT(A) has followed the tribunal s order in ITA 1425/Ahd/2006 for assessment year 2002-03 holding that the incentive provided is in the form of sales tax exemption and not towards meeting the cost of any particular asset. A co .....

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of assets in question. 16. We have confronted the Revenue with the above said findings. It fails to point out any distinction on facts or law. We find that the tribunal s earlier order relates to the very subsidy schemes (supra). It has also been held that the authorities below have wrongly treated the same to be revenue receipt as in the impugned assessment year as well. We adopt consistency in these circumstances and affirm the CIT(A) findings under challenge. The Revenue s sole substantive gr .....

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ision) of ₹ 1,56,350/-. We do not find any discussion much less an elaborate one in the Assessing Officer s order dated 28.12.2007. The CIT(A) holds that the assessee s plea of impugned deduction in respect of this exchange rate difference is covered by the tribunal s decision of the tribunal in Priyanka Gems vs. ACIT 94 TTJ 557 (Ahm.). The hon ble jurisdictional high court has affirmed the said decision in its judgment reported as (2014) 367 ITR 575 (Guj.) CIT vs. Priyanka Gems and holds .....

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n 80HHC and 80IA deduction regarding interest on debtors (Mandali Division) of ₹ 12,96,576/-. The CIT(A) has followed decision of hon ble jurisdictional high court reported as (2006) 283 ITR 402 (Guj.) Nirma Industries Ltd. Vs. DCIT in assessee s own case in assessment year 1992-93 holding as under: However, the parties having made elaborate submission, the matter may be examined from a slightly different angle. When the assessee enters into a contract for sale of its products it could eit .....

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the additional sale proceeds as interest in the case of a contract as per illustration (a) above, such payment would not be profits derived from the industrial undertaking, but in the case of illustration (b) above, if the payment is described as sale price it would be profits derived from the industrial undertaking, this can never be because in sum and substance these are only two modes of realising sale consideration, the object being to realise the sale proceeds at the earliest and without d .....

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neither in consonance with law nor commercial practice. The Tribunal was, therefore, not justified in holding that while computing deduction under section 80-1 of the Act, interest received from trade debtors towards late payment of sales consideration is required to be excluded from the profits of the industrial undertaking as the same cannot be stated to have been derived from the business of the industrial under taking . 20. We have confronted the Revenue a specific query to prove that the i .....

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e Revenue s next ground is against the CIT(A) directions directing the Assessing Officer to excluded sales tax and excise duty while working out section 80HHC deduction. The same is stated to be in contravention of section 145A of the Act. The case file reveals that a co-ordinate bench of the tribunal in assessee s case for assessment year 2002-03 has relied on the judgment of hon ble apex court in CIT vs. Lakshmi Machine Works, 290 ITR 667 (SC) holding that excise duty and sales tax do not invo .....

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ves us with the Revenue s fourth and last ground seeking to restore the Assessing Officer s action treating sales tax subsidy benefit as a capital receipt. We have already held hereinabove that a sales tax subsidy is a capital receipt only (supra).We adopt the very reasoning herein as well and reject the Revenue s arguments. 23. The Revenue s appeal ITA 1389/Ahd/2011 is dismissed. 24. Now we come to the assessee s appeal ITA No.1442/Ahd/2011 raising following substantive grounds. 2. In law and i .....

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t be reduced for working out deduction u/ss.80IA & 80HH of Income-tax Act. 4) In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in confirming that expenses should not be reduced from the insurance claim income for working out deduction u/s. 80IA of Income-tax Act. 5) In law and in facts and circumstances of the Appellant's case, the learned C1T(A) has grossly erred in confirming disallowance of depreciation on wooden structure for  .....

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umstances of the Appellant's case, the learned CIT(A) has grossly erred in holding that charging of interest u/ss.234B and 234C is consequential. 25. The assessee submits at the very outset that its grounds no.2 to 4 relate to interest on fixed deposits, loans, interest expenditure and reduction of expenses from the insurance claim for the purpose of deductions claimed u/ss. 80HH, 80HHC and 80IA of the Act. It quotes the decision of hon ble jurisdictional high court in Tax Appeal No.358 of 2 .....

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any serious objection to the same. We follow the aforesaid case law in these circumstances and direct the Assessing Officer to adopt netting formula qua assessee s grounds no.2 to 4 raised in these appeal. These grounds are accepted for statistical purpose. 26. The assessee s next substantive ground challenges disallowance of depreciation on wooden structures of ₹ 13,70,650/-. The Assessing Officer observed that the assessee did not furnish original purchase bill and installation details .....

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ssing Officer s findings. He holds that the purchase bills of the items in question are not in the assessee s name and no installation details are forthcoming. 28. Heard rival contentions. Case file perused. The assessee submits to have paid its group concern for the impugned wooden structure installed in the office during job work assignment. It states that the relevant invoices had been raised in the name of its sister concern which were later on reimbursed. It is further contended that this g .....

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e installation details thereof despite clear findings of both the lower authorities. We reiterate that the present is second round of proceedings upto the tribunal. Thus, we hold that the assessee s claim in question amounting to ₹ 13,70,603/- has been rightly disallowed by both the lower authorities for want of necessary factual evidence. The assessee s corresponding ground is accordingly rejected. 29. The assessee s next substantive ground challenges the CIT(A) order confirming disallowa .....

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ure was of common indirect revenue nature. This resulted in the impugned disallowance of expenditure of ₹ 5,35,61,516/- relating to soda ash project and ₹ 40,57,968/- relating to LAB project. 30. The CIT(A) has also affirmed the Assessing Officer s findings in the order under challenge. He agreed with the assessee s submission that in A.Y. 1997-98 the tribunal had held identical expenses to be revenue in nature. However, he refers to the tribunal s order in the earlier round of litig .....

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the lower appellate order. 31. Heard rival contentions and case record perused. The assessee refers to the hon ble high court s order in assessment year 1998-99 in tax appeal no.385 of 2014 as well as the case law of CIT vs. Rane (Madras) Ltd. 215 ITR 250 to argue in favour of its claim. It has not placed on record the tribunal s earlier order (supra) holding that the expenditure in question has not been incurred in expansion of the already existing units of business. We observe in these facts .....

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is entitled for consequential depreciation relief. We find that this plea requires examination at the Assessing Officer s behest in facts of the case. We entertain this alternative plea and direct the Assessing Officer to pass a fresh order as per law. The assessee s alternative contention is allowed for statistical purpose. 32. The assessee s next substantive ground seeks depreciation relief of ₹ 39,00,750/- on soda ash project and ₹ 2,199/- on LAB END Project. The assessee claim t .....

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see s assets are used during the construction of the project, depreciation in question cannot be allowed before commencement of the production. It does not give any specific after examining the assessee s books and other relevant supportive details. The assessee quotes hon ble Madras high court decision (supra) and that of the tribunal in assessment year 1997-98 and 1998-99 allowing the very relief. We find that the hon ble Madras high court dealt with a case of revenue expenditure arising from .....

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n if its commercial production has not commenced. We quote the case law of hon ble Delhi high court in CIT vs. Integrated Technologies Ltd. dated 16.12.2011 in these facts holding that it is not necessary to actually put to use the plant and machinery in question but such a depreciation claim is allowable even if the assets in question are kept ready for being used in the business concern. The Revenue fails to point out any judicial precedent to the contrary. We accept the assessee s correspondi .....

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377; 10,444.21 lacs. It places on record Annexure-A comprising of the appropriate computation of deduction u/s.80HHC. It is further stated that the Assessing Officer while passing consequential order dated 27.3.2015 has allowed its deduction claimed by taking into account correct adjusted business profits of ₹ 10326.75 lacs. A copy of this order is placed on record. The Revenue does not raise any objection to this factual position. We observe in these facts and circumstances that the Asses .....

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corresponding ground before the CIT(A). The same is rejected as under: 5 The ground No.5 is against the charging of interest u/s.234D of the I.T. Act for ₹ 7,34,974/-. 5.1 The appellant has submitted that the CIT(A) has already deleted the said interest vide order dated 05.09.2007 and the same should be deleted. It was also submitted that interest u/s.234D is not applicable for A.Y.1998-99 as the provision of section 234D was introduced by the Finance Act, 2003 w.e.f. 01.06.2003 and thus, .....

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