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TMI Blog2014 (1) TMI 1695X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of Rs. 19,56,465/- on account of sales tax deferral scheme as capital in nature. 4. Whether on the facts and in the circumstances of the case, the Ld.CIT(A)-I, Nashik was justified in holding that the subsidy given in the form of Special Capital Incentive shall not be reduced from the WDV of the assets while computing the depreciation of the assets. 5. The appellant prays the order of the Assessing Officer may be restored. 6. The appellant prays to adduce such further evidence to substantiate his case. 7. The appellant prays leave to add, alter, clarify, amend and or withdraw any grounds of appeal as and when the occasion demands. 2. The assessee is a firm engaged in manufacturing of Automobile Components. The assessee filed a return of income declaring total income of Rs. 5,25,45,080/- on 30.09.2008. The Assessing Officer assessed the total income of the assessee at Rs. 5,31,51,896/-. The addition of Rs. 3,00,000/- on a/c of non-maintenance of quantity details, Rs. 29,198/- u/s 14A and Rs. 1,84,347/- on a/c of depreciation were made by the Assessing Officer. The matter was carried by first appellate authority. 3. The first grievance before the appellate authority was tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been increased to Rs. 10,55,18,632/- at the year end due to current year's profit. It was also pointed out that the current year's profit is much more than the investment made in Mutual Funds. No disallowance could be made u/s.14A of interest on borrowed funds. In case of mixed funds not possible to ascertain whether the investment in tax free bonds is out of his own funds, the source of investment in the tax free bonds was identified. The Assessing Officer failed to establish any nexus between the borrowed funds and the investments in the tax free bonds. He has not considered the cash flow of the assessee. Therefore, the apportionment on a pro-rata basis was not justified in the absence of anything brought by the Assessing Officer on record to rebut the assessee's stand that the investment in the tax free bonds had been made out of the funds of own funds. In the case the funds were available, both interest free and interest bearing, then a presumption would arise that interest free funds have been used for investment and no disallowance of interest could be made u/s.14A. 4.2 In view of above legal factual discussion, the CIT(A) has rightly held that the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed of the benefits during the financial year 1999-2000, therefore, repayment of the loan was required to commence during the financial year 2010-11. As per the 4th proviso to section 38(4) of the Bombay Sales Tax Act, 1959 read with Rule 3ID of the Bombay Sales Tax Rules, 1959, the appellant had an option to prepay the deferred sales taxes at net present value. The proviso also stated that such prepayment would amount to discharge of deferred tax liability. It was specifically mentioned that deferred tax was fully paid and not remitted or waived. The appellant exercised the option and had repaid the deferred tax liability at net present value (NPV) of Rs. 20,06,310/-, in respect of the loans availed during F.Ys. 1999-2000 to 2002-03. In the Accounting Practice this prematured repayment of deferral loan tentamounts to discharge of a future liability. As per the Bombay Sales Tax Act, 1959 and the Rules there under the mechanism of calculating the Net Present Value (NPV) is given. The appellant has contended that there is no dispute with regard to the procedure for determining the N.P.V. The N.P.V. is nothing but the present value of an amount calculated by determining the future a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not taxable as per law though shown by the assessee in the return. It is always open to the assessee to take a plea that the taxable income though shown as income is not taxable under law before the higher authorities. The CIT(A) without going into the merit of the case held that the CIT(A) is not having any power to reduce the taxable income of the assessee at the appellate stage, which is not correct. In the case of CIT Vs. Charanjit Jawa [ 142 Tax man 101 P & H ] relied upon by the learned counsel for the assessee supports the views that the interest received as a result of the Order of the Hon'ble High Court was not a statutory interest and was in the form of damage/compensation and the same was not liable to ax. In view of the above, after considering the totality of the facts and circumstances of the case arid also on perusal of the case laws relied upon by both the parties we hold that the interest of Rs. 2,53,730/- received by the assessee as per the order of the Hon'ble High Court was not taxable and the same is a capital receipt. WE also take support from the Circular issued by the CBDT vide Circular No.14 (XL-35) dated 11/04/1955 which has directed the office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & Shareholders Pvt. Ltd. (I.T.A. no.3908 of 2010), Pradeep Kumar Harlaka Vs. ACIT (2012) 143 TTJ (Mumbai) 446; PT Sheo Prasad Sharma Vs. CIT (1967) 66 ITR 647 (All.) and Calibre Personnel Services Pvt. Ltd. Vs. ACIT (I.T.A. No.8188/Mum/2010 and I.T.A. No.34Q7/Mum/2011. 8.6.4 In view of the above facts and the circumstances and the position of law, it is held that the impugned amount of Rs. 19,56,465/- is not an income of the assessee and was erroneously shown by it in the return of income. Therefore, the same is directed to be deleted. This ground of appeal is allowed." 5.3 This reasoned findings of the CIT(A) need no interference from our side who has deleted the impugned addition of 19,56,465/- by holding that the same is not the income of the assessee for the reasons discussed above and mere so because was erroneously shown in its return of income by the assessee, therefore, the same was rightly deleted by the CIT(A). We uphold the same. 6. Next issue is with regard to disallowance of depreciation at Rs. 1,84,347/- by reducing the amount of special capital incentive received by the assessee from the Govt. of Maharashtra. The matter was carried before the CIT(A) who has rightl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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