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2015 (10) TMI 2494 - ITAT CHANDIGARH

2015 (10) TMI 2494 - ITAT CHANDIGARH - TMI - Addition u/s 68 - share capital and share premium received from non-resident company - Held that:- In the present case, assessee company had received money on allotment of shares from M/s Glacis Investment Limited through banking channel and furnished complete details of the shareholder, no addition would be made under section 68 of the Act, in the absence of any positive material or evidence to indicate that the shareholder company was benamidar or f .....

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dentity of the shareholder company and that transaction was genuine. The assessee has also proved the credit worthiness of the shareholder company, therefore, authorities below were not justified in making the huge addition against the assessee. We are of the view that assessee has been able to prove the identity of the creditor which is not in dispute, credit worthiness of the shareholder company and genuineness of the transaction in the matter. Therefore, addition under section 68 of the Act i .....

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rame work. Therefore, the scheme in the case of the assessee was intended to encourage the group of entrepreneurs to come together and establish Integrated Textile Parks with world class infrastructure under a public private partnership frame work and the grant-in-aid was given for setting up of the industries/textile parks in the State, therefore, the grant-in-aid could not be considered as a payment directly or indirectly to meet any portion of actual cost and thus, it would fall outside the p .....

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enditure. - Decided in favour of assessee

Disallowance of depreciation - Held that:- Expenditure 10 to Section 43 (1) is not applicable in this case because the scheme of the Government was to encourage group of entrepreneurs to come together and establish integrated textile parks with worth class infrastructure under a Public Private partnership frame work. The grant-in-aid was granted to the entrepreneurs to develop textile parks under the scheme. Following the reasons for decision .....

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ed which according to the ld. CIT(Appeals), were not filed before the authorities below. The authorities below should also give a finding whether amounts are advanced for commercial exigencies. Therefore matter should be remanded to Assessing Officer. - Decided in favour of assessee for statistical purposes. - ITA No. 1138/CHD/2014 , ITA No. 1139/CHD/2014 - Dated:- 1-10-2015 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND Ms. RANO JAIN, ACCOUNTANT MEMBER For the Appellant : Shri Ashwani Kumar,CA & .....

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1 assessee challenged the order of ld. CIT(Appeals) in upholding the addition of ₹ 3,70,00,000/- received by the assessee as share capital and share premium from non-resident company M/s Glacis Investment Limited. The facts are that the assessee has allocated 740000 shares to M/s Glacis Investment Limited at premium. The Assessing Officer asked for the Income Tax Return, assessee's PAN number, mode of acceptance of money with date, bank account of M/s Glacis Investment Limited to prov .....

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rtificate of incorporation of the investor company is placed on record and relied upon various case laws. The Assessing Officer, however, noted that assessee failed to prove the credit worthiness of the party and genuineness of the transaction and made the addition. 4. The assessee challenged the addition before ld. CIT(Appeals). During the appellate proceedings, the assessee reiterated the submissions made before Assessing Officer. It was further contended that as per provisions of Section 68, .....

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to produce the bank statement does not falsify the credit worthiness of the creditor. The assessee submitted that confirmation could be obtained only after culmination of assessment proceedings. As regards genuineness of the transaction, same is proved as the transaction is through banking channel. The assessee relied upon decision in the case of CIT V Steller Investments Ltd. 251 ITR 263 (S.C) and CIT V Lovely Exports Pvt. Ltd. 299 ITR 268 (Delhi) etc. The Assessing Officer in the counter comme .....

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iled to prove credit worthiness of the subscriber. Therefore, addition was rightly made under section 68 of the Act. The ld. CIT(Appeals) further noted that even if additional evidence i.e. confirmation of the subscriber is admitted, it would not make any difference because the confirmation would not justify the credit worthiness of the party. This ground was, accordingly, dismissed. 5. The ld. counsel for the assessee reiterated the submissions made before authorities below. He has filed applic .....

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of the company is that of investment holding and has sufficient assets to make investment in the assessee company and also submitted that the balance sheet of M/s Glacis Investment Limited shows that subscriber company has made investment in assessee company M/s Lotus Integrated Taxpark ltd.(PB-21). On the other hand, ld. DR objected to the admission of additional evidence and submitted that the subscriber company was not having any income in assessment year under reference and that the entire .....

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sheet was necessary to prove credit worthiness of the subscriber company. Therefore, the balance sheet of the subscriber company is relevant document and goes to the root of the matter. The assessee has explained the reasons that at the proceedings before authorities below, the balance sheet could not be obtained which is now available to the assessee, therefore, same was filed for consideration. The Hon'ble Supreme Court in the case of Tek Ram 262 CTR 118 admitted the additional evidence be .....

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also the affidavit of the author of the diary. Though the documents had a direct bearing on the issue". 7. Considering the facts of the case in the light of the above decisions, it is clear from the findings of the ld. CIT(Appeals) that balance sheet of the subscriber company was relevant document to prove the credit worthiness of the subscriber company and would go to the root of the matter. Therefore, the additional evidence in the form of balance sheet of the subscriber company is admitt .....

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, Mauritius, PB-30 is share certificates issued by the assessee to M/s Glacis Investment Limited, PB-38 is confirmation of M/s Glacis Investment Limited of making investment in assessee company in a sum of ₹ 3.70 Cr on allotment of 740000 equity shares, PB-47 is certificate of Mauritius Government granting Global Business License to M/s Glacis Investment Limited under the Financial Services Act. The ld. counsel for the assessee submitted that the identity of the subscriber company is not i .....

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king channel with approval of the Reserve Bank of India. No evidence has been brought on record that it was the money of the assessee which is routed through the subscriber. He has relied upon following decisions in support of his contention : i) Decision of Delhi High Court in the case of CIT V Steller Investment Ltd. 192 ITR 287 in which it was held as under : If it be assumed that the subscribers to the increased share capital were not genuine, even then under no circumstances could the amoun .....

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vestment Ltd. 251 ITR 263. ii) Decision of Delhi High Court in the case of CIT V Divine Leasing & Finance Ltd. 299 ITR 268 in which it was held as under : In the instant case the Tribunal noted that the assessee was a public limited company, which had received subscriptions to the public issue through banking channels and the shares were allotted in consonance with the provisions of the Securities Contract Regulation Act, 1956, as also the Rules and Regulations of the Delhi Stock Exchange. C .....

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bscribers. Had any suspicion still remained in the mind of the Assessing Officer, he could have initiated 'coercive process', but that course of action had not been adopted. In view of the concurrent finding, pertaining to the factual matrix, there was no merit in those appeals which were, accordingly, to be dismissed. iii) Decision of Hon'ble Supreme Court in the case of CIT V Lovely Exports P.Ltd. 216 CTR 195 in which it was held as under : If the share application money is receive .....

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that during the proceedings under section 143(3) read with section 250 of the Act, the assessee furnished a confirmation certificate from A along with PAN number, The assessee had confirmed that the liability was still outstanding. Hence Section 41(1) was not applicable.(ii) That at the time of the original assessment, the assessee had had supplied the list of the persons to whom the shares were sold along with their addresses. The Assessing Officer did not doubt the identity of the persons fro .....

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sh credits - Assessment year 2001-02 - Assessee-company took some unsecured loan from ACL and also filed confirmation thereof - Assessing Officer asked assessee to file a copy of income-tax return of ACL along with its audited profit and loss account, balance sheet and copy of bank statement for relevant period - Assessee furnished all documents asked for - From bank statement of ACL, Assessing Officer noticed that funds were transferred through internal transfer to ACL and then in same manner i .....

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on regarding any ingenuineness or fictitious identity of entries or non-capacity of lender, addition was rightly deleted - Held, yes. vi) Decision of Delhi High Court in the case of CIT V Value Capital Services (P) Ltd. 307 ITR 334 in which it was held as under : If department wants to make addition on account of share application money, burden is on department to show that even if applicant did not have means to make investment, investment made by assessee actually emanated from coffers of asse .....

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of assessee]. viii) Decision of Delhi High Court in the case of CIT V Dwarkadhish Investment (P) Ltd. 330 ITR 298 in which it was held as under : In any matter, the onus of proof is not a static one. Though in section 68 proceedings, the initial burden of proof lies on the assessee, yet once he proves the identity of the creditors/share applicants by either furnishing their PAN numbers or income-tax assessment numbers and shows the genuineness of transaction by showing money in his books either .....

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t in the case of CIT V Winstral Petrochemicals (P) Ltd. 330 ITR 603 in which it was held as under : Undisputedly the share application money was received by the assessee by way of account payee cheques, through normal banking channels. It was not the case of the revenue that the payment of share application money was not made from the bank account of the applicant-companies. Admittedly, copies of applications for allotment of shares were also provided to the Assessing Officer. It was not the cas .....

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s including certified copies issued by Registrar of Companies in relation to share application, affidavits of directors, Form 2 filed with Registrar of Companies by such applicants, confirmations by applicants for company's shares, certificates by auditors, etc., Assessing Officer was not justified in making addition under section 68 on account of share application money merely on general inference to be drawn from the reading of the investigation report. The least that Assessing Officer oug .....

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The ld. counsel for the assessee, therefore, submitted that assessee has proved the credit worthiness of the subscriber company, its credit worthiness and genuineness of the transaction in the matter. The assessee is not connected with the subscriber company. He has, therefore, submitted that addition is wholly unjustified. On the other hand, ld. DR relied upon orders of the authorities below and submitted that copy of the bank account of subscriber company was not filed, therefore, credit wort .....

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sued to this company at premium value. No investments have been made in this regard. The ld. DR also admitted that the reasons for issuing the shares to the subscriber company at paid up value and at premium have not been investigated by the Assessing Officer at assessment stage. The assessee has filed copy of the certificate of incorporation of M/s Glacis Investment Limited which is a registered company in Republic of Mauritius. The ld. CIT(Appeals) considering the subscriber company to be a co .....

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transaction held between assessee and M/s Glacis Investment Limited, Mauritius for issuing the shares at paid up value and premium for 740000 equity shares were recorded by the Reserve Bank of India in their records. The ld. DR submitted that the name of M/s Glacis Investment Limited is wrongly recorded in the Reserve Bank of India certificate. It appears to be typographical error and is not having much significance on the same because the assessee has issued 740000 equity shares to the sharehol .....

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appeal. The Republic of Mauritius also certified that Global Business License under Financial Services Act have been granted to M/s Glacis Investment Limited. The balance sheet of the shareholder company M/s Glacis Investment Limited is also filed on record which is admitted as additional evidence which proved that the principal activity of this company is that of investment holding and was having the sufficient funds/assets to make investment in assessee company and that the investment made in .....

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e transaction in the matter. The documentary evidences produced on record also support the contention of assessee that the shareholder company M/s Glacis Investment Limited, Mauritius has made investment in assessee company in 740000 equity shares by investing ₹ 3,70,00,000/-. The shareholder company also filed confirmation to that effect which is supported by Tax Residence Certificate, allotment of share certificates and Global Business License granted by Republic of Mauritius and the ban .....

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decisions relied upon by ld. counsel for the assessee support the fact that assessee has received genuine share application money from the shareholder company. 10(ii) The ITAT Indore Bench in the case of Peoples General Hospital Ltd. in ITA 57/2007 vide order dated 28.09.2007 considering the identical issue held in para 11 to 12.2 as under : 11. We have considered rival submissions and material on record. We have bestowed our careful consideration and do not find any justification to interfere .....

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The use of the words "any sum found credited in the books". Section 68 indicates that the section is very widely worded and the Income tax Officer is not precluded from making and enquiry as to the true nature and source of a sum credited in the account books even if it is credited as receipt of share application money. The mere fact that the (assessee) company choose to show the receipt of the money as capital does not prelude the Income-tax Officer from going into the question whethe .....

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shareholders do not exist then, in effect, it would mean that there is no valid issuance of share capital. Shares cannot be issued in the name of non-existing persons. The use of the words "may be charged" in section 68 clearly indicates that the Income-tax Officer would then have the jurisdiction, if the facts so warrant, to treat such a credit to be the income of the assessee. If the share holders are identified and it is established that they have invested money in the purchase of .....

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, 134 Tax Man 747 (180 CTR 491), held "Sec. 68 is applicable in respect of share application money; however, the question of genuineness of the entries regarding share application money is a question of fact to be decided by the assessee authority on the basis of evidence available on record." Delhi High Court in the case of CIT vs. Stellar Investment Ltd., 192 ITR 287, held "that, even if it be assumed that the subscribers to the increased share capital were not genuine, under no .....

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o costs." Delhi High Court in the case of CIT vs. Dolphin Canpack Ltd., 283 ITR 190, held "In its return for the assessment year 1998-99, the assessee claimed to have received share application money of ₹ 62 lakhs. The Assessing Officer rejected the explanation of the assessee and added the amount to the taxable income of the assessee. The Tribunal found that the assessee had furnished complete details to the Assessing Officer regarding the transactions in question, which include .....

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, dismissing the appeal, that in the absence of any perversity in the view taken by the Tribunal or anything to establish conclusively that the finding regarding the genuineness of the subscribers and the transactions suffered from any irrationality, no substantial question of law arose from the order of the Tribunal. The deletion of the amount was justified." Gauhati High Court in the case of CIT vs. Down Town Hospital Pvt. Ltd., 267 ITR 439, held "That regarding amounts received as s .....

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ics Ltd. vs. CIT, 283 ITR 377, held "If the transactions are made through banking channels and once the existence of persons by name in the share applications in whose name the shares have been issued is shown, the assessee-company cannot be held responsible to prove whether that person himself has invested the said money or some other person had made investment in the name of that person. The burden then shifts on the Revenue to establish that such investment has come from the assessee-com .....

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irectors resolution approving such transactions as well as cheque number, branch and address of the bank through which the investment was made. It was also noticed that the Assessing Officer himself had noticed in his order that the applicant-share holders were income-tax payees. In such circumstances, it could not be presumed that the share holder who was assessed to tax was not in existence. That would tantamount to contradiction in the stand of the department itself." ITAT, Jodhpur Bench .....

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radesh High Court in the case of CIT vs. Metachem Industries, 245 ITR 160, held "Once it is established that the amount has been invested by a particular person, be he a partner or an individual, then the responsibility of the assessee is over. Whether that person is an income-tax payer or not and where he had brought this money from, is not the responsibility of the firm. The moment the firm gives a satisfactory explanation and produces the person who has deposited the amount, then the bur .....

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ce filed in form of confirmation letter, copy of acknowledgement receipt of some of the share holders filing return of income, evidence of agricultural holding, etc. We have also noted that the assessee company has furnished complete details of all the share holders. Therefore, before drawing any conclusion the AO should have issued summons u/s 131 to these share holders to arrive at the truth about the investment made by them. However, no such exercise was carried out by the AO and simply for t .....

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Delhi High Court in the case of CIT vs. Glocom Impex P. Ltd. , 205 CTR 571, held "Once it was established that the share holder was a genuine person and also creditworthy and that she had the requisite amount for making the investment in question, no addition could be made under s. 68 in the hands of the assessee-company ; Revenue could not go further to find out whether the person from whom the share holder had received money through cheque was also a genuine party and creditworthy." .....

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e creditworthiness to advance the loans. Thereafter, the burden had shifted to the Assessing Officer to prove the contrary. The failure on the part of the creditors to show that their sub-creditors had creditworthiness to advance the said loan amounts to the assessee, could not, under the law be treated as the income from undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or were owned .....

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he share holders/ share applicants were genuinely existing persons. It was also not denied that each of them was an income-tax assessee and copies of the return of their income were also place before the Assessing Officer. There was no presumption that the assessee was the benami owner of the investment made by the existing persons. The Tribunal was justified in deleting the addition." Hon'ble Delhi High Court in the recent decision in the case of CIT vs. Illac Investment Pvt. Ltd. 287 .....

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isfactorily established identity of the share subscribers. The view taken with the Assessing Officer was, accordingly, reversed. The Income-tax Appellate Tribunal has in a further appeal filed by the Revenue before it placed reliance upon the decision of this court in CIT v. Antarctica Investment P. Ltd. [2003] 262 ITR 493 and CIT v. Sophia Finance Ltd. [1994] 205 ITR 98 (Delhi) [FB] to hold that the respondent assessee had discharged the onus by reference to the material produced to establish t .....

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e of CIT v. Sophia Finance Ltd. [1994] 205 ITR 98 (Delhi) [FB]. The learned Commissioner of Income-tax (Appeals) has also considered the provisions of sections 72,75 and 77 of the Companies Act and has also taken into consideration the details furnished by the assessee before the Assessing Officer including the certificate of incorporation of subscribers, copies of their bank statements and copies of their assessment orders as well as the copies of their audited accounts. The findings recorded b .....

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of several payments are mentioned. It is also admitted fact that the said NRI Company is registered company and which fact is also proved by the certificate of incorporation of M/s. Alliance Industries Ltd. which is also certified by the Notary Public and is countersigned by the Governor and Commander in Chief of the city of Gibraltar. These certificates are supported by later on by Faria and Associates Chartered Accountants. The identity of the foreign investor M/s. Alliance Industries Ltd. is .....

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ey in the business of the assessee after obtaining the permission of the Govt. of India. The forms filed with the RBI would also indicate that the foreign remittances received from M/s. Alliance Industries Ltd. were duly approved by RBI for investment in the shareholding of the assessee company. The assessee also filed several certificates issued time to time by the State Bank of India, Commercial Branch, Bhopal explaining therein that on several dates the foreign remittances were ordered, to be .....

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re the same as have been mentioned in the confirmation letter of M/s. Alliance Industries Ltd. filed before the AO and are on the same line on which assessee filed several certificates before the AO. The Standard Chartered Bank also filed certificate confirming the above position and that M/s. Alliance Industries Ltd. maintained bank account with them and the account is conducted to their satisfaction. The AO neither at the assessment stage nor at the appellate stage disputed the genuineness of .....

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d. through proper banking channel and it is the money of M/s. Alliance Industries Ltd. that has come to the assessee and that M/s. Alliance Industries Ltd. had the capacity to invest this much of the amount during the FY relevant to the AY in question. The transfer of foreign currency from the bank account of M/s. Alliance Industries Ltd. clearly proved the creditworthiness of M/s. Alliance Industries Ltd. It is a settled law that the income-tax authority cannot ask the assessee to prove source .....

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fore AO was not justified in drawing adverse inference against the assessee. The AO has not brought any evidence on record that the share application money received by assessee from M/s. Alliance Industries Ltd. belong to the assessee or that it was the assessee s own money which it had received in the shape of dollars from the NRI Company. It is therefore not in the nature of income of the assessee because the money received was on account of share capital/share premium. The ld. CIT(A) has give .....

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(1). Ld. counsel for assessee also argued and made the above submission before the Tribunal as considered by ld. CIT(A). During the course of arguments, ld. DR did not dispute the above facts recorded by the ld. CIT(A) in the impugned order and therefore it stands proved that in the earlier years the AO did not dispute the identity of M/s. Alliance Industries Ltd., genuineness of transaction and its creditworthiness in respect of share application money remitted by the above foreign investor. We .....

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cata is not applicable and AO is competent to make inquiry on the same facts in the subsequent year. Hon ble M.P. High Court in the case of CIT vs. Godawari Corpn. Ltd., 156 ITR 835 held "With regard to the third point, we would like to say that the question posed before us is not whether the Tribunal has committed an error of law in applying the principles of res-judicate. However, though it is true that the principles of res-judicata do not apply, the rule of consistency does apply. In th .....

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TR 610 at pp. 613-614". Hon ble Punjab & Haryana High Court in the case of CIT vs. Vikas Chemi Gum India, 276 ITR 32 held "That since the appellant did not challenge the order passed by the Tribunal in relation to the assessment year 1986-87 by which it confirmed the order of the Commissioner(Appeals) deleting the addition made by the AO on account of value of "bardana" used for storing "churi and korma", it could not challenge a similar order passed in relation .....

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iance Industries Ltd. is not filed as is considered relevant in the case of M/s. Kalani Industries Ltd. (supra). We do not agree with the submission of ld. DR because every case has its own facts and the findings are dependant upon the appreciation of the evidence available on record. In the case of present assessee, the entire documentary evidence available on record and the previous history of assessee noted above in respect of the same NRI company M/s. Alliance Industries Ltd. clearly proved .....

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DR that he himself contradicted his submission because according to his submission for proving genuine credit u/s 68 the assessee shall have to prove identity of creditor, genuineness of transaction and creditworthiness of the creditor which assessee in this case has already proved. What the businessman has taken a decision is entirely dependant upon their business needs which is not open to challenge by the revenue therefore it was not relevant criteria to disbelieve the version of the assesse .....

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was held "whether onus of assessee in the case of share capital by public issue is lighter one and therefore such onus would stand discharged if identity of share applicant is established-held-Yes." This case is not applicable in favour of the revenue because the amount is not received from close relative or friend. 12.1 On going through the above documentary evidences on records and the judicial pronouncements referred to above, it is clear neither the AO nor the ld. DR appearing for .....

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ey is a question of fact to be decided on the basis of evidence available on record. The assessee on the basis of evidence available on record has been able to prove creditworthiness of M/s. Alliance Industries Ltd. The ratio of the decisions relied upon by the ld. counsel for assessee and referred to by us in this order are squarely applicable to the facts and circumstances of this case. The assessee through the evidences on record has been able to prove the identity of shareholder, its existen .....

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ved because all the payments have been made through banking channel through the account payee cheque which fact could be verified from the respective bank and in fact the respective banks namely SBI, Bhopal and Standard Chartered Bank have certified the same fact. The genuineness of the transaction is not disputed. Considering the totality of facts and circumstances of the case in the light of the material and evidence on record, we are of the view that assessee has discharged the onus lay upon .....

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lied upon by ld. DR has considered the fact in which the AO held that the gift though apparent were not real and accordingly treated all the amounts of the gift as income of the assessee u/s 68 of the IT Act. The assessee did not contend that even if there explanation was not satisfactory, the amount were not of the nature of income. The ld. CIT(A) confirmed the order and the Tribunal through majority view confirmed the orders of the authorities below. On an appeal, the High Court re-appreciated .....

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transaction was not by itself of any consequence. The High Court misdirected itself and erred in disturbing the concurrent findings of fact." However, the facts and circumstances of the appeal before us are clearly distinguishable as noted above. The reliance of ld. DR on the cases referred to above are therefore misplaced. 12.2 Considering the above discussion, we do not find any infirmity in the order of the ld. CIT(A). The appeal of the revenue has no merit and is accordingly dismissed. .....

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urnished complete details of the shareholders, no addition could be made under section 68 of the Income-tax Act, 1961, in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented the company's own income from undisclosed sources. It was nobody's case that the non-resident Indian company was a bogus or non-existent company or that the amount subscribed by the company by way of .....

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of shares from M/s Glacis Investment Limited through banking channel and furnished complete details of the shareholder, no addition would be made under section 68 of the Act, in the absence of any positive material or evidence to indicate that the shareholder company was benamidar or fictitious company or that any part of the share capital represented the assessee's own income from undisclosed sources. The assessee on the basis of the documentary evidence on record has been able to prove tha .....

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huge addition against the assessee. 13. Considering the totality of the facts and circumstances on the basis of the evidences on record and in the light of the judicial pronouncements noted above, we are of the view that assessee has been able to prove the identity of the creditor which is not in dispute, credit worthiness of the shareholder company and genuineness of the transaction in the matter. Therefore, addition of ₹ 3.70 Cr under section 68 of the Act is wholly unjustified. We, acco .....

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ion of ₹ 3 Cr as expenditure on up-gradation of Sub Station owned by the company. When confronted, the assessee, during the course of assessment proceedings submitted that the assessee company has developed Textile Capital with a cluster of units so as to ensure power supply and MOU was made between Abhishek Industries and the assessee company for uninterrupted supply of power by Abhishek Industries assessee's company. The assessee agreed to bear cost of ₹ 3 crores for up gradati .....

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nditure. The A.O. relied upon the case of Sudarson Chemical Industries Ltd. vs. ACITvs. ITAT Pune (110) ITD 171 etc. The A.O. also distinguished the case relied upon by the assessee. It was noted that the assets in this case are actually shown by the assessee in the list of fixed assets and, therefore, owned by the assessee. The A.O. also held that depreciation is not allowed on this capital expenditure as this expendituree is made out of the grant received from the Ministry of Textile. 14 (i) D .....

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ard ld. Representatives of both the parties. The ld. counsel for the assessee reiterated the submissions made before authorities below. He has fairly stated that the issue whether the expenditure was revenue or capital in nature has been decided against the assessee by Hon'ble Punjab & Haryana High Court in the case of CIT V Shreyans Industries Ltd. 303 ITR 393 in which it was held as under : Held, (i) that setting up of a system/plant and creation of other infrastructure in an industria .....

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lakhs, which was being allowed as revenue expenditure. Therefore, the expense made by the assessee during the first year when the drain was dug out was capital in nature. The expenditure was not deductible. 15 (i) He has further submitted that the matter is remanded back to the High Court in the matter reported in 314 ITR 302. He has, however, submitted that depreciation on the capital expenditure is liable to be allowed by the authorities below. He has submitted that the grant-in-aid as is not .....

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infrastructure under a Public Private Partnership frame work. Under the scheme, Ministry of Textiles would pro vide a grant upto 40% of the approved capital cost of each textile park subject to ceiling of ₹ 40 Cr to the special purpose vehicle established for setting up the textile park. The objective to grant-in-aid to the entrepreneurs was to develop textile parks under the scheme. The details of the same is also filed on the subject. He has submitted that the incentive/grant-in-aid coul .....

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held as under : "(ii) That the Tribunal was right in treating the subsidy as a capital receipt and deleting the addition representing the wind mill subsidy and not reducing it from the cost of the wind mills to work out the value for calculating depreciation." ii) Decision of Allahabad High Court in the case of CIT V P. Glass Works 333 ITR 355 in which it was held as under : (ii) That in computing the actual cost for purposes of depreciation Government subsidy was not deductible. CIT .....

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ishakhapatnam Bench in the case of Sasisri Extractions Ltd. V ACIT 122 ITD 428 (307 ITR (AT) 127 in which it was held as under Held allowing the appeal, that the scheme was intended to accelerate industrial development of the State and the incentive was given for setting up of industries in Andhra Pradesh. The amount of subsidy to be given was determined by taking the cost of eligible investment as the basis. The incentive in the form of subsidy could not be considered as a payment directly or i .....

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te subsidy - Revenue held that said subsidy had to be reduced from cost of fixed assets for purpose of arriving at depreciation - Whether if payment of subsidy is not related to actual acquisition of assets and subsidy is granted on capital investment on land, building and machinery then it cannot be reduced from value of asset (written down value) - Held, yes - Whether further, if there is no special mention regarding intention to adjust said subsidy against actual cost of machinery, then that .....

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in the case of Soham Electroplast Pvt. Ltd. V ITO in ITA No. 1578/PN/2008 dated 28.10.2008 in which the Tribunal following the decision of Vishakhapatnam Bench in the case of Sasisri Extractions Ltd. V CIT (supra) has held the similar claim of assessee. 16. On the other hand, ld. DR relied upon orders of the authorities below and submitted that Explanation 10 to Section 43(1) applies in the case of the assessee, therefore, no depreciation is allowable. 17. We have considered rival submissions. .....

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claim it to be revenue expenditure. The authorities below were, therefore, justified in holding it to be capital expenditure and the similar claim of assessee has already been disallowed by Hon'ble Punjab & Haryana High Court in the case of Shreyans Industries Ltd.(supra) in which also ld. counsel for the assessee accepted that the issue has been decided against the assessee. Therefore, we confirm the orders of authorities below that expenditure involved on this issue is capital in natu .....

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ever, confirmed the addition holding that since this amount was made through the grant-in-aid, therefore, no depreciation is allowable on ₹ 3 Cr addition. Explanation 10 to Section 43 (1) of the Income Tax Act reads as under : "Explanation 10. - Where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government or any authority established under any law or by any other person, in the form of a subsidy or .....

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ith reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee." 19. For applying the above provisions against the assessee, it is necessary to prove that portion of cost of asset acquired by the assessee has been met directly or indirectly by the government or the authority established under any law or by any other person in the form of subsidy or grant or reimbursement by whatever name called. In the decis .....

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nd the incentive was given for setting up of industries in the State and for the purpose of determining the amount of subsidy to be given, cost of eligible investment was taken as basis. Under those circumstances, the incentives in the form of subsidy could not be considered as payment directly or indirectly to meet any portion of actual cost and thus, it was held that same would fall outside the provisions of Explanation 10 to Section 43(1) of the Income Tax Act and depreciation was allowed. Th .....

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h world class infrastructure under a public private partnership frame work and the grant-in-aid was given for setting up of the industries/textile parks in the State, therefore, the grant-in-aid could not be considered as a payment directly or indirectly to meet any portion of actual cost and thus, it would fall outside the purview of Explanation 10 to Section 43(1) of the Act. All the decisions relied upon by ld. counsel for the assessee are on identical point and support the contention of the .....

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lenged the order of ld. CIT(Appeals) in upholding the disallowance of depreciation amounting to ₹ 3,04,63,791/-. The facts are that in this case, the assessee has received grant-in-aid of ₹ 40 Cr from the Ministry of Textiles, New Delhi under the scheme of Integrated Taxpark (SITP). Out of total grant of ₹ 40 Cr., ₹ 36 Cr was received upto 31.03.2010 including ₹ 12 Cr received during the year under consideration. As per provisions of Section 43 (1) Explanation 10, t .....

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ly. The Assessing Officer noted that total approved project cost was ₹ 110.26 Cr and grant-in- aid was sanctioned for ₹ 40 Cr. The Assessing Officer reproduced the sanction order in the assessment order. As per project report submitted during the course of assessment proceedings, the total cost is ₹ 129.25 Cr and excluding the cost of land, the figure is ₹ 110.26 Cr. Since the assessee has not furnished head-wise grant received and money utilized for each specific head of .....

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to be deducted from the cost of the acquisition of fixed assets for the purpose of computing depreciation as the amount is in the nature of contribution towards the total subsidy outlay. It was submitted that the grant was given to stimulate growth in the Textile Industry. The ld. CIT(Appeals), however, noted that since grant-in-aid was used to meet the cost of assets, therefore, in this case Section 43(1) Expenditure-10 is clearly applicable and accordingly, dismissed this ground of appeal of t .....

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textile parks under the scheme. Following the reasons for decision on ground No. 2 above, we set aside the orders of authorities below and direct the authorities below to grant depreciation to the assessee without reducing the grant received from Ministry of Textiles. This ground of appeal of the assessee is accordingly, allowed. 24. In the result, this appeal of the assessee is partly allowed, as indicated above. ITA 1139/CHD/2014 ( A.Y. 2011-12) 25. The assessee has raised the following groun .....

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not justified to uphold the disallowance of a sum of ₹ 1,00,00,000/- crore paid to M/S Abhishek Industries Limited for upgradation of power sub-station required for supply of power to the appellant company. 3. That the Ld. CIT (Appeals) was not justified to arbitrarily uphold the following out of interest account:- a) a sum of ₹ 81,62,546/- in respect of capital advances which were advanced out of own funds as well as grant-in-aid received from Ministry of Textiles in earlier years. .....

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rounds of appeal of the assessee and directed the authorities below to grant depreciation to the assessee. Both the parties stated that these issues are same as have been decided in assessment year 2010-11 on ground No. 2 & 3. Therefore, following the order for assessment year 2010-11 in ITA 1138/2014, we set aside the orders of authorities below and direct the authorities below to grant depreciation to the assessee. Accordingly, ground Nos. 1 & 2 of appeal of the assessee are allowed. 2 .....

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t free grant-in-aid received from the Government of India and from the operating income. However, the Assessing Officer held that entire fund is kept in a common kitty and the4refore, decision rendered in the case of CIT V Abhishek Industries Ltd. 286 ITR 1 (P&H) is clearly applicable. The Assessing Officer, accordingly, disallowed proportionate interest of ₹ 81,62,546. The Assessing Officer further noticed that assessee has shown capital work in progress at ₹ 4.93 Cr as per deta .....

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essing Officer, however, did not accept the contention as no such corroborative evidences were filed. 28. The assessee challenged both the additions before ld. CIT(Appeals) and as regards addition of ₹ 81,62,546/-, it was submitted that capital advance was made against work orders which was complete in the financial year 2010-11 and 2012-13. However, the Assessing Officer, on the basis of assessment records has submitted that no details of such work orders were filed. Regarding addition of .....

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as taken before Assessing Officer. The assessee is having common kitty out of which expenses were made. No evidence is submitted that advance is made out of interest free grant-in-aid. Further, no evidence regarding assets having been put to use in assessment year 2010-11 have been submitted and accordingly, this ground was dismissed. 29. We have heard ld. Representatives of both the parties. The ld. counsel for the assessee reiterated the submissions made before authorities below and regarding .....

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es of ₹ 5.93 Cr, a sum of ₹ 4.74 Cr was paid out of Government grant received which was totally interest free and no interest was required to be disallowed. He has relied upon decision of the Hon'ble Supreme Court in the case of S.A. Builders Vs CIT 288 ITR 1. As regards disallowance of interest of ₹ 30,68,339/- in respect of capital work in progress, it was submitted that assessee company was having outstanding balance in term loan account of ₹ 14.27 Cr as on 31.03.2 .....

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the four parties namely Lotus Infra Build Ltd. (Advance Landscaping ), Lotus Infra Build Ltd. ( Advance Pack IV) Lotus Infra Build Ltd. (Advance Pack V) and Lotus Infra Build Ltd. (Advance Pack VII) for a sum of ₹ 5.93 Cr. He has referred to source of the funds out of share capital, reserve and surplus, equity share warrants and secured loans for a sum of ₹ 80.84 Cr. He has referred to Schedule V of Fixed Assets to show that in preceding assessment year 2010- 11, the net block was of .....

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of interest free grant-in-aid received from Government of India and from operating income. The Assessing Officer, however, relied upon decision of the Hon'ble Punjab & Haryana High Court in the case of Abhishek Industries Ltd. (supra) holding that when entire fund is kept in common kitty, therefore, this decision would apply against the assessee. Hon'ble Punjab & Haryana High Court in its subsequent unreported decision in the case of Bright Enterprises Pvt. Ltd. V CIT in ITA 224 .....

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