TMI Blog2016 (4) TMI 1320X X X X Extracts X X X X X X X X Extracts X X X X ..... when no exempt income was earned by the assessee in the relevant A.Y and since in the present case the AO as well as the ld. CIT(A) has not brought out any allegation or fact to allege or disturb or doubt the genuinety of the expenditure incurred by the assessee, therefore, no disallowance can be made u/s 14A of the Act in A.Y 2007-08 u/s 14A r.w.r 8D of the Rules for A.Y 2008-09. Respectfully following the decision of the Hon'ble High Court of Delhi in the case of Chem Invest Ltd [2009 (8) TMI 126 - ITAT DELHI-B] Depreciation on computer peripherals at an estimated basis - Held that:- Depreciation of computers peripherals is available @ 60%, Relying on the lead case being CIT Vs. BSES Yamuna Power [2010 (8) TMI 58 - DELHI HIGH COURT] Adhoc disallowance @ 10% out of foreign travelling expenses - Held that:- When the assessee went in first appeal, the ld. CIT(A) relying upon the judgment of the Hon'ble Jurisdictional High Court in the case of CIT Vs. Kulwant Rai [2007 (2) TMI 185 - DELHI HIGH COURT] deleted the addition by holding that there was no basis to make the addition. Accordingly, finding no merits in the ground of appeal raised by the Revenue, - I.T.A. No. 1506/Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in law and on the facts and in the circumstances of the appellant s case in confirming the action of the AO to hold that the sales tax subsidy received by the Revenue is of Revenue nature. 1.2 That the ld. CIT(A) ought to have appreciated that the treatment given by the appellant to the sales tax subsidy by reducing the same from the cost of fixed assets was the only possible legal treatment to be given to the subsidy. 4. Apropos the above grounds, we have heard the rival submissions and have perused the relevant material on record of the Tribunal. The ld. AR submitted that the assessee had set up a plant at village Navada, in a remote area in Gurgaon in the year 2002-03. He further submitted that as per the Scheme of Sales Tax of Haryana Government, the assessee was entitled to sales tax exemption with total upper limit of ₹ 451.30 lakhs during the period 3.11.2004 to 2.11.2009. The ld. AR further submitted that during A.Y 2007-08, the assessee claimed an amount of ₹ 60,70,404/- as capital subsidy in this year and earlier years also and reduced the said amount from the cost of fixed assets u/s 43(1) of the Act. The ld. AR further contended that this treatment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then the same has to be treated as capital subsidy and the treatment given by the assessee during the earlier A.Ys and the year under consideration was to be held as correct and justified and the same should be accepted by following the principle of consistency. The ld. AR has also drawn our attention towards assessee s paper book spread over 136 pages and submitted that as per the Haryana General Sales Tax Act, 1973 and Rule 28C of the Haryana General Sales Tax Rules, 1975, the exempted unit would be required to pay balance of tax after deducting the rebate and capital subsidy and any purchase tax payable in the hands of the assessee. The ld. AR further pointed out that the assessee is entitled to defer the payment of 50% tax and to retain the same as capital subsidy from the state. 7. The ld. AR also pointed out that as per the Entitlement Certificate dated 3.11.2004 available at page 56 of assessee s paper book, the assessee was entitled for limited quantum of tax concession for the period of only five years which was not related to the quantum of sales but the purpose of the said subsidy and tax concession was to promote industry in the backward area and to contribute to fix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim has been deducted from the total amount of fixed assets and after reducing the value of fixed assets, the assessee had claimed depreciation of the reduced value of fixed assets. 10. On the other hand, the AO as well as the ld. CIT(A) treated the sales tax subsidy as revenue receipt and the ld. CIT(A) directed the AO to allow depreciation to the assessee on the enhanced value of fixed assets after adding amount of subsidy to the opening amount of fixed assets. 11. Admittedly and undisputedly, the assessee was held entitled for sales tax subsidy under the Haryana General Sales Tax Act, 1973 and Rule 28C of the Haryana General Sales Tax Rules, 1975, As per the relevant rules, the assessee was entitled to defer 50% payment of sales tax and to retain the same as capital subsidy from the state. Relevant part of Haryana Government General Sales Tax Act, 1973 Rule 28C reads as under: The scale of concession admissible to him is 50%. He is entitled to deter the payment of ₹ 60[50% of ₹ 120] and retain the same as capital subsidy from the State. He is required to pay ₹ 30 as purchase tax [same as in a normal case] and ₹ 10 as sales tax [total sales tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down by the Hon'ble High Court of Gujarat in case of Birla CXL [supra] we are convinced that in the present case, the main purpose of sales tax subsidy/concession given by the Haryana Government to the assessee unit was to give benefit on Sales Tax waiver/deferment at the option of the industry concerned. From the tables given in Rule 28C, it is also clear that the tax concession/subsidy have been linked with the amount of fixed capital investment and percentage and period of subsidy has also been linked and fixed with the fixed capital investment in the case of new industrial unit and additional investment in plant and machinery for expansion and diversify units. The Sales Tax subsidy/concession benefit were to last for five years and the amount of subsidy was also fixed to ₹ 451.30 lakhs as maximum limit which was computed in terms of percentage of fixed capital investment. Therefore, the assessee rightly treated the assessee sales tax subsidy as capital subsidy since the first two years of subsidy period that was A.Y 2005- 06 and 2006-07 which was accepted by the department. 15. Admittedly and undisputedly, the issue of sales tax subsidy was not agitated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of capital receipt as claimed by the assessee. Therefore, the conclusion of the authorities below is not sustainable and thus we dismiss and demolish the same. Accordingly, Ground No. 1 to 1.2 of the assessee for A.Y 2007-08 and 2008-09 are allowed and the AO is directed to treat the amount of sales tax subsidy as capital receipt and to grant depreciation on the reduced value of fixed assets. Ground No. 2 of the assessee for A.Y 2007-08 18. Ground No 2 of the assessee reads as under: 2. That the ld. CIT(A) has grossly erred in law and on the facts of the appellant s case in attributing a sum of ₹ 2 lakhs u/s 14A of the Act in spite of the fact that no dividend income has been earned by the appellant during the year under consideration. Ground No. 2 of the assessee for A.Y 2008-09 19. Ground No 2 of the assessee reads as under: 2. That the ld. CIT(A) has grossly erred in law and on the facts of the appellant s case in confirming the disallowance u/s 14A of the Act r.w.r 8D of the I.T. Rules. 2.1 That the ld. CIT(A) has grossly erred in law in holding that the disallowance u/s 14A needs to be made inspite of the fact that no dividend income has been recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in A.Y. 2008-09 of the assessee are allowed and the AO is directed to delete the addition made in the assessment order. 23. During the arguments, the ld. DR submitted that the Revenue does not want to press Ground Nos. 4 and 4.1 for A.Y 2007-08 and we therefore, dismiss the same as not pressed. 24. It is pertinent to mention that Ground Nos. 2 and 2.1 of the Revenue in A.Y 2007-08 pertains to the direction given by the ld. CIT(A) to the AO to allow depreciation on the enhanced value of the fixed assets. Since by the earlier part of this order we have allowed Ground Nos. 1 to 1.2 of the assessee in both the A.Ys and the conclusion in this regard would apply to Ground No. 2 and 2.1 of the Revenue for A.Y 2007-08. Finally, Ground Nos. 2 and 2.1 of the Revenue are dismissed with the direction to the AO that the amount of Sales tax subsidy should be accepted as capital receipt and depreciation on the reduced value of fixed assets should be allowed to the assessee accordingly. 25. Ground No. 4 of the Revenue being depreciation on computer peripherals at an estimated basis is by now covered by various judgments of the Hon'ble Jurisdictional High Court wherein it has been held ..... X X X X Extracts X X X X X X X X Extracts X X X X
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