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2019 (4) TMI 558

bserved that the assessee paid commission of ₹ 22.59 lakhs to Kasturchand Raghunath & Sons, which fact was clearly stated before the AO as has also been recorded in the assessment order. Not only that, the assessee also furnished details of commission. AO proceeded to make an ad hoc disallowance at 50% of commission without even endeavoring to verify the genuineness of such payment from Kasturchand Raghunath & Sons. He simply stated that vouchers were handmade and there were discrepancies in some vouchers and bills. He, however, failed to spell out any such discrepancy in any of the vouchers produced by the assessee. Under the given circumstances, we are satisfied that the CIT(A) was justified in deleting the addition. We, therefore, uphold the same. Addition on account of interest on interest-free loans - advance for allotment of shares - HELD THAT:- CIT(A) has categorically recorded that the assessee did charge interest @9% on the advance given to Indo Sprint. Such an interest was shown as receivable in the books of account of the assessee. This finding has not been controverted on behalf of the Revenue. In our considered opinion, no exception can be taken to the vi .....

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called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee’. Proviso to this Explanation states that : where such subsidy or grant or reimbursement is of such nature that it cannot be directly relatable to the asset acquired, so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with 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’. On going through the language of the Explanation 10, it is manifest that it is attracted only when the object of the Scheme is to subsidize the cost of an asset and not otherwise. Proviso also refers to `such subsidy’ only. subsidy given by the Central Government or a State Government or any authority etc. for any purpose, except where it is taken into account for determination of the actual cost of the asset under Explanation 10 section 43(1), has become chargeable to tax. Even if a subsidy is given to attract industrial investment or exp .....

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he relevant material on record, it is observed that the assessee paid commission of ₹ 22.59 lakhs to Kasturchand Raghunath & Sons, which fact was clearly stated before the AO as has also been recorded in the assessment order. Not only that, the assessee also furnished details of commission. The AO proceeded to make an ad hoc disallowance at 50% of commission without even endeavoring to verify the genuineness of such payment from Kasturchand Raghunath & Sons. He simply stated that vouchers were handmade and there were discrepancies in some vouchers and bills. He, however, failed to spell out any such discrepancy in any of the vouchers produced by the assessee. Under the given circumstances, we are satisfied that the ld. CIT(A) was justified in deleting the addition. We, therefore, uphold the same. 5. The second ground of the Revenue s appeal is against deletion of addition on account of interest on interest-free loans. Briefly stated, the facts of this ground are that the AO observed during the course of assessment proceedings that the assessee gave advance of ₹ 2,03,05,669 and ₹ 62,65,000/- to Vyanjan Hotels and Indo Sprint respectively, without charging a .....

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reduced from the cost of assets in terms of Explanation 10 to section 43(1) of the Income tax Act, 1961 (hereinafter also called the Act ). 9. Succinctly, the facts of these grounds are that the assessee received financial assistance granted by the Government of Maharashtra to eligible units under the Financial assistance to Grain Distillery Scheme, 2007. The AO has highlighted the important features of the scheme in the assessment order. It has been mentioned that the scheme was brought out to encourage investments in grain based distilleries in the backward regions of Maharashtra State. Such subsidy was paid to the assessee in the form of rebate of ₹ 10/- per litre and Excise duty was repaid on the products supplied. The AO held that the subsidy was revenue in nature. The ld. CIT(A) overturned the assessment order on this point. He, however, held that the amount of subsidy should be reduced from the cost of assets in view of Explanation 10 to section 43(1) of the Act. Both the sides are in appeal on their respective stands. 10. We have heard both the sides and gone through the relevant material on record. It can be seen from the text of the scheme dated 08-07-200, relevant .....

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al Government or a State Government or any authority established under any law or by any other person, in the form of a subsidy or grant or reimbursement (by whatever name called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee . Proviso to this Explanation states that : where such subsidy or grant or reimbursement is of such nature that it cannot be directly relatable to the asset acquired, so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with 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 . On going through the language of the Explanation 10, it is manifest that it is attracted only when the object of the Scheme is to subsidize the cost of an asset and not otherwise. Proviso also refers to such subsidy only. If the object of the Scheme is to accelerate the industrial development of the State, then the case is not caught within the mandate of the Explanation 10. Similar view h .....

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eration. Thus, the ground raised by the Revenue is dismissed and that of the assessee is allowed. 14. There is no other effective ground raised by the assessee in its appeal. 15. The cross objection filed by the assessee is in support of the impugned order which has become academic in view of our decision on the appeal filed by the Revenue. 16. In the result, the appeal of the Revenue is dismissed; that of the assessee is allowed; and the cross objection is dismissed as having become infructuous. A.Y. 2012-13 : 17. The only issue raised by the Revenue in its appeal is against the direction of the ld. CIT(A) to treat the subsidy received by the assessee in the instant year from Government of Maharashtra under Grain Distillery Scheme, as a capital receipt and the assessee is aggrieved by the decision of the ld.CIT(A) in holding that the amount of the subsidy should be reduced from the cost of assets for the purposes of depreciation. 18. The factual panorama of the issue is that the assessee received subsidy of ₹ 6,30,40,000/- during the year under the same scheme as continuing from the preceding year. The AO treated the amount as of revenue character. The ld. CIT(A) held the am .....

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