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TMI Blog2021 (8) TMI 873X X X X Extracts X X X X X X X X Extracts X X X X ..... ct & ESI Act], the AO disallowed the same and added back Rs. 1,37,44,385/-. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the same. Aggrieved the Revenue is in appeal before us. 4. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the Ld. CIT(A) has taken note that the payments in respect of PF & ESI accounts (i.e. both the employees and employers' contribution) has been made by the assessee within the due date of filing of return of income (ROI) u/s. 139(1) of the Income-tax Act (hereinafter referred to as the "Act") i.e. before 30.09.2013. This fact has been taken note by the Ld. CIT(A) from perusal of Annexure 5A and 5B of the Tax Audit Report dated 26.09.2013. And since the assessee has deposited the PF & ESI deposits before the due date of filing of ROI, the assessee relied upon the decision of the Hon'ble jurisdictional High Court in the case of CIT Vs. M/s. Vijayshree Ltd., ITAT No. 245 of 2011 dated 16.09.2011 and the Hon'ble Apex Court's decision in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., reported in (2009) 390 ITR 306 and contended that since both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orresponding statutes; respectively. We notice in this factual backdrop that the legislature has not only incorporated necessary amendment in Sections 36(1)(va) as well as 43B vide Finance Act, 2021 to this effect but also the CBDT has issued Memorandum of Explanation that the same applies w.e.f. 1.4.2021 only. It is further not an issue that the foregoing legislative amendments have proposed employers' contribution/ disallowance u/s 43B as against employee's contribution u/s 36 (va) of the Act; respectively. However, keeping in mind the fact that the same has been clarified to be applicable only with prospective effect from 1.4.2021, we hold that the impugned disallowance is not sustainable in view of all these latest developments." 5. From the aforesaid decision of the Hyderabad bench of this Tribunal this amendment made by Finance Act, 2021 applies prospectively w.e.f. 01.04.2021, so it does not help the case of the Revenue to sustain the disallowance. Therefore, we note that the impugned action of the Ld. CIT(A) is in consonance with the decision of the Hon'ble jurisdictional High court in the case of CIT Vs. M/s. Vijayshree Ltd. (supra) and this Tribunal's order in assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund by way of Unsecured loan from related parties and paying interest. From the said fact it is clear that assessee company is taking interest bearing loan from related parties and interest free advance given to subsidiary. The assessee company mat under business compulsion for arranging loan for subsidiary. But paying interest on borrowed fund to related party and after borrowing said fund advanced interest free to subsidiary is nothing but a colourable device to evade tax as held in the case of Mc Dowell & Co. Limited. The assessee borrowed fund at average rate of interest @ 12%. The interest payment on borrowed fund equivalent to 12% utilized for interest free advances to subsidiary not for purpose of business and earning income. The interest @ 12% works out by averaging amount further advanced during the year at Rs. 96,61,517/- ( Rs. 86,34,546/- + Rs. 10,26,971/-) is being disallowed out of interest payment, claim by assessee company from borrowed fund utilized for interest free advances to subsidiary company and added back into total income of assessee company." 10. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who was pleased to delete the same by hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erusal of assessment records and decision of various judicial authorities including the decision of Hon'ble SC in case of S A Builders, the investment made is out of own funds and in the interest of its own business and out of commercial expediency. Therefore, the disallowance of Rs. 96,61,517/- is deleted. The ground no. 4 of appeal succeeds and, therefore, allowed." 11. Aggrieved, the revenue is in appeal before us. 12. We have heard rival submissions and gone through the facts and circumstances of the case. We note that similar issue cropped up in assessee's own case in AYs 2008-09 and 2011-12 and the Tribunal has held in AY 2008-09 as under: "10. Vide it's ground no. 4, grievance of the revenue is that interest of Rs. 19,63,017/- added by the Assessing Officer was deleted by ld. CIT(Appeals). 11. Facts apropos are that assessee had given a sum of Rs. 2.91 crores to one of its subsidiary company called Kamarthatty Power Ltd. Assessing Officer required the assessee to explain the source of loans given. Assessee thereupon submitted that the loans given to the subsidiary company came to Rs. 1,27,68,000/- as on 31.03.2007, which increased to Rs. 2,91,26,483/- by the end of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. Per contra, ld. AR supported the order of ld. CIT(Appeals). 17. We have heard the rival submissions. Whenever a cheque issued by a party is cleared through a Bank loan account, the dues to the Bank will increase. If the cheque is cleared out of a deposit account, the dues from the Bank will be decreased. This arithmetics by itself will not show that money had gone out of interest bearing funds. Assessee has clearly pointed out that the cash credit balance had gone down over the relevant previous year. In other words, the cash credit account stood replenished by more than what was given out as advance, through deposits made by the assessee during the relevant previous year. Assessee had substantial profits during the relevant previous year and, therefore, there is much strength in its arguments that loans did not go out of any interest bearing funds. In any case, the loans were given only to a subsidiary of the assessee and Assessing Officer has not doubted the commercial expediency of such loans. We are, therefore, of the opinion that ld. CIT(Appeals) was justified in deleting this addition. Ground No. 4 of the Revenue stands dismissed." 13. Further, it has been brought to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it is a revenue receipt. The AO did not accept the assessee's explanation that the subsidy received from the National Jute Board is for the purpose of acquisition of plant and machinery. According to the AO, the assessee failed to deduct from the cost of plant and machinery the said sum of Rs. 60,16,264/- and has claimed depreciation on the machinery also and therefore, made the addition. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the addition. Aggrieved, the revenue is in appeal before us. 16. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the AO has made the addition mainly on the reason that assessee failed to deduct from the cost of plant and machinery the sum of Rs. 60,16,264/- and has also claimed the depreciation on this amount of machinery. However, we note that the Ld. CIT(A) has found this allegation of the AO as erroneous and has in para 8.3 of the impugned order has held that the subsidy received towards plant and machinery has been very much deducted from the plant and machinery and depreciation on the balance amount only has been claimed which fact is evident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble Supreme Court Sawhney Steel and Press Works Ltd. v. CIT (1997) 228 ITR 253 (SC) and CIT Vs. Pony Sugars & Chemicals Ltd. 306 ITR 392 wherein the Hon'ble Supreme Court held the principle of examining the nature of subsidy receipt in the hands of the assessee. The Hon'ble Supreme Court held that the under lying principle in such cases is to examine "purpose" for which the subsidy is granted. The taxability of the subsidy needs to be determined by analyzing whether the subsidy is a capital receipt or revenue receipt in the hands of the assessee. It is settled that revenue receipt are chargeable to tax on the other hand capital receipts are not unless specifically made taxable under the Act. If subsidies are given for various purpose like for promoting, construction of new industries, expansion of existing industries etc. then it is on capital account. On the other hand, the object of the subsidy scheme was to enable the assessee to run the business more profitably or to meet day to day business expenses, then the receipt shall be of revenue nature. So, if the object of this assistance/subsidy was to enable the assessee to set up a new unit or to expand the existing unit then ..... X X X X Extracts X X X X X X X X Extracts X X X X
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