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TMI Blog2023 (7) TMI 1265X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Revenue were heard together, they are disposed of by this common order for the sake of convenience and brevity. 3. Before embarking upon the specific grounds taken in each captioned A.Y, it would be pertinent to understand the underlying facts relating to Sales Tax subsidy, whether the same is revenue, receipt or capital receipt, and if it is capital receipt, then whether, it will reduce the written down value of the assets for allowability of depreciation. 4. In so far as whether Sales Tax subsidy is of revenue in nature or is capital receipt, this issue travelled up to the Tribunal in the first round of litigation and the Tribunal in ITA No. 2831/DEL/07 and others have given a categorical finding that Sales Tax subsidy is of ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trepreneurs to move to backward areas and establish industries, the specified percentage of the fixed capital cost, which is the basis for determining the subsidy, being only a measure adopted under the scheme to quantify the financial aid, is not a payment, directly or indirectly, to meet any portion of the "actual cost". The expression "actual cost" in section 43(1) of the Income-tax Act, 1961, needs to be interpreted liberally. Such a subsidy does not partake of the incidents which attract the conditions for its deductibility from "actual cost". The amount of subsidy is not to be deducted from the "actual Cost" under section 43(1) for the purpose of calculation of depreciation, etc" 11. Similar view was taken by the Hon'ble Madras High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e audited every year and separate balance sheet and profit and loss account is prepared for EOU being also certified by auditors of the Company. 17. It was explained that the EOU unit is separately registered with Excise and Sales Tax department having separate factory building and separate production facilities. It was further pointed out that the Sales Tax return and Excise returns were filed for EOU units. Product mix of EOU and non-EOU units are different and these products are having different margin of profit and, therefore, allocation of profits of the company as a whole in the ratio of sales of EOU and non-EOU units is not justified. 18. After considering the facts and submissions, the ld. CIT(A) observed that different units have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Senior Management Salary, which has been allocated by the Assessing Officer in the ratio of turnover of EOU and non-EOU units as against appellant's allocation of 5% of total expenses. 25. In A.Y 2006-07, the Assessing Officer was not convinced with the allocation and in the year under consideration i.e A.Y 2007-08, the assessee itself has allocated the Senior Management Salary cost in the ratio of sales of EOU units and non-EOU units. Therefore, the adverse inference of the AO in A.Y 2006-07 has been taken care of in A.Y 2007- 08. 26. Considering the facts of the case in totality, we do not find any merit in the action of the Assessing Officer in reducing the claim of deduction u/s 10B of the Act. Therefore, we do not find any reason to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not find any reason to interfere with the findings of the LD. CIT(A). Ground No. 2 is, accordingly, dismissed. 33. Grievance raised in ITA Nos. 5038, 5039 and 5040/DEL/2018 for A.Y 2004-05, 2005-06 and 2006-07 are identical to the issue raised in A.Y 2007-08 considered hereinabove. For our detailed reasons given therein, these appeals are dismissed. 34. Coming to ITA No. 6504/DEL/12, for A.Y 2008-09, the revenue has raised four substantive grounds of appeal. 35. Ground No. 1 relates to deletion of addition made on account of capital subsidy, treating the same as capital receipt. 36. As mentioned elsewhere, this issue has been settled in favour of the assessee and against the revenue by this Tribunal in A.Ys 2004-05, 2005-06 and 2006- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. The nature of the expenditure incurred in raising a loan would depend upon the nature and purpose of the loan. A loan is a liability and has to be repaid and, in our opinion, it is erroneous to consider a liability as an asset or an advantage. A loan may be intended to be used for the purchase of raw-material when it is negotiated, but the company may after raising the loan change its mind and spend it on securing capital assets. Therefore, the purpose for which the new loan was required was irrelevant to the consideration of the question whether the expenditure for obtaining the loan was revenue expenditure or capital expenditure. Hence (a) the loan obtained is not an asset or advantage of an enduring nature; (b) that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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