TMI Blog2024 (1) TMI 547X X X X Extracts X X X X X X X X Extracts X X X X ..... has been released against the reimbursement of the expenditure already incurred by the assessee as it was verified from the audited accounts. As specifically stated that the grant-in-aid shall be utilized exclusively for the purpose for which it is sanctioned. No Utilization Certificate(UC) is required to be furnished in instant case as per Rule 212(1) of GFR since grant-in-aid are being made as reimbursement of expenditure already incurred on the basis of duly audited accounts. Assessee has also explained before authorities below that the expenditure was already incurred for more than Rs. 4,81,58,385/- out of which a sum of Rs. 4,89,65,171/- was claimed to be eligible for grant-in-aid from Ministry of Food Processing Industries. This expenditure was already incurred in the earlier years and only sum of Rs. 8,06,786/- was incurred during the year under consideration. Thus, the disallowance made by the AO by considering incorrect fact and rather taking incomplete facts is highly unjustified. Thus, when the Ministry of Food Processing Industries has acknowledged the expenditure and released amount of grant-in-aid as reimbursement of the expenditure already incurred then in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed CIT(A) grossly erred, both on facts and in law, in not appreciating the appellant's submission to the effect that the Id. same AO who passed the subject assessment order, while subsequently framing the regular assessment under s.143(3) of the Act in the case of the appellant company for the immediately succeeding assessment year i.e. A.Y. 2013- 14, has duly considered and allowed the second installment of Rs. 25,00,000/- as in the nature of capital receipt itself and therefore, there was no occasion for the authorities below to classify and assess the first installment of the same subsidy as that of revenue in the nature. 2c). That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the Id. AO in treating the first installment of the total subsidy of Rs. 50,00,000/- as that of revenue in the nature, without considering the settled position of the law as propounded by the Hon'ble Supreme Court in the case of CIT vs. Ponni Sugars Chemicals Ltd. Ors. (2008) 306 ITR 392 (SC). 3. That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs. 12,991/- in the appellant's income, by makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this amount of Rs. 25 lakhs was granted and paid as reimbursement of the expenditure already incurred by the assesse. The assessee has produced entire bills and vouchers before the AO in support of the expenditure. However, the AO did not consider bills and vouchers and given the reasons that the assessee has not produced the relevant evidence in support of the expenditure. He has further submitted that the Ministries of Food Processing Industry, Government of India has released total amount of Rs. 50 lakhs in two instalments of the 50% each to the assessee out of which first instalment was received during the year under consideration and second was received during the next assessment year i.e. 2013-14. The AO while passing the assessment order u/s 143(3) for A.Y.2013-14 has allowed this claim of subsidy as capital receipt towards reimbursement of the cost of expenditure of the unit. Thus, the disallowance made by the AO for the year under consideration is contrary to the record and unjustified. He has also referred to the reply filed by the assessee before the AO and submitted that the assessee has explained each and every facts and details before the AO and also explained that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy incurred by the company. Hence furnish the head wise details of the expenditure so incurred relatable to the grants-in-aid so received alongwith relevant bills and vouchers thereof. Also furnish relevant ledger of the expenditure so incurred. 2. As per para 2a of the said grant-in-aid the grantee should execute a bond with two sureties to the president. Furnish the copy of the bond executed by you to fulfill the conditions pertaining to the grants-in- aid. 3. As requested therein you have to submit the required documents to the concerned bank branch with an undertaking to comply with all the conditions governing the sanction of the grant-in-aid. Hence furnish the copy of documents so produced before the concerned bank to avail the grants-in-aid. 5.1 Thus, the AO asked the assessee to furnish head wise details of the expenditure incurred in respect of the expansion of the plant for which grant-in-aid was received by the assessee with relevant bills and vouchers along with other documents as submitted by the assessee with the ministry at the time sanction of grant-in-aid comprising of guarantee bond as well as bank account statements. In response the assessee has ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I am satisfied that the assessee has furnished inaccurate particulars of its income by not treating the subsidy as per the instructions laid down in grants-in-aid, by doing so has attracted the provisions of section 271(1)(c) of the Act. Accordingly, penalty proceedings u/s 271(1)(c) of the Act is initiated on this issue separately. 5.3 As it is evident from the reply reproduced by the AO that the assessee has stated that it produced voluminous bills and vouchers in support of the capital expenditure incurred before the AO for necessary verification whereas the AO has considered only ledger account and raised the objection that assessee failed to comply with the instruction made in grant-in-aid as well as failed to furnish evident in support of the claim. This observation of the AO is contrary to the reply itself which is reproduced in para 4.4 of assessment order. 5.4. We further note that as per letter of grant-in-aid Ministry has clearly stated that this amount has been released against the reimbursement of the expenditure already incurred by the assessee as it was verified from the audited accounts. The relevant part of the grant-in-aid letter as per Annexure -2 placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant-in-aid in question is in the form of reimbursement of the cost of asset and duly taken in the account in accordance with provisions of explanation (10) to clause(1) of section 43 of the Act. At this point it is appropriate to refer section 2(24)(xviii) of the Act inserted vide Finance Act 2015 as under: 2(24) Income includes (i) Xxxx xxxxxxx (xviii) assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by the Central Government or a State Government or any authority or body or agency in cash or kind to the assessee [other than,- (a) the subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the asset in accordance with the provisions of Explanation 10 to clause (1) of section 43; or (b) the subsidy or grant by the Central Government for the purpose of the corpus of a trust or institution established by the Central Government or a State Government, as the case may be];] 5.5 The above clause is applicable w.e.f. 01.04.2016 and under this amended provisions the Government incentive towards reimbursement of cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised on behalf of the assessee on the facts of that case stood rejected and it was held that the subsidy received by Sahney Steel could not be regarded as anything but a revenue receipt. Accordingly the matter was decided against the assessee. The importance of the judgment of this Court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the scheme with which we are concerned in this case is that the incentive must be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the subsidy scheme was to enable the assessee to run the business more profitably then the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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