TMI Blog2024 (2) TMI 1190X X X X Extracts X X X X X X X X Extracts X X X X ..... e the issue afresh in accordance law. Thus, the ground raised by the Revenue is allowed for statistical purposes. Disallowance u/s 14A - investments which yield exempt income during the year under consideration - HELD THAT:- As perused the decision of Vireet Investment (P) Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] wherein, it has been held that while computing the disallowance under section 14A of the Act read with Rule 8D(2)(ii)/(iii) of Income Tax Rules, 1962, only the investments which yielded exempt income during the year under consideration are to be included for the purpose of average value of investments. DR could not controvert the above decision of the Delhi Special Bench. Thus, we find no infirmity in the order of the ld. CIT(A) on this issue and dismiss the ground raised by the Revenue. Disallowance u/s 14A added in the book profit u/s 115JB - HELD THAT:- As decided in Beach Minerals Company P. Ltd [ 2015 (8) TMI 1031 - ITAT CHENNAI] and Vireet Investment (P) Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] computation under clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to the computation as contemplated under section 14A read with Rule 8D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal due to outbreak of COVID-19 pandemic and accordingly, the delay in filing the appeals are condoned and admitted the appeals for adjudication. 3. First, we shall take the appeal No. 581/Chny/2021 for adjudication. Ground No. 1 is general in nature and requires no adjudication. 4. Ground No. 2 relates to deletion of addition made under section 40(a)(i) of the Act. The ld. Counsel for the assessee has submitted that the very same issue was subject matter in appeal before the Tribunal in earlier assessment year 2007-08 in ITA No. 2394/Chny/2017 CO No. 188/Chny/2017 dated 29.10.2018. The issue has been remitted back to the Assessing Officer to examine MFN clause available in the protocol of Indo-Belgium DTAA as to whether the same shall override the specific provisions laid down under Article 12 and decide the issue afresh in accordance with law and prayed that the same order may be followed for the year under consideration. 4.1 On the other hand, the ld. DR has not raised any objection. 4.2 We have heard both the sides, perused the orders of authorities below. With regard to the issue of addition made under section 40(a)(i) of the Act, we find that this issue has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween India and Belgium includes services of managerial nature, having regard to the MFN clause in the India-Belgium Treaty, the restrictive definition of the term fee for technical services in the India-UK Treaty can be applied and by following various decisions as referred hereinabove, the ld. CIT(A) held that the payment made to SG Exprover cannot be considered to partake of the nature of fees for technical services and allowed the ground raised by the assessee without obtaining any comments from the Assessing Officer. Under the above facts and circumstances, we direct the Assessing Officer to examine the MFN clause available in the Protocol of Indo-Belgium DTAA as to whether the same shall override the specific provisions laid down under Article 12 and decide the issue afresh in accordance with law. Thus, the ground raised by the Revenue is allowed for statistical purposes. 4.3 Since the issue involved in this appeal is similar to that of the assessment year 2007-08 and in view of the above findings of the Tribunal, we direct the Assessing Officer to re-examine and decide the issue afresh in accordance law. Thus, the ground raised by the Revenue is allowed for statistic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. ACIT 64 taxmann.com 218, the ld. CIT(A) directed to delete the addition made to book profits with respect to the disallowance made under section 14A of the Act r.w.s. Rule 8D. 6.1 We have heard the rival contentions and perused the case law relied upon the appellate order. By following the decision in the case of Beach Minerals Company P. Ltd. v. ACIT (supra), in assessee s own case for the assessment year 2007-08 in ITA No. 2096/Mds/2011 dated 13.07.2016, the Coordinate Benches of the Tribunal has held that the provisions of section 14A r.w.r. 8D cannot be applied while computing the book profits as per section 115JB of the Act. Moreover, in the case of ACIT v. Vireet Investment (P) Ltd. (supra), wherein, the Delhi Special Bench has categorically held at para 6.22 of its order that the computation under clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to the computation as contemplated under section 14A read with Rule 8D of the Income Tax Rules. Hence, we are of the opinion that the ld. CIT(A) has rightly directed the Assessing Officer to delete the addition made to book profits with respect to the disallowance made under section 14A r.w.s. Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme of incentives to the industry compatible with VAT regime, wherever, the unit was availing exemption/waiver, the unit would be paid Investment Promotion Subsidy equivalent to the amount of Sales Tax paid during unutilized portion of the waiver period. In accordance with the above, the Government of Tamil Nadu through SIPCOT paid Investment Promotion Subsidy of Rs. 49,253,755 to the company in the month of November 2010. Copy of the order from the Joint Commissioner (CT), MOU Cell, Chennai determining the amount of Rs. 4,92,53,735/- as refund in accordance with G O (MS) No. 60 (CT and R) and (MS) No.80 is enclosed as Annexure I. In this connection, we wish to submit that the Input Output VAT is not passed through the P L Account but accounted as a Balance Sheet item. The company has neither debited the VAT in the P L Account nor has claimed the VAT for income tax purposes. As per the scheme, the VAT amount paid has been refunded to the company and hence it is not chargeable to tax. 7.1 However, the Assessing Officer has not accepted the above reply of the assessee and observed that since the industrial unit of assessee in Tamilnadu was functioning for the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores and thus, the receipt should be capital receipt and not revenue receipt. He strongly relied on the judgement of the Hon ble Supreme Court in the case of CIT v. Shree Balaji Alloys [2017] 80 taxmann.com 239 (SC). He also relied on the following case law: 1. Banco Products (I) Ltd. v. DCIT 379 ITR 1 (Guj) 2. ACIT v. Genus Electrotech Limited in ITA No. 9513/Del/2019 ors. 3. Sasisri Extractions Ltd. v. ACIT 119 TTJ 976 (Viz) 4. Indo Rama Synthetics (I) Ltd. v. ACIT 0 33 CCH 526 (Del - Trib) 5. PCIT v. M/s. Welspun Steels Ltd. 264 Taxman 252 (Bom) 6. PCIT v. Budge Budge Refineries Ltd. 139 Taxman.com 124 (Cal) 7.5 We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. The written submissions filed by the assessee before the ld. CIT(A) are reproduced as under: 4.1 During the previous year relevant to the above assessment year, the Appellant had received investment promotion subsidy amounting to Rs. 4,92,53,755/- from Govt. Of Tamil Nadu for investments made in the State. As the subsidy received was in the nature of promoter s contribution, the Appellant had added the same to Capital Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 4,92,53,755/- to the Appellant in the FY 2010-11. Since this is for the setting up of the factory and promote investments, it is in the nature o capital receipt. 4.6 We wish to submit that the above subsidy was given as part of the mega investment scheme to encourage investment in the state. The subsidy is towards investment made and is capital in nature and hence the Appellant credited the same to the Reserves account in accordance with the Accounting Standards issued by the Institute of Chartered Accountants of India. 4.7 We also submit that the subsidy has been received towards the promoter s contribution i.e they have been given With reference to the investments made in the undertaking or in other words it is 'towards the capital outlay made by the Appellant and hence it has been directly credited to the shareholders funds. The subsidy is not earned but represents incentive provided by the Government and hence it is inappropriate to treat is as revenue income. 4.8 At the outset we wish to submit that the Supreme Court in the case of CIT vs. Ponni Sugars Chemicals Ltd 306 ITR 392 (SC), has held that where the scheme in question was linked directly t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one there is no larger or immediate object. That the object is carried out in a particular manner is irrelevant as has been held in both Ponni Sugar and Sahney Steel. ...... We have no hesitation in holding the finding of the Jammu and Kashmir High Court on the facts of the incentive subsidy contained in that case is absolutely correct. In that once the object of the subsidy was to industrialize the State and to generate employment in the state, the fact that the subsidy took a particular form and the fact that it was granted only after commencement of production would make no difference 4.12 The Chennai Tribunal in the case of DCIT vs. Regen Powertech Limited [2016] 73 taxmann.com 370 relying on the above decisions of the Apex Court, held as under: We perused the Industrial Investment Promotion Policy referred at page 159 of the paper book which considered the incentives and subsidy provided to the units according to their investments criteria. Further, the facts that VAT subsidy is as per the order issued by the Government and further due to amendment to See. 2(24) (xviii) w.e.f. 01.04.2015 subsidy or a grant defined was made taxable under Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: I have considered the findings of the AO as per the assessment order as well as the written submission of the appellant. During the appellate proceedings, the AR submitted that %the subsidy is towards investment promotion and providing employment opportunities in the State and is a capital receipt. The AR s submission that the issue is squarely covered by the decision of the Supreme Court in the case of Shree Bataji Alloys 198 Taxman 122 and the decision of the Hon ble ITAT in the case of DCIT u. Regen Powertech Limited [2016] 73 taxmann.com 370 is considered. Respectfully following the decision of the Apex Court in the case of Shree Balaji Alloys and the jurisdictional Tribunal decision in the case of DCIT v. Regen Powertech Limited [2016] 73 taxmann.com 370, the AO is directed to delete the addition of Rs. 4,92,53,755/-. Accordingly, this ground of appeal is allowed. 7.7 We find that the Hon ble Supreme Court in the case of Shree Balaji Alloys (supra), by considering its own judgement in the case of CIT v. Ponni Sugars Chemicals Ltd. (supra), dismissed the appeal of the Department and upheld the judgement of Hon ble High Court of Jammu Kashmir in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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