Income Tax Appellate Tribunal - Chandigarh
H.M. Steels Ltd., Sangrur vs Acit, Sangrur on 5 November, 2018
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ -"ए", च डीगढ़
I N T H E I NC O ME T A X A P PE L L A T E T RI B U N AL
D I VI S I O N B E NC H , ' A ' , CH A ND I G AR H
ी संजय गग , या यक सद य एवं डा. बी.आर.आर, कुमार, लेखा सद य
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND
DR. B.R.R. KUMAR, ACCOUNTANT MEMBER
आयकर अपील सं I T A N o . 3 6 6 / C H D / 2 0 1 3
नधा रण वष / Assessment Year : 2008-09
M/s H.M. Steels Ltd., Vs. The Addl CIT.
Sangrur Road, Sangrur Range, Sangrur
Dibra, Distt.Sangrur
PAN No. AABCH0164Q
आयकर अपील सं./ I T A N o . 5 8 3 / C H D / 2 0 1 4
नधा रण वष / Assessment Year : 2009-10
The DCIT, Vs. M/s H.M. Steels Ltd.,
Circle, Sangrur Road, Dibra,
Sangrur Distt.Sangrur
PAN No. AABCH0164Q
आयकर अपील सं./ I T A N o . 5 8 9 / C H D / 2 0 1 4
नधा रण वष / Assessment Year : 2009-10
M/s H.M. Steels Ltd., Vs. The Addl CIT.
Sangrur Road, Sangrur Range, Sangrur
Dibra, Distt. Sangrur
PAN No. AABCH0164Q
आयकर अपील सं./ I T A N o . 5 8 4 / C H D / 2 0 1 4
नधा रण वष / Assessment Year : 2010-11
The DCIT, Vs. M/s H.M. Steels Ltd.,
Circle , Sangrur Road, Dibra,
Sangrur Distt.Sangrur
PAN No. AABCH0164Q
आयकर अपील सं./ I T A N o . 5 9 0 / C H D / 2 0 1 4
नधा रण वष / Assessment Year : 2010-11
M/s H.M. Steel Ltd., Vs. The Addl CIT.
Sangrur Road, Sangrur Range, Sangrur
Dibra, Distt.Sangrur
PAN No. AABCH0164Q
ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013
587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur
2
आयकर अपील सं./ I T A N o . 1 1 0 1 / C H D / 2 0 1 6
नधा रण वष / Assessment Year : 2011-12
The ACIT, Vs. M/s H.M. Steel Ltd.,
Circle, Sangrur Road, Dibra,
Sangrur Distt.Sangrur
PAN No. AABCH0164Q
&
आयकर अपील सं./ I T A N o . 5 8 5 / C H D / 2 0 1 3
नधा रण वष / Assessment Year : 2008-09
The DCIT, Vs. M/s H.M. Steels Ltd.,
Circle, Sangrur Road, Dibra,
Sangrur Distt.Sangrur
Appellant by : Sh. N.K.Garg, Advocate
Sh. Vibhor Garg, Advocate
Respondent by : Smt. Chanderkanta, Sr.DR
(Appellant) (Respondent)
Date of Hearing : 10.08.2018
Date of Pronouncement : 05.11.2018
ORDER
Per Sanjay Garg, Judicial Member:
The captioned bunch of appeals have been preferred by the assessee & Revenue against the separate orders of the Commissioner of Income Tax(A), Patiala [hereinafter referred to as 'CIT(A)'] dated 31/3/2013 (ITA Nos. 366/Chd/2013), dated 28.3.2014 (ITA Nos. 583, 584, 589 & 590/Chd/2014), dated 21/3/2013 (ITA No. 585/Chd/2013) and dated 30.8.2016 (ITA No. 1101/Chd/2016).
ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 3
2. Since almost identical issues have been raised in the aforesaid appeals, they were heard together and are being disposed of by this common and consolidated order. For the sake of convenience, the facts are taken from the appeal of the assessee in ITA No. 366/Chd/2013 (for assessment year 2008-09).
3. The assessee in its appeal (ITA No. 366/Chd/2013) has taken the following grounds:-
1. That the impugned appellate order is bad both on facts and law.
2. That the learned Appellate Authority wrongly and illegally confirmed the disallowance of deduction U/s 8OIC by an amount of Rs. 1,70,78,838/- being received as transport subsidy to reimburse the excess transport expenses incurred on transportation of raw material & finished goods in the hilly areas ignoring the submissions, pleading and evidence on record or alternatively should be treated as capital receipt being non-taxable.
3. That the learned Appellate Authority wrongly and illegally confirmed the disallowance of deduction U/s 80IC by an amount of Rs.24,98,964/- being the sale tax rebate not paid under sales tax deferment rebate scheme ignoring the submissions, pleading and evidence on record or alternatively should be treated as capital receipt being non taxable.
4. That the learned Appellate Authority wrongly and illegally held that interest income of Rs.23,00,560/- on FDRs obtained for ILC/FLC opened for raw material purchase, is not eligible for deduction U/s 80 IC ignoring the submissions, pleading and evidence on record and alternatively be reduced from the cost of raw material in view of Apex court judgment in the case of Karnal Co-op Sugar Mills Ltd.
5. That the income from the receipts of transport subsidy, ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 4 sale tax deferment amount and Bank interest should be determined under proper head of income after deduction of expenses incurred directly or indirectly for receipt of such amount
6. That the depreciation, while determining the profits and gains from the industrial undertaking, should not be deducted because the allowance of depreciation has no direct or proximate connection as an expense incurred for earning any income from such industrial undertaking and is being allowed because of statutory provisions like statutory policies.
7. That the learned Appellate Authority wrongly and illegally failed to consider and give any finding that interest U/s 234B and 234-C, on the facts and circumstances of the case, has been wrongly and illegally charged and levied.
8. That the appellant craves permission to elucidate, amend, alter, add or delete any ground of appeal at the time of hearing.
It is therefore prayed that the appeal may kindly be accepted and the addition may kindly be deleted wholly inter- alia allowing the deduction U/s 80 IC or any other relief to which the appellant may found entitled may kindly be granted.
4. Ground No.1 is general in nature and does not require any specific adjudication.
5. Ground Nos. 2, 3 & 5: Vide ground Nos. 2, 3 and 5 of the appeal, the assessee has agitated the disallowance of deduction claimed u/s 80IC of the Income-tax Act, 1961 (in short 'the Act') on account of the amount received as Transport subsidy and sales tax rebate given under sales tax deferment rebate scheme.
ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 5
6. At the outset, Ld. Counsel for the assessee has submitted that both the issues have been decided in favour of the assessee by the decision of the Hon'ble Supreme Court in the own case of the assessee for assessment year 2007-08 bearing SLP (C )No.8110 - 8111/2006 decided along with other appeals with the lead case being 'Commissioner of Income Tax Vs. Vijay Steel Industries in Civil Appeal No. 5107/2015 dated 21.09.2017. The Ld. Counsel has submitted that so far as the issue relating to the transport subsidy is concerned, the Hon'ble Supreme Court has dismissed the Civil Appeal No. 15557 filled by Department against the P&H High Court judgement in ITA No. 352/2013 decided on 4.8.2015 for assessment year 2007-08, issue being covered by Meghalaya Steel Ltd.) (Page No.1-23 of Compilation of Judgments), whereas, so far as the issue of sales tax rebate under sales tax deferment scheme is concerned, the Hon'ble Supreme Court has allowed Civil Appeal No. 15563 & 15564 filed by Appellant against the P&H High Court judgment in case No. ITA 352/2013 decided on 4.8.2015 for assessment year 2007-08. The relevant part of the order of the Hon'ble Supreme Court in group of cases with the lead case being Commissioner of Income Tax vs M/s Vijay Steel Industries in Civil Appeal No.5107/2015 Dt.21-09-2017 is as under:-
"After hearing the learned counsel for the parties we find that the issue raised in these appeals is covered against the Revenue by the decision of this Court in " Commissioner of Income Tax, Madras Vs. Ponni Sugars and Chemicals Ltd."
reported in (2008) 9 SCC 337, or in the alternate, in "Commissioner of Income Tax Vs. M/s.
Meghalaya Steels Ltd. ", reported in (2016) 3 SCALE 192.
ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 6 Therefore, the appeals of the Revenue are dismissed and the appeal (s) of the assessee(s) is allowed.
However, in a particular case, if it is found that the facts or issue is different, liberty is granted to the Revenue to make an appropriate application."
7. The Ld. counsel has further invited our attention to the decision of the Hon'ble Supreme Court in the case of 'CIT Vs. Meghalya Steels Ltd.,' Civil Appeal No. 7622 of 2014, wherein, the issue of transport subsidy has been discussed and the Hon'ble Supreme Court while relying upon another decision of the Supreme Court in the case of 'Jai Bhagawan Oil & Flour Mills Vs. Union of India and Others' (2009) 14 SSC) 63 and 'Sahney Steel and Press Works Ltd Vs. CIT A.P.-1 Hyderabad' (1997) 7 SCC 764 has allowed the claim of deduction u/s 80IB / 80IC of the Act on account of transport subsidy.
However, the assessee before us has made the claim that the subsidy received by the assessee was capital in nature otherwise. He, in this respect has relied upon the decision of the Hon'ble Supreme C o u r t i n t h e case of 'CIT-I Vs. M/s Chaphalkar Brothers, Pune' and Others in Civil Appeal Nos. 6513-6514 of 2012 vide order dated 7.12.2017 reported in ( 2 0 1 7 ) 8 8 t a x ma n . c o m 2 7 8 ( S C . ) The Ld. counsel in this respect has submitted that as per the scheme of the government subsidy, VAT deferment scheme and transport subsidy was granted as incentives with the object to develop particularly the remote area in the State of Himachal Pradesh for the infrastructure and economic development of the area and also to generate employment with a ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 7 view to promote the growth of industries in the areas which are geographically placed at disadvantageous position as compared to industries in the plain areas.
8. We find that the issue under consideration is now settled by the decision of the Hon'ble Supreme Court in the case of 'CIT-I Vs. M/s C h a p h a l k a r B r o t h e r s , P u n e ' a n d O th e r s i n C i v i l A pp e a l N o s . 6 5 1 3 - 6 5 1 4 o f 2 0 1 2 v i de o r d e r d a t e d 7 . 12 . 2 0 1 7 [ 2 0 1 7 ] 8 8 t a x ma n . c o m 2 7 8 (SC). T h e H o n 'b l e S u p r e me C o u r t w h i l e d e l i b e r a t in g o n t h e o t h e r d e c i s i o n s o f t h e S u p r e me C o u r t i n t h e c a s e s o f ' S a h ne y S t e e l & P r e s s Wo r k s L t d . H yd e r a b a d V s . C I T , A .P . - 1 , H yd e r a b a d ' : 1 9 9 7 ( 7 ) S CC 7 6 5 , ' C I T , M a d r a s V s . P o o n i S u g a r s a n d C h e mi c a l s L i mi t e d ' 2 0 0 9 ( 9 ) S C C 3 3 7 a n d f u r t h e r o f t h e H o n 'b l e J & K H i g h C o u r t i n t h e c a s e o f ' S h r i B a l a j i A l l o ys V s . C I T ' ( 2 0 1 1 ) 3 3 3 I T R 3 3 5 , h a s h e l d t h a t t o h o l d w h e t h e r a n y o f s u c h r e c e i p t s a r e c a pi t a l o r R e v e n u e i n n a t u r e , ' p u r p o s e t e s t ' i s t o b e a p pl i e d . If t h e p u r po s e i s f or t h e s e tt i n g u p o f n e w i n d u s t r y, t h e n t h e r e c e i p t s a r e t o b e c o n s i d e r e d a s c a p i t a l i n n a t u r e . H o w e v e r , if t h e r ec e i p t s a r e i n t h e na t u r e of f a ci l i t a t i on / h e l p i n g ha n d t o t h e t r a d e , t h e sa me a r e t o b e c o ns t r u e d a s R e v e n u e i n n a t u r e . Wh a t i s i mp o r t a n t i s t h e o b j e c t f o r w h i c h t h e s u b s i d y / i n c e n t i v e i s g r a n t e d . T h a t t h e o b j e c t i s c a r r i e d o u t i n a p ar t i c u l a r ma n n e r i s i r r e l e v a n t . O n ce t h e o b j e c t o f t h e su b s i d y w a s t o i n d u s t r i a l i z e t h e S t a t e a n d t o g e n e r a t e e mp l o ym e n t i n t h e S t a t e , t h e f a c t t h a t a s u b s i d y t o o k a p a r t i c u l a r f o r m a n d t h a t i t w a s g r a n t e d o n l y a f t e r c o m me n c e me n t o f p r o d u c t i o n , w o u l d n o t ma k e a n y d i f f er e n c e . T h e H o n 'b le S u p r e me C o u r t ma d e r e f e r e n c e t o ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 8 t h e d e c i s i o n o f t h e H o n 'b l e J & K H i g h C o u r t i n t h e c a s e o f ' S h r i B a l a j i A l l o ys v CIT' (supra), wherein, the H o n 'b l e High Court while c o n s i d e r i n g t h e s ch e me o f r ef u n d of e x c i s e d u t y a n d i n t e r e s t s u b s i d y, h a s h e l d t h a t t h e re c e i p t s w e r e c a p ita l i n n a t u r e d e s p i te t h e f a c t t h a t t h e incentives were not available u nt i l and unless th e c o m me r c i a l production has started and despite the fact that these incentives were not given to the assessee expressly f o r t h e p u r p o s e o f c a p i t a l a s s e t s. T h e r e l e v a n t p a r t o f t h e d e c i s i o n of t h e H o n 'b l e S u p r e me C o u r t i n t h e c a s e o f ' C I T V s . M / s C h a p h a l k a r B r o t h e r s , P u n e ' i s r e p r o d u c e d as under:-
"Finally, it was found that, applying the test of purpose, the Court was satisfied that the payment received by the assessee under the scheme was not in the nature of a helping hand to the trade but was capital in nature.
What is important from the ratio of this judgment is the fact that Sahney Steel was followed and the test laid down was the "purpose test". It was specifically held that the point of time at which the subsidy is paid is not relevant; the source of the subsidy is immaterial; the form of subsidy is equally immaterial.
Applying the aforesaid test contained in both Sahney Steel as well as Ponni Sugar, we are of the view that the object, as stated in the statement of objects and reasons, of the amendment ordinance was that since the average occupancy in cinema theatres has fallen considerably and hardly any new theatres have been started in the recent past, the concept of a Complete Family Entertainment Centre, more popularly known as Multiplex Theatre Complex, has emerged. These complexes offer various entertainment facilities for the entire family as a whole. It was noticed that these complexes are highly capital intensive and their gestation period is quite long and therefore, they need Government support in the form of incentives qua entertainment duty. It was also added that ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 9 government with a view to commemorate the birth centenary of late Shri V. Shantaram decided to grant concession in entertainment duty to Multiplex Theatre Complexes to promote construction of new cinema houses in the State. The aforesaid object is clear and unequivocal. The object of the grant of the subsidy was in order that persons come forward to construct Multiplex Theatre Complexes, the idea being that exemption from entertainment duty for a period of three years and partial remission for a period of two years should go towards helping the industry to set up such highly capital intensive entertainment centers. This being the case, it is difficult to accept Mr. Narasimha's argument that it is only the immediate object and not the larger object which must be kept in mind in that the subsidy scheme kicks in only post construction, that is when cinema tickets are actually sold. We hasten to add that the object of the scheme is only 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.
Mr. Ganesh, learned Senior Counsel, also sought to rely upon a judgment of the Jammu and Kashmir High Court in Shri Balaji Alloys vs. C.I.T. (2011) 333 I.T.R. 335. While considering the scheme of refund of excise duty and interest subsidy in that case, it was held that the scheme was capital in nature, despite the fact that the incentives were not available unless and until commercial production has started, and that the incentives in the form of excise duty or interest subsidy were not given to the assessee expressly for the purpose of purchasing capital assets or for the purpose of purchasing machinery. After setting out both the Supreme Court judgments referred to hereinabove, the High Court found that the concessions were issued in order to achieve the twin objects of acceleration of industrial development in the State of Jammu and Kashmir and generation of employment in the said State. Thus considered, it was obvious that the incentives would have to be held capital and not revenue. Mr. Ganesh, learned Senior Counsel, pointed out that by an order dated 19.04.2016, this Court stated that the issue raised in those appeals was covered, inter alia, by the judgment in Ponni Sugars, and the appeals were, therefore, dismissed.
ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 10 We have no hesitation in holding that 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 ."
We ma y f u r t h e r a d d h e r e t h a t t h e d e c i s i o n o f t h e H o n 'b l e J a m mu & K a s h mi r H i g h C o u r t i n t h e c a s e of 'C I T V s . S h r i B a l aj i A l l o ys & O r s ' (supra) h a s b e en u p h e l d b y t h e H o n 'b l e S u p r e me C o u r t v i d e i t s d e c i s i o n d a t e d 1 9. 1 2 . 2 0 1 6 r e p o r t e d i n ( 2 0 1 6 ) 9 5 CC H 0 2 4 9 S C C / (2016) 138 DTR 0036 (SC).
9. I n v i e w of t h i s p r o p o s i t i o n of l aw l a i d d o w n b y t h e H o n 'b l e S u p r e me C o u r t , t h e a f o re s a i d r e c e ip t s o f t h e a s s e s s ee o n a c c o u n t of s a l e s t a x / V A T d e f e r me n t s u b s i d y a n d T r a n s p o r t s u b s i d y a r e h e l d t o b e capital in nature and not taxable. Since the receipts have been held to be capital in nature, hence, no addition is attracted on account of these r e c e i p t s i n t o t h e i nc o me o f t h e a s s e s se e .
10. Ground No. 4 : Vide this ground, the assessee the assessee has agitated the action of the Assessing officer in denying deduction u/s 80IC of the Act in respect of interest income of Rs. 23,00,560/- on FDRs obtained from ILC/ FLC for purchase of raw material.
11. At the outset, Ld. Counsel for the assessee has invited our attention to the order of the Tribunal passed in the own case of the assessee in ITA ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 11 No. 643/Chd/2011 dated 17.6.2013, wherein, this issue has been remanded back by the Tribunal to the file of the Assessing officer with a direction to decide the same afresh keeping in view the decision of the Hon'ble Jurisdictional High Court in the case of 'Vishal Tools & Forging Pvt Ltd. v CIT' order dated 20.5.2011 passed in ITA No. 121 of 2011. The relevant part of the order of the Tribunal in the earlier assessment year is reproduced as under:-
"4. In the above order, it was recorded that Ld. Counsel for the assessee had conceded that question No. (i) to (iii) stood concluded against the assessee and in favour of the Revenue in view of judgement of this Court dated 20.5.2011 in ITA No. 121 of 2011 ( Vishal Tools & Forgings Private Limited v. Commissioner of Income Tax, Jalandhar (Punjab). Today, argument have been addressed by learned counsel for the assessee on Question No.(iv) only. He submitted that netting of interest for purposes of calculation required to be done and relying upon judgement of the Apex Court in ACG Associated Capsules Private Limited vs. Commissioner of Income Tax, Central -FV, Mumbai, (2012) 3 (SC) 321 and judgement of Delhi High Court in Commissioner of Income Tax Vs. Shashi Export House, (2010) 46 DTK (Del.) 34, submitted that the matter requires to be remanded to the Assessing officer to re-compute deduction under section 80HHC of the Act in terms of the aforesaid judgement of the Apex court.
5. Ld. Counsel for the Revenue did not dispute the aforesaid submission.
In view of the above, the Question No. (iv) stands answered in terms of judgement of the Apex Court in ACG Associated Capsules Private Limited's case (supra) and the matter is remanded to the Assessing officer for passing fresh order in terms of the said judgement with regard to the claim of the assessee u/s 80HHC of the Act.
ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 12
20. Accordingly, by keeping in view the ratio laid down by the Hon'ble Jurisdictional High Court this issue is remanded back to the file of the A.O. for fresh adjudication in accordance with law and by keeping in view the aforesaid referred to decision of the Hon'ble Jurisdictional High Court in the case of Vishal Industries (supra) Accordingly, the order of the Ld. CIT(A) is set aside and the matter is remanded back to the A.O."
12. The Ld. counsel has further invited our attention to the order of the Jurisdictional High Court in the case of the assessee passed in ITA No. 352 of 2013 vide order dated 4.8.2015, wherein, the Hon'ble High Court has refused to interfere in the above order of the Tribunal observing as under:-
"Now re: Question No. (v)
16. It was noticed by the Assessing Officer that the assessee had received interest on FDRs kept with the bank as margin money. He treated the same as income from other sources and not profit derived from industrial undertaking. Accordingly, he disallowed the deduction. The Tribunal remanded the issue to the Assessing Officer for fresh adjudication in accordance with law and by keeping in view a decision of this Court referred to therein. As the matter has been kept open, no question of law arises. No interference is called for."
In view of this, the issue raised vide ground No.4 in similar terms is restored to the file of the Assessing officer to decide it afresh as per the directions given in earlier assessment year, as observed above.
13. Ground No.6: No arguments have been addressed in respect of ground No. 6, hence, this ground is dismissed as 'not pressed'.
ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 13
14. Ground No. 7: This ground is consequential in nature and does not require any adjudication.
15. Ground No.8: This ground is general in nature and needs no specific adjudication.
16. Apart from that, the assessee has taken following additional ground of appeal :-
That the amount VAT Deferment of Rs. 16,96,924/- may be excluded while computing book profits u/s 115JB as being the capital receipt and not liable to tax in view of the proposition laid down in the case of Shree Balaji Alloys & Ors.
17. Though the Ld. DR h a s o b j e c t e d t o t a k i n g of t h e a d d i t i o n a l g r o u n d a t t h i s s t a ge , h o w e v e r , c o n s id e r i n g t h e f a ct s a nd c i r c u ms t a n c e s o f t h e c a s e a n d a l s o c o n s i d e r i n g t h e s u b s e q u e n t d e c i s i o n s o f the H o n 'b l e S u p r e me C o u r t i n r e s p e c t o f n a t u r e a n d c h a r a c t e r o f t he s u b s i d y r e c e i v e d o n V A T d ef e r me n t a s ' c a p i t a l r e ce i p t' , w e d e e m i t f i t t o a d mi t t h i s a d d i t i o n a l g r o u n d .
18. I n t h e a d d i t i o n a l g r o u n d , t h e a s s e s se e h a s c l a i me d t ha t s i n c e t h e s u b s i d y o n a c c o u n t o f V A T d e f e r me n t i s a s c a p i t a l r e c e i p t , t h e s a me i s n o t l i a b l e t o b e t a x e d t a k i n g i n t o c o n s i d e r i n g w h i l e c o mp u t i n g t h e b o o k profit u/s 115JB of the Act. He in this respect has relied upon the decision of the Lucknow Bench of the Tribunal in the case of 'ACIT Vs. L.H. Sugar Factory Ltd and Anr" in ITA Nos. 339, 417 & 4 1 8 / L K W/ 2 0 1 3 , 5 1 8 & 5 3 / L K W/ 5 6 9 & C O N o . 2 6 & 2 7 / L K W/ 2 0 1 3 ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 14 o r d e r d a t e d l 9 . 2 . 20 1 6 . T h e r e l e v a nt i s s u e h a s b e e n di s c u s s e d i n p a r a 5 0 o f t h e sa i d o r d er , w h i c h i s r e p r o du c e d f o r t h e s a k e o f c o n v e n i e nc e .
"50. From the above paras, we find that the Tribunal has duly considered the judgment of the Hon'ble Apex Court rendered in the case of Apollo Tyres Ltd. ((Supra) and thereafter, it was noted by the Tribunal in this case that as per the decision of Special Bench of the Tribunal rendered in the case of Rain Commodities Ltd. Vs. DCIT, 41 DTR 449, if profit and loss account is not in accordance with Part II & Part III of Schedule VI to the Companies Act, 1956 because it is prerequisite for Section 115JB of the Act. The Tribunal in this case also considered two another Tribunal's orders rendered in the case of DCIT Vs. Bombay Diamond Company Ltd. 33 DTR 59 and Syndicate Bank Vs. ACIT, 7 SOT 51 Bangalore where it was held by the Tribunal after considering the decision of Hon'ble Apex Court rendered in the case of Apollo Tyres Ltd. (Supra), and after 28 explaining the same that adjustment to profit and loss account is possible to make it compliant with Schedule VI Part II and Part III of the Companies Act, 1956 which is prerequisite of Section 115JB of the Act. On this basis, the Tribunal in the case of Shree Cement Ltd. (Supra) decided this issue in favour of the assessee and it was held that capital receipt in the form of sales tax subsidy needs to be excluded from profit as per P&L account for the purpose of computing book profit u/s 115JB of the Act. By respectfully following these Tribunal's orders, we hold that in the present case also, the receipt on account of transfer of carbon credit which is held to be a capital receipt needs to be excluded from profit as per P&L account for the present year while computing the book profit u/s 115JB of the Act. This issue is decided in favour of the assessee and accordingly Ground Nos.1 to 5 are allowed. The assessee gets relief of Rs.27,70,880/- and consequent interest being 10% of amount received by the assessee on sale of carbon credit of Rs.277,08,800/-.
19. S i n c e i n t h e l i g h t o f t h e v a r i o u s d e c is i o n s of t h e H o n 'b l e S u p r e me C o u r t i t h a s a l r e a d y b e e n h e l d t h a t t h e s u b s i d y o n a c c o u n t o f V AT ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 15 d e f e r me n t i s a c a p i t a l r e c e i p t , h e n c e , i n t h e l i g h t o f t h e a b o v e d e c i s i o n o f t h e T r i b u n a l , th e s a me n e e d t o b e e x c l u d e d f r o m t h e p r o f i t s a s p e r t h e p r of i t a n d l o ss a c c o u n t of t he p r e s e n t ye a r w h i l e c o mp u t i n g t h e b o o k p r o f i t u / s 1 1 5 J B o f t h e A ct . T h i s a d d i t i o n a l g r o u n d o f t h e a s s e s s e e , i s t h e r ef o r e , a l l o w e d .
I n t h e r e s u l t , t h i s a p p e a l o f t h e a s s e ss e e i s p a r t l y a l l o w e d . ITA No.583/Chd/2014 (A.Y. 2009-10)-Revenue's appeal :
20. The Revenue in this has taken the following effective grounds:-
1. In the facts and circumstances of the case, Ld. CIT(A) has erred in holding that the Transport Subsidy received from the Himachal Govt. by the assessee is allowed to be included as profit derived from Industrial Undertaking and eligible as deduction u/s 80IC of the Income Tax Act, 1961, when it has been clearly laid down by Supreme Court in its decision in the cases of Cambay Electric Supply Industrial Co. Ltd. Vs. CIT 1978 (TR/SC) 50:1978) 1/3 ITR 84/SC) that the words derived from referred to in the section 80IC has narrower meaning than attributable to and the freight subsidy cannot be treated as profit derived from Industrial Undertaking through it may be attributable to Industrial Undertaking?
2. In the facts and circumstances of the case, Ld. CIT(A) has erred in holding that the Transport Subsidy was rightly taken into consideration by the assessee in working out the profits and gains of the business undertaking relying on the decision of Calcutta High Court in the case of Merino Ply and Chemicals Ltd. Vs. CIT (1004) 122 CTR (Cal) 262 :(1994) 209 ITR 508 (Cal.) where the point in issue was whether a receipt on account of transport/freight subsidy was of a revenue nature and was inseparably connected with the business and not whether it was income derived from the business of the industrial undertaking and eligible for deduction u/s 80HH/80IA/80IB of the Income Tax Act. 1961?
3. In the facts and circumstances of the case, Ld. CIT(A) has ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 16 erred in not appreciating the judgment of Hon'ble Himachal Pradesh High Court in its decision in the case of CIT vs. Kiran Enterprises reported in 327 ITR 520 and M/s Mehar Packaging Pvt. Ltd. Vs. CIT reported in 24 Taxman 204 which are applicable in this case wherein it has already been held that the amount of transport/freight subsidy received from the Govt. by the assessee is not a profit derived from business since it is not an operational profit. The source of subsidy is not the business of assessee but scheme of Central Govt. and cannot be included in the profits eligible for deduction u/s 80IC.
The ITAT was also not right in law in not appreciating the ratio of Hon'ble Supreme Court in the cases of M/s Liberty India Vs. CIT 225 CTR 233(SC), CIT vs. Sterling Foods 153 CTR 439, 237 ITR 589, Vellore Electric Corporation Ltd. Vs. CIT 227 ITR 557 (SC).
4. In the facts and circumstances of the case, Ld. CIT(A) has erred in holding that the income from Deferred VAT Rebate received by the assessee is allowed to be included as profits derived from industrial undertaking and eligible for deduction u/s 80IC of the Income Tax Act, 1961, when the assessee received it from the Himachal Govt. for the benefit of any incentive of Sales Tax leviable on the sale of manufactured goods under Himachal Pradesh General Sales Tax Act. 1968 and the income derived from such rebate is not an income derived from industrial undertaking. However, the immediate source of this rebate was the scheme of Govt. to give such rebate and not the conduct of the business of the industrial undertaking.
5 In the facts and circumstances of the case, Ld. CIT(A) has erred in allowing the relief on account of disallowance of Bank Interest of Rs.21,49,556/- under section 80IC of the Income Tax Act, 1961, without appreciating the fact that the Department has not accepted the decision of Hon'ble ITAT in ITA No.643/Chd/2011 dated 17.06.2013 on the issue of deduction under section 80IC and the department has preferred an appeal before the Hon'ble Punjab and Haryana High Court, Chandigarh.
ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 17
6. It is prayed that the order of Ld. CIT(A) be set aside and that of the AO restored
7. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard and finally disposed of.
21. Ground Nos. 1, 2, 3 & 4 : As regarding these grounds are concerned, in view of our findings given above while deciding ITA No. 366/Chd/2013 vide grounds No.2, 3 & 5 of the appeal of the assessee, these issues are accordingly decided in favour of the assessee.
22. Ground No.5 : Vide this ground, the Revenue has agitated the action of the CIT(A) in allowing on deduction u/s 80IC of the Act in respect of bank interest on FDRs. This issue has been dealt with by us while deciding ground No.4 of the appeal of the assessee in ITA No. 366/Chd/2013.
In view of our above observation, this issue is accordingly restored to the file of the Assessing officer to decide it afresh, as per directions, given above.
Ground Nos. 6 & 7 are general in nature and do not require any adjudication This appeal of the Revenue stands partly allowed. ITA No.589/Chd/2014 (A.Y. 2009-10)-Assessee's appeal
23. The assessee has filed this corresponding appeal relating to assessment year 2009-10. The assessee in this appeal has taken the following grounds of appeal:-
1. That the impugned appellate order is bad both on facts and law to the extend the additions/ disallowances have been confirmed.
ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 18
2. That the learned Appellate Authority wrongly and illegally disallowed the netting of income of interest of Rs. 34,85,564/- by deducting the interest amount which has been incurred in relation to the amounts on which interest of Rs.
Rs.34,85,564/- was charged ignoring the pleadings, evidence and material on record alternatively the total interest income of Rs. 52182 69 /-
should be properly computed after deducting the expenses incurred.
3. That the learned Appellate Authority wrongly and illegally confirmed the addition of Rs.
19000/- being the reversal entry of Advance rent paid and claimed expense in AY 2007-08 ignoring the pleadings, admitted material and provision of section 41(l)(a] applicable as expense claimed in earlier year.
4. That the learned Appellate Authority wrongly and illegally disallowed the claim of deduction @ 30% on rental income of Rs. 24000/- u/s 24.
5. That the learned Appellate Authority wrongly and illegally failed to consider and give any finding that interest U/S.234-B and 234-C, on the facts and circumstances of the case, which has been wrongly and illegally charged and levied,
6. That the appellant craves permission to elucidate, amend, alter, add or delete any ground of appeal at the time of hearing.
It is therefore prayed that the appeal may kindly be accepted and the addition may kindly be deleted wholly inter-alia allowing the deduction U/s 80IC or any other relief to which the appellant may found entitled may kindly be granted
24. G r o u n d N o . 1 i s g e n e r a l i n n a t u r e a n d n e e d s n o a d j u d i c at i o n .
ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 19
25. Ground No.2 : Vide this ground, the assessee has agitated the a c t i o n of t h e C I T (A ) i n n o t a l l o w i n g c e r t a i n p a r t of t he i n t e r e s t i n c o me for netting for the purpose of deduction of claim u/s 80IC of the Act. The claim of the assessee is that the CIT(A) allowed the netting in r e s p e c t o f o n e p art o f t h e i n t e r e st i nc o me a n d d i s a l l o w e d a n o t h e r p a r t o f t h e i n t e r e s t in c o me . S i n c e , w h i l e d e c i d i n g g r o u n d N o . 4 o f t h e R e v e n u e a p p e a l , th i s i s s u e h a s b e e n r e s t o r e d t o t he f i l e of t h e A s s e s s i ng o f f i c e r, a c c o r d i n g ly t h i s g r o u n d o f th e a p p e a l of t h e a s s e s s e e i s a l s o r e s t o r e d t o t h e f i le of t h e A s s e s s i n g o f f i c e r f o r a d j u d ic a t i o n af r e s h as p e r t h e d i r e c t i o n s g i v e n a b o v e w h i l e d e c i d i n g t h e re l e v a n t i s s u e i n Revenue appeal.
26. Ground Nos. 3 & 4: N o a r g u me n t s h a v e b e e n ad d r e s s e d i n r e s p e c t of g r o u n d N o s . 3 & 4 o f t h e a p p e a l , h e n ce , t h e s a me a r e d i s mi s s e d a s ' n o t p r e s s e d ' .
27. G r o u n d N o . 5 i s co n s e q u e n t i a l i n n at u r e a n d d o e s n o t r e q u i r e a nd adjudication.
28. Ground No.6 is general in nature and needs no s p e c i f ic adjudication.
29. Apart from above, the assessee has taken following additional ground of appeal :-
That the amount VAT Deferment of Rs. 89,41,810/- may be excluded while computing book profits u/s 115JB as being the capital receipt and not liable to tax in view of the proposition laid down in the case of Shree Balaji Alloys & Ors.
ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 20
30. The issue raised in this additional ground has already been dealt w i t h a n d a d j u d i c a te d b y u s i n f a v o u r o f t h e a s se s s e e wh i l e d e c i d i n g t he additional ground of appeal raised in ITA No. 366/Chd/2013. This g r o u n d i s a c c o r d i ng l y d e c i d e d i n f a vo u r o f t h e a s s e s s e e.
I n t h e r e s u l t , t h i s a p p e a l o f t h e a s s e ss e e i s p a r t l y a l l o w e d . ITA No.584/Chd/2014 (A.Y. 2010-11)-Revenue's appeal
31. The Revenue in this appeal has taken the following effective grounds:-
1. In the facts and circumstances of the case, Ld. CIT(A) has erred in holding that the Transport Subsidy received from the Himachal Govt. by the assessee is allowed to be included as profit derived from Industrial Undertaking and eligible as deduction u/s 80IC of the Income Tax Act, 1961, when it has been clearly laid down by Supreme Court in its decision in the cases of Cambay Electric Supply Industrial Co.
Ltd. Vs. CIT 1978 (TR/SC) 50:1978) 1/3 ITR 84/SC) that the words derived from referred to in the section 80IC has narrower meaning than attributable to and the freight subsidy cannot be treated as profit derived from Industrial Undertaking through it may be attributable to Industrial Undertaking?
2. In the facts and circumstances of the case, Ld. CIT(A) has erred in holding that the Transport Subsidy was rightly taken into consideration by the assessee in working out the profits and gains of the business undertaking relying on the decision of Calcutta High Court in the case of Merino Ply and Chemicals Ltd. Vs. CIT (1004) 122 CTR (Cal) 262 :(1994) 209 ITR 508 (Cal.) where the point in issue was whether a receipt on account of transport/freight subsidy was of a revenue nature and was inseparably connected with the business and not whether it was income derived from the business of the industrial undertaking and eligible for deduction u/s 80HH/80IA/80IB of the ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 21 Income Tax Act. 1961?
3. In the facts and circumstances of the case, Ld. CIT(A) has erred in not appreciating the judgment of Hon'ble Himachal Pradesh High Court in its decision in the case of CIT vs. Kiran Enterprises reported in 327 ITR 520 and M/s Mehar Packaging Pvt. Ltd. Vs. CIT reported in 24 Taxman 204 which are applicable in this case wherein it has already been held that the amount of transport/freight subsidy received from the Govt. by the assessee is not a profit derived from business since it is not an operational profit. The source of subsidy is not the business of assessee but scheme of Central Govt. and cannot be included in the profits eligible for deduction u/s 80IC. The ITAT was also not right in law in not appreciating the ratio of Hon'ble Supreme Court in the cases of M/s Liberty India Vs. CIT 225 CTR 233(SC), CIT vs. Sterling Foods 153 CTR 439, 237 ITR 589, Vellore Electric Corporation Ltd. Vs. CIT 227 ITR 557 (SC).
4. In the facts and circumstances of the case, Ld. CIT(A) has erred in holding that the income from Deferred VAT Rebate received by the assessee is allowed to be included as profits derived from industrial undertaking and eligible for deduction u/s 80IC of the Income Tax Act, 1961, when the assessee received it from the Himachal Govt. for the benefit of any incentive of Sales Tax leviable on the sale of manufactured goods under Himachal Pradesh General Sales Tax Act. 1968 and the income derived from such rebate is not an income derived from industrial undertaking. However, the immediate source of this rebate was the scheme of Govt. to give such rebate and not the conduct of the business of the industrial undertaking.
5. In the facts and circumstances of the case, Ld. CIT(A) has erred in deleting the addition of Rs.2,19,320/- made on account of Miscellanous Receipts, without appreciating the fact that these receipts have not been derived by the assessee from the business activities of the industrial undertaking ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 22
6. In the facts and circumstances of the case, Ld. CIT(A) has erred in allowing the relief on account of disallowance of Bank Interest of Rs.21,49,556/- under section 80IC of the Income Tax Act, 1961, without appreciating the fact that the Department has not accepted the decision of Hon'ble ITAT in ITA No.643/Chd/2011 dated 17.06.2013 on the issue of deduction under section 80IC and the department has preferred an appeal before the Hon'ble Punjab and Haryana High Court, Chandigarh.
7. It is prayed that the order of Ld. CIT(A) be set aside and that of the AO restored
8. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard and finally disposed of
32. Ground Nos. 1, 2, 3 & 4 : These grounds raised by the Revenue are squarely covered by our findings given above while deciding grounds Nos. 2, 3 & 5 of the appeal of the assessee in ITA No. 366/Chd/2013. Thus, these issues are accordingly decided in favour of the assessee and against the Revenue.
33. Ground No.5 : Vide ground No.5, the Revenue has agitated the action of the CIT(A) in deleting the addition of Rs. 2,19,320/- made on account of Misc. receipts. The Assessing officer disallowed the deduction u/s 80IC of the Act in respect of the aforesaid receipts observing that said receipts have not been derived by the assessee from the business activity of the industrial undertaking.
34. The Ld. CIT(A) during appellate proceedings observed that the aforesaid receipts were on account of reimbursement of CST paid and power expenses paid which are out of the expenditure claimed earlier and, ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 23 hence, the same being reimbursement of the expenditure would amount to income earned from the business activity of the assessee. He, therefore, held that the same income was from the business activity of the assessee and the assessee was entitled to claim deduction in respect of the same u/s 80IC of the Act.
We do not find any infirmity in the order of the CIT(A) on this issue and the same is upheld.
35. Ground No.6 : This ground is in respect of the denial of deduction on account of bank interest. This issue is restored to the file of the Assessing officer in the light of the directions given above while deciding ground No.4 in ITA No. 366/Chd/2013 for assessment year 2007-08.
36. Ground Nos. 7 & 8 are general in nature and do not require any adjudication.
In the result, appeal of the Revenue is partly allowed. ITA No.590/Chd/2014 (A.Y. 2010-11)- Assessee's appeal
37. The assessee in this appeal has taken following grounds of appeal:-
1. That the impugned appellate order is bad both on facts and law to the extend the additions/ disallowances have been confirmed.
2. That the learned Appellate Authority wrongly and illegally disallowed the interest of Rs.
16,84,582/- without the netting of income of interest by deducting the interest amount which has been incurred in relation to the amounts on which ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 24 interest of Rs. 1684582/- ignoring the pleadings, evidence and material on record alternatively the total interest income of Rs. 3834078/- should be properly computed after deducting the expenses incurred.
3. That the learned Appellate Authority wrongly and illegally confirmed the disallowance of Rs. 4969652/-
being the memorandum entries relating to the purchase value in foreign exchange of Import of raw material on credits payments and payments thereof later on, while computing the profit and gains u/s 80IC without considering the pleadings and evidence on record.
4. That the learned Appellate Authority wrongly and illegally confirmed the disallowance of Rs. 1,63,064/- being profit on sale of Bus while computing the profit and gains for deduction u/s 80IC or alternatively the amount should not be added after disallowance being not liable to tax u/s 32, without considering and ignoring the pleadings and evidence/material on record.
5. That the learned Appellate Authority wrongly and illegally is allowed the claim of deduction @ 30% on rental income of Rs.351340/- u/s 24.
6. That the learned Appellate Authority wrongly and illegally confirmed the disallowance of payment of interest Rs. 1,70,005/- u/s 36(iii) against the facts and circumstances of the case without considering the pleadings and evidence/material on record.
7. That the Ld. Appellate Authority wrongly and illegally failed to consider and give any finding that interest u/s 234-B and 234-C, on the facts and circumstances of the case, which has been wrongly and illegally charged and levied.
8. That the appellant craves permission to elucidate, amend, alter, add or delete any ground of appeal at the time of hearing.
ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 25 It is therefore, prayed that the appeal may kindly be accepted and the addition may kindly be deleted wholly inter-alia allowing the deduction u/s 80-IC or any other relief to which the appellant may found entitled may kindly be granted.
38. G r o u n d N o . 1 : Gr o u n d N o . 1 i s g en e r a l i n n a t u r e a nd d o e s n o t require any specific adjudication.
39. Ground No. 2: Th e g r o u n d N o . 2 i s r e l a t i n g t o t h e cl a i m o f t he a s s e s s e e r e g a r d i ng i n t e r e s t i n c o me w h e t h e r t o b e i n c l u d e d w h i le c o mp u t i n g t h e d e d u c t i o n u / s 8 0 I C o f t h e A c t . I n t h e l i g h t of o ur o b s e r v a t i o n ma d e a b o v e , t h i s g r o u n d i s r e s t o r e d t o t h e f i l e of the A s s e s s i n g of f i c e r f o r a d j u d i c a t i o n af r e s h a s p e r f i n d in g s g i v e n a b o ve w h i l e d e c i d i n g g r ou n d N o . 4 i n I T A N o . 3 6 6 / C h d / 2 0 1 3 .
40. Ground No.3 : Vide this ground the assessee has agitated the a c t i o n o f t h e l o w er a u t h o r i t i e s i n ma k i n g / c o n f ir mi n g t h e d i s a l l o w a n c e o f R s . 4 9 , 6 9 , 6 5 2 / - b e i n g t h e d if f e r e nc e i n f l u c t u a t i o n of e x c h a n g e r a t e .
41. The facts relating to this issue are that the assessee had shown an i n c o me o f R s . 4 9 , 6 9 , 6 5 2 / - under head 'gain on foreign exchange fluctuation'. During the assessment proceedings, the appellant submitted that "During the year assessee has imported raw material for use in the manufacturing in the industrial undertaking situated in Kale-Aam. For import of raw material, assessee's company has opened letter of credit in favour of the supplier of the raw material. The payment against FLC is made after some period after the receipt of material i.e. the suppliers ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 26 extend the credits against the FLC. The appellant passes the entry in his book of purchase of material in Indian currency on the date of receipt of the material and conversion rate of Indian Rupees and US$ is considered. The payment of FLC was made by the assessee to the Bank at a later date i. e. on expiry on FLC. Bank charges at the conversion rate applicable on that date. Copy of the statement showing the value of Indian rupees on the date of receipt of material when a relevant entry passed in the books of account although no payment was made and in column-6 amount actually paid in Indian rupees on due date, is enclosed. Appellants real and actual liability of the payment is when the payment is made to the bank and not when the goods are received in the premises. The first entry was contra- general entries and due to rate fluctuation, the plus or minus difference are taken to foreign currency exchange fluctuation account. Any plus or minus, directly effects the costs of the raw material to the assessee company. The difference is not the real income or loss arising to the assessee. The payment is made at a predetermined time which is mentioned in the FLC documents. We, therefore, submit that the sum of Rs. 49,69,652/- though shown separately infact should be reduced from the costs of the raw material. It is, therefore, submitted that the amount of Rs.49,69,652/- is intrinsically and directly connected with the activities of the industries undertaking and mainly related to the expenses incurred and it is not a independent income nor it is a real income and, therefore, it should not be excluded from the profit and gains of the industrial under taking."
ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 27 However, the A.O. didn't accept the submission of the appellant observing that the contention of the appellant is not convincing.
42. T h e L d . C I T ( A ) c o n f i r me d t h e f i n d in g s o f t h e A s s e s s i n g o f f i c e r o b s e r v i n g a s u n d e r: -
"7.3 I have considered the submissions made. The appellant has booked the expense on the date of purchase. The income of Rs. 49,69,652/- is earned on account of foreign exchange fluctuation and it is basically a premium earned on exchange fluctuation against the FLC opened. Therefore, in my opinion, this amount can't be held to be directly attributable or derived from the business of the appellant. Thus, this ground of appeal is dismissed."
43. We h a v e c o n s i d e r e d t h e r i v a l c o n t e n t i o n s a n d h a v e a l s o g o n e t h r o u g h t h e r e c o rd . I n t h i s c a s e , th e a s s e s s e e i mp o r t e d r a w ma t e r i a l a n d t h e p a ym e n t w a s r e q u i r e d t o b e ma d e o n a f i x e d d a t e i n f o r e i g n c u r r e n c y. H o w e v e r , t h e a s s e s s e e p a s s e d o n t h e e n t r y i n t h e b o o k s o f a c c o u n t i n I n d i a n c u r r e n c y o n t h e d a t e o f r e c e i p t o f ma t e r i a l . S i n c e t h e p a ym e n t t o t h e b a n k w a s ma d e o n s t i p u l a t e d d a t e , h e n c e t h e g a i n , i f a n y, a n d d u e t o t h e f l u c t u a ti o n i n t he f o r e i g n e x c ha n ge , i n o u r v i e w , i s n o t h i n g b u t i t g o e s o n t o r e d u c e t h e co s t o f r a w ma t e r i a l.
44. We d o n o t a g r e e w i t h t h e f i n d i ng s o f t h e C I T ( A ) t h a t i t is b a s i c a l l y a p r e mi u m e a r n e d o n e x ch a n g e f l u c t u a t i o n a g a i n s t t h e F LC o p e n e d . M e r e p a s s i n g o f e n t r y o n t h e d a t e o f r e c e i p t of ma t e r i a l , i n o u r v i e w , d o e s n o t af f e c t t h e n a t ur e of th e g a i n e a r n e d b y t h e a s s e s s e e d ue t o f l u c t u a t i o n i n f o r e i g n e x c h a n ge a s t h e s a me i s d i r e c t l y l i n k e d t o w a r d s t h e r e d u c t i o n i n t h e c o s t o f r a w ma t e r i a l . T h i s c a n n o t b e s a i d t o ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 28 b e a n i n c o me e a r n e d b y t h e a s s e s s e e . R a t h e r , i t i s t h e e f f e c t of r e d u c t i o n of c o s t o f e x p e n d i t u r e i n t h e r a w ma t e r i a l an d t h e r e s u l t a n t b e n e f i t i s n o t h i n g b u t t h e b u s i n e s s i n c o me o f t h e a s s e s s e e l i a b l e f or deduction u/s 8 0I C o f t h e A ct . T hi s i s s u e i s a c c o r di n g l y d e c i d e d i n f a v o u r of t h e a s s e ss e e .
45. Ground No.4: The assessee vide this ground has agitated the disallowance of Rs. 1,63,064/- being profit on sale of bus, while c o mp u t i n g t h e p r o f i t a n d g a i n s f o r de d u c t i o n u / s 8 0 I C o f t h e A c t . T h e L d . C o u n s e l o f t h e a s s e s s e e h a s s u bmi t t e d t h a t t h e p r o f i t e ar n e d o n s a l e o f b u s i s a c a p i ta l r e c e i p t , he n c e , no t l i a b l e f or d e d uc t i o n u / s 8 0 I C of t h e A c t . H o w e v e r , h e h a s f u r t h e r s u b mi t t e d t h a t s i n c e t h e s a l e p r i c e i s a d j u s t a b l e i n b l o c k o f a s s e t a s p e r s e c t i o n 3 2 , h e n c e , t h i s i n c o me n e e d s t o b e e x c l u d e d e v en f r o m t h e t o t a l a ss e s s e d i n c o me .
46. We a g r e e w i t h t h e a b o v e c o n t e n t i on o f t h e L d . C o un s e l f o r t he a s s e s s e e t h a t t h e s a i d a mo u n t b e i n g c a p i t a l r e c e i p t i s r e q u i r e d t o b e a d j u s t e d i n t h e v a l u e o f t h e b l o c k o f a s s e t , h o w e v e r , t h e s a me i s n o t l i a b l e t o b e t a k e n i n t o c o n s i d e r a t i o n w h i l e c o mp u t i n g t a x a b l e i n c o me o f t h e a s s e s s e e . T h i s i s s u e i n t h e a b o ve t e r ms i s a l l o w e d i n f a v o u r of t he assessee.
47. Ground No.5 : The assessee vide ground No.5 has agitated the a c t i o n o f t h e l o we r a u t h o r i t i e s i n d i s a l l o w i n g t h e c l a i m o f s t a n d a r d d e d u c t i o n @ 3 0 % o n a c c o u n t o f r e n ta l i n c o me . I n o u r v i e w , t h e l o w e r ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 29 authorities h a v e r i g h t l y d e n i e d t h e c l a i m o f r e n t a l i n c o me t o b e e l i g i b l e f o r d e d u ct i o n u / s 8 0 I C o f th e A c t . H o w e v e r , w e f i n d f o rc e i n the contention of the Ld. AR that the standard deduction of 30% out o f r e n ta l i n c o me i s a l l o w a b l e t o th e a s s e s s e e a s pe r the statutory p r o v i s i o n s o f se c t io n 2 4 o f t h e I n c o me t a x A c t .
This ground is accordingly allowed and the Assessing officer is d i r e c t e d t o a l l o w t h e s t a n d a r d d e d uc t i o n a s p e r t h e pr o v i s i o n s o f t h e A c t o u t o f t h e r e n t a l i n c o me w h i l e c o mp u t i n g t h e t o t a l i n c o me o f t h e assessee.
48. Ground No.6 : This ground is in relation to d i s a l l o w a n c e of i n t e r e s t e x p e n d i t ur e u / s 3 6 ( i ) ( i i i) o f t h e I . T . A c t. T h e A s s e s s i n g o f f i c e r a s w e l l as t h e C I T ( A ) d i s a l l o w e d t h e a f o r es a i d a mo u n t u / s 3 6 ( i ) ( i i i ) o b s e r v i n g t h a t t h e a s s e s s e e h a d u s e d i n t e r e s t b e a r i n g f u n d s f or n o n - b u s i n e s s p u r po s e s . H o w e v e r , th e L d . C o u n s e l f o r t h e a s s e s s e e, b e f o r e u s , h a s s u bmi t t e d t h a t t h e a m o u n t i n q u e s t i o n w a s g i v e n t o t h e c o n c e r n e d a u t h o r i ti e s o n a c c o u n t of b u s i n e s s e x i g e n c i es . F u r t h e r , t h a t t h e a s s e s s e e h a d o w n s u r p l u s f u n d s mo r e t h a n t h e i n t e r e s t f r e e a d v a n c e s g i v e n . T h e a s s e s se e h a s i t s o w n f u nd s o f mo r e t h a n R s . 4 9 c r o r e s . T he s e c u r e d l o a n s t a k e n b y t h e a s s e s s e e c o mp a n y w e r e t a k e n f o r s p e c if ic b u s i n e s s p u r p o s e s a n d t h a t t h e s a me w e r e n o t u s e d o f n o n - b u s i n e s s purposes. T h e Ad v a n c e s w e r e ma d e b y t h e a s s e s s e e o u t of i t s o wn funds. The lower authorities have not doubted the above claim of the a s s e s s e e b u t h a v e d i s a l l o w e d t h e c l a i m o f t h e a s s e s s e e t h a t t h e f u n ds w e r e mi x e d f u n d s . H o w e v e r , a s p e r t h e l a w l a i d d o w n b y t h e H o n 'b l e ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 30 Jurisdictional High Court of Punjab & H a r ya n a i n t h e c a s e o f 'CIT Vs. Kaspsons Associates', 381 ITR 204 (P&H) and further of the Hon'ble Supreme Court in the case of 'Hero Cycles Ltd., 379 ITR 347 (SC), s i n c e t h e a s s e s s e e ' s o wn f u n d s w e r e s uf f ic i e n t t o me e t t h e a f o r e s a i d i n t e r e st f r e e a d va n c e s a nd a l s o t a k i n g i n to c o n s i d e r a t i o n th e c l a i m o f t h e assessee t h a t t h e f u n d s w e re g i v e n o u t o f b u s i n e s s e xp e d i e n c y, w e d o n o t f i n d a n y j u s t i f i c a ti o n o n t h e p a r t of t h e l o w e r a u t h o r i t i e s in d i s a l l o w i n g t h e af o r e s a i d c l a i m o f t he a s s e s s e e .
T h i s i s s u e i s a c c o rd i n g l y d e c i d e d i n f a v o u r of t h e a s s e s se e a n d t h e d i s a l l o w a n c e ma d e b y t h e l o w e r a u t h o r i t i e s i s h e r e b y o r d e r e d t o b e deleted.
49. G r o u n d N o . 7 : G ro u n d N o . 7 i s c o ns e q u e n t i a l i n n a t ur e a n d d o e s not require any adjudication.
50. Ground No. 8 : This ground i s ge n e r a l i n n a t u r e an d d o e s n o t require any specific adjudication.
51. Apart from above, the assessee has taken following additional ground of appeal :-
That the amount VAT Deferment of Rs. 25,53,547/- may be excluded while computing book profits u/s 115JB as being the capital receipt and not liable to tax in view of the proposition laid down in the case of Shree Balaji Alloys & Ors.
52 The issue raised in this additional ground has already been dealt w i t h a n d a d j u d i c a te d b y u s i n f a v o u r o f t h e a s se s s e e wh i l e d e c i d i n g t he ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 31 additional ground of appeal raised in ITA No. 366/Chd/2013. This g r o u n d i s a c c o r d i ng l y d e c i d e d i n f a vo u r o f t h e a s s e s s e e.
I n t h e r e s u l t , t h i s a p p e a l o f t h e a s s e ss e e i s p a r t l y a l l o w e d ITA No.1101/Chd/2016 (A.Y. 2011-12 -Revenue's appeal)
53. I n t h i s a p p e a l , th e R e v e n u e h a s t a k e n f o l l o w i n g g r o u n d s of appeal:
1. In the facts and circumstances of the case, the Ld. C1T(A) has erred in deleting the addition of Rs.64,29,094/- made by the AO on account of interest free advances without appreciating the judgment given by Hon'ble Punjab & Haryana High Court in the case of M/s. Abhishek Industries Ltd.
(2006) 286 ITR.
2. In the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.54,75,479/- made by the AO on account of disallowance of proportionate interest on investments made without appreciating the judgment given by Hon'ble Punjab & Haryana High Court in the case of M/s. Abhishek Industries Ltd.(2006) 286 ITR.
3. In the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.1,64,980/- made by the AO on account of disallowance of deduction claimed u/s 80IC of the Income Tax Act, 1961 in respect of misc. receipts.
4. It is prayed that the order of Ld. CIT(A) be set aside and that of the AO be restored.
5. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard and finally disposed off.
ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 32
54. G r o u n d N o . 1 : T hi s g r o u n d r e l a t e s to t h e a c t i o n of t h e C I T ( A ) i n d e l e t i n g t h e a d d i t io n of R s . 6 4 , 2 9 , 09 4 / - ma d e b y t h e A s s e s s i n g of f i c e r u / s 3 6 ( i ) ( i i i ) o f th e A c t o n a c c o u n t o f i n t e r e s t f r e e ad v a n c e s g i v e n b y the assessee. This issue has been discussed by the Ld. CIT(A) in para 7 . 2 o f t h e i mp u g n e d o r d e r , w h e r e in , h e h a s g i v e n a f i n d i n g t h a t t he a s s e s s e e w a s p o s s e s s e d o f o w n s u r p l u s f u n d s mo r e t h a n t h e i n t e r e s t f r ee a d v a n c e s g i v e n . He h a s o b s e r v e d t h at t h e a s s e s s e e h a d s h a r e c a p i t a l of R s . 1 0 . 1 0 c r o r e s a n d f r e e r e se r v e s o f R s . 4 3 . 0 6 c r or e s , w h e r e a s , t h e i n t e r e s t f re e a d v an c e s g i v e n t o t h e a s s e s s e e w e r e t o t h e t u n e o f R s . 1 2 . 2 8 c r o r e s . H e , t h e r ef o r e , r el i e d o n t h e d e c i s i o n of t h e H o n 'b l e J u r i s d i c t i o n a l H i g h C o u r t i n t h e c a s e o f 'CIT Vs. Kaspsons Associates', (2015) 381 ITR 204 (P&H) and further of the Hon'ble Supreme Court in the case of 'Hero Cycles Ltd., (2011) 379 ITR 347 (SC), and deleted the disallowance made by the Assessing officer on this issue.
55. After hearing the Ld. Representatives of the parties, we do not find any reason to interfere in the well justified order of the CIT(A) on this issue and, therefore, this issue is accordingly decided in favour of the assessee.
56. Ground No.2 : Vide ground No. 2, the Revenue has agitated the action of the CIT(A) in deleting the addition of Rs. 54,75,479/- made by the Assessing officer on account of disallowance of proportionate interest on investments made. This issue raised vide this ground is identical of the issue raised in ground No.1. The Ld. CIT(A) has discussed this issue in para 8 of the impugned order, wherein, he has observed that the assessee ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 33 was possessed of sufficient own funds to make the aforesaid investments. We do not find any infirmity in the order of the CIT(A) on this issue also.
57. Ground No. 3: The Revenue vide ground No.3 has agitated the a c t i o n o f t h e C I T (A ) i n d e l e t i n g t h e a d d i t i o n o f R s . 1 ,6 4 , 9 8 0 / - ma d e o n a c c o u n t of d i s a l l ow a n c e of d e d u c t io n c l a i me d u / s 8 0 I C o f t h e A c t in respects of Misc. receipts. This issue has been discussed by the Ld. C I T ( A ) i n p a r a 9 of t h e o r d e r . T h e As s e s s i n g o f f i c e r h el d t h a t t h e M i s c. r e c e i p t s of R s . 1 ,6 4 , 9 8 0 / - w a s n o t i n c o me e a r n e d f r om t h e business activity of the assessee and, hence, was not eligible for deduction u/s 8 0 I C o f t h e A c t . T h e L d . C I T ( A ) , h o w e v e r , h a s g i v en a f i n d i n g t h at t h e s e r e c e i p t s w e r e i n f a c t r e - i mb u r s e me n t o f t h e e x p e n d i t u r e c l a i me d b y t h e a s s e s s e e i n e a r l i e r ye a r s a n d , h e n c e , t h e s e w e r e r e l a t i n g t o t h e business activity of the assessee a n d t h u s t h e r e i m b u r s e me n t o f t h e s a me g o e s i n t o i n c r e a s e t h e i n c o me o f t h e a s s e s s e e which otherwise w a s e l i g i b l e f o r d ed u c t i o n u / s 8 0 I C o f t h e A c t.
I n v i e w o f t h i s , we d o n o t f i n d a n y i n f i r mi t y i n t h e o r d e r o f t h e C I T ( A ) . T h i s a p p ea l o f t he R e v e n u e i s t h e r ef o r e , d i s mi s s e d .
58. Ground Nos.4 & 5 are general in nature and do not require any s p e c i f i c a d j u d i c a t io n .
I n t h e r e s u l t , t h i s a p p e a l o f t h e R e v en u e i s d i s mi s s e d ITA No. 585/Chd/2013 (A.Y. 2008-09) - Revenue's appeal:-
59. I n t h i s a p p e a l , th e R e v e n u e h a s t a k e n f o l l o w i n g g r o u n d s of appeal:
ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 34 1 . In the facts and circumstances of the case, the Ld. C1T(A) has erred in deleting the penalty of Rs. 71,63,840/- imposed u/s 271(1)(c) of the Income-tax Act, 1961 in respect of addition of Rs. 2,10,76,322/- made on account of disallowance of deduction u/s 80IC on Transport subsidy, Deferred VAT liability and Interest income even thought the deduction was clearly not allowable.
2 . I t i s p r a y e d t h a t t h e o r d e r o f L d . C I T (A ) b e s e t a s i d e a n d t h a t o f t h e A s s e s s in g o f f i c e r restored.
3. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard and finally disposed of.
60. G r o u n d N o . 1 : T h i s a p p e a l of t h e R ev e n u e i s a g a i n s t t he a c t i o n of the CIT(A) i n d e l e t i n g t h e p e n a l t y o f R s . 7 1 , 6 3 , 8 4 0 / - ma d e u / s 2 7 1 ( 1 ) ( c ) of t h e A c t i n r e s p e c t of t h e a d d i t i o n of R s . 2 , 1 0 , 7 6 , 3 2 2 / - ma d e o n a c c o u n t o f d i s a l l o w a n c e of d e d u c t i o n u / s 8 0 I C o f t h e A c t o n T r a n s p o r t S u b s i d y, D e f e r r e d V A T L i ab i l i t y a n d i n t e r e s t i n c o me .
61. S o f a r a s t h e i s s u e r e l a t i n g t h e d e d uc t i o n u / s 8 0 I C of t h e A c t o n T r a n s p o r t s u b s i d y a n d D ef e r r e d V AT l i a b i l i t y i s c o n c e r n e d , t h e s a me h a s b e e n d e a l t w i th b y u s w h i l e d e c i d i n g t h e a p p e a l of t h e a s s e s s e e i n I T A N o . 3 6 6 / C h d/ 2 0 1 3 . We h a v e a l r e a d y h e l d t h e s a me a s c a p i t a l r e c e i p t a n d i n t h e a l t e r n a t i v e e l i g ib l e f o r c l a i mi n g o f d e d u c t i o n u / s 80IC of the Act, hence, the levy of penalty on this issue does not s u r v i v e . S o f a r a s t h e c l a i m r e g a r d i n g i n t e r e s t i n c o me i s c o n c e r n e d , t h e i s s u e h a s a l r e a d y b e e n r e s t o r e d b y u s t o t h e f i l e of t h e As s e s s i n g o f f i c er ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 35 o f a d j u d i c a t i o n af r e s h , h e n c e , a t t h i s s t a g e ; p e n a l t y i s n o t s u s t a i n a b l e on this issue also.
62 Ground Nos.2 & 3 : These grounds are general in nature and do n o t r e q u i r e a n y s p e c i f i c a d j u d i c a t i o n.
I n t h e r e s u l t , t h i s a p p e a l o f t h e R e v en u e i s p a r t l y a l l o w e d .
63. T o s u m u p a l l t h e a p p e a l s of t h e a ss e s s e e a r e R e ve n u e a r e p a rt l y a l l o w e d e x c e p t t h e a p p e a l o f t h e R e v e n u e f o r a s s e s s me n t ye a r 2 0 1 1 - 1 2 i n I T A N o . I T A N o . 1 1 0 1 / C / 2 0 1 6 w h i c h s t a n d s d i s mi s s e d .
Order pronounced in the Open Court on 05.11.2018 Sd/- Sd/-
बी.आर.आर, कुमार संजय गग
( B.R.R. KUMAR) (SANJAY GARG )
लेखा सद य/ Accountant Member या यक सद य/ Judicial Member
*दनांक/Date: 05.11. 2018
"आर.के."
आदे श क त ल प अ े षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आय
ु त/ CIT
4. आयकर आय
ु त (अपील)/ The CIT(A)
5. वभागीय त न#ध, आयकर अपील&य आ#धकरण, च)डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड, फाईल/ Guard File
आदे शानस
ु ार/ By order,
सहायक पंजीकार/ Assistant Registrar
ITA Nos..366/Chd/2013, 583 to 584 & 589 to 590/Chd/2014,585/Chd/2013 587/Chd/2014 & 1101/Chd/2016- H.M. Steels & Padmawati Steel Ltd., Sangrur 36