ACIT, Nashik V. M.D.Industries, Nashik

ITA 2454/PUN/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76115 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 12-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Depreciation; Earning of tax free income; Capital receipt
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.2454/PN/2012 A.Y. 2008-09 ADDL. CIT, RANGE-1, NASHIK APPELLANT VS. M.D. INDUSTRIES, F-82/H-28, MIDC, AMBAD, NASHIK 422010 PAN: AAEFM7391J RESPONDENT APPELLANT BY : SHRI P.L. P ATHADE RESPONDENT BY : SHRI C.H . NANIWADEKAR DATE OF HEARING: 20.01.2014 DATE OF ORDER : 31.01.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL)-I, [SHORT CI T(A)-I] NASHIK, DATED 12.09.2012 FOR A.Y. 2008-09 ON THE FO LLOWING GROUNDS. 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD.CIT(A)-!, NASHIK WAS JUSTIFIED IN DETE RMINING THE TOTAL INCOME AT RS.5,25,45,080/- AS PER COMPUTA TION OF INCOME WHERE AS THE TOTAL INCOME AS PER ROI WAS CLE ARLY SHOWN AT RS.5,26,38,351/-. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD.CIT(A)-I, NASHIK WAS JUSTIFIED IN DELE TING THE DISALLOWANCE OF RS.29,198/- MADE BY INVOKING PROVISIONS OF RULE 8D R.W.S 14A OF THE ACT. 2 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD.CIT(A)-I, NASHIK WAS JUSTIFIED IN T REATING THE INCOME OF RS.19,56,465/- ON ACCOUNT OF SALES TAX DE FERRAL SCHEME AS CAPITAL IN NATURE. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD.CIT(A)-I, NASHIK WAS JUSTIFIED IN HOLD ING THAT THE SUBSIDY GIVEN IN THE FORM OF SPECIAL CAPITAL IN CENTIVE SHALL NOT BE REDUCED FROM THE WDV OF THE ASSETS WHI LE COMPUTING THE DEPRECIATION OF THE ASSETS. 5. THE APPELLANT PRAYS THE ORDER OF THE ASSESSING OFFI CER MAY BE RESTORED. 6. THE APPELLANT PRAYS TO ADDUCE SUCH FURTHER EVIDENCE TO SUBSTANTIATE HIS CASE. 7. THE APPELLANT PRAYS LEAVE TO ADD, ALTER, CLARIFY, A MEND AND OR WITHDRAW ANY GROUNDS OF APPEAL AS AND WHEN T HE OCCASION DEMANDS. 2. THE ASSESSEE IS A FIRM ENGAGED IN MANUFACTURING OF AUTOMOBILE COMPONENTS. THE ASSESSEE FILED A RETURN OF INCOME DECLARING TOTAL INCOME OF 5,25,45,080/- ON 30.09.2008. THE ASSESSING OFFICER ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT 5,31,51,896/-. THE ADDITION OF 3,00,000/- ON A/C OF NON- MAINTENANCE OF QUANTITY DETAILS, 29,198/- U/S 14A AND 1,84,347/- ON A/C OF DEPRECIATION WERE MADE BY THE ASSESSING OFFICER. THE MATTER WAS CARRIED BY FIRST APPELLATE AUTHORITY. 3. THE FIRST GRIEVANCE BEFORE THE APPELLATE AUTHORI TY WAS THAT ASSESSING OFFICER HAS ERRED IN RETURN AS 5,26,38,351/- AGAINST THE RETURNED INCOME AS PER COMPUTATION OF INCOME SU BMITTED 5,25,45,080/- WHILE PASSING THE ASSESSMENT ORDER U/ S 143(3). IT WAS PRAYED TO CONSIDER RETURNED INCOME AS PER COMPU TATION OF INCOME. CONSIDERING THE FACTS OF THE CASE AND SUBM ISSIONS OF THE ASSESSEE, CIT(A) HAS OBSERVED THAT THE ASSESSING OF FICER HAS INCORRECTLY ADOPTED RETURN OF INCOME 5,26,38,351/- INSTEAD OF 5,25,45,080/-. THUS, THE ASSESSING OFFICER WAS RIG HTLY DIRECTED TO ADOPT THE RETURN OF INCOME AT 5,25,45,080/-. THIS REASONED 3 FACTUAL FINDING OF CIT(A) NEEDS NO INTERFERENCE FRO M OUR SIDE. WE UPHOLD THE SAME. 4. SECOND ISSUE IS WITH REGARD TO DISALLOWANCE OF 29,198/- MADE BY THE ASSESSING OFFICER BY APPLYING RULE 8D R .W.S. 14A. IN APPEAL, THE STAND OF THE ASSESSEE HAS BEEN THAT THE ASSESSEE HAS INVESTED 40,95,000/- IN MUTUAL FUNDS. THE SAME HAS BEEN MADE OUT OF NON-INTEREST BEARING FUNDS. THE ASSESS EE HAD EARNED 30,918/- AS DIVIDEND ON MUTUAL FUND WHICH WAS EXEMPTED U/S 10(35) OF THE ACT. THE ATTENTION WAS DRAWN TO THE BALANCE SHEET OF ASSESSEE FOR A.Y. 2008-09 INTER AL IA STATED THAT THE CAPITAL ACCOUNT OF THE PARTNERS IS SHOWING BALA NCE OF 10,55,18,632/- AS ON 31.03.2008 AND BALANCE OF 7,48,97,341/- AS ON 31.03.2007. FURTHER, THE PROFITS OF THE FIRM FOR THE F.Y. 2007-08 WAS 5.23 CRORE. THUS, THE INVESTMENT IN MUTUAL FUNDS WERE MADE FROM PROFITS GENERATED AND THE INTEREST F REE FUNDS AVAILABLE WITH THE FIRM. FURTHER, THE INVESTMENT I N MUTUAL FUNDS HAVE BEEN DONE IN AY 2008-09 WHEREAS BORROWED FUNDS WERE AVAILED IN THE PREVIOUS YEAR 2008-09. THE LOANS WE RE FOR ASSESSEE'S MANUFACTURING BUSINESS ACTIVITY. HENCE, THERE CAN BE NO NEXUS BETWEEN THE BORROWED FUNDS AND INVESTMENT IN MUTUAL FUNDS. 4.1 THE CIT(A) HAVING CONSIDERED THE FACTS OBSERVE D THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE FOR EARNI NG EXEMPT INCOME OF 30,918/- U/S.10(35) OF I.T. ACT AS THE ASSESSEE HA S SHOWN EXEMPTED INCOME. THE ASSESSING OFFICER HAS D ISALLOWED THE INTEREST OF 29,198/- APPLYING STRAIGHT JACKET FORMULA FOR DISALLOWING INTEREST AS THE ASSESSEE HAS EARNED EXE MPT INCOME. THE ASSESSEE HAS NOT UTILIZED ANY BORROWED MONEY TO INVEST IN THE MUTUAL FUNDS. THE ASSESSEE HAS POINTED OUT THA T IT HAS MADE INVESTMENT OUT OF PROFITS AS THE OPENING BALAN CE TO PARTNERS CAPITAL ACCOUNT WAS 7,48,97,341/- WHICH HAS BEEN INCREASED TO 10,55,18,632/- AT THE YEAR END DUE TO CURRENT 4 YEARS PROFIT. IT WAS ALSO POINTED OUT THAT THE CU RRENT YEAR'S PROFIT IS MUCH MORE THAN THE INVESTMENT MADE IN MUTUAL FUN DS. NO DISALLOWANCE COULD BE MADE U/S.14A OF INTEREST ON B ORROWED FUNDS. IN CASE OF MIXED FUNDS NOT POSSIBLE TO ASCE RTAIN WHETHER THE INVESTMENT IN TAX FREE BONDS IS OUT OF HIS OWN FUNDS, THE SOURCE OF INVESTMENT IN THE TAX FREE BONDS WAS IDEN TIFIED. THE ASSESSING OFFICER FAILED TO ESTABLISH ANY NEXUS BETWEEN THE BORROWED FUNDS AND THE INVESTMENTS IN THE TAX FREE BONDS. HE HAS NOT CONSIDERED THE CASH FLOW OF THE ASSESSEE. THEREFORE, THE APPORTIONMENT ON A PRO-RATA BASIS WAS NOT JUSTIFIED IN THE ABSENCE OF ANYTHING BROUGHT BY THE ASSESSING OFFICE R ON RECORD TO REBUT THE ASSESSEE'S STAND THAT THE INVESTMENT IN T HE TAX FREE BONDS HAD BEEN MADE OUT OF THE FUNDS OF OWN FUNDS. IN THE CASE THE FUNDS WERE AVAILABLE, BOTH INTEREST FREE AND IN TEREST BEARING, THEN A PRESUMPTION WOULD ARISE THAT INTEREST FREE F UNDS HAVE BEEN USED FOR INVESTMENT AND NO DISALLOWANCE OF INT EREST COULD BE MADE U/S.14A. 4.2 IN VIEW OF ABOVE LEGAL FACTUAL DISCUSSION, T HE CIT(A) HAS RIGHTLY HELD THAT THE ASSESSEE HAS NOT UTILIZED THE BORROWED MONEY TO INVESTMENT IN MUTUAL FUNDS, ACCORDINGLY, T HE ADDITION OF 29,198/- MADE BY THE ASSESSING OFFICER BY APPLYING RULE 8D R.W.S. 14A WAS HELD NOT JUSTIFIED. THIS REASONED F INDING OF CIT(A) NEED NO INTERFERENCE FROM OUR SIDE WHEREBY CIT(A) H AS GRANTED RELIEF TO THE ASSESSEE ON THIS ACCOUNT. WE UPHOLD THE SAME. 5. NEXT ISSUE IS WITH REGARD TO THE TREATMENT OF IN COME OF 19,56,465/- ON ACCOUNT OF SALES TAX DEFERRAL CLAIME D AS CAPITAL IN NATURE. 5.1 IN APPEAL BEFORE CIT(A), IT WAS ARGUED ON BEHAL F OF THE ASSESSEE AND VIDE LETTER DATED 07.09.2012 CONTENDED AS UNDER: 'THE APPELLANT WAS ENTITLED TO AVAIL SALES TAX INCE NTIVE BY WAY OF 'SALES TAX DEFERRAL' BENEFIT AS PER 1983 PAC KAGE 5 SCHEME OF INCENTIVE OF GOVERNMENT OF MAHARASHTRA. T HE APPELLANT HAD LIABILITY OF RS.39,62,775/- ON ACCOUN T OF DEFERRED SALES TAX AS ON 31/03/2007 WHICH IS SHOWN UNDER THE HEADING 'SALES TAX DEFERRAL LOAN'. AS PER THE 4 TH PROVISO TO SECTION 38(4) OF THE BOMBAY SALES TAX ACT, 1959 READ WITH RULE 3 ID OF THE BOMBAY SALES TAX RULES, 1959, THE APPELLANT HAD AN OPTION TO PREPAY THE DEFERRED SALE S TAXES AT NET PRESENT VALUE. THE PROVISO ALSO STATED THAT SUCH PREPAYMENT WOULD AMOUNT TO DISCHARGE OF DEFERRED TA X LIABILITY. THUS, IT IS SPECIFICALLY MENTIONED THAT DEFERRED TAX IS FULLY PAID AND NOT REMITTED OR WAIVED. THE APPEL LANT HAS EXERCISED THE OPTION AND HAD REPAID THE DEFERRED TA X LIABILITY AT NET PRESENT VALUE (NPV) OF RS.20,06,310/- (COPY OF CHALLANS ENCLOSED AT PAGE NOS. 63 TO 76). THE DIFFE RENCE OF RS.19,56,465/- BETWEEN THE LIABILITY AMOUNT AND THE PAYMENT AMOUNT WAS ERRONEOUSLY TREATED BY THE APPEL LANT AS REVENUE RECEIPT. 5.2 IN APPEAL, THE CIT(A) HAVING CONSIDERED THE CON TENTIONS OF THE ASSESSEE IN THIS REGARD AND DECIDED THE ISSUE I N FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER: 8.6 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE SUBMISSIONS OF THE APPELLANT. IT IS NOTICED THA T THERE IS A SALES TAX DEFERRAL LOAN OF RS.39,62,775/-OUTSTANDIN G IN THE BALANCE SHEET AS ON 31/03/2007. THEREFORE, FOR THE PREVIOUS YEAR 2007-08, THE SAID AMOUNT IS THE OPENI NG BALANCE. THE ASSESSEE HAS AVAILED THE BENEFITS UNDE R THE PACKAGE SCHEME OF INCENTIVE OF GOVT. OF MAHARASHTRA OF 1988 AND AS PER THE SAID SCHEME, THE AFORESAID LOAN WAS REQUIRED TO BE REPAID IN FIVE EQUAL INSTALLMENTS AF TER THE END OF 10 YEARS. AS MAY BE SEEN, THE ASSESSEE FIRST AVA ILED OF THE BENEFITS DURING THE FINANCIAL YEAR 1999-2000, THERE FORE, REPAYMENT OF THE LOAN WAS REQUIRED TO COMMENCE DURI NG THE FINANCIAL YEAR 2010-11. AS PER THE 4 TH PROVISO TO SECTION 38(4) OF THE BOMBAY SALES TAX ACT, 1959 READ WITH R ULE 3ID OF THE BOMBAY SALES TAX RULES, 1959, THE APPELLANT HAD AN OPTION TO PREPAY THE DEFERRED SALES TAXES AT NET PR ESENT VALUE. THE PROVISO ALSO STATED THAT SUCH PREPAYMENT WOULD AMOUNT TO DISCHARGE OF DEFERRED TAX LIABILITY. IT W AS SPECIFICALLY MENTIONED THAT DEFERRED TAX WAS FULLY PAID AND NOT REMITTED OR WAIVED. THE APPELLANT EXERCISED THE OPTION AND HAD REPAID THE DEFERRED TAX LIABILITY AT NET PR ESENT VALUE (NPV) OF RS.20,06,310/-, IN RESPECT OF THE LOANS AV AILED DURING F.YS. 1999-2000 TO 2002-03. IN THE ACCOUNTIN G PRACTICE THIS PREMATURED REPAYMENT OF DEFERRAL LOAN TENTAMOUNTS TO DISCHARGE OF A FUTURE LIABILITY. AS PER THE BOMBAY SALES TAX ACT, 1959 AND THE RULES THERE UNDE R THE 6 MECHANISM OF CALCULATING THE NET PRESENT VALUE (NPV ) IS GIVEN. THE APPELLANT HAS CONTENDED THAT THERE IS NO DISPUTE WITH REGARD TO THE PROCEDURE FOR DETERMINING THE N. P.V. THE N.P.V. IS NOTHING BUT THE PRESENT VALUE OF AN AMOUN T CALCULATED BY DETERMINING THE FUTURE AMOUNTS AFTER ACCOUNTING THE TIME DIFFERENCE. THEREFORE, THE APPE LLANT HAS CORRECTLY POINTED OUT THAT THE N.P.V. REPRESENTS TH E EQUIVALENT VALUE OF LIABILITY. IN THE PRESENT CASE, THE N.P.V. OF THE OUTSTANDING LOAN OF RS.39,62,775/- AS ON 01/04/2007 WAS WORKED OUT AT RS.20,06,309/- AND REP AID BY THE ASSESSEE TO THE GOVT. OF MAHARASHTRA. THE SA ME IS DEBITED TO THE SALES TAX DEFERRAL LOAN ACCOUNT AND IS SUPPORTED BY THE CHALLANS. THE DIFFERENCE OF RS.39, 62,775/- AND RS.20,06,309/- = RS.19,56,466/- PARTAKES THE CHARACTER OF A CAPITAL RECEIPT. THEREFORE, WHAT THE ASSESSEE WAS REQUIRED TO REPAY AFTER 10 YEARS IN FIVE EQUAL ANNUAL INSTALLMENTS, THE SAME WAS REPAID BY THE ASSESSEE A S N.P.V. IS FUTURE VALUE OF THE SUM OF RS.39,62,775/-. THERE FORE, THERE IS NO MATERIAL TO SHOW THAT THERE HAS BEEN AN Y REMISSION OR CESSATION OF LIABILITY BY THE GOVT. OF MAHARASHTRA. HENCE, THE PROVISIONS OF SECTION 41(1) DO NOT APPLY ON THE FACTS OF THIS CASE. THIS VIEW IS FULLY SUPPORTED BY THE SPECIAL BENCH DECISION DATED 10/11/2010 OF H ON'BLE ITAT E BENCH, MUMBAI IN I.T.A. NO.2944/MUM/2007 REPORTED IN (2010) 42 SOT 457 (MUM.) (S.B.). ON THE SE FACTS AND THE CIRCUMSTANCES AND THE DECISION OF LAW, THE DIFFERENCE OF RS.19,56,465/- BETWEEN THE LIABILITY AMOUNT AND THE PAID AMOUNT WAS A CAPITAL RECEIPT WHICH WAS ERRONEOUSLY SHOWN BY THE ASSESSEE AS A REVENUE RECE IPT. HOWEVER, DURING THE ASSESSMENT PROCEEDINGS, THE ASS ESSEE VIDE LETTER DATED 23/12/2010 (SUPRA) REQUESTED THE AO NOT TO TREAT THE SAID RECEIPT AS REVENUE RECEIPT, BUT T HE ID. AO DID NOT CONSIDER THIS CLAIM AT ALL. IN FACT, THE AS SESSMENT ORDER IS SILENT ON THIS ISSUE. 8.6.1 IT IS WELL SETTLED PRINCIPLE OF LAW FOR DETERMINING TAXABLE INCOME UNDER THE INCOME TAX ACT THAT IF THE TAXABLE INCOME DETERMINED BY THE AO IS NOT IN ACCORDANCE WI TH THE SAID PRINCIPLE IT IS OPEN TO THE ASSESSEE TO CONTEN D THE SAME BEFORE THE HIGHER AUTHORITIES TO FOLLOW THE CORRECT PRINCIPLE OF LAW TO DETERMINE THE ACTUAL ASSESSABLE INCOME OF THE ASSESSEE. 8.6.2 THE HON'BLE ITAT IN THE CASE OF SHRI SUSHIL KUMAR DAS VS. ITO (2011) 5 TAX CORP (A.T.) 25879 HA S HELD THAT AN ASSESSEE IS LIABLE TO PAY TAX ONLY UPON THE TAXABLE INCOME TO BE DETERMINED IN ACCORDANCE WITH THE LEGA L PRINCIPLES AND ASSESSED LAWFULLY. THE HON'BLE TRIBU NAL THUS HAS HELD THAT 'IN DOING SO, THE ASSESSING OFFICER C ANNOT 7 ASSESS THE INCOME OF THE ASSESSEE AN AMOUNT WHICH I S NOT TAXABLE AS PER LAW THOUGH SHOWN BY THE ASSESSEE IN THE RETURN. IT IS ALWAYS OPEN TO THE ASSESSEE TO TAKE A PLEA THAT THE TAXABLE INCOME THOUGH SHOWN AS INCOME IS NOT TA XABLE UNDER LAW BEFORE THE HIGHER AUTHORITIES. THE CIT(A) WITHOUT GOING INTO THE MERIT OF THE CASE HELD THAT THE CIT( A) IS NOT HAVING ANY POWER TO REDUCE THE TAXABLE INCOME OF TH E ASSESSEE AT THE APPELLATE STAGE, WHICH IS NOT CORRE CT. IN THE CASE OF CIT VS. CHARANJIT JAWA [ 142 TAX MAN 101 P & H ] RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTS THE VIEWS THAT THE INTEREST RECEIVED AS A RESULT OF THE ORDER OF THE HON'BLE HIGH COURT WAS NOT A STATU TORY INTEREST AND WAS IN THE FORM OF DAMAGE/COMPENSATION AND THE SAME WAS NOT LIABLE TO AX. IN VIEW OF THE ABOVE , AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE ARID ALSO ON PERUSAL OF THE CASE LAWS RELI ED UPON BY BOTH THE PARTIES WE HOLD THAT THE INTEREST OF RS.2, 53,730/- RECEIVED BY THE ASSESSEE AS PER THE ORDER OF THE HO N'BLE HIGH COURT WAS NOT TAXABLE AND THE SAME IS A CAPITA L RECEIPT. WE ALSO TAKE SUPPORT FROM THE CIRCULAR ISS UED BY THE CBDT VIDE CIRCULAR NO.14 (XL-35) DATED 11/04/19 55 WHICH HAS DIRECTED THE OFFICERS NOT TO TAKE ADVANTA GE OF THE IGNORANCE OF THE ASSESSEE. THE APPELLATE AUTHORITIE S HAS POWERS TO ADMIT POINTS OF LAW AND ADMIT CLAIM FOR EXEMPTION BASED ON MATERIALS ON RECORD AS PER THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F NATIONAL THERMAL POWER CO. LTD. VS. CIT (1998) REPO RTED IN 229 ITR 383 (SC). IN VIEW OF THE ABOVE, WE DIRECT T HE ASSESSING OFFICER TREAT THE AFORESAID RECEIPT OF RS.2,53,730/- AS CAPITAL RECEIPT WHICH WAS RECEIVED BY HIM AS PER THE ORDER OF THE HON'BLE HIGH COURT'. SIMILA R VIEW HAS BEEN TAKEN BY THE JURISDICTIONAL TRIBUNAL IN TH E CASE OF MRS. MEENA BIPIN BATAVIA IN I.T.A. NO.LL39/PN/2008 VIDE THEIR ORDER DATED 31/05/2010 IN WHICH THE HON'BLE TRIBUNAL HAS HELD THAT IN A CASE WHERE EXCESS PROFI T HAS BEEN SHOWN BY AN ASSESSEE IN THE RETURN OF INCOME A ND SUCH PROFIT IS OTHERWISE NOT TAXABLE IN ACCORDANCE WITH THE PRINCIPLES OF LAW, DEDUCTION IN RESPECT OF SUCH EXC ESS PROFIT WAS HELD TO BE ALLOWABLE IN THE APPELLATE PR OCEEDINGS. THEREFORE, IN THAT CASE THE HON'BLE TRIBUNAL ALLOWE D REDUCTION FROM THE RETURN OF INCOME BY RS.1,64,410/ - AS CLAIMED BY THE ASSESSEE IN THAT CASE. 8.6.3 IT IS SETTLED LAW THAT MERELY BECAUSE THE ASSESSEE UNDER WRONG UNDERSTANDING OF LAW OFFERS AMOUNT TO T AX, THE SAME WILL NOT BE A REASON, TO TAX THE SAID AMOUNT U NLESS IT IS LAWFUL TO TAX THE SAME. THIS VIEW IS FORTIFIED I N THE FOLLOWING JUDICIAL CITATIONS:- 73 TAXMAN 437(CAL); 130 TAXMAN 500 (CAL.) AND 262 ITR 638 (CAL.). THE APPEL LANT 8 HAS PLACED RELIANCE ON CBDT CIRCULAR NO.496 DATED 25/09/1987 AND 674 DATED 29/12/1993 WHEREIN IT IS H ELD THAT DEFERRAL SALES-TAX UNDER THE DEFERRAL SCHEME I S REQUIRED TO BE TREATED AS ACTUALLY PAID SO THAT STA TUTORY LIABILITY WILL BE TAKEN TO HAVE BEEN DISCHARGED FOR THE PURPOSE OF SEC. 43B. AS PER BOARD'S CIRCULAR CONVER SION OF SALES-TAX LIABILITY INTO LOAN SHALL BE TAKEN TO BE THE DISCHARGE OF LIABILITY FOR SALES-TAX. THOUGH THE SA LES TAX COLLECTED FROM CUSTOMERS WAS A TRADING RECEIPT, THE SAME WAS TAKEN TO HAVE BEEN PAID TO THE GOVERNMENT UNDER THE DEFERRAL SCHEME. AFTER SUCH DEEMED PAYMENT, THE UNP AID SALES TAX IS BY WAY OF DEFERRAL LOAN AND NOT A TRAD ING RECEIPT AND HENCE THE REMISSION OF LOAN CANNOT BE TAXED AS INCOME OF THE ASSESSEE. THE APPELLANT HAS PLACED RELIANCE ON THE FOLLOWING JUDICIAL DECISIONS:- SUZLER INDIA LTD. VS . JCIT(2010) (8 TAXMANN.COM 36) (SB); CIT VS. M/S PRUTHVI BROKER S & SHAREHOLDERS PVT. LTD. (I.T.A. NO.3908 OF 2010), PR ADEEP KUMAR HARLAKA VS. ACIT (2012) 143 TTJ (MUMBAI) 446; PT SHEO PRASAD SHARMA VS. CIT (1967) 66 ITR 647 (ALL.) AND CALIBRE PERSONNEL SERVICES PVT. LTD. VS. ACIT ( I.T.A. NO.8188/MUM/2010 AND I.T.A. NO.34Q7/MUM/2011. 8.6.4 IN VIEW OF THE ABOVE FACTS AND THE CIRCUMSTANCES AND THE POSITION OF LAW, IT IS HELD THAT THE IMPUGN ED AMOUNT OF RS.19,56,465/- IS NOT AN INCOME OF THE ASSESSEE AND WAS ERRONEOUSLY SHOWN BY IT IN THE RETURN OF INCOME. TH EREFORE, THE SAME IS DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED. 5.3 THIS REASONED FINDINGS OF THE CIT(A) NEED NO INTERFERENCE FROM OUR SIDE WHO HAS DELETED THE IMPUGNED ADDITION OF 19,56,465/- BY HOLDING THAT THE SAME IS NOT THE IN COME OF THE ASSESSEE FOR THE REASONS DISCUSSED ABOVE AND MERE S O BECAUSE WAS ERRONEOUSLY SHOWN IN ITS RETURN OF INCOME BY TH E ASSESSEE, THEREFORE, THE SAME WAS RIGHTLY DELETED BY THE CIT( A). WE UPHOLD THE SAME. 6. NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF DEP RECIATION AT 1,84,347/- BY REDUCING THE AMOUNT OF SPECIAL CAPIT AL INCENTIVE RECEIVED BY THE ASSESSEE FROM THE GOVT. OF MAHARASH TRA. THE MATTER WAS CARRIED BEFORE THE CIT(A) WHO HAS RIGHTL Y GRANTED THE RELIEF TO THE ASSESSEE BY OBSERVING THAT THE SUBSID Y WAS NOT GIVEN 9 FOR ANY SPECIFIC PURPOSE OF MEETING ANY PORTION OF COST OF THE ASSETS, THEREFORE, COULD NOT BE REDUCED FROM W.D.V. SIMILAR VIEW WAS TAKEN BY ITAT IN ASSESSEES OWN CASE IN ITA NO. 1427 AND 1428/PN/2007 FOR A.Y. 2002-03 AND 2003-04. ACCOR DINGLY, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF DEPRECIATION OF 1,84,347/-. THE SAME NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 31 ST OF JANUARY, 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 31 ST JANUARY, 2014 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-I, NASHIK 4) THE CIT-I, NASHIK 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE