RSWM Ltd. Khari Gram Vs DCIT (ITAT Delhi)
Undisclosed Income Addition Overturned Due to Unverified Documents, Education Cess Not Allowed as Deductible Business Expense, FPS/FMS Subsidies Treated as Capital Receipts, Not Taxable Income, TUFS and RIPS Interest Subsidies Exempt from Taxation
ITAT Delhi ruled that uncompleted project estimates seized during search cannot form the sole basis for addition under Section 69. The decision emphasizes the need for corroborative evidence before claiming undisclosed income. It further held that education cess is an additional surcharge and cannot be claimed as a business expense under Section 37(1). Tribunal confirmed that export subsidies under the Focus Product Scheme and Focus Market Scheme are capital receipts, excludable from book profit under Section 115JB.
Income Tax Appellate Tribunal (ITAT) Delhi delivered a comprehensive judgment in the appeals filed by RSWM Ltd. against the orders of the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) (CIT(A)) for Assessment Years 2014-15 and 2015-16. The case involved multiple issues including alleged undisclosed cash payments, claim of education cess as business expenditure, and treatment of various export and interest subsidies under the Income Tax Act, 1961.
1. Addition under Section 69 – Alleged Undisclosed Cash Payment for Land Acquisition
During a search conducted on the laptop of an employee, Mr. Vineet Agarwal, the AO seized an incomplete working estimating costs for acquisition and development of certain land in the name of RSWM Ltd. The AO treated the unverified figures, specifically Rs. 1.52 crore, as cash payments made for land acquisition and added the same under Section 69 of the Income Tax Act.
The ITAT noted that:
