Mahindra & Mahindra Ltd. Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that Industrial Promotion Subsidy received under Package Incentive Scheme 2007 declared by the Government of Maharashtra is capital receipt and hence not taxable.
Facts-
During the course of assessment proceedings, it was observed that the assessee is not deducting the TDS on certain year end provisions as the assessee is of the view that the liability of deducting TDS arises in subsequent year when the bill of the party is booked. Accordingly, the assessee was asked to show cause as to why due to non-deduction of TDS on year end provisions, same are not to be disallowed as per provisions of section 40(a)(ia) of the Income Tax Act.
AO vide draft assessment order didn’t accept the submissions of the assessee and held that expenses are liable to TDS. AO held that the submission of the assessee that it is not crediting the party account during the year, which would have made the payments liable to TDS, is not tenable on the grounds that once the assessee is debiting its P& L account, it automatically is crediting the party account based on matching principle. Accordingly, AO disallowed Rs. 32,75,21,640/- u/s. 40(a)(ia) of the Income Tax Act for non-deduction of tax at source.
Further, the assessee has claimed Rs.12,374.18 lakh being Industrial Promotion Subsidy received under Package Scheme of Incentives, 2007 announced by Government of Maharashtra as capital receipt not chargeable to tax. The AO vide draft assessment order following the approach adopted in assessment year 2013–14 disallowed the claim stating that the Industrial Promotion Subsidy as revenue in nature and cannot be construed as capital receipt.
Conclusion-
We further find that in assessment years 2011-12 to 2013-14, the coordinate bench of the Tribunal, decided this issue in favour of assessee by following the order passed in assessee’s own case for assessment year2009–10. Thus, respectfully following the judicial precedents rendered in assessee’s own case cited supra, we direct the AO to delete the disallowance made under section 40(a)(ia) of the Act.
We find that the coordinate bench of Tribunal in assessee’s own case cited supra, vide order dated 19/06/2020, for assessment years 2011–12 to 2013–14, treated the Industrial Promotion Subsidy received under Package Incentive Scheme 2007 declared by the Government of Maharashtra in respect of setting up of industry in certain backward areas (Chakan) as capital receipt.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeal has been filed by the assessee challenging the impugned final assessment order dated 29/10/2018, passed under section 143(3) r/w section 144C(13) of the Income Tax Act, 1961 (―the Act”) for the assessment year 2014–15, pursuant to the directions dated 18/09/2018 issued by the learned Dispute Resolution Panel (DRP)–III, Mumbai (“learned DRP”) under section 144C(5) of the Act.
2. In its appeal, the assessee has raised following grounds:–
“1. Expenditure debited to Profit and loss account Rs. 18.81.14.927/–
On the facts and in the circumstances of the case and in law the Appellant contends that the learned ACIT erred in proposing and the DRP erred in confirming disallowance of the following sums treating the same as capital expenditure:
