EVEREST INDUSTRIES LTD. ,NOIDA vs. DY CIT CIRCLE- 1 , THANE
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “E” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI PAVAN KUMAR GADALE
PER OM PRAKASH KANT, AM PER OM PRAKASH KANT, AM
These cross appeals by the Revenue and the assessee These cross appeals by the Revenue and the assessee These cross appeals by the Revenue and the assessee are directed against order dated 03.12.2019 passed by the Ld. directed against order dated 03.12.2019 passed by the directed against order dated 03.12.2019 passed by the Commissioner of Income Commissioner of Income-tax (Appeals)-1, Thane [in short ‘the Ld. 1, Thane [in short ‘the Ld. CIT(A)’] for assessment year 2006 CIT(A)’] for assessment year 2006-07.
The grounds raised by the Revenue are reproduced as under: The grounds raised by the Revenue are reproduced as under: The grounds raised by the Revenue are reproduced as under:
(i) Whether the CIT (A) Whether the CIT (A) erred on the facts and in the erred on the facts and in the circumstances of the case and in law, in deleting an circumstances of the case and in law, in deleting an circumstances of the case and in law, in deleting an amount of Rs. 4,38,56,713/ amount of Rs. 4,38,56,713/- being disallowance of claim being disallowance of claim of sales tax incentive. of sales tax incentive. (ii) Whether the CIT (A) erred on the facts and in the Whether the CIT (A) erred on the facts and in the Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, circumstances of the case and in law, in holding that Sales in holding that Sales Tax was embedded in the Sales prices charged by the Tax was embedded in the Sales prices charged by the Tax was embedded in the Sales prices charged by the assessee and the same was in the nature of capital assessee and the same was in the nature of capital assessee and the same was in the nature of capital receipt. The Ld. CIT (A) ignored the fact that the assessee The Ld. CIT (A) ignored the fact that the assessee The Ld. CIT (A) ignored the fact that the assessee was legally required to collect Sales Tax on the Sales was legally required to collect Sales Tax on the Sales was legally required to collect Sales Tax on the Sales made, yet it had made, yet it had worked out the notional Sales Tax so worked out the notional Sales Tax so collected and had claimed the same as capital receipts. collected and had claimed the same as capital receipts. collected and had claimed the same as capital receipts. (iii) Whether the CIT (A) erred on the facts and in the Whether the CIT (A) erred on the facts and in the Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in relying on the circumstances of the case and in law, in relying on the circumstances of the case and in law, in relying on the decision of ITAT, Mumbai and the decision of Bomba decision of ITAT, Mumbai and the decision of Bomba decision of ITAT, Mumbai and the decision of Bombay High Court (ITA No. 1299 of 2008)in the case of Reliance High Court (ITA No. 1299 of 2008)in the case of Reliance High Court (ITA No. 1299 of 2008)in the case of Reliance Industries Limited, even though subsequent to the Industries Limited, even though subsequent to the Industries Limited, even though subsequent to the Departmental appeal against the Order of High Court, the Departmental appeal against the Order of High Court, the Departmental appeal against the Order of High Court, the issue has been remitted back to the Bombay High Court to issue has been remitted back to the Bombay High Court to issue has been remitted back to the Bombay High Court to decide afresh and the same is sti decide afresh and the same is still pending for ll pending for adiudication. adiudication. 2. Whether on the facts and in the circumstance of the 2. Whether on the facts and in the circumstance of the 2. Whether on the facts and in the circumstance of the case and law, the Hon'ble Tribunal was correct in case and law, the Hon'ble Tribunal was correct in case and law, the Hon'ble Tribunal was correct in disallowing addition of Rs. 16,03,927/ disallowing addition of Rs. 16,03,927/- on account of on account of lease rent liability without appreciating the fact that lease rent liability without appreciating the fact that lease rent liability without appreciating the fact that
Everest Industries Ltd. 3 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
liability is contingent/disputed and thus not accrued in the contingent/disputed and thus not accrued in the contingent/disputed and thus not accrued in the A.Y. 2006-07? 07? 3.1 Whether on the facts and in the circumstances of the 3.1 Whether on the facts and in the circumstances of the 3.1 Whether on the facts and in the circumstances of the case and in law, the tribunal was justified in allowing the case and in law, the tribunal was justified in allowing the case and in law, the tribunal was justified in allowing the deduction u/s 54G without appreciating the fact that the deduction u/s 54G without appreciating the fact that the deduction u/s 54G without appreciating the fact that the industrial undertak industrial undertaking was shifted in the F.Y. Peg us a Peg us a say 894-95 and deduction is claimed in FY. 2006 95 and deduction is claimed in FY. 2006 95 and deduction is claimed in FY. 2006-07 which is beyond the which is beyond the prescribed time limit of one year rescribed time limit of one year before or three year after the date of before or three year after the date of transfer of capital transfer of capital asset as per the provision of section 50G and it can ne asset as per the provision of section 50G and it can ne asset as per the provision of section 50G and it can neither be considered as effected in the course of or in be considered as effected in the course of or in be considered as effected in the course of or in consequences of shifting of such industrial undertaking? consequences of shifting of such industrial undertaking? consequences of shifting of such industrial undertaking? 3.2 Whether on the facts and in the circumstances of the 3.2 Whether on the facts and in the circumstances of the 3.2 Whether on the facts and in the circumstances of the case and in law, the tribunal was justified in allowing the case and in law, the tribunal was justified in allowing the case and in law, the tribunal was justified in allowing the deduction u/s 54G for A.Y. deduction u/s 54G for A.Y. 2006-07 without appreciating 07 without appreciating the fact that the same has already been claimed and the fact that the same has already been claimed and the fact that the same has already been claimed and allowed in the earlier years? allowed in the earlier years? 4.1 Whether the CIT (A) erred on the facts and in the 4.1 Whether the CIT (A) erred on the facts and in the 4.1 Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO circumstances of the case and in law, in directing the AO circumstances of the case and in law, in directing the AO to exclude Sales Tax incentive, w to exclude Sales Tax incentive, while computing the book hile computing the book profits u/s 115]B of the Act, without appreciating that they profits u/s 115]B of the Act, without appreciating that they profits u/s 115]B of the Act, without appreciating that they have not been specifically excluded in Explanation 1 to have not been specifically excluded in Explanation 1 to have not been specifically excluded in Explanation 1 to section 115]B of the Act. section 115]B of the Act. 4.2 Whether the CIT (A) erred on the facts and in the 4.2 Whether the CIT (A) erred on the facts and in the 4.2 Whether the CIT (A) erred on the facts and in the circumstances of the case and in la circumstances of the case and in law, in directing the A to w, in directing the A to exclude Sales Tax incentive, while computing the book exclude Sales Tax incentive, while computing the book exclude Sales Tax incentive, while computing the book profits u/s 115JB of the Act despite the fact that no profits u/s 115JB of the Act despite the fact that no profits u/s 115JB of the Act despite the fact that no adjustment other than the ones mentioned in Sec.115JB is adjustment other than the ones mentioned in Sec.115JB is adjustment other than the ones mentioned in Sec.115JB is permissible as held by the Supreme Court in the case of permissible as held by the Supreme Court in the case of permissible as held by the Supreme Court in the case of Apollo. 2.1 The grounds raised by the assessee are reproduced as The grounds raised by the assessee are reproduced as The grounds raised by the assessee are reproduced as under:
1(a). That on the facts and in the circumstances of the That on the facts and in the circumstances of the That on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) (here case, the Ld. Commissioner of Income Tax (Appeals) (here case, the Ld. Commissioner of Income Tax (Appeals) (here- in-after referred to as 'Ld. CIT(Appeals) was not justified & after referred to as 'Ld. CIT(Appeals) was not justified & after referred to as 'Ld. CIT(Appeals) was not justified & rather grossly erre rather grossly erred in confirming the decision of the A.O. d in confirming the decision of the A.O. that there has been a sale of reserved land of 22,492.50 that there has been a sale of reserved land of 22,492.50 that there has been a sale of reserved land of 22,492.50
Everest Industries Ltd. 4 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
sq. meters instead of sale of TDR of 1,91,106 sq. ft. during sq. meters instead of sale of TDR of 1,91,106 sq. ft. during sq. meters instead of sale of TDR of 1,91,106 sq. ft. during the previous year under consideration. the previous year under consideration. 1(b) That on the facts and in the circumstances of the cas That on the facts and in the circumstances of the case, That on the facts and in the circumstances of the cas the Ld. CIT(Appeals) was not justified &rather grossly the Ld. CIT(Appeals) was not justified &rather grossly the Ld. CIT(Appeals) was not justified &rather grossly erred in confirming the action of the A.O.in not holding that erred in confirming the action of the A.O.in not holding that erred in confirming the action of the A.O.in not holding that the sale consideration received in respect of TDR is not the sale consideration received in respect of TDR is not the sale consideration received in respect of TDR is not liable to capital gain tax as there is no cost of acquisition liable to capital gain tax as there is no cost of acquisition liable to capital gain tax as there is no cost of acquisition on the above TDR. on the above TDR. 2(a). That on the facts and in the circumstances of the case That on the facts and in the circumstances of the case That on the facts and in the circumstances of the case and without prejudice to Ground No. 1(a) and 1(b) taken and without prejudice to Ground No. 1(a) and 1(b) taken and without prejudice to Ground No. 1(a) and 1(b) taken here-in-above, the Ld. CIT(Appeals) was not justified & above, the Ld. CIT(Appeals) was not justified & above, the Ld. CIT(Appeals) was not justified & grossly erred in confirming the action of the A.O. in grossly erred in confirming the action of the A.O. in grossly erred in confirming the action of the A.O. in reducing the Fair Market reducing the Fair Market Value of Land as on 01 Value of Land as on 01-04-1981 without appreciating the fact that the said valuation was without appreciating the fact that the said valuation was without appreciating the fact that the said valuation was duly supported by independent valuation report. duly supported by independent valuation report. 2(b). That on the facts and in the circumstances of the case That on the facts and in the circumstances of the case That on the facts and in the circumstances of the case and without prejudice to Ground No. 1(a) and 1(b) taken and without prejudice to Ground No. 1(a) and 1(b) taken and without prejudice to Ground No. 1(a) and 1(b) taken here-in-above, the Ld. CIT(Appeals) was not justified above, the Ld. CIT(Appeals) was not justified above, the Ld. CIT(Appeals) was not justified &rather grossly erred ipn confirming the action of the A.O. &rather grossly erred ipn confirming the action of the A.O. &rather grossly erred ipn confirming the action of the A.O. in adopting the Fair Market Value of Land as on 01 in adopting the Fair Market Value of Land as on 01 in adopting the Fair Market Value of Land as on 01-04- 1981 as determined by the Departmental Valuer in earlier 1981 as determined by the Departmental Valuer in earlier 1981 as determined by the Departmental Valuer in earlier assessment years in computing the assessment years in computing the Long Term Capital Long Term Capital Gain for the year under consideration Gain for the year under consideration without appreciating without appreciating the fact that said valuation is bad in law. the fact that said valuation is bad in law. 3. That on the facts and in the circumstances of the case That on the facts and in the circumstances of the case That on the facts and in the circumstances of the case and without prejudice to Ground No. 1(a) and 1(b) taken and without prejudice to Ground No. 1(a) and 1(b) taken and without prejudice to Ground No. 1(a) and 1(b) taken here-in-above, the L above, the Ld. CIT(Appeals) was not justified & d. CIT(Appeals) was not justified & rather grossly erred in confirming the action of the A.O. in rather grossly erred in confirming the action of the A.O. in rather grossly erred in confirming the action of the A.O. in applying the provisions of section 50C of the Income Tax applying the provisions of section 50C of the Income Tax applying the provisions of section 50C of the Income Tax Act, 1961 in computing the capital gains Act, 1961 in computing the capital gains without without That on the facts and in the circumstances of the cas the facts and in the circumstances of the case and without e and without prejudice to Ground No. 1(a) and 1(b) taken here prejudice to Ground No. 1(a) and 1(b) taken here- -in-above, the appellant shall be entitled to claim proportionate the appellant shall be entitled to claim proportionate the appellant shall be entitled to claim proportionate indexed cost of improvement of Rs. indexed cost of improvement of Rs. 4,18,33,580/ 4,18,33,580/- while computing capital gain and hence necessary direction may computing capital gain and hence necessary direction may computing capital gain and hence necessary direction may please be given please be given to the AO to allow the same. 3. Briefly stated facts of the case are that during the year under Briefly stated facts of the case are that during the year under Briefly stated facts of the case are that during the year under consideration, the assessee company was engaged in the business consideration, the assessee company was engaged in the business consideration, the assessee company was engaged in the business
Everest Industries Ltd. 5 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
of manufacturing of asbestos cement sheet and accessories. For the of manufacturing of asbestos cement sheet and accessories. For the of manufacturing of asbestos cement sheet and accessories. For the year under consideration, the year under consideration, the assessee filed return of income on assessee filed return of income on 07.11.2006 declaring total income of Rs.22,90,16,735/- which was 07.11.2006 declaring total income of Rs.22,90,16,735/ 07.11.2006 declaring total income of Rs.22,90,16,735/ further further further revised revised revised on on on 28.03.2008 28.03.2008 28.03.2008 declaring declaring declaring total total total income income income at Rs.22,96,26,773/-. The return of income was selected for scrutiny . The return of income was selected for scrutiny . The return of income was selected for scrutiny and statutory notices under the I and statutory notices under the Income-tax Act, 1961 (in short ‘the tax Act, 1961 (in short ‘the Act’) were issued and complied with. In the assessment completed Act’) were issued and complied with. In the assessment completed Act’) were issued and complied with. In the assessment completed u/s 143(3) of the Act on 24.12.2008, the Assessing Officer made u/s 143(3) of the Act on 24.12.2008, the Assessing Officer made u/s 143(3) of the Act on 24.12.2008, the Assessing Officer made various additions/disallowances and assessed the income to various additions/disallowances and assessed the income to various additions/disallowances and assessed the income to Rs.44,02,20,600/-. On further app . On further appeal, the Ld. CIT(A) allowed part eal, the Ld. CIT(A) allowed part relief. Aggrieved with the finding of the Ld. CIT(A) relief. Aggrieved with the finding of the Ld. CIT(A), both the Revenue both the Revenue and the assessee are in appeal before the Income-tax Appellate and the assessee are in appeal before the Income and the assessee are in appeal before the Income Tribunal (ITAT) raising the grounds as reproduced above. Tribunal (ITAT) raising the grounds as reproduced above. Tribunal (ITAT) raising the grounds as reproduced above.
The ground No. 1 of the appe The ground No. 1 of the appeal of the Revenue relates to al of the Revenue relates to treating the sales tax incentives of Rs.4,38,56,713/ treating the sales tax incentives of Rs.4,38,56,713/- - received by the assessee as capital receipt. assessee as capital receipt.
4.1 Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that issue in dispute is covered in favour of the assessee by the order of issue in dispute is covered in favour of the assessee by the orde issue in dispute is covered in favour of the assessee by the orde the the Tribunal Tribunal for for assessment assessment year year 2004-05 2004 05 in in ITA ITA No. No. 1419/Mum/2020.
4.2 The Ld. Departmental Representative (DR) on the other hand, The Ld. Departmental Representative (DR) on the other hand, The Ld. Departmental Representative (DR) on the other hand, relied on the order of the Assessing Officer. relied on the order of the Assessing Officer.
Everest Industries Ltd. 6 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
4.3 We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The Assessing e and perused the relevant material on record. The Assessing e and perused the relevant material on record. The Assessing Officer in para 4.2 of the impugned assessment order has relied on Officer in para 4.2 of the impugned assessment order has relied on Officer in para 4.2 of the impugned assessment order has relied on the finding of his predecessor for assessment year 2004-05 and the finding of his predecessor for assessment year 2004 the finding of his predecessor for assessment year 2004 accordingly made addition holding sales tax incentives as revenue accordingly made addition holding sales tax incentives as revenue accordingly made addition holding sales tax incentives as revenue receipt. The Ld. CIT(A) however relied on the order of the Tribunal receipt. The Ld. CIT(A) however relied on the order of the Tribunal receipt. The Ld. CIT(A) however relied on the order of the Tribunal as well as his predecessor. The relevant part of the impugned order as well as his predecessor. The relevant part of the impugned order as well as his predecessor. The relevant part of the impugned order is reproduced as under: is reproduced as under:
“6.2 I have carefully considered the facts of the case, findings I have carefully considered the facts of the case, findings I have carefully considered the facts of the case, findings of the AO, submission of the a of the AO, submission of the appellant and material placed on ppellant and material placed on record. In A.Y. 2004 In A.Y. 2004-05 and 2005-06, the Hon'ble ITAT in vide Order 06, the Hon'ble ITAT in vide Order dated 15.09.2017 restored the issue to the file of the A stating dated 15.09.2017 restored the issue to the file of the A stating dated 15.09.2017 restored the issue to the file of the A stating that the AO should compare the 1979 Scheme of Government of that the AO should compare the 1979 Scheme of Government of that the AO should compare the 1979 Scheme of Government of Maharashtra with that of New P Maharashtra with that of New Package Scheme of Incentive, ackage Scheme of Incentive, 1993. The A passed order u/s 143(3) r.w.s. 254, in the AY. 1993. The A passed order u/s 143(3) r.w.s. 254, in the AY. 1993. The A passed order u/s 143(3) r.w.s. 254, in the AY. 2004-05, holding the sales tax incentives as revenue in nature 05, holding the sales tax incentives as revenue in nature 05, holding the sales tax incentives as revenue in nature and held that, and held that, "The issue of sales tax incentive of Rs.6,57,91,246/- "The issue of sales tax incentive of Rs.6,57,91,246/ "The issue of sales tax incentive of Rs.6,57,91,246/ claimed as capital receipt was set aside to the file of the claimed as capital receipt was set aside to the file of the claimed as capital receipt was set aside to the file of the 10 for fresh adjudication with a direction to compare the 10 for fresh adjudication with a direction to compare the 10 for fresh adjudication with a direction to compare the sales tax incentive scheme of 1979 availed by Reliance sales tax incentive scheme of 1979 availed by Reliance sales tax incentive scheme of 1979 availed by Reliance Industries Limited and the Ne Industries Limited and the New Package Scheme of w Package Scheme of Incentive 1993 which is availed by the assessee. Incentive 1993 which is availed by the assessee. Incentive 1993 which is availed by the assessee. However, the issue of sales tax incentive claimed as However, the issue of sales tax incentive claimed as However, the issue of sales tax incentive claimed as capital receipt, allowed by the Hon'ble ITAT in the case of capital receipt, allowed by the Hon'ble ITAT in the case of capital receipt, allowed by the Hon'ble ITAT in the case of Reliance Industries Limited, has been sent back to the Reliance Industries Limited, has been sent back to the Reliance Industries Limited, has been sent back to the Hon'ble Bombay High Hon'ble Bombay High Court by the Hon 'ble Supreme Court by the Hon 'ble Supreme Court with a direction to decide whether sales tax Court with a direction to decide whether sales tax Court with a direction to decide whether sales tax incentive is a capital receipt or not. Accordingly, the issue incentive is a capital receipt or not. Accordingly, the issue incentive is a capital receipt or not. Accordingly, the issue has not yet attained finality. The case of the assessee for has not yet attained finality. The case of the assessee for has not yet attained finality. The case of the assessee for AY. 2003 AY. 2003-04 has been clubbed with the appeal pending 04 has been clubbed with the appeal pending in the case of Reliance Industries in the Hon 'ble Bombay in the case of Reliance Industries in the Hon 'ble Bombay in the case of Reliance Industries in the Hon 'ble Bombay High High High Court. Court. Court. Accordingly, Accordingly, Accordingly, since since since the the the Income Income Income Tax Tax Tax
Everest Industries Ltd. 7 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
Department has not accepted the view of the Tribunal Department has not accepted the view of the Tribunal Department has not accepted the view of the Tribunal both in case of Reliance Industries and the assessee and both in case of Reliance Industries and the assessee and both in case of Reliance Industries and the assessee and filed further appeals before the Hon'ble filed further appeals before the Hon'ble High Court and High Court and these appeals are still pending with the Hon 'ble High these appeals are still pending with the Hon 'ble High these appeals are still pending with the Hon 'ble High Court, the contention of the assessee to claim sales tax Court, the contention of the assessee to claim sales tax Court, the contention of the assessee to claim sales tax incentive as capital receipt is not tenable and hence incentive as capital receipt is not tenable and hence incentive as capital receipt is not tenable and hence disallowed, in view of the detailed discussion made by disallowed, in view of the detailed discussion made by disallowed, in view of the detailed discussion made by the 10 in the assess the 10 in the assessment order passed ws 143(3) dated ment order passed ws 143(3) dated 03.03.2006 and further confirmed by the CIT(A)" 03.03.2006 and further confirmed by the CIT(A)" 03.03.2006 and further confirmed by the CIT(A)" On perusal of the above paragraphs, it is clear that the AO did On perusal of the above paragraphs, it is clear that the AO did On perusal of the above paragraphs, it is clear that the AO did not compare the terms and conditions of the Sales Tax Incentive not compare the terms and conditions of the Sales Tax Incentive not compare the terms and conditions of the Sales Tax Incentive Scheme of 1979 availed by Reliance Industries Scheme of 1979 availed by Reliance Industries Scheme of 1979 availed by Reliance Industries Ltd. with the New Package Scheme of Incentives, 1993 which was availed New Package Scheme of Incentives, 1993 which was availed New Package Scheme of Incentives, 1993 which was availed by the appellant company. Thus, the directions of Hon'ble by the appellant company. Thus, the directions of Hon'ble by the appellant company. Thus, the directions of Hon'ble Mumbai ITAT as per order dated 15.09.2017 were not followed Mumbai ITAT as per order dated 15.09.2017 were not followed Mumbai ITAT as per order dated 15.09.2017 were not followed by the AO in the right earnest. The AO thereafter proceeded to by the AO in the right earnest. The AO thereafter proceeded to by the AO in the right earnest. The AO thereafter proceeded to make an addition of Rs. 6,57,91,2461 an addition of Rs. 6,57,91,2461-on account of Sale Tax on account of Sale Tax Incentives as revenue receipts on the ground that the decision Incentives as revenue receipts on the ground that the decision Incentives as revenue receipts on the ground that the decision of Hon'ble Mumbai High Court in the case of Reliance Industries of Hon'ble Mumbai High Court in the case of Reliance Industries of Hon'ble Mumbai High Court in the case of Reliance Industries Ltd. had not attained finality. Ltd. had not attained finality. 6.3 Here it is pertinent to mention that in appellant's own case, Here it is pertinent to mention that in appellant's own case, Here it is pertinent to mention that in appellant's own case, the Hon'ble ITAT for A.Y. 2003-04 has allowed the appeal on 04 has allowed the appeal on this issue holding sales tax Incentive to be capital in nature. this issue holding sales tax Incentive to be capital in nature. this issue holding sales tax Incentive to be capital in nature. Further, the then CsIT(A) has also allowed the appeals on this , the then CsIT(A) has also allowed the appeals on this , the then CsIT(A) has also allowed the appeals on this issue in favour of n favour of appellant company for A.Y. 2007 company for A.Y. 2007-08 and 2008-09 vide order dated 19.11.2012 09 vide order dated 19.11.2012 and 31.03.2015 and 31.03.2015 respectively. respectively. 6.4 Subsequently while disposing the appeal of the appellant Subsequently while disposing the appeal of the appellant Subsequently while disposing the appeal of the appellant company for AY company for AY 2009-10, the Hon'ble Mumbai ITAT vide its 10, the Hon'ble Mumbai ITAT vide its order dated 30.01.2018 order dated 30.01.2018 in ITA Nos.380483849/Mum/2015 in ITA Nos.380483849/Mum/2015 again remanded the matter to the Assessing Officer and he again remanded the matter to the Assessing Officer and he again remanded the matter to the Assessing Officer and he was directed to compare the scheme deliberated upon by the was directed to compare the scheme deliberated upon by the was directed to compare the scheme deliberated upon by the Tribunal in the case of Reliance Industries Ltd. and the scheme Tribunal in the case of Reliance Industries Ltd. and the scheme Tribunal in the case of Reliance Industries Ltd. and the scheme of 1993 applicable availed by the appellant. of 1993 applicable availed by the appellant. The set aside assessment for A. Y. 2009 The set aside assessment for A. Y. 2009-10 was completed by 10 was completed by the AO on 28.12.2018 u/s 143(3) r.w.254 of the Act with the the AO on 28.12.2018 u/s 143(3) r.w.254 of the Act with the the AO on 28.12.2018 u/s 143(3) r.w.254 of the Act with the following findings in para 3.2 & following findings in para 3.2 &
Everest Industries Ltd. 8 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
"3.2 1 have considered the facts of the case and the "3.2 1 have considered the facts of the case and the "3.2 1 have considered the facts of the case and the submission made by the assessee. submission made by the assessee. The issue of Sal The issue of Sales Tax Incentive of Rs.5,83,36,300/ Tax Incentive of Rs.5,83,36,300/-claimed as capital claimed as capital receipt was set aside to the file of the Assessing Officer receipt was set aside to the file of the Assessing Officer receipt was set aside to the file of the Assessing Officer with a limited purpose for comparing the sales tax with a limited purpose for comparing the sales tax with a limited purpose for comparing the sales tax incentive scheme of 1979 availed by Reliance Industries incentive scheme of 1979 availed by Reliance Industries incentive scheme of 1979 availed by Reliance Industries Limited and the New package scheme Limited and the New package scheme of incentives 1993 of incentives 1993 which is availed by the assessee. It is seen that the which is availed by the assessee. It is seen that the which is availed by the assessee. It is seen that the comparison between the two schemes has already been comparison between the two schemes has already been comparison between the two schemes has already been made by the Hon'ble ITAT in assessee's own case for AY made by the Hon'ble ITAT in assessee's own case for AY made by the Hon'ble ITAT in assessee's own case for AY 2003-04 in its order dated 04.12.2009 and held that 04 in its order dated 04.12.2009 and held that 04 in its order dated 04.12.2009 and held that both the schemes are sim both the schemes are similar and identical. Accordingly, ilar and identical. Accordingly, by placing reliance on the ITAT Order for AY 2003-04,it is by placing reliance on the ITAT Order for AY 2003 by placing reliance on the ITAT Order for AY 2003 held that both the schemes are similar and identical. held that both the schemes are similar and identical. held that both the schemes are similar and identical. 3.3 However, the issue of sales tax incentive claimed as 3.3 However, the issue of sales tax incentive claimed as 3.3 However, the issue of sales tax incentive claimed as capital receipt, allowed by the Hon'ble ITAT in the case of capital receipt, allowed by the Hon'ble ITAT in the c capital receipt, allowed by the Hon'ble ITAT in the c Reliance Industries Limited, has been sent back to the Reliance Industries Limited, has been sent back to the Reliance Industries Limited, has been sent back to the Hon'ble Bombay High Court by the Hon'ble Supreme Hon'ble Bombay High Court by the Hon'ble Supreme Hon'ble Bombay High Court by the Hon'ble Supreme Court with a direction to decide whether sales tax Court with a direction to decide whether sales tax Court with a direction to decide whether sales tax incentive is a capital receipt or not. Accordingly, the issue incentive is a capital receipt or not. Accordingly, the issue incentive is a capital receipt or not. Accordingly, the issue has not yet attained finality. T has not yet attained finality. The case of the assessee for he case of the assessee for AY 2003 AY 2003-04 has been clubbed with the appeal pending in 04 has been clubbed with the appeal pending in case of Reliance Industries in the Hon'ble Bombay High case of Reliance Industries in the Hon'ble Bombay High case of Reliance Industries in the Hon'ble Bombay High Court. Accordingly since the Income Tax Department has Accordingly since the Income Tax Department has not accepted the view of the Tribunal both in case of not accepted the view of the Tribunal both in case of not accepted the view of the Tribunal both in case of Reliance Reliance Industries and the assessee and filed further Industries and the assessee and filed further appeals before the Hon'ble High Court, the contention of appeals before the Hon'ble High Court, the contention of appeals before the Hon'ble High Court, the contention of the assessee to claim sales tax incentive as capital the assessee to claim sales tax incentive as capital the assessee to claim sales tax incentive as capital receipt is not tenable and hence disallowed". receipt is not tenable and hence disallowed". receipt is not tenable and hence disallowed". 6.5 It is noted that in the case of appellant for A.Y. 5 It is noted that in the case of appellant for A.Y. 2003-04 in 5 It is noted that in the case of appellant for A.Y. ITA 814/Mum/2007, it was held by the Hon'ble Tribunal that 814/Mum/2007, it was held by the Hon'ble Tribunal that 814/Mum/2007, it was held by the Hon'ble Tribunal that both the schemes are similar and identical and it was both the schemes are similar and identical and it was both the schemes are similar and identical and it was adjudicated by the Hon'ble ITAT that this issue is squarely adjudicated by the Hon'ble ITAT that this issue is squarely adjudicated by the Hon'ble ITAT that this issue is squarely covered by the decision of the Special Bench in the case of DCIT covered by the decision of the Special Bench in the case of DCIT covered by the decision of the Special Bench in the case of DCIT vs. Reliance Industries Ltd. (2004) 88 ITD 273 (Mum)(SB). liance Industries Ltd. (2004) 88 ITD 273 (Mum)(SB). liance Industries Ltd. (2004) 88 ITD 273 (Mum)(SB).” 4.3.1 Further, the Ld. CIT(A) also relied on the order of his Further, the Ld. CIT(A) also relied on the order of his Further, the Ld. CIT(A) also relied on the order of his predecessor for assessment year 2010 predecessor for assessment year 2010-11 and 2011 2011-12. Following the finding, the Ld. CIT(A) compared the incentives schemes of the Ld. CIT(A) compared the incentives schemes of the Ld. CIT(A) compared the incentives schemes of
Everest Industries Ltd. 9 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
Government of Maharashtra under which assessee received the Maharashtra under which assessee received the Maharashtra under which assessee received the sales tax incentives during the year under consideration. The sales tax incentives during the year under consideration. The sales tax incentives during the year under consideration. The relevant part of the Ld. CIT(A) is reproduced as under: relevant part of the Ld. CIT(A) is reproduced as under: relevant part of the Ld. CIT(A) is reproduced as under:
6.7 From the discussions, in the paras above, it is evident that 6.7 From the discussions, in the paras above, it is evident that 6.7 From the discussions, in the paras above, it is evident that on numerous occasions, the on numerous occasions, the assessing/appellate authorities assessing/appellate authorities have held the schemes to be identical. have held the schemes to be identical. 6.8 The comparison between the two schemes is as under: 6.8 The comparison between the two schemes is as under: 6.8 The comparison between the two schemes is as under: Sl. No. 1 Maharashtra Incentive Scheme 1979 Maharashtra Incentive Scheme 1979 Maharashtra Incentive Scheme Maharashtra Incentive Scheme 1993 i. The The aim aim was was to to disperse disperse the the The aim was to intensify and The aim was to intensify and industries industries outside outside the Bombay- accelerate accelerate the the process process of of Thane Thane-Pune belt and to hasten the dispersal of industries from, dispersal of industries from, pace pace of of industrialization industrialization in in the the the developed areas and for the developed areas and for developing regions of the state developing regions of the state development development of of the the underdeveloped regions of the underdeveloped state particularly those farther state particularly those farther away from theBombay-Thane- away from theBombay Pune belt Pune belt ii. No No incentive incentive was was available available to to No incentive was available to No incentive was available to industries in the developed areas of industries in the developed areas of Group A area comprising the State the State developed areas, viz Bombay developed areas, viz Bombay Metropolitan Region and Pune Metropoli Metropolitan Region Metropolitan Region iii. The Quantum of sales tax incentive is The Quantum of sales tax incentive is The incentive is based on the The incentive is based on the based on amount of investment in based on amount of investment in percentage of fixed capital percentage of fixed capital fixed assets fixed assets investment. investment iv. The quantum of sales tax incentive The quantum of sales tax incentive The quantum of sales tax The quantum of sales tax depends upon the area i depends upon the area in which the incentive depends upon the incentive depends upon the industry was located industry was located are in which the unit is located are in which the unit is located v. The incentive was in the form of sales The incentive was in the form of sales The The incentive incentive will will be be tax tax exemption exemption or or interest interest free free admissible admissible to to a a New New unsecured loan. subject unsecured loan. subject to monetary unit/Pioneer unit/Pioneer unit/prestigious unit/prestigious ceilings ceilings directly directly related related to to fixed fixed unit and will be in the nature unit and will be in the nature capital investment. capital investment. of sales tax incentive by way of sales tax incentive by way of exemption/deferral/interest of exemption/deferral/interest free unsecured loan subj unsecured loan subject to ceiling ceiling based based on on the the percentage of fixed capital percentage of fixed capital investment investment vi. The The period period of of eligibility eligibility varied varied The period of eligibility shall The period of eligibility shall depending on whether the unit was depending on whether the unit was be computed from the date be computed from the date new or existing or a pioneer unit. The new or existing or a pioneer unit. The specified specified in in the the Eligibility Eligibility period period of of entitlement entitlement was was also also certificate in respect of eligible certificate in respect of eligible directly connected to the gross fixed directly connected to the gross fixed units as specified in table II units as specified in table II
Everest Industries Ltd. 10 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
capital investment. capital inve under para 5.1 (Il) for different under para 5.1 (Il) for different units. The period of The period of entitlement was also directly also directly connected to percentage of fixed capital percentage of fixed capital investment investment vii. An An intending intending entrepreneur entrepreneur could could An eligible unit can apply for gible unit can apply for apply for incentive immediately after apply for incentive immediately after incentive after it has taken all incentive after it has taken all taking the taking the initial effective steps. the initial effective steps. The the initial effective steps. The though the final though the final eligibility certificate eligibility certificate shall be eligibility certificate shall be and the letter of and the letter of entitlement could obtained within 6 months from obtained within however however be be granted granted only only after afte the the date date of of commercial commercial commencement of production. The commencement of production. The production. production. SICOM could process the application SICOM could process the application without waiting for the completion of without waiting for the completion of the setting up of the unit and could the setting up of the unit and could issue a letter of intent/provisional issue a letter of intent/provisional eligibility certificate on completion of eligibility certificate on completion of the final effective steps the final effective steps.
Respectfully, following the decisions of the Hon'ble ITAT for A. Respectfully, following the decisions of the Hon'ble ITAT for A. Respectfully, following the decisions of the Hon'ble ITAT for A.Y. 2003-04,(ITA No.814 Mum 2007) and that of the Cs|T(A) for 04,(ITA No.814 Mum 2007) and that of the Cs|T(A) for 04,(ITA No.814 Mum 2007) and that of the Cs|T(A) for A.Y. 2007-08 and 2008 08 and 2008-09 (vide order dated 19.11.2012 and 09 (vide order dated 19.11.2012 and 31.03.2015 respectively), and of the CIT 31.03.2015 respectively), and of the CIT-(A)-3, Nashik for A.Y. 3, Nashik for A.Y. 2010-11 11 and and 2011-12(16.10.2019 2011 12(16.10.2019 and and 21.10.2019 21.10.2019 respectively), I hereby hol respectively), I hereby hold ,that sales tax incentive received by d ,that sales tax incentive received by the appellant under the aegis of New package scheme 1993 is the appellant under the aegis of New package scheme 1993 is the appellant under the aegis of New package scheme 1993 is "capital" in nature. "capital" in nature.” 4.3.2 Since, the Ld. CIT(A) has followed the binding precedent Since, the Ld. CIT(A) has followed the binding precedent Since, the Ld. CIT(A) has followed the binding precedent of the Tribunal in the case of the assessee of the Tribunal in the case of the assessee itself for assessment year itself for assessment year 2003-04 in ITA No. 814/Mum/2014, t 04 in ITA No. 814/Mum/2014, therefore, we do not find any herefore, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute. Further, error in the order of the Ld. CIT(A) on the issue in dispute. Further, error in the order of the Ld. CIT(A) on the issue in dispute. Further, we find that the Tribunal in assessment year 2004-05 in ITA No. we find that the Tribunal in assessment year 2004 we find that the Tribunal in assessment year 2004 1419/Mum/2020 held as under: 1419/Mum/2020 held as under:
“6. To adjudicate the issue we need to understand the exact To adjudicate the issue we need to understand the exact To adjudicate the issue we need to understand the exact nature and purpose of the scheme and the settled position of nature and purpose of the scheme and the settled position of nature and purpose of the scheme and the settled position of law thereon. It is relevant to mention here that on the similar law thereon. It is relevant to mention here that on the similar law thereon. It is relevant to mention here that on the similar issue in assessee own case for AY 2003 issue in assessee own case for AY 2003-2004 ITAT Mumbai 2004 ITAT Mumbai vide ITA NO 814/ vide ITA NO 814/Mum/2007 allowed the position in favour of Mum/2007 allowed the position in favour of assessee. Moreover for AY 2007 assessee. Moreover for AY 2007-2008, 2008-09, 2010 09, 2010-11 and
Everest Industries Ltd. 11 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
2011-12 the then CIT (A) s also decided in favour of assessee 12 the then CIT (A) s also decided in favour of assessee 12 the then CIT (A) s also decided in favour of assessee and held as under: and held as under: “5.1 With this background. I proceed to adjudicate this ground of “5.1 With this background. I proceed to adjudicate this ground of “5.1 With this background. I proceed to adjudicate this ground of appeal o appeal on merit in the succeeding paragraphs. The Package n merit in the succeeding paragraphs. The Package Scheme of Incentives, 1993 was introduced with a view to revise Scheme of Incentives, 1993 was introduced with a view to revise Scheme of Incentives, 1993 was introduced with a view to revise the 1988 Scheme to rationalize the scope of incentives, various the 1988 Scheme to rationalize the scope of incentives, various the 1988 Scheme to rationalize the scope of incentives, various scales and mode of release of incentives to intensify and scales and mode of release of incentives to intensify and scales and mode of release of incentives to intensify and accelerate the proce accelerate the process of dispersal of industries from the ss of dispersal of industries from the developed areas and for development of the underdeveloped developed areas and for development of the underdeveloped developed areas and for development of the underdeveloped regions of the State, particularly those farther away from the regions of the State, particularly those farther away from the regions of the State, particularly those farther away from the Bombay Bombay-Thane-Pune belt. The appellant company has received Pune belt. The appellant company has received Sales Tax Incentive vide Resolution N Sales Tax Incentive vide Resolution No.IDC-1093(8889)/IND 1093(8889)/IND-8 dated 07.05.1993. Prior to that such benefits were available under dated 07.05.1993. Prior to that such benefits were available under dated 07.05.1993. Prior to that such benefits were available under 1988 Scheme and Prior to 1988 Scheme, the benefits were 1988 Scheme and Prior to 1988 Scheme, the benefits were 1988 Scheme and Prior to 1988 Scheme, the benefits were extended by 1979 Scheme. The Scheme of 1979 was a modified extended by 1979 Scheme. The Scheme of 1979 was a modified extended by 1979 Scheme. The Scheme of 1979 was a modified form of 1977 Scheme. The Scheme of 1988 war revised to form of 1977 Scheme. The Scheme of 1988 war revised form of 1977 Scheme. The Scheme of 1988 war revised rationalize the scope of incentives, various scales and mode of rationalize the scope of incentives, various scales and mode of rationalize the scope of incentives, various scales and mode of release of incentive to intensify and accelerate the process of release of incentive to intensify and accelerate the process of release of incentive to intensify and accelerate the process of dispersal of industries from the developed area to develop the dispersal of industries from the developed area to develop the dispersal of industries from the developed area to develop the underdeveloped regions of State, particularly those farther away underdeveloped regions of State, particularly those farther a underdeveloped regions of State, particularly those farther a from Bombay from Bombay- Thane-Pune belt The Scheme of 1993 under which Pune belt The Scheme of 1993 under which appellant company got benefit was basically a revised form of appellant company got benefit was basically a revised form of appellant company got benefit was basically a revised form of incentives. In this revised Scheme of 1993 the experience gained in incentives. In this revised Scheme of 1993 the experience gained in incentives. In this revised Scheme of 1993 the experience gained in the implementation of earlier scheme particularly of 1988 and the implementation of earlier scheme particularly of 1988 and the implementation of earlier scheme particularly of 1988 and liberalized industrial policy of Govt of India was taken into liberalized industrial policy of Govt of India was taken into liberalized industrial policy of Govt of India was taken into consideration and there were some modifications with regard to consideration and there were some modifications with regard to consideration and there were some modifications with regard to scope of incentives, various scales and mode of release of scope of incentives, various scales and mode of release of scope of incentives, various scales and mode of release of incentives. On perusal of the 1993 Scheme and the eligibility incentives. On perusal of the 1993 Scheme and the eligibility incentives. On perusal of the 1993 Scheme and the eligibility certificat certificate issued to the appellant company, it is seen that the e issued to the appellant company, it is seen that the purpose for the grant of the assistance by the Government was to purpose for the grant of the assistance by the Government was to purpose for the grant of the assistance by the Government was to encourage encourage encourage additional additional additional investments investments investments for for for expansion expansion expansion and and and modernization of the industrial undertakings located at modernization of the industrial undertakings located at modernization of the industrial undertakings located at Lakhmapur in the State of Mah Lakhmapur in the State of Maharashtra The specific purpose for arashtra The specific purpose for granting assistance through said scheme was encouragement of granting assistance through said scheme was encouragement of granting assistance through said scheme was encouragement of entrepreneurs to set up new units, to attract expansion in the entrepreneurs to set up new units, to attract expansion in the entrepreneurs to set up new units, to attract expansion in the existing units and revival of close and sick units. The objectives existing units and revival of close and sick units. The objectives existing units and revival of close and sick units. The objectives
Everest Industries Ltd. 12 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
clearly indicated that the ince clearly indicated that the incentive/subsidy granted to the ntive/subsidy granted to the appellant company by way of Sales Tax exemption directly related appellant company by way of Sales Tax exemption directly related appellant company by way of Sales Tax exemption directly related to expansion of the undertaking and to encourage investment in to expansion of the undertaking and to encourage investment in to expansion of the undertaking and to encourage investment in fixed capital and hence it was a capital receipt. On comparison of fixed capital and hence it was a capital receipt. On comparison of fixed capital and hence it was a capital receipt. On comparison of 1979 scheme with 1993 scheme, th 1979 scheme with 1993 scheme, the following similarities in the e following similarities in the terms and conditions are noticed: terms and conditions are noticed: Salient 1979 Scheme 1993 Scheme 1993 Scheme features Object of Promotion Promotion of of industrialization industrialization in in Promotion of industrialization Promotion of subsidy backward areas of the State of backward areas of the State of in backward areas of the State in backward areas of the State Maharashtra through Scheme of Maharashtra through Scheme of of of Maharashtra Maharashtra through through incentives. incentives. Scheme of incentives. Scheme of incentives. Eligibility a) Eligible unit to make application a) Eligible unit to make application a) a) Eligible Eligible unit unit to to make make Claim after completion of initial effective after completion of initial effective completion after completion of mpletion after completion of steps. initial effective steps initial effective steps b) Complete final effective steps b) Complete final effective steps b) Complete final effective b) Complete final effective steps Initial step i) Effective possession of land i) Effective possession of land i) Effective possession of land i) Effective possession of land ii) ii) Obtaining Obtaining provisional provisional SST SST ii) Obtaining provisional SST ii) Obtaining provisional SST registration/letter of intent from registration/letter of intent from registration/letter registration/letter of of intent intent Government of India or permission Government of India or permission from Government of India or from Government of India or from state Government from state Government for setting up permission permission from from state state eligible unit. eligible unit. Government for setting up Government for setting up eligible unit. Final i) Typing up means i) Typing up means of finance for i) Typing up means of finance i) Typing up means of finance effective project project to to satisfaction satisfaction of of for project to satisfaction of for project to satisf steps implementing authority implementing authority implementing authority implementing authority ii) Acquisition of at least 10% ii) Acquisition of at least 10% ii) Acquisition of at least 10% of ii) Acquisition of at least 10% of authority of total fixed assets at site authority of total fixed assets at site total fixed assets at site total fixed assets at site iii) Expenditure of at least 25% of total iii) Expenditure of at least 25% of total iii) Expenditure of at least 25% iii) Expenditure of at least 25% capital cost of project. capital cost of project. of total capital cost of project. of total capital cost of project. Ranting of Effective Effective from from date dat of Effective Effective from from date date of of Eligibility commencement commencement of of commercial commercial commencement of commercial commencement of commercial Certificate production. production. production. from SICOM (Implementin g authority) Mode of a) By way of Exemption of purchase a) By way of Exemption of purchase a) By way of Exemption of a) By way of Exemption of disbursemen tax, sales tax on purchase of raw tax, sales tax on purchase of raw purchase tax, sales tax on purchase tax, sales tax on t of sales tax materials, sales tax payable on sal materials, sales tax payable on sale of purchase of raw materials, purchase of raw materials, incentive finished goods, CST on Sale of finished finished goods, CST on Sale of finished sales tax payable on sale of sales tax payable on sale of 9% of fixed capital investment. 9% of fixed capital investment. finished goods, CST on Sale of finished goods,
Everest Industries Ltd. 13 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
b) By way of interest free unsecured b) By way of interest free unsecured finished goods, as a % of fixed finished goods, as a % of fixed loans or refund. loans or refund. capital investment. capital investment. b) By way of interest free b) By way of interest free unsecured loans or refund. unsecured loans or refund. c) By way of deferral of c) By way of deferral of payment of sales tax liability. payment of sales tax liability. Other i) Refund of octroi without any i) Refund of octroi without any i. Refund of octroi/entry tax up i. Refund of octroi/entry tax up benefits monetary ceiling monetary ceiling to to 100% 100% admissible admissible fixed fixed ii) ii) 75% 75% contribution towards capital investment of eligible capital investment of eligible preparation of feasibility study preparation of feasibility study new unit. iii) iii) Preferential Preferential treatment treatment in in ii. 75% contribution towards ii. 75% contribution towards government/government undertaking government/government undertaking preparation of feasibility study. preparation of feasibility study. statutory statutory bodies bodies purchase purchase iii. Refund of electricity duty for iii. Refund of electricity duty for programme. programme. EHTP or 100% EOU EHTP or 100% EOU iv. 10% waiver of cost of power iv. 10% waiver of cost of power line for prestigious units. line for prestigious units.
We have gone through the finding on facts given by Ld. CIT (A). In the We have gone through the finding on facts given by Ld. CIT (A). In the We have gone through the finding on facts given by Ld. CIT (A). In the present case, the purpose of granting Sales Tax incentive was clearly present case, the purpose of granting Sales Tax incentive was clearly present case, the purpose of granting Sales Tax incentive was clearly to provide for establishment of new industries or expand the existing to provide for establishment of new industries or expand the existing to provide for establishment of new industries or expand the existing units in the State of Maharashtra. The intention was not to increase the units in the State of Maharashtra. The intent ion was not to increase the viability of the eligible units but promote development of further viability of the eligible units but promote development of further viability of the eligible units but promote development of further industry, accelerate industrialization and infrastructure in the region. It industry, accelerate industrialization and infrastructure in the region. It industry, accelerate industrialization and infrastructure in the region. It is clear that the Sales Tax benefit as per Package Scheme of Incentives, is clear that the Sales Tax benefit as per Package Scheme of Incentives, is clear that the Sales Tax benefit as per Package Scheme of Incentives, 1993, State of Maharashtra, was oriented towards the fixed capital of Maharashtra, was oriented towards the fixed capital of Maharashtra, was oriented towards the fixed capital investment. The quantum of incentive benefit was to be determined investment. The quantum of incentive benefit was to be determined investment. The quantum of incentive benefit was to be determined with reference to the gross fixed capital investment of the eligible unit with reference to the gross fixed capital investment of the eligible unit with reference to the gross fixed capital investment of the eligible unit during the period of eligibility. The quantum of incentive be during the period of eligibility. The quantum of incentive benefit was during the period of eligibility. The quantum of incentive be variable and said quantum of deferral benefit was directly related to variable and said quantum of deferral benefit was directly related to variable and said quantum of deferral benefit was directly related to the cumulative gross fixed capital investment made by the eligible unit. the cumulative gross fixed capital investment made by the eligible unit. the cumulative gross fixed capital investment made by the eligible unit. As and when further fresh capital investment was made, the quantum As and when further fresh capital investment was made, the quantum As and when further fresh capital investment was made, the quantum of Sales Tax Incentive was further increased during the period of of Sales Tax Incentive was further i ncreased during the period of eligibility. The period of entitlement of benefit could be curtailed if the eligibility. The period of entitlement of benefit could be curtailed if the eligibility. The period of entitlement of benefit could be curtailed if the gross fixed investment fell short of sales tax liability. For earning gross fixed investment fell short of sales tax liability. For earning gross fixed investment fell short of sales tax liability. For earning eligibility for the incentive benefit, the Industrial unit was supposed to eligibility for the incentive benefit, the Industrial unit was supposed to eligibility for the incentive benefit, the Industrial unit was supposed to take some initial and final steps and it could apply for incentive benefit some initial and final steps and it could apply for incentive benefit some initial and final steps and it could apply for incentive benefit after having taken possession of the land and having made an after having taken possession of the land and having made an after having taken possession of the land and having made an application of DGTD for registration. Such application was to be application of DGTD for registration. Such application was to be application of DGTD for registration. Such application was to be processed by the implementing agency, i.e. SICOM without wai processed by the implementing agency, i.e. SICOM without waiting for processed by the implementing agency, i.e. SICOM without wai the completion of the setting up of the Industrial unit and the the completion of the setting up of the Industrial unit and the the completion of the setting up of the Industrial unit and the
Everest Industries Ltd. 14 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
provisional eligibility certificate was issued to the industrial unit on provisional eligibility certificate was issued to the industrial unit on provisional eligibility certificate was issued to the industrial unit on acquisition of at least 10% of the total fixed assets envisaged in the acquisition of at least 10% of the total fixed assets envisaged in the acquisition of at least 10% of the total fixed assets envisaged in the project and incurrence of expenditure to the extent of 25% of the capital project and incurrence of expenditure t o the extent of 25% of the capital cost of project. In the aforesaid facts, the exemption availed of by the cost of project. In the aforesaid facts, the exemption availed of by the cost of project. In the aforesaid facts, the exemption availed of by the appellant's eligible units under the said notification, was a capital appellant's eligible units under the said notification, was a capital appellant's eligible units under the said notification, was a capital receipt not liable to tax. In the case of DCIT Vs. Reliance Industries receipt not liable to tax. In the case of DCIT Vs. Reliance Industries receipt not liable to tax. In the case of DCIT Vs. Reliance Industries Ltd.(88 ITD 273) (Mumbai SB), the Hon'ble ITAT observed that the ITD 273) (Mumbai SB), the Hon'ble ITAT observed that the ITD 273) (Mumbai SB), the Hon'ble ITAT observed that the thrust of the Maharashtra Scheme was the industrial development of thrust of the Maharashtra Scheme was the industrial development of thrust of the Maharashtra Scheme was the industrial development of the backward districts as well as generation of employment thus, the backward districts as well as generation of employment thus, the backward districts as well as generation of employment thus, establishing a direct nexus with the investment in fixed capital a establishing a direct nexus with the investment in fixed capital assets. establishing a direct nexus with the investment in fixed capital a The Sales Tax Incentive was envisaged only as an alternative to the The Sales Tax Incentive was envisaged only as an alternative to the The Sales Tax Incentive was envisaged only as an alternative to the cash disbursement and by the very nature, was available only after cash disbursement and by the very nature, was available only after cash disbursement and by the very nature, was available only after commencement of production. The object of the subsidy was to commencement of production. The object of the subsidy was to commencement of production. The object of the subsidy was to encourage the setting up of industries in the backward area and the encourage the setting up of industries in the backwar d area and the incentive was not given to the industrial unit for assisting it in carrying incentive was not given to the industrial unit for assisting it in carrying incentive was not given to the industrial unit for assisting it in carrying out its day to day business operations. The Hon'ble Mumbai Tribunal out its day to day business operations. The Hon'ble Mumbai Tribunal out its day to day business operations. The Hon'ble Mumbai Tribunal in the aforesaid decision followed the principle laid down by the in the aforesaid decision followed the principle laid down by the in the aforesaid decision followed the principle laid down by the Hon’ble Apex Court in the case of Sahney Steel Press Works Ltd. Vs. Hon’ble Apex Court in the case of Sahney Steel Press Works Ltd. Vs. CIT(228 ITR 253) wherein it was held that the object for which the CIT(228 ITR 253) wherein it was held that the object for which the CIT(228 ITR 253) wherein it was held that the object for which the subsidy was given was decisive. It also recognized the distinction subsidy was given was decisive. It also recognized the distinction subsidy was given was decisive. It also recognized the distinction pointed out by the Supreme Court that if the subsidy was given for pointed out by the Supreme Court that if the subsidy was given for pointed out by the Supreme Court that if the subsidy was given for setting up or expansion of the industry in a backward area, it would be nsion of the industry in a backward area, it would be nsion of the industry in a backward area, it would be a capital receipt, irrespective of the modality or the source of funds a capital receipt, irrespective of the modality or the source of funds a capital receipt, irrespective of the modality or the source of funds through or from which it was given and if monies were given for through or from which it was given and if monies were given for through or from which it was given and if monies were given for assisting the assessee in carrying out the business operations, it assisting the assessee in carrying out the business operations, it shall assisting the assessee in carrying out the business operations, it be revenue receipts. The case of the appellant company is squarely be revenue receipts. The case of the appellant company is squarely be revenue receipts. The case of the appellant company is squarely covered by the facts and principles lay down in the case of Reliance covered by the facts and principles lay down in the case of Reliance covered by the facts and principles lay down in the case of Reliance Industries Ltd. (88 ITD 273) in view of the following similarities: Industries Ltd. (88 ITD 273) in view of the following similarities: Industries Ltd. (88 ITD 273) in view of the following similarities: a) In the Reliance's case, the assistance was given for the specific purpose of a) In the Reliance's case, the assistance was given for the specific purpose of expansion and modernization of the existing unit which in turn implied meeting expansion and modernization of the existing unit which in turn implied meeting expansion and modernization of the existing unit which in turn implied meeting capital cost. In the case of the appellant company, the incentive was granted at capital cost. In the case of the appellant company, the incentive was granted at capital cost. In the case of the appellant company, the incentive was granted at the time of setting up its unit in the backward area and further for the the time of setting up its unit in the backward area and furth the time of setting up its unit in the backward area and furth expansion of the said unit implying meeting of capital cost. expansion of the said unit implying meeting of capital cost. b) In the Reliance's case, Sales Tax exemption was granted under 1979 Scheme b) In the Reliance's case, Sales Tax exemption was granted under 1979 Scheme b) In the Reliance's case, Sales Tax exemption was granted under 1979 Scheme of the Govt. of Maharashtra after grant of eligibility certificate. In the case of of the Govt. of Maharashtra after grant of eligibility certificate. In the case of of the Govt. of Maharashtra after grant of eligibility certificate. In the case of
Everest Industries Ltd. 15 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
the appellant company also, Sales Tax exemption had been granted after issue the appellant company al so, Sales Tax exemption had been granted after issue of eligibility certificate. of eligibility certificate. c) In the Reliance's case, Sales Tax exemption had been quantified on the basis c) In the Reliance's case, Sales Tax exemption had been quantified on the basis c) In the Reliance's case, Sales Tax exemption had been quantified on the basis of percentage of investment in fixed capital assets. In the case of the appellant of percentage of investment in fixed capital assets. In the case of the appellant of percentage of investment in fixed capital assets. In the case of the appellant company also, Sales Tax exemption was granted at a percentage of investment , Sales Tax exemption was granted at a percentage of investment , Sales Tax exemption was granted at a percentage of investment of fixed capital assets to the extent ofRs.45.74 crores and Rs. 18.90 crores of fixed capital assets to the extent ofRs.45.74 crores and Rs. 18.90 crores of fixed capital assets to the extent ofRs.45.74 crores and Rs. 18.90 crores respectively. The above basis of calculating the incentive was itself an indication respectively. The above basis of calculating the incentive was itself an indication respectively. The above basis of calculating the incentive was itself an indication of its being a capital receipt. of its being a capital receipt. d) In the Reliance's case, the Sales Tax exemption had been granted on the basis d) In the Reliance's case, the Sales Tax exemption had been granted on the basis d) In the Reliance's case, the Sales Tax exemption had been granted on the basis of sales and purchases. In the case of the appellant company also, exemption of sales and purchases. In the case of the appellant company also, exemption of sales and purchases. In the case of the appellant company also, exemption had been granted on the basis of sales. had been granted on the basis of sales. 7. As observed above the features of the scheme and a As observed above the features of the scheme and a As observed above the features of the scheme and a comparison chart of the scheme of the year 1979 Vis mparison chart of the scheme of the year 1979 Vis -a-Vis 1993. The Vis 1993. The scheme of 1979 has already been examined by the special bench in scheme of 1979 has already been examined by the special bench in scheme of 1979 has already been examined by the special bench in the case of DCIT Vs Reliance the case of DCIT Vs Reliance the case of DCIT Vs Reliance Industries Ltd (2004)88 Industries Ltd (2004)88 Industries Ltd (2004)88 ITD ITD ITD 273(Mum)(SB). The basic features of this scheme framed in 1979 and 273(Mum)(SB). The basic features of this scheme framed in 1979 and 273(Mum)(SB). The basic features of this scheme framed in 1979 and the scheme framed in 1993 (applicable to the assessee) the ITAT held the scheme framed in 1993 (applicable to the assessee) the ITAT held the scheme framed in 1993 (applicable to the assessee) the ITAT held that both the schemes are similar and identical hence the sales tax that both the schemes are similar and identical hence the sales tax that both the schemes are similar and identical hence the sales tax subsidy received by the assessee was capital receipt. subsidy received by the assessee was capital receipt. 8. Moreover in our decision we have relied upon the decision of Moreover in our decision we have relied upon the decision of Moreover in our decision we have relied upon the decision of honourable supreme court in the case of CIT Vs Ponny Sugars and onourable supreme court in the case of CIT Vs Ponny Sugars and onourable supreme court in the case of CIT Vs Ponny Sugars and Chemical Ltd (2008) 306 ITR 392 (S.C). In this regard, it has been held Chemical Ltd (2008) 306 ITR 392 (S.C). In this regard, it has been held Chemical Ltd (2008) 306 ITR 392 (S.C). In this regard, it has been held in a number of judicial pronouncements that modality or the source of in a number of judicial pronouncements that modality or the source of in a number of judicial pronouncements that modality or the source of funds or from which incentive subsidy is given shall not be decisive funds or from which incentive subsidy is given shal l not be decisive factor in determining whether the subsidy is revenue or capital in factor in determining whether the subsidy is revenue or capital in factor in determining whether the subsidy is revenue or capital in nature rather the purpose of the incentive scheme shall be seen. The nature rather the purpose of the incentive scheme shall be seen. The nature rather the purpose of the incentive scheme shall be seen. The said view finds support from the decision of the Apex Court in the case said view finds support from the decision of the Apex Court in the case said view finds support from the decision of the Apex Court in the case of CIT- vs. - Ponni Sugars & C Ponni Sugars & Chemicals Ltd. (2008) 306 ITR 392(SC) hemicals Ltd. (2008) 306 ITR 392(SC) wherein it was held that:- wherein it was held that: "The importance of the judgement of this Court in Sahney Steel case lies in "The importance of the judgement of this Court in Sahney Steel case lies in "The importance of the judgement of this Court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case law and it has the fact that it has discussed and analysed the entire case law and it has the fact that it has discussed and analysed the entire case law and it has laid down the basic test to be applied in laid down the basic test to be applied in judging the character of a subsidy. judging the character of a subsidy. That test is that the character of the receipt in the hands of the assessee That test is that the character of the receipt in the hands of the assessee That test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is has to be determined with respect to the purpose for which the subsidy is has to be determined with respect to the purpose for which the subsidy is
Everest Industries Ltd. 16 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
given. In other words, in such cases, one has to apply the purpose te given. In other words, in such cases, one has to apply the purpose te given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is point of time at which the subsidy is paid is not relevant. The source is point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition immaterial. The form of subsidy is immaterial. The main eligibility condition immaterial. The form of subsidy is immaterial. The main eligibility condition in the scheme with which we are concerned in this case is that the incentive in the scheme with which we are concerned in this case is that the incentive in the scheme with which we are concerned in this case is that the incentive must be utilized fo must be utilized for repayment of loans taken by the assessee to set up new r repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is units or for substantial expansion of existing units. On this aspect there is units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the subsidy scheme was to enable the assessee no dispute. If the object of the subsidy scheme was to enable the assessee no dispute. If the object of the subsidy scheme was to enable the assessee to run the business more profitably then the r to run the business more profitably then the receipt is on revenue account. eceipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme On the other hand, if the object of the assistance under the subsidy scheme On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing was to enable the assessee to set up a new unit or to expand the existing was to enable the assessee to set up a new unit or to expand the existing unit then the receipt was on capital account. Therefore, it is the object fo unit then the receipt was on capital account. Therefore, it is the object fo unit then the receipt was on capital account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the which the subsidy/assistance is given which determines the nature of the which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is incentive subsidy. The form of the mechanism through which the subsidy is incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant." given is irrelevant." 9. The Hon'ble Apex Court in the case of CIT vs. Chaphalkar The Hon'ble Apex Court in the case of CIT vs. Chaphalkar The Hon'ble Apex Court in the case of CIT vs. Chaphalkar Brothers (Civil Appeal Nos. 6513-6514 of 2012 order did. 07 Brothers (Civil Appeal No 6514 of 2012 order did. 07-12-2017) (SC) by placing reliance on its earlier decisions in the case of Sahney (SC) by placing reliance on its earlier decisions in the case of Sahney (SC) by placing reliance on its earlier decisions in the case of Sahney Steel & Press Works Ltd. -vs- CIT (supra) and CIT-vs- Ponni Sugars and Steel & Press Works Ltd. Ponni Sugars and Chemicals Ltd. (supra) reaffirmed that the purpose test' is the essen Chemicals Ltd. (supra) reaffirmed that the purpose test' is the essential Chemicals Ltd. (supra) reaffirmed that the purpose test' is the essen test that is to be adopted in determining the character of a subsidy. test that is to be adopted in determining the character of a subsidy. test that is to be adopted in determining the character of a subsidy. The outward form in which the subsidy is granted is not determinative The outward form in which the subsidy is granted is not determinative The outward form in which the subsidy is granted is not determinative of the issue. Since, in the given case object of granting entertainment of the issue. Since, in the given case object of granting entertainment of the issue. Since, in the given case object of granting entertainment duty subsidy was to promote the construction of multiplex theatre duty subsidy was to promote the constru ction of multiplex theatre complexes, the receipt of subsidy was held to be a capital receipt, not complexes, the receipt of subsidy was held to be a capital receipt, not complexes, the receipt of subsidy was held to be a capital receipt, not chargeable to tax. Similar view has been held by the Hon'ble Gujarat chargeable to tax. Similar view has been held by the Hon'ble Gujarat chargeable to tax. Similar view has been held by the Hon'ble Gujarat High Court in the case of DCIT vs. Inox Leisure Ltd. (2013) 351 ITR 314 High Court in the case of DCIT vs. Inox Leisure Ltd. (2013) 351 ITR 314 High Court in the case of DCIT vs. Inox Leisure Ltd. (2013) 351 ITR 314 (Guj.) wherein the High Court held that entertainment tax exemption he High Court held that entertainment tax exemption he High Court held that entertainment tax exemption enabling the assessee to set up a new unit or expand the existing unit enabling the assessee to set up a new unit or expand the existing unit enabling the assessee to set up a new unit or expand the existing unit is a capital receipt. 10. Further, reliance is placed on the decision of the Apex Court in Further, reliance is placed on the decision of the Apex Court in Further, reliance is placed on the decision of the Apex Court in the case of CIT vs Shree Balaji Alloys [Civil Appeal No. 10061 OF the case of CIT vs Shree Balaji Alloys [C ivil Appeal No. 10061 OF 20111 wherein the court upheld the decision of the Hon'ble High Court 20111 wherein the court upheld the decision of the Hon'ble High Court 20111 wherein the court upheld the decision of the Hon'ble High Court of Jammu & Kashmir in case of Shree Balaji Alloys -vs- of Jammu & Kashmir in case of Shree Balaji Alloys CIT (2011) S1 DTR 217 (J&K), which relying on the principles laid down by the DTR 217 (J&K), which relying on the principles laid down by the DTR 217 (J&K), which relying on the principles laid down by the Hon'ble Apex Court in the case of Sahney Steel and Press Works Ltd Hon'ble Apex Court in the ca se of Sahney Steel and Press Works Ltd (Supra) & Ponni Sugars (Supra) had held that subsidy received with (Supra) & Ponni Sugars (Supra) had held that subsidy received with (Supra) & Ponni Sugars (Supra) had held that subsidy received with
Everest Industries Ltd. 17 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
the object of creating avenues for Perpetual Employment, to eradicate the object of creating avenues for Perpetual Employment, to eradicate the object of creating avenues for Perpetual Employment, to eradicate the social problem of unemployment in the State by accelerating the social problem of unemployment in the State by accelerating the social problem of unemployment in the State by accelerating industrial development is capital receipt. opment is capital receipt. 11. Reliance is also placed on the decision of the Jurisdictional Reliance is also placed on the decision of the Jurisdictional Reliance is also placed on the decision of the Jurisdictional High Court in CIT vs. Harinagar Sugar Mills Ltd. (ITA No. 1132 of 2014 High Court in CIT vs. Harinagar Sugar Mills Ltd. (ITA No. 1132 of 2014 High Court in CIT vs. Harinagar Sugar Mills Ltd. (ITA No. 1132 of 2014 order dated. 04-01-2017) (Bom) wherein it has been held that subsidy 2017) (Bom) wherein it has been held that subsidy 2017) (Bom) wherein it has been held that subsidy received for the purpose of attracting capital investment and to received for the purpos e of attracting capital investment and to encourage setting up/expansion of existing units would be on capital encourage setting up/expansion of existing units would be on capital encourage setting up/expansion of existing units would be on capital account not chargeable to tax. The Hon'ble High Court relying on the account not chargeable to tax. The Hon'ble High Court relying on the account not chargeable to tax. The Hon'ble High Court relying on the decision of the Hon'ble Apex Court in CIT vs. Ponni Sugars & Chemicals decision of the Hon'ble Apex Court in CIT vs. Ponni Sugars & Chemicals decision of the Hon'ble Apex Court in CIT vs. Ponni Sugars & Chemicals Ltd. (supra) reiterated the fact that it is the object or purpose of the (supra) reiterated the fact that it is the object or purpose of the (supra) reiterated the fact that it is the object or purpose of the subsidy which would decide its character as revenue or capital. subsidy which would decide its character as revenue or capital. subsidy which would decide its character as revenue or capital. 12. In the case of Zenith Fibres Ltd. vs. ITO (2009 In the case of Zenith Fibres Ltd. vs. ITO (2009-TIO1 TIO1-468-ITAT- Mum) the assessee claimed sales tax incentive (exemption) Mum) the assessee claimed sales tax incentive (exemption) as capital Mum) the assessee claimed sales tax incentive (exemption) receipt. The Mumbai Tribunal relying on the decision in the case of receipt. The Mumbai Tribunal relying on the decision in the case of receipt. The Mumbai Tribunal relying on the decision in the case of Reliance Industries Ltd. (Supra) held that the Incentive was given in Reliance Industries Ltd. (Supra) held that the Incentive was given in Reliance Industries Ltd. (Supra) held that the Incentive was given in several instalments depending on the setting up and expansion of the several instalments depending on the setting up and expansion of the several instalments depending on the setting up and expansion of the industrial site and object of the said subsidy is in nature industrial site and object of the sai d subsidy is in nature of sales tax exemption was to fund the cost of setting up an industry. of sales tax exemption was to fund the cost of setting up an industry. of sales tax exemption was to fund the cost of setting up an industry. The Hon'ble Tribunal therefore held that what is of vital significance is The Hon'ble Tribunal therefore held that what is of vital significance is The Hon'ble Tribunal therefore held that what is of vital significance is the purpose and object of the scheme and merely because the monies the purpose and object of the scheme and merely because the monies the purpose and object of the scheme and merely because the monies are received after production commences, it cannot be said, irrespective re received after production commences, it cannot be said, irrespective re received after production commences, it cannot be said, irrespective of the purpose and object of the scheme that the receipt is of revenue of the purpose and object of the scheme that the receipt is of revenue of the purpose and object of the scheme that the receipt is of revenue nature. 13. Reliance is also placed on the decision of the Kolkata ITAT in Reliance is also placed on the decision of the Kolkata ITAT in Reliance is also placed on the decision of the Kolkata ITAT in the case of Ambuja Cement Eastern Ltd--DCIT (ITA. Nos. 2475 & 2476 the case of Ambuja Cement Eastern Ltd DCIT (ITA. Nos. 2475 & 2476 (Kol.) of 2005). In the said case the Hon'ble ITAT held that the facts of (Kol.) of 2005). In the said case the Hon'ble ITAT held that the facts of (Kol.) of 2005). In the said case the Hon'ble ITAT held that the facts of the case and the legal issues involved are similar to the case of the case and the legal issues involved are similar to the case of the case and the legal issues involved are similar to the case of Reliance Industries Ltd. (Supra), as adjudicated upon by the ITAT. Reliance Industries Ltd. (Supra), as adjudicated upon by the ITAT. Reliance Industries Ltd. (Supra), as adjudicated upon by the ITAT. Special Bench, Mumbai. In that case also, the purpose behind granting Special Bench, Mumba i. In that case also, the purpose behind granting the subsidy by the Maharashtra Government was dispersal of the subsidy by the Maharashtra Government was dispersal of the subsidy by the Maharashtra Government was dispersal of industries out of the Bombay-Thane congested industrial belt area as industries out of the Bombay Thane congested industrial belt area as well as industrialization of the state especially in its backward regions. well as industrialization of the state especially in its backward regions. well as industrialization of the state especially in its backward regions. Unlike the case of Sahney Steel (supra), where the sales tax incentive ike the case of Sahney Steel (supra), where the sales tax incentive ike the case of Sahney Steel (supra), where the sales tax incentive was given simply for the purpose of helping the industries in carrying was given simply for the purpose of helping the industries in carrying was given simply for the purpose of helping the industries in carrying on their existing businesses, in both the Reliance Industries (supra) on their existing businesses, in both the Reliance Industries (supra) on their existing businesses, in both the Reliance Industries (supra)
Everest Industries Ltd. 18 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
case and in the case of the assessee, the relevant Schemes of the case and in the case of the assessee, the relev ant Schemes of the Maharashtra and West Bengal Governments respectively worked on Maharashtra and West Bengal Governments respectively worked on Maharashtra and West Bengal Governments respectively worked on the capital field viz. setting up of the industrial units in certain the capital field viz. setting up of the industrial units in certain the capital field viz. setting up of the industrial units in certain specified areas and were also for the specific purposes of the specified areas and were also for the specific purposes of the specified areas and were also for the specific purposes of the respective states viz. decongestion of the saturated Bombay respective states viz. decongestion of the saturated Bombay-Pune belt in the case of Maharashtra and industrialization of the state in case of in the case of Maharashtra and industrialization of the state in case of in the case of Maharashtra and industrialization of the state in case of West Bengal The ITAT further observed that another specific purpose of West Bengal The ITAT further observed that another specific purpose of West Bengal The ITAT further observed that another specific purpose of the state viz. environmental pollution removal was also served. Hence, the state viz. environmental pollution removal was also served. Hence, the state viz. environmental pollution removal was also served. Hence, it cannot be considered that by granting subsidy to the assessee, the considered that by granting subsidy to the assessee, the considered that by granting subsidy to the assessee, the Government of West Bengal helped the assessee company in carrying Government of West Bengal helped the assessee company in carrying Government of West Bengal helped the assessee company in carrying on its day-to-day business activities. day business activities. 14. Further, reliance is also placed on CBDT Circular No. 142 dated Further, reliance is also placed on CBDT Circular No. 142 dated Further, reliance is also placed on CBDT Circular No. 142 dated 01-08-1974 wherein the Boa 1974 wherein the Board has clarified that where the subsidy is rd has clarified that where the subsidy is primarily given for helping the growth of industries and not primarily given for helping the growth of industries and not primarily given for helping the growth of industries and not supplementing their profits, such subsidy shall be regarded as capital supplementing their profits, such subsidy shall be regarded as capital supplementing their profits, such subsidy shall be regarded as capital receipt. In coming to the said conclusion the Board has laid emphasis receipt. In coming to the said conclusion the Board has laid emphasis receipt. In coming to the said conclusion the Board has laid emphasis on the fact that under the scheme the quantum of subsidy was that under the scheme the quantum of subsidy was that under the scheme the quantum of subsidy was determined with reference to the fired capital and not the profits. The determined with reference to the fired capital and not the profits. The determined with reference to the fired capital and not the profits. The Board thus held that, “further, since the subsidy is intended to be a Board thus held that, “further, since the subsidy is intended to be a Board thus held that, “further, since the subsidy is intended to be a contribution towards capital outlay of the industrial unit, the contribution towards capital outlay of the industrial unit, the Board are contribution towards capital outlay of the industrial unit, the advised that such subsidy can be regarded as being in the nature of advised that such subsidy can be regarded as being in the nature of advised that such subsidy can be regarded as being in the nature of capital receipt in the hands of the recipient." capital receipt in the hands of the recipient." 15. Further, in the case of Piyush Kanti Chowdhury Further, in the case of Piyush Kanti Chowdhury Further, in the case of Piyush Kanti Chowdhury -vs- State of West Bengal and Ors.,2007 (3) CHN 178 (Cal) the Hon'ble Calcutta West Bengal and Ors.,2007 (3) CHN 178 (Cal) the Hon'ble Calcutta West Bengal and Ors.,2007 (3) CHN 178 (Cal) the Hon'ble Calcutta High Court held as under- High Court held as under "Therefore, the effect of the order of stay in a pending appeal before "Therefore, the effect of the order of stay in a pending appeal before "Therefore, the effect of the order of stay in a pending appeal before the Apex Court does not amount to any declaration of law' but is only the Apex Court does not amount to any declaration of law' but is only the Apex Court does not amount to any declaration of law' but is only binding upon the parties to the said proceedings and at the same time, binding upon the parties to the said proceedings and at the same time, binding upon the parties to the said proceedings and at the same time, such interim orde such interim order does not destroy the binding effect of the judgment r does not destroy the binding effect of the judgment of the High Court as a precedent because while granting the interim of the High Court as a precedent because while granting the interim of the High Court as a precedent because while granting the interim order, the Apex Court had no occasion to lay down any proposition of order, the Apex Court had no occasion to lay down any proposition of order, the Apex Court had no occasion to lay down any proposition of law inconsistent with the one declared by the High Court which is law inconsistent with the one declared by the High Court which is law inconsistent with the one declared by the High Court which is impugned." 16. In view of the aforesaid discussions it is clear that the decision In view of the aforesaid discussions it is clear that the decision In view of the aforesaid discussions it is clear that the decision of the Special Bench in the case of Reliance Industries Limited (Supra) of the Special Bench in the case of Reliance Industries Limited (Supra) of the Special Bench in the case of Reliance Industries Limited (Supra) and appellant's own case for AY 2003-04 is still a binding precedent and appellant's own case for AY 2003 04 is still a binding precedent
Everest Industries Ltd. 19 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
even if the said orders has been appealed and are pending before even if the said orders has been appealed and are pending before Hon'ble Bombay High Court. In view of the above, Ground No. 1 & 2 Hon'ble Bombay High Court. In view of the above, Ground No. 1 & 2 Hon'ble Bombay High Court. In view of the above, Ground No. 1 & 2 raised by the Revenue are dismissed.” d by the Revenue are dismissed.” 4.3.3 Since the issue in dispute is undisputedly identical to Since the issue in dispute is undisputedly identical to Since the issue in dispute is undisputedly identical to respectfully following the finding issue in assessment year 2004 assessment year 2004-05, respectfully following the finding of the Tribunal (supra of the Tribunal (supra, we uphold the order of the Ld. CIT(A) on the we uphold the order of the Ld. CIT(A) on the issue in dispute. The ground No. 1 of the appeal of the Revenue is issue in dispute. The ground No. 1 of the appeal of the Revenue is issue in dispute. The ground No. 1 of the appeal of the Revenue is accordingly dismissed. accordingly dismissed.
The ground No. 2 of the appeal of the Revenue relates to The ground No. 2 of the appeal of the Revenue relates to The ground No. 2 of the appeal of the Revenue relates to disallowance disallowance disallowance of of of provision provision provision of of of enhanced enhanced enhanced rent rent rent amounting amounting amounting to to to Rs.16,03,927/-. The . The facts in brief qua the issue in dispute are facts in brief qua the issue in dispute are that the assessee had taken land on lease from Calcutta Port Trust (CPT) the assessee had taken land on lease from Calcutta Port Trust (CPT) the assessee had taken land on lease from Calcutta Port Trust (CPT) for construction of the factory of the factory. The said lease agreement he said lease agreement was expired in February, 1998 and the CP February, 1998 and the CPT ordered ordered to renew at exorbitantly high rent which was challenged by the assessee in the exorbitantly high rent which was challenged by the assessee in the exorbitantly high rent which was challenged by the assessee in the Hon’ble Calcutta High Court. The assessee in its books of accounts Hon’ble Calcutta High Court. The assessee in its books of accounts Hon’ble Calcutta High Court. The assessee in its books of accounts debited rent of Rs.57,84,186/ debited rent of Rs.57,84,186/- but actually paid amount of but actually paid amount of Rs.41,80,259/-. According to the Assessing Officer the balance . According to the Assessing Officer the balance . According to the Assessing Officer the balance amount of Rs.16,03,927/ amount of Rs.16,03,927/- was in the nature of provision thus being in the nature of provision thus being contingent in nature contingent in nature, was not allowable. According to the Ld. was not allowable. According to the Ld. Assessing Officer, the assessee the assessee challenged the demand raised by the challenged the demand raised by the CPT before the Hon’ble High Court, t before the Hon’ble High Court, therefore, the demand raised herefore, the demand raised was not crystallized. not crystallized. The Ld. Assessing Officer relied on the decision he Ld. Assessing Officer relied on the decision of the Hon’ble Bombay High Court in the case of Standard Mills Co. of the Hon’ble Bombay High Court in the case of Standard of the Hon’ble Bombay High Court in the case of Standard Pvt. Ltd. 229 ITR 366. The Ld. Assessing Officer further relied n the Pvt. Ltd. 229 ITR 366. The Ld. Assessing Officer furthe Pvt. Ltd. 229 ITR 366. The Ld. Assessing Officer furthe
Everest Industries Ltd. 20 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
Hon’ble Calcutta High Court in the case of Hon’ble Calcutta High Court in the case of Century Enka Century Enka Ltd. (1981) 130 ITR 207 and disallowed the claim of expenses as (1981) 130 ITR 207 and disallowed the claim of expenses as (1981) 130 ITR 207 and disallowed the claim of expenses as contingent liability. The Ld. CIT(A) following the finding of the . The Ld. CIT(A) following the finding of the . The Ld. CIT(A) following the finding of the Tribunal in the case of the assessee for assessment year 2003-04 Tribunal in the case of the assessee for assessment yea Tribunal in the case of the assessee for assessment yea deleted the disallowance. deleted the disallowance.
5.1 We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. Before us, the dispute and perused the relevant material on record. Before us, the dispute and perused the relevant material on record. Before us, the Ld. Counsel of the assessee submitt Ld. Counsel of the assessee submitted that against the exorbitant ed that against the exorbitant rise of the lease rent by the CPT, the assessee filed writ petition ent by the CPT, the assessee filed writ petition ent by the CPT, the assessee filed writ petition before the Hon’ble Calcutta High Court which was dismissed in before the Hon’ble Calcutta High Court which was dismissed in before the Hon’ble Calcutta High Court which was dismissed in financial year 2004-05. 05. The Ld. Counsel referred to the copy of the e Ld. Counsel referred to the copy of the order of the Hon’ble Calcutta High Court in writ petition, which is order of the Hon’ble Calcutta High Court in writ petition order of the Hon’ble Calcutta High Court in writ petition available on page 224 to 240 of the Paper Book. Thus according to on page 224 to 240 of the Paper Book. Thus according to on page 224 to 240 of the Paper Book. Thus according to the Ld. Counsel in view of the order of the Hon’ble High Court , the Ld. Counsel in view of the order of the Hon’ble High Court the Ld. Counsel in view of the order of the Hon’ble High Court which was prior to the previous year corresponding to the which was prior to the previous year corresponding to the which was prior to the previous year corresponding to the assessment year , the payment of lease rent was duly crystallized. the payment of lease rent was duly crystallized. the payment of lease rent was duly crystallized. He further submitted that as far as recovery of lease rent from the r submitted that as far as recovery of lease rent from the r submitted that as far as recovery of lease rent from the assessee, the Hon’ble Calcutta High Court had Hon’ble Calcutta High Court had allowed allowed an interim relief and according to which the assessee had paid the lease rent. relief and according to which the assessee had paid the lease rent relief and according to which the assessee had paid the lease rent The relevant order of the Hon’ble High Court allowing interim r he relevant order of the Hon’ble High Court allowing interim relief he relevant order of the Hon’ble High Court allowing interim r is available on page 248 is available on page 248 of the paper book. The Ld. Counsel further . The Ld. Counsel further submitted that on filing regular appeal before the Hon’ble High submitted that on filing regular appeal before the Hon’ble High submitted that on filing regular appeal before the Hon’ble High Court, also the claim of the assessee was rejected also the claim of the assessee was rejected also the claim of the assessee was rejected though it was rejected in year subsequent to the assessment year under rejected in year subsequent to the assessment year under rejected in year subsequent to the assessment year under
Everest Industries Ltd. 21 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
consideration. The relevant order of the . The relevant order of the Hon’ble Hon’ble High Court is available on page 289 to 298 available on page 289 to 298 of the paper book.
5.2 In view of the order of the Hon’ble In view of the order of the Hon’ble High Court in writ petition High Court in writ petition which is before the previous year corresponding to the assessment which is before the previous year corresponding to the assessment which is before the previous year corresponding to the assessment year under consideration, therefore consideration, therefore there is no doubt that there is no doubt that liability to incur lease rent was stands lease rent was stands crystallized and the assessee has crystallized and the assessee has paid the amount only only under the order of the interim relief for interim relief for payment of the rent. T . Thus the liability of expenses already accrued of expenses already accrued however only liability to pay liability to pay was shifted. Since, the was shifted. Since, the liability for the expenses accrued in the previous year corresponding to the expenses accrued in the previous year corresponding to the expenses accrued in the previous year corresponding to the assessment year unde assessment year under consideration, it is not contingent but contingent but it is crystallized. The said he said lease rent expenses debited in profit and loss debited in profit and loss account is allowable is allowable u/s 37 of the Act. Further, the Ld. CIT(A) . Further, the Ld. CIT(A) following the order of the Tribunal in ITA No. 7910/Mum/2011 has following the order of the Tribunal in ITA No. 7910/Mum/2011 has following the order of the Tribunal in ITA No. 7910/Mum/2011 has deleted the disallowance observing as under: he disallowance observing as under:
“8.1 It is seen that the appellant has taken land on long term 8.1 It is seen that the appellant has taken land on long term 8.1 It is seen that the appellant has taken land on long term lease from Calcutta Port Trust. The initial lease agreement lease from Calcutta Port Trust. The initial lease agreement lease from Calcutta Port Trust. The initial lease agreement expired in February 1998 and while renewing the lease expired in February 1998 and while renewing the lease expired in February 1998 and while renewing the lease agreement, the CPT vide letter dated 01.03. agreement, the CPT vide letter dated 01.03.2001 offered to 2001 offered to renew the lease agreement for a period of 15 years with renew the lease agreement for a period of 15 years with renew the lease agreement for a period of 15 years with certain terms and conditions. However, the appellant found certain terms and conditions. However, the appellant found certain terms and conditions. However, the appellant found the lease rental demanded by the CPT to be high and filed a the lease rental demanded by the CPT to be high and filed a the lease rental demanded by the CPT to be high and filed a writ petition before writ petition before writ petition before the the Hon'ble Calcutta High Court the Hon'ble Calcutta High Court Hon'ble Calcutta High Court challenging challenging the enhancement of rent. During the relevant the enhancement of rent. During the relevant assessment year, the appellant has debited rent of Rs.57,84, assessment year, the appellant has debited rent of Rs.57,84, assessment year, the appellant has debited rent of Rs.57,84, 186/- to the P & L Avc, which is the actual rent demanded by to the P & L Avc, which is the actual rent demanded by to the P & L Avc, which is the actual rent demanded by the CPT; although it has paid an amount of Rs.41,80,2591 the CPT; although it has paid an amount of Rs.41,80,2591 the CPT; although it has paid an amount of Rs.41,80,2591- as per the Interim Order of the per the Interim Order of the Calcutta High Court. The Calcutta High Court. The assessing officer has disallowed Rs. 16,03,927/ assessing officer has disallowed Rs. 16,03,927/ assessing officer has disallowed Rs. 16,03,927/- being the difference difference between between Rs.57,84,186/- Rs.57,84,186/ and and Rs.41,80,259/- Rs.41,80,259/
Everest Industries Ltd. 22 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
stating that the demand raised by CPT was not an stating that the demand raised by CPT was not an stating that the demand raised by CPT was not an ascertained demand since it was disputed and hence not ascertained demand since it was disputed and hence not ascertained demand since it was disputed and hence not crystallized. crystallized. It is seen that the Hon'ble ITAT in its order for It is seen that the Hon'ble ITAT in its order for A.Y. 2003-04 in ITA No. 7910/M/2011 on 22.05.2013 has 04 in ITA No. 7910/M/2011 on 22.05.2013 has 04 in ITA No. 7910/M/2011 on 22.05.2013 has dealt with the issue and decided as hereunder: dealt with the issue and decided as hereunder: "5. We We We have have have considered considered considered submissions submissions submissions of of of Ld Ld Ld representatives of parties and orders of authorities representatives of parties and orders of authorities representatives of parties and orders of authorities below. We o below. We observe that assessee is maintaining its bserve that assessee is maintaining its accounts on mercuntile system of accounting und, accounts on mercuntile system of accounting und, accounts on mercuntile system of accounting und, therefore the provisions for lease rent made pertaining therefore the provisions for lease rent made pertaining therefore the provisions for lease rent made pertaining to this period, debited to P & L Alc for the year under to this period, debited to P & L Alc for the year under to this period, debited to P & L Alc for the year under consideration is an allowable expenditure. consideration is an allowable expenditure. The Hon ble Allahabad High Court in the case of Commissioner of Allahabad High Court in the case of Commissioner of Allahabad High Court in the case of Commissioner of Income Tax Vs. Income Tax Vs. Govind Prasad Prabhu Nath, 171 ITR Govind Prasad Prabhu Nath, 171 ITR 417 (All) has held that till the claim of the assessee was 417 (All) has held that till the claim of the assessee was 417 (All) has held that till the claim of the assessee was decided by the Hon'ble Supreme Court in an appeal decided by the Hon'ble Supreme Court in an appeal decided by the Hon'ble Supreme Court in an appeal pending, it could not be said that there was in existence pending, it could not be said that there was pending, it could not be said that there was a right in favour of the assessee to receive the amount, a right in favour of the assessee to receive the amount, a right in favour of the assessee to receive the amount, receivable on sale of own shares pursuant to an interim receivable on sale of own shares pursuant to an interim receivable on sale of own shares pursuant to an interim order passed by Hon 'ble Supreme Court. It was held order passed by Hon 'ble Supreme Court. It was held order passed by Hon 'ble Supreme Court. It was held that said amount was not assessable to tax. The that said amount was not assessable to tax. The that said amount was not assessable to tax. The Hon'ble High Court has also he Hon'ble High Court has also held in the case of ld in the case of Commissioner of Income Tax Vs. Shree Amrit Cold Commissioner of Income Tax Vs. Shree Amrit Cold Commissioner of Income Tax Vs. Shree Amrit Cold Storage, 229 ITR 641 (All) that the difference in amount Storage, 229 ITR 641 (All) that the difference in amount Storage, 229 ITR 641 (All) that the difference in amount collected by the Government, ie. the amount collected by collected by the Government, ie. the amount collected by collected by the Government, ie. the amount collected by cold storage owner and amount to be charged notified cold storage owner and amount to be charged notified cold storage owner and amount to be charged notified and pending dispute on and pending dispute on validity of notification issued validity of notification issued fixing the maximum amount of storage charges could be fixing the maximum amount of storage charges could be fixing the maximum amount of storage charges could be charged by owners, the excess amount could not be charged by owners, the excess amount could not be charged by owners, the excess amount could not be assessable in the hands of the ssessee. Similar view assessable in the hands of the ssessee. Similar view assessable in the hands of the ssessee. Similar view has also been taken by Hon'ble P & H High Court in the has also been taken by Hon'ble P & H High Court in the has also been taken by Hon'ble P & H High Court in the case of case of Commissioner of Income Tax Vs. Santa Co Income Tax Vs. Santa Co- operative Sugar Mills Ltd., 223 ITR 661 (Raj.) in view of operative Sugar Mills Ltd., 223 ITR 661 (Raj.) operative Sugar Mills Ltd., 223 ITR 661 (Raj.) the above, the above, we hold that there is no infirmity in the order ity in the order of the la CIT(A of the la CIT(A). Hence, we uphold the order of LdCI(4) Hence, we uphold the order of LdCI(4) and reject ground of appeal taken by and reject ground of appeal taken by department." department." Respectfully, following the decision of the Hon'ble ITAT on this Respectfully, following the decision of the Hon'ble ITAT on this Respectfully, following the decision of the Hon'ble ITAT on this issue, this ground of appeal is allowed. issue, this ground of appeal is allowed.”
Everest Industries Ltd. 23 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
5.3 Since, the Ld. CIT(A) has followed the binding precedent on the Since, the Ld. CIT(A) has followed the binding precedent on the Since, the Ld. CIT(A) has followed the binding precedent on the issue in dispute in the case of the assessee itself issue in dispute in the case of the assessee itself, we do not find we do not find any error in the order of the Ld. CIT(A) and accordingly, we uphold the error in the order of the Ld. CIT(A) and accordingly error in the order of the Ld. CIT(A) and accordingly same. The ground No. 2 of the appeal of the Revenue is accordingly same. The ground No. 2 of the appeal of the Revenue is accordingly same. The ground No. 2 of the appeal of the Revenue is accordingly dismissed.
In the ground No. 3, the Revenue has raised the issue of In the ground No. 3, the Revenue has raised the issue of In the ground No. 3, the Revenue has raised the issue of exemption u/s 54G of the Act allowed by the L exemption u/s 54G of the Act allowed by the Ld. CIT(A) d. CIT(A). The grounds raised by the assessee are also in relation to the grounds raised by the assessee are also in relation to the grounds raised by the assessee are also in relation to the computation of the claim u/s 54G by the assessee. computation of the claim u/s 54G by the assessee.
6.1 The facts in brief qua the issue in dispute are that the The facts in brief qua the issue in dispute are that the The facts in brief qua the issue in dispute are that the assessee has shifted the assessee has shifted the industrial undertaking from urban area to undertaking from urban area to rural area in assessment year 1995 n assessment year 1995-96 and 1996 96 and 1996-97. The land owned by the assessee in urban area owned by the assessee in urban area constituted developed land developed land as well as reserve land. land. The developed land was sold in the previous The developed land was sold in the previous year corresponding to the assessment year 2004-05, whereas year corresponding to the assessment year 2004 year corresponding to the assessment year 2004 reserve land has been sold in the previous year corresponding to land has been sold in the previous year corresponding to land has been sold in the previous year corresponding to the assessment year under consideration. The contention of the the assessment year under consideration. The contention of the the assessment year under consideration. The contention of the assessee that for reserve assessee that for reserve land, the assessee was entitled for the assessee was entitled for Transfer Development Right (TDR) and the assessee has accordingly Transfer Development Right (TDR) and the assessee has accordingly Transfer Development Right (TDR) and the assessee has accordingly sold TDR in the reserve land. The assessee shown loss under the R in the reserve land. The assessee shown loss under the R in the reserve land. The assessee shown loss under the head “long term capital gain long term capital gain” and thus no claim u/s 54G was made. and thus no claim u/s 54G was made. The Ld. Assessing Officer did not accept the computation of the long The Ld. Assessing Officer did not accept the computation of the long The Ld. Assessing Officer did not accept the computation of the long term capital loss of the assessee and term capital loss of the assessee and invoking provision provisions of section 53C of the Act, computed , computed the cost of acquisition of the assessee the cost of acquisition of the assessee and
Everest Industries Ltd. 24 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
converted the long term long term capital loss into long term capital gain and capital loss into long term capital gain and further denied the claim of the assessee for section 54G deduction. claim of the assessee for section 54G deduction. claim of the assessee for section 54G deduction. But the ld CIT(A) though allowed the claim of But the ld CIT(A) though allowed the claim of deduction u/s 54G deduction u/s 54G but upheld the computation of long term capital gain. The assessee but upheld the computation of long term capital gain. but upheld the computation of long term capital gain. is aggrieved in respect of the computation of the long term capital is aggrieved in respect of the computation of the long term capital is aggrieved in respect of the computation of the long term capital gain, whereas the Revenue is aggrieved with the deduction u/s 54G whereas the Revenue is aggrieved with the deduction u/s 54G whereas the Revenue is aggrieved with the deduction u/s 54G granted by the Ld. CIT(A). Before us granted by the Ld. CIT(A). Before us, the Ld. Counsel of the , the Ld. Counsel of the assessee submitted that in case assessee submitted that in case, the assessee get the assessee gets relief on the issue of deduction u/s 54G disputed by the Revenue of deduction u/s 54G disputed by the Revenue of deduction u/s 54G disputed by the Revenue, then the grounds raised by the assessee will be merely rendered academic. grounds raised by the assessee will be merely rendered academic. grounds raised by the assessee will be merely rendered academic. Accordingly, we firstly, we took up the ly, we took up the issue is dispute raised by the issue is dispute raised by the Revenue for adjudication for adjudication.
6.2 According to the Assessing Officer to the Assessing Officer, the assessee is not entitled the assessee is not entitled for deduction u/s 54G of the Act as for deduction u/s 54G of the Act as indutrial undertaking was undertaking was shifted from urban area to rural area in financial year 1994-95 and shifted from urban area to rural area in financial year 1994 shifted from urban area to rural area in financial year 1994 thereafter the assessee has already made investment in the unit in thereafter the assessee has already made investment in the unit in thereafter the assessee has already made investment in the unit in rural area at Lakhmapur , Lakhmapur ,Nashik which was completed before Nashik which was completed before 01.01.2002. According to the Ld. Assessing Of 01.01.2002. According to the Ld. Assessing Officer the assessee was ficer the assessee was eligible for deduction u/s 54G i eligible for deduction u/s 54G in the one year prior and two year n the one year prior and two years thereafter from the shifting of the thereafter from the shifting of the industrial undertaking from undertaking from urban to rural area. The relevant finding of the Assessing Officer is urban to rural area. The relevant finding of the Assessing Officer is urban to rural area. The relevant finding of the Assessing Officer is reproduced as under: reproduced as under:
“49.1. The The said pleadings, however, would not merit said pleadings, however, would not merit acceptance for acceptance for the following reasons -
Everest Industries Ltd. 25 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
(i) The statutory provision clearly circumscribes the (i) The statutory provision clearly circumscribes the (i) The statutory provision clearly circumscribes the investment period to be one year before and three vears investment period to be one year before and three vears investment period to be one year before and three vears upon the transfer of upon the transfer of capital asset. (i) The assessee's contention (i) The assessee's contention that there is no bar on that there is no bar on piecemeal sale of capital asset as per provision of piecemeal sale of capital asset as per provision of piecemeal sale of capital asset as per provision of Section 54G of the Act may be correct. However, the Section 54G of the Act may be correct. However, the Section 54G of the Act may be correct. However, the capital gain arising from each sale transaction of capital capital gain arising from each sale transaction of capital capital gain arising from each sale transaction of capital asset has to necessarily fit within the time period of one asset has to necessarily fit within the time period of one asset has to necessarily fit within the time period of one year befor year before and three years after the transfer of such e and three years after the transfer of such capital asset for claim of eligibility of deduction W/s capital asset for claim of eligibility of deduction W/s capital asset for claim of eligibility of deduction W/s 54G of the Act. 54G of the Act. (iii) The certificate in respect of Sales Tax exemption, (iii) The certificate in respect of Sales Tax exemption, (iii) The certificate in respect of Sales Tax exemption, issued issued issued by by by the the the SICOM SICOM SICOM dated dated dated 07.08.1996 07.08.1996 07.08.1996 and and and 01.01.2002 clearly indicate that even aft 01.01.2002 clearly indicate that even after shifting of er shifting of industrial undertaking of the assessee, located at industrial undertaking of the assessee, located at industrial undertaking of the assessee, located at Mulund, in FY 1994 Mulund, in FY 1994-95, the assessee had further 95, the assessee had further expanded the capacity of the plant at Lakhmapur, expanded the capacity of the plant at Lakhmapur, expanded the capacity of the plant at Lakhmapur, Nasik. This shows that the expansion, after shifting of Nasik. This shows that the expansion, after shifting of Nasik. This shows that the expansion, after shifting of the industrial undertaking to Lakhmap the industrial undertaking to Lakhmapur, Nasik, was ur, Nasik, was also completed before 01.01.2002 itself. The litera of also completed before 01.01.2002 itself. The litera of also completed before 01.01.2002 itself. The litera of Section 54G of the Act do not provide for exemption for Section 54G of the Act do not provide for exemption for Section 54G of the Act do not provide for exemption for any further expansion in the capacity or investment in any further expansion in the capacity or investment in any further expansion in the capacity or investment in the plant and machinery, subsequent to the original the plant and machinery, subsequent to the original the plant and machinery, subsequent to the original shifting of industrial shifting of industrial undertaking. (iv) The computation of income for AY 2000-01 and the (iv) The computation of income for AY 2000 (iv) The computation of income for AY 2000 AY 2001 AY 2001-02 indicate that the assessee had sold part of 02 indicate that the assessee had sold part of residential land during the residential land during the previous year relevant to AY previous year relevant to AY 2000.01 and the AY 2001 2000.01 and the AY 2001-02 also. However, there is no However, there is no mention of any claim ws mention of any claim ws. 54G for these assessment . 54G for these assessment years, in the notes attached with the computation of years, in the notes attached with the computation of years, in the notes attached with the computation of income. It is pertinent to note here that the assessee income. It is pertinent to note here that the assessee income. It is pertinent to note here that the assessee had, in the said notes, mentioned that they had not had, in the said notes, mentioned that they had not had, in the said notes, mentioned that they had not claimed deduction us 80IA for their Lakhmapur unit claimed deduction us 80IA for their Lakhmapur unit claimed deduction us 80IA for their Lakhmapur unit because of the neg because of the negative profit. However, there is no ative profit. However, there is no mention of the reasons for non mention of the reasons for non-claim of deduction w/s claim of deduction w/s 54G of the Act indicating thereby the assessee's own 54G of the Act indicating thereby the assessee's own 54G of the Act indicating thereby the assessee's own stand for non stand for non-eligibility of deduction W/s 54G of the Act eligibility of deduction W/s 54G of the Act for AY 2000 for AY 2000-01 and the AY 2001-02, as it did not fall 02, as it did not fall within period of one year before and three years after thin period of one year before and three years after thin period of one year before and three years after transfer of capital asset. transfer of capital asset.”
Everest Industries Ltd. 26 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
6.3 On further appeal, the Ld. CIT(A) following the finding of the On further appeal, the Ld. CIT(A) following the finding of the On further appeal, the Ld. CIT(A) following the finding of the Tribunal in assessment year 2004 Tribunal in assessment year 2004-05, allowed the exemption u/s allowed the exemption u/s 54G of the Act.
6.4 We have heard rival subm We have heard rival submission of the parties on the issue in ission of the parties on the issue in dispute and perused the relevant material on record. We are of the dispute and perused the relevant material on record. We are of the dispute and perused the relevant material on record. We are of the opinion that deduction u/s 54G of the Act is allowable qua the opinion that deduction u/s 54G of the Act is allowable qua the opinion that deduction u/s 54G of the Act is allowable qua the transfer of capital asset in the process of shifting of the industrial transfer of capital asset in the process of shifting of the transfer of capital asset in the process of shifting of the undertaking from urban area to rural area and not qua the event of urban area to rural area and not qua the event of urban area to rural area and not qua the event of shifting. The relevant finding of the Ld. CIT(A) shifting. The relevant finding of the Ld. CIT(A) on the issue in on the issue in dispute is reproduced as under: is reproduced as under:
It is seen that the appellant has not claimed exemption 11. It is seen that the appellant has not claimed exemption 11. It is seen that the appellant has not claimed exemption u/s 54G in his return of income as it had not claimed any u/s 54G in his return of income as it had not claimed any u/s 54G in his return of income as it had not claimed any capital gain on account of sale of TDR. However, during the capital gain on account of sale of TDR. However, during the capital gain on account of sale of TDR. However, during the course of assessment proceedings, vide letter dated course of assessment proceedings, vide letter dated course of assessment proceedings, vide letter dated 28.11.2008, it was submitt 28.11.2008, it was submitted before the AO that in case ed before the AO that in case capital gain, if any, is computed by the AO, then it is eligible capital gain, if any, is computed by the AO, then it is eligible capital gain, if any, is computed by the AO, then it is eligible for exemption us 54G of the Act. The AO in page no. 14 to for exemption us 54G of the Act. The AO in page no. 14 to for exemption us 54G of the Act. The AO in page no. 14 to 86 of his order, has not allowed deduction us 54G of the Act 86 of his order, has not allowed deduction us 54G of the Act 86 of his order, has not allowed deduction us 54G of the Act on the ground that to avail such exemption on the ground that to avail such exemption, the industrial , the industrial undertaking has to be shifted within one year before and undertaking has to be shifted within one year before and undertaking has to be shifted within one year before and three years after the date of transfer and since the three years after the date of transfer and since the three years after the date of transfer and since the appellant had transferred its reserved land in F.Y. 2006 appellant had transferred its reserved land in F.Y. 2006 appellant had transferred its reserved land in F.Y. 2006 while it shifted its industrial undertaking and started its while it shifted its industrial undertaking and started its while it shifted its industrial undertaking and started its commercial p commercial production in F.Y. 1994-95, it did not fall within 95, it did not fall within the stipulated period. The AO has in para 48 of his order, the stipulated period. The AO has in para 48 of his order, the stipulated period. The AO has in para 48 of his order, emphasized that "what has been stipulated in the litera in emphasized that "what has been stipulated in the litera in emphasized that "what has been stipulated in the litera in section 54G'of the Act, is the shift of the industry section 54G'of the Act, is the shift of the industry section 54G'of the Act, is the shift of the industry undertaking, withir a period of one undertaking, withir a period of one year before or three year before or three years after the date of transfer of capital asset for claiming years after the date of transfer of capital asset for claiming years after the date of transfer of capital asset for claiming deduction thereunder. The capital asset, in question herein, deduction thereunder. The capital asset, in question herein, deduction thereunder. The capital asset, in question herein, is a subject reserved' lands, which have been sold and is a subject reserved' lands, which have been sold and is a subject reserved' lands, which have been sold and transferred in the FY 2005 transferred in the FY 2005-06. In order to claim the 06. In order to claim the deductions, as envisaged us 54G of the Act, the shift of the ductions, as envisaged us 54G of the Act, the shift of the ductions, as envisaged us 54G of the Act, the shift of the industrial undertaking, therefore, has to be between the FY industrial undertaking, therefore, has to be between the FY industrial undertaking, therefore, has to be between the FY
Everest Industries Ltd. 27 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
2004-05 and the FY 2008 05 and the FY 2008-09. The records of the The records of the assessment for AY 1995 assessment for AY 1995-96 and the A. Y. 1996 96 and the A. Y. 1996-97, however, show that the industrial undertaking of the however, show that the industrial undertaking of the however, show that the industrial undertaking of the assessee was shifted from the subject larger industrial assessee was shifted from the subject larger industrial assessee was shifted from the subject larger industrial lands including the subject reserved' lands at Mulund to lands including the subject reserved' lands at Mulund to lands including the subject reserved' lands at Mulund to Lakhampur, Nasik. Consequent upon its shi Lakhampur, Nasik. Consequent upon its shift, the records ft, the records show, the transferred undertaking of the assessee had also show, the transferred undertaking of the assessee had also show, the transferred undertaking of the assessee had also started the commercial production in the FY 1994 started the commercial production in the FY 1994 started the commercial production in the FY 1994-95 itself. The records of the AY 1995 The records of the AY 1995-96 and the AY 1996 96 and the AY 1996-97 also show that the assesseee had also claimed exemption us show that the assesseee had also claimed exemption us show that the assesseee had also claimed exemption us 54G for the r 54G for the retums filed for the said assessment years. As etums filed for the said assessment years. As the industrial undertaking has already been shifted in the the industrial undertaking has already been shifted in the the industrial undertaking has already been shifted in the FY 1994,95. the assessoo cannot under any draumstancos, 1994,95. the assessoo cannot under any draumstancos, 1994,95. the assessoo cannot under any draumstancos, would be eligible to eligible to claim offsets, us 54G of the Act, from claim offsets, us 54G of the Act, from the long term capital gains derived the long term capital gains derived from the sale from the sale of the subject reserved lands and as computed above.' reserved lands and as computed above.' It is necessary to re It is necessary to recapitulate section 54G and the capitulate section 54G and the conditions necessary for its conditions necessary for its application: 1. Sec 54 is applicable when there is shifting of an 1. Sec 54 is applicable when there is shifting of an 1. Sec 54 is applicable when there is shifting of an industrial undertaking from an urban area to rural industrial undertaking from an urban are industrial undertaking from an urban are area 2. There should be a transfer of a cantal asset in 2. There should be a transfer of a cantal asset in 2. There should be a transfer of a cantal asset in consequence of such consequence of such shifting. 3. Capital gain should arise from such transfer of 3. Capital gain should arise from such transfer of 3. Capital gain should arise from such transfer of capital asset. capital asset. 4. The assessee should within a period of one year 4. The assessee should within a period of one year 4. The assessee should within a period of one year before or three years after the date of su before or three years after the date of such transfer ch transfer purchase purchase new machinery/acquire building, land, etc. machinery/acquire building, land, etc. It is essential to reconsider the events leading to the claim It is essential to reconsider the events leading to the claim It is essential to reconsider the events leading to the claim of deduction us of deduction us 54G and whether the conditions bid down 54G and whether the conditions bid down in the Act are fulilled by the Appellant. in the Act are fulilled by the Appellant. It is seen that after It is seen that after the industrial undertaking of the appellant has transferred rial undertaking of the appellant has transferred rial undertaking of the appellant has transferred to Lakhampur the land of the appellant at Mulund which to Lakhampur the land of the appellant at Mulund which to Lakhampur the land of the appellant at Mulund which consisted of residential land (where employees of the consisted of residential land (where employees of the consisted of residential land (where employees of the factory used to stay and industrial land (where the factory factory used to stay and industrial land (where the factory factory used to stay and industrial land (where the factory was located) was decided to be dispos was located) was decided to be disposed off by the ed off by the appellant. It entered into an agreement with LHCL and sold appellant. It entered into an agreement with LHCL and sold appellant. It entered into an agreement with LHCL and sold off the residential land in 1995 off the residential land in 1995-96 and 1996 1996-97. After
Everest Industries Ltd. 28 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
cessation of manufacturing in its unit at mulund it entered cessation of manufacturing in its unit at mulund it entered cessation of manufacturing in its unit at mulund it entered into a supplementary agreement with LHCL on 27.07.1995 into a supplementary agreement with LHCL on 27.07.1995 into a supplementary agreement with LHCL on 27.07.1995 for disposal for disposal of this land. However, due to disputes and However, due to disputes and defaults in payments by LHCL, the appellant approached defaults in payments by LHCL, the appellant approached defaults in payments by LHCL, the appellant approached courts and had to settle through Arbitration Award. courts and had to settle through Arbitration Award. courts and had to settle through Arbitration Award. Finally, the appellant transferred the rights in the reserved land to MIs. appellant transferred the rights in the reserved land to MIs. appellant transferred the rights in the reserved land to MIs. Nirmal Lifestyles on Nirmal Lifestyles on 20.12.2005. The appellant states that . The appellant states that this transfer of capital asset was in consequence to the this transfer of capital asset was in consequence to the this transfer of capital asset was in consequence to the shifting of the industrial undertaking. shifting of the industrial undertaking. The AO has further held that the investment for exemption The AO has further held that the investment for exemption The AO has further held that the investment for exemption us 54G of the Act should be within one year and two years us 54G of the Act should be within one year and two years us 54G of the Act should be within one year and two years from the date o from the date of shifting of industrial undertaking and in f shifting of industrial undertaking and in order to claim deduction, the shift should have been order to claim deduction, the shift should have been order to claim deduction, the shift should have been between 2004 2004-05 and 2008-09. The AO further contends that the appellant has sold land The AO further contends that the appellant has sold land The AO further contends that the appellant has sold land earlier and piece wise sale of capital asset and investment earlier and piece wise sale of capital asset and investment earlier and piece wise sale of capital asset and investment of the gain t of the gain thereof is not envisaged in the Act. He has also hereof is not envisaged in the Act. He has also stated that deduction u/s 54G of the Act was not available stated that deduction u/s 54G of the Act was not available stated that deduction u/s 54G of the Act was not available for expansion in capacity and investment in plant & for expansion in capacity and investment in plant & for expansion in capacity and investment in plant & machinery machinery after after the the date date of of shifting of of industrial industrial undertaking. undertaking. These issues have been explicitly These issues have been explicitly discussed in the discussed in the Combined Order of Combined Order of Hon’ble ITAT in the case of the in the case of the Appellant for the A.Y.04 Appellant for the A.Y.04-05 ,05-06,07-08,08-09 pronounced pronounced on 15.09.2017. The ITAT while adjudicating on the on 15.09.2017. The ITAT while adjudicating on the on 15.09.2017. The ITAT while adjudicating on the disallowance made u/s 54 G of the Act in Para 4 of its disallowance made u/s 54 G of the Act in Para 4 of its disallowance made u/s 54 G of the Act in Para 4 of its Order has held as under : Order has held as under : 4.Next effective ground of appeal (GOA.6 4.Next effective ground of appeal (GOA.6- -8)is about disallowance made u/s.54 G of the Act. With regard disallowance made u/s.54 G of the Act. With regard disallowance made u/s.54 G of the Act. With regard to to to admissibility admissibility admissibility of of of claim, claim, claim, made made made by by by the the the assessee,u/s.54G of the Act,the AO observed that in assessee,u/s.54G of the Act,the AO observed that in assessee,u/s.54G of the Act,the AO observed that in the computation of income under the head income the computation of income under the head income the computation of income under the head income from capital from capital gains the assessee had computed net gains the assessee had computed net loss from sale of land, that it had claimed that an loss from sale of land, that it had claimed that an loss from sale of land, that it had claimed that an amount of Rs.6.79 crores had been invested in plant amount of Rs.6.79 crores had been invested in plant amount of Rs.6.79 crores had been invested in plant and and and machinery machinery machinery (P&M)head for (P&M)head (P&M)head for for the factory the factory the factory at at at Lakhampur Nasik,that Rs.20 crores were claimed to Lakhampur Nasik,that Rs.20 crores were claimed to Lakhampur Nasik,that Rs.20 crores were claimed to have been invested in t have been invested in the capital gain account he capital gain account
Everest Industries Ltd. 29 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
scheme as per section 54G(2),that the claim for the scheme as per section 54G(2),that the claim for the scheme as per section 54G(2),that the claim for the said amount had been taken at NIL because of loss said amount had been taken at NIL because of loss said amount had been taken at NIL because of loss computed under the head capital gains. Referring to computed under the head capital gains. Referring to computed under the head capital gains. Referring to the provisions of the section,he held that the capital the provisions of the section,he held that the capital the provisions of the section,he held that the capital asset in question was p asset in question was plot of land that was sold in lot of land that was sold in the year 2004,that from the past records it was clear the year 2004,that from the past records it was clear the year 2004,that from the past records it was clear that the industrial undertaking had been shifted to that the industrial undertaking had been shifted to that the industrial undertaking had been shifted to Nasik and it had started commercial production in the Nasik and it had started commercial production in the Nasik and it had started commercial production in the AY.1995 AY.1995-96,that the assessee had claimed exemption 96,that the assessee had claimed exemption u/s. 54 for the u/s. 54 for the AY.s 1995-96 and 1996-97,that the 97,that the land was transferred in 2004 and that the period land was transferred in 2004 and that the period land was transferred in 2004 and that the period allowed by the Act should have been between 2003 allowed by the Act should have been between 2003 allowed by the Act should have been between 2003 and 2007 for claiming deduction u/s. 54G, that the and 2007 for claiming deduction u/s. 54G, that the and 2007 for claiming deduction u/s. 54G, that the industrial undertaking had been shifted in the industrial undertaking had been shifted in the industrial undertaking had been shifted in the FY.1994 FY.1994- 95,that the assessee could not by any see could not by any stretch of imagination claim that was applicable for stretch of imagination claim that was applicable for stretch of imagination claim that was applicable for the sale of land in the FY.2003 the sale of land in the FY.2003-04,that the contention 04,that the contention of the assessee that there was no bar on piece-meal of the assessee that there was no bar on piece of the assessee that there was no bar on piece sale of capital asset as per the provisions of section sale of capital asset as per the provisions of section sale of capital asset as per the provisions of section 54G was incorrect, t 54G was incorrect, that the capital gains arising from hat the capital gains arising from each sale transaction of capital asset had to each sale transaction of capital asset had to each sale transaction of capital asset had to necessarily fit in the time period of one year before necessarily fit in the time period of one year before necessarily fit in the time period of one year before and three years after the transfer of such capital and three years after the transfer of such capital and three years after the transfer of such capital asset for being eligible for deduction u/s.54G of the asset for being eligible for deduction u/s.54G of the asset for being eligible for deduction u/s.54G of the Act, that shifti Act, that shifting of original industrial undertaking ng of original industrial undertaking was complete before 01/01/2002 itself, that the was complete before 01/01/2002 itself, that the was complete before 01/01/2002 itself, that the provisions of section 54G did not intend to give provisions of section 54G did not intend to give provisions of section 54G did not intend to give exemption for any further expansion in the capacity exemption for any further expansion in the capacity exemption for any further expansion in the capacity or investment in plant and machinery subsequent to or investment in plant and machinery subsequent to or investment in plant and machinery subsequent to original shifting original shifting of industrial undertaking, that the of industrial undertaking, that the computation of income for the AY.s 2000-01 and computation of income for the AY.s 2000 computation of income for the AY.s 2000 2001-02 indicated that the assessee had sold part of 02 indicated that the assessee had sold part of 02 indicated that the assessee had sold part of residential land during the previous year relevant to residential land during the previous year relevant to residential land during the previous year relevant to those AY.s also, that there was no mention of any those AY.s also, that there was no mention of any those AY.s also, that there was no mention of any claim u/s. 54 fo claim u/s. 54 for the said AY.s in the notes submitted r the said AY.s in the notes submitted with the computation of income.Finally,he held that with the computation of income.Finally,he held that with the computation of income.Finally,he held that claim made by the assessee for deduction u/s. 54G claim made by the assessee for deduction u/s. 54G claim made by the assessee for deduction u/s. 54G was not admissible for the year under consideration. was not admissible for the year under consideration. was not admissible for the year under consideration. 4.1.After considering the submission of the assessee 4.1.After considering the submission of the assessee 4.1.After considering the submission of the assessee and the and the assessment order, the FAA held that the assessment order, the FAA held that the section 54G had to be read as a whole, that the section 54G had to be read as a whole, that the section 54G had to be read as a whole, that the phrase ‘in consequence of’related to the period of 3 phrase ‘in consequence of’related to the period of 3 phrase ‘in consequence of’related to the period of 3
Everest Industries Ltd. 30 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
years after the date of transfer of the capital asset years after the date of transfer of the capital asset years after the date of transfer of the capital asset referred to in the provisions of section 54G(1) of the referred to in the provisions of section 54G(1) of the referred to in the provisions of section 54G(1) of the Act,that the assessee had already claimed and had at the assessee had already claimed and had at the assessee had already claimed and had also been allowed also been allowed the benefit of special deduction the benefit of special deduction u/s. 54G in the earlier years, that it could not be u/s. 54G in the earlier years, that it could not be u/s. 54G in the earlier years, that it could not be allowed the same deduction again.Finally,she upheld allowed the same deduction again.Finally,she upheld allowed the same deduction again.Finally,she upheld the order of the AO. the order of the AO. 4.2.Before us,the AR argued that th 4.2.Before us,the AR argued that the assessee had e assessee had fully satisfied all condition for claiming deduction fully satisfied all condition for claiming deduction fully satisfied all condition for claiming deduction u/s.54G,that undertaking was shifted from urban u/s.54G,that undertaking was shifted from urban u/s.54G,that undertaking was shifted from urban area to non area to non-urban area i.e. from Mulund to urban area i.e. from Mulund to Lakhampur,that as a consequence of shifting of Lakhampur,that as a consequence of shifting of Lakhampur,that as a consequence of shifting of undertaking capital asset (rights in the land)had also undertaking capital asset (rights in the land)had undertaking capital asset (rights in the land)had been transferred,that the assessee had utilised the been transferred,that the assessee had utilised the been transferred,that the assessee had utilised the proceeds from the transfer for purchase/acquisition proceeds from the transfer for purchase/acquisition proceeds from the transfer for purchase/acquisition of specified assets within a period of one year,that an of specified assets within a period of one year,that an of specified assets within a period of one year,that an amount of 6.79 crores had been appropriated amount of 6.79 crores had been appropriated amount of 6.79 crores had been appropriated towards purchase of P&M at Lakhampur, that Rs.20 towards purchase of P&M at Lakhampur, that Rs.2 towards purchase of P&M at Lakhampur, that Rs.2 crores had been deposited under the Capital Gains crores had been deposited under the Capital Gains crores had been deposited under the Capital Gains Accounts Scheme 1988,that the time limit of three Accounts Scheme 1988,that the time limit of three Accounts Scheme 1988,that the time limit of three year had to be taken from the date of transfer of year had to be taken from the date of transfer of year had to be taken from the date of transfer of capital asset and not from the date of shifting of capital asset and not from the date of shifting of capital asset and not from the date of shifting of industrial undertaking,that the word transfer was industrial undertaking,that the word transfer was industrial undertaking,that the word transfer was used in conjunction with capital asset, and utilisation d in conjunction with capital asset, and utilisation d in conjunction with capital asset, and utilisation of the capital gains arising therefrom, that the word of the capital gains arising therefrom, that the word of the capital gains arising therefrom, that the word shifting shifting shifting was was was prefixed prefixed prefixed with with with phrase phrase phrase industrial industrial industrial undertaking,that it had shifted its undertaking to undertaking,that it had shifted its undertaking to undertaking,that it had shifted its undertaking to Lakhmpur in AY.1995 Lakhmpur in AY.1995-96, that to obtain economic 96, that to obtain economic benefits from vacant land it entered into development its from vacant land it entered into development its from vacant land it entered into development agreement,that due to the dispute with the developer agreement,that due to the dispute with the developer agreement,that due to the dispute with the developer the matter was contended before the courts,that after the matter was contended before the courts,that after the matter was contended before the courts,that after settlement of dispute it had transferred the capital settlement of dispute it had transferred the capital settlement of dispute it had transferred the capital asset in the very next year to another developer, that asset in the very next year to another develope asset in the very next year to another develope all the conditions of section 54G were duly complied all the conditions of section 54G were duly complied all the conditions of section 54G were duly complied with,that the AO and the FAA had misread the law. with,that the AO and the FAA had misread the law. with,that the AO and the FAA had misread the law. The DR argued that industrial unit was shifted before The DR argued that industrial unit was shifted before The DR argued that industrial unit was shifted before nine years of purchasing of plant and machinery and nine years of purchasing of plant and machinery and nine years of purchasing of plant and machinery and depositing depositing depositing of of of money money money in in in the the the specified specified specified ba bank ba account,that investment was not made in the time account,that investment was not made in the time account,that investment was not made in the time limit prescribed by the Act. limit prescribed by the Act.
Everest Industries Ltd. 31 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
4.3. We have heard the rival submissions and 4.3. We have heard the rival submissions and 4.3. We have heard the rival submissions and perused the material before us. We find that during perused the material before us. We find that during perused the material before us. We find that during the previous year relevant to the assessment year the previous year relevant to the assessment year the previous year relevant to the assessment year 1995-96 the assessee had sh 96 the assessee had shifted its industrial ifted its industrial undertaking out of Mumbai, that it had entered into undertaking out of Mumbai, that it had entered into undertaking out of Mumbai, that it had entered into an agreement with Lok group for transfer of an agreement with Lok group for transfer of an agreement with Lok group for transfer of development rights for the industrial land at Mulund, development rights for the industrial land at Mulund, development rights for the industrial land at Mulund, that because of litigation the agreement with Lok that because of litigation the agreement with Lok that because of litigation the agreement with Lok group was terminated, that later on group was terminated, that later on the assessee the assessee entered into a new agreement with NL for a entered into a new agreement with NL for a entered into a new agreement with NL for a consideration of Rs.64.92 crores,that it made a claim consideration of Rs.64.92 crores,that it made a claim consideration of Rs.64.92 crores,that it made a claim that it was entitled for deduction u/s. 54G of the Act. that it was entitled for deduction u/s. 54G of the Act. that it was entitled for deduction u/s. 54G of the Act. 4.3.1.Before proceeding further,it would be useful to 4.3.1.Before proceeding further,it would be useful to 4.3.1.Before proceeding further,it would be useful to consider the background of the sec consider the background of the section 54G of the tion 54G of the Act.Section 280 ZA of the Act,dealing with the shifting Act.Section 280 ZA of the Act,dealing with the shifting Act.Section 280 ZA of the Act,dealing with the shifting of an assessee from an urban area to another of an assessee from an urban area to another of an assessee from an urban area to another area,was omitted from 01.04.1987 and on the same area,was omitted from 01.04.1987 and on the same area,was omitted from 01.04.1987 and on the same day section 54G was introduced in the Act.In his day section 54G was introduced in the Act.In his day section 54G was introduced in the Act.In his budget Speec,Hon’ble budget Speec,Hon’ble budget Speec,Hon’ble Minister Minister Minister of Finance,while of Finance, of Finance, introducing the Finance Act, 1987 stated as under: introducing the Finance Act, 1987 stated as under: introducing the Finance Act, 1987 stated as under: "83. Concentration of industries in many of our "83. Concentration of industries in many of our urban urban areas areas poses poses serious serious problems problems of of congestion, pollution and hazards. In order to In order to encourage industries to shift out of such areas, encourage industries to shift out of such areas, I propose to exempt capital gains made on the I propose to exempt capital gains made on the sale of land and buildings in such areas sale of land and buildings in such areas provided these are reinvested in approved provided these are reinvested in approved relocation schemes." Notes on clause for the Finance Bill,1987 r Notes on clause for the Finance Bill,1987 reads as under: eads as under: “The new section 54G provides for exemption of “The new section 54G provides for exemption of capital gains on transfer of assets in cases of capital gains on transfer of assets in cases of industrial undertaking shifting from urban industrial undertaking shifting from urban area. Sub-section (1) provides that if an section (1) provides that if an assessee transfers a long-term capital asset in term capital asset in the nature of machinery, plant, building or land f machinery, plant, building or land used for the purposes of the business of the used for the purposes of the business of the industrial under taking situated in an urban industrial under taking situated in an urban area in connection with the shifting of such area in connection with the shifting of such undertaking to a non-urban area, and within a urban area, and within a
Everest Industries Ltd. 32 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
period of one year before or three years after period of one year before or three yea the date of transfer, purchases new machinery the date of transfer, purchases new machinery or plant and acquires land or building or or plant and acquires land or building or constructs build ing for the purposes of his constructs build ing for the purposes of his business in the area to which the under taking business in the area to which the under taking is shifted or incurs expenses on shifting the is shifted or incurs expenses on shifting the original asset and transferring ansferring the the establishment of the undertaking to such area establishment of the undertaking to such area and incurs expenses on such other purposes as and incurs expenses on such other purposes as may be specified in a scheme framed by the may be specified in a scheme framed by the Central Government, the capital gain shall be Central Government, the capital gain shall be exempt to the extent such gain has been exempt to the extent such gain has been utilised for the aforesaid purposes. Explanation resaid purposes. Explanation to sub-section (1) defines 'urban area' on the section (1) defines 'urban area' on the lines of the definition in section 280Y." lines of the definition in section 280Y." The relevant part of the Memorandum Explaining the The relevant part of the Memorandum Explaining the The relevant part of the Memorandum Explaining the Provisions in the Finance Bill, 1987, reads as under : Provisions in the Finance Bill, 1987, reads as under : Provisions in the Finance Bill, 1987, reads as under : "34. Under the existing provisions of section "34. Under the existing provisions of section 280ZA of the Income- tax Act, any company tax Act, any company owning an industrial undertaking situated in owning an industrial undertaking situated in an urban area, is entitled for a tax credit an urban area, is entitled for a tax credit certificate with reference to the amount of the certificate with reference to the amount of the tax payable on capital gains arising from the ising from the transfer of its machinery, plant, etc., to any transfer of its machinery, plant, etc., to any other area. These provisions have not proved to other area. These provisions have not proved to be very effective. With a view to promoting be very effective. With a view to promoting decongestion of urban areas and bal anced decongestion of urban areas and bal anced regional growth, the Bill seeks to exempt regional growth, the Bill seeks to exempt capital gains arising on transfer of long ing on transfer of long-term capital assets in the nature of machinery, capital assets in the nature of machinery, plant, building or land used for the purposes of plant, building or land used for the purposes of the business of the industrial undertaking the business of the industrial undertaking situated in an urban area in connection with situated in an urban area in connection with the shifting of such industrial undertaking from the shifting of such industrial undertaking fro an urban area to a non-urban urban area. area. Accordingly, capital gains arising in such cases Accordingly, capital gains arising in such cases will be exempt to the extent they are utilised will be exempt to the extent they are utilised within a period of one year before or three within a period of one year before or three years after the date of transfer, for the years after the date of transfer, for the purchase of new machinery or plant or purchase of new machinery or plant or acquiring land and building, etc., for the acquiring land and building, etc., for the
Everest Industries Ltd. 33 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
purpose of the business in the area to which purpose of the business in the area to which the undertaking is shifted or incurs expenses the undertaking is shifted or incurs expenses on shifting the original asset and transfer ring on shifting the original asset and transfer ring the establishment of the undertaking to such the establishment of the undertaking to such area and incurs expenses as may be specified. may be specified. As a consequential measure, section 280ZA of As a consequential measure, section 280ZA of the Income-tax Act is proposed to be omitted. tax Act is proposed to be omitted. These amendments will take effect from 1st These amendments will take effect from 1st April, 1988, and will, accordingly, apply in April, 1988, and will, accordingly, apply in relation to the assessment year 1988-89 and relation to the assessment year 1988 subsequent years." On a conjoint reading of the rs." On a conjoint reading of the aforesaid Budget Speech, Notes on clauses and aforesaid Budget Speech, Notes on clauses and Memorandum Explaining the Finance Bill of Memorandum Explaining the Finance Bill of 1987, it becomes clear that the idea of omitting 1987, it becomes clear that the idea of omitting section 280ZA and introducing on the same section 280ZA and introducing on the same date section 54G was to do away with the tax date section 54G was to do away with the ta credit certificate scheme together with the prior credit certificate scheme together with the prior approval required by the Board and to approval required by the Board and to substitute the repealed provision with the new substitute the repealed provision with the new scheme contained in section 54G of the Act. scheme contained in section 54G of the Act. 4.3.2.The opening portion of section 54G reads as follow: 4.3.2.The opening portion of section 54G reads as follow: 4.3.2.The opening portion of section 54G reads as follow: Subject to the p Subject to the provisions of sub-section (2), where the section (2), where the capital gain arises from the transfer of a capital asset……..” capital gain arises from the transfer of a capital asset……..” capital gain arises from the transfer of a capital asset……..” In our opinion,the most important and decisive factor for In our opinion,the most important and decisive factor for In our opinion,the most important and decisive factor for claiming the deduction,arising of capital gain,is transfer of claiming the deduction,arising of capital gain,is transfer of claiming the deduction,arising of capital gain,is transfer of capital asset.In other words,capit capital asset.In other words,capital gains and transfer of al gains and transfer of specified assests should have a direct and live link.Shifting specified assests should have a direct and live link.Shifting specified assests should have a direct and live link.Shifting of undertaking is also important,but the tax incidence will of undertaking is also important,but the tax incidence will of undertaking is also important,but the tax incidence will come into picture only after assets are transferred.The come into picture only after assets are transferred.The come into picture only after assets are transferred.The purpose behind the section is to decongest the urban purpose behind the section is to decongest the urban purpose behind the section is to decongest the urban areas and to shift the industries from the cities.In that sense it is and to shift the industries from the cities.In that sense it is and to shift the industries from the cities.In that sense it is a welfare legislation.As per the settled principles of taxation a welfare legislation.As per the settled principles of taxation a welfare legislation.As per the settled principles of taxation benevolent provisions of Act should always be interpreted benevolent provisions of Act should always be interpreted benevolent provisions of Act should always be interpreted liberally.The intention behind the section is clear that liberally.The intention behind the section is clear that liberally.The intention behind the section is clear that assessee should invest the sale proceeds of sale of e should invest the sale proceeds of sale of e should invest the sale proceeds of sale of specified assets in industrialisation or should deposit the specified assets in industrialisation or should deposit the specified assets in industrialisation or should deposit the same in a designated bank account. same in a designated bank account. The assessee,in the case under consideration,had entered The assessee,in the case under consideration,had entered The assessee,in the case under consideration,had entered in to an agreement with a developer for selling rights in in to an agreement with a developer for selling rights in in to an agreement with a developer for selling rights in the plots of land. plots of land. But,the agreement was cancelled later on due But,the agreement was cancelled later on due
Everest Industries Ltd. 34 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
to differences between the assessee and the developer.It to differences between the assessee and the developer.It to differences between the assessee and the developer.It found a new developer and sold the specified assets found a new developer and sold the specified assets found a new developer and sold the specified assets resulting in accruing of capital gains.There is no doubt that resulting in accruing of capital gains.There is no doubt that resulting in accruing of capital gains.There is no doubt that after receiving the s after receiving the sale proceeds from the developer,the ale proceeds from the developer,the assessee had invested the money in purchasing P&M and assessee had invested the money in purchasing P&M and assessee had invested the money in purchasing P&M and part of it was deposited in a designated bank account. part of it was deposited in a designated bank account. part of it was deposited in a designated bank account. P &M purchased by it at the time of shifting the premises had &M purchased by it at the time of shifting the premises had &M purchased by it at the time of shifting the premises had nothing to do with the new P & M acquired after s nothing to do with the new P & M acquired after s nothing to do with the new P & M acquired after sale of capital assets.There is no precondition in the section that capital assets.There is no precondition in the section that capital assets.There is no precondition in the section that new machinery should be purchased at the time of shifting new machinery should be purchased at the time of shifting new machinery should be purchased at the time of shifting of industrial undertaking.No undertaking can function of industrial undertaking.No undertaking can function of industrial undertaking.No undertaking can function without P&M.But, the assessee can purchase machinery without P&M.But, the assessee can purchase machinery without P&M.But, the assessee can purchase machinery even after shifting and even after shifting and commissioning of business from the commissioning of business from the new premises. new premises. Expansion of business can take place any Expansion of business can take place any time. Generally, Generally, shifting of industrial unit from urban to shifting of industrial unit from urban to rural areas take place simultaneously. But, rural areas take place simultaneously. But, in a few cases,there can be time lag between shifting of unit a cases,there can be time lag between shifting of unit a cases,there can be time lag between shifting of unit and receipt of capital gains. In such cases what is be considered receipt of capital gains. In such cases what is be considered receipt of capital gains. In such cases what is be considered is sale of assets and receipt of capital gains. is sale of assets and receipt of capital gains. Considering the peculiar facts and circumstances of the Considering the peculiar facts and circumstances of the Considering the peculiar facts and circumstances of the case, we are of the opinion that the AO and the FAA had we are of the opinion that the AO and the FAA had we are of the opinion that the AO and the FAA had wrongly denied the benefit of wrongly denied the benefit of the section 54 G of the Act to the section 54 G of the Act to the assessee. the assessee. Grounds No. 6-8 are decided in favour of the 8 are decided in favour of the assesssee.” 6.5 Since, the Ld. CIT(A) has followed the binding precedent of the Since, the Ld. CIT(A) has followed the binding precedent of the Since, the Ld. CIT(A) has followed the binding precedent of the Tribunal in the case of the assessee itself Tribunal in the case of the assessee itself, we do not find any error we do not find any error in the order of the Ld. CIT(A) on the issue in dispute and the Ld. CIT(A) on the issue in dispute and the Ld. CIT(A) on the issue in dispute and accordingly we uphold the same. The ground No. 3 of the Revenue accordingly we uphold the same. The ground No. 3 of the Revenue accordingly we uphold the same. The ground No. 3 of the Revenue is accordingly dismissed. is accordingly dismissed.
6.6 Since the assessee has already Since the assessee has already been allowed relief in respect of allowed relief in respect of deduction u/s 54G of the Act deduction u/s 54G of the Act while adjudicating groun while adjudicating ground No. 3 of the appeal of revenue, the grounds raised by the assessee are rendered , the grounds raised by the assessee are rendered , the grounds raised by the assessee are rendered academic and therefore we are not required to adjudicate upon the academic and therefore we are not required to adjudicate upon the academic and therefore we are not required to adjudicate upon the
Everest Industries Ltd. 35 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
same . The grounds of the assessee grounds of the assessee are accordingly dismissed as accordingly dismissed as infructuous.
The ground No. 4 of the app The ground No. 4 of the appeal of the Revenue relates to eal of the Revenue relates to addition by the sales tax incentives while computing book profit u/s addition by the sales tax incentives while computing book profit u/s addition by the sales tax incentives while computing book profit u/s 115JB of the Act.
7.1 Brief facts qua the issue in dispute Brief facts qua the issue in dispute are that the Assessing that the Assessing Officer did not make any addition for book profit u/s 115JB of the Officer did not make any addition for book profit u/s 115JB of the Officer did not make any addition for book profit u/s 115JB of the Act as in the case of the assessee already taxable income was in the case of the assessee already taxable income was in the case of the assessee already taxable income was assesed in regular provisions of the Act. However, before the Ld. in regular provisions of the Act. However, before the Ld. in regular provisions of the Act. However, before the Ld. CIT(A) the assessee filed additional ground for adjudicating the CIT(A) the assessee filed additional ground for adjudicating the CIT(A) the assessee filed additional ground for adjudicating the sales tax incentives of Rs.4,38,56,713/ sales tax incentives of Rs.4,38,56,713/- while computing the book while computing the book profit u/s 115JB of the Act. The Ld. CIT(A) in detailed finding in it u/s 115JB of the Act. The Ld. CIT(A) in detailed finding in it u/s 115JB of the Act. The Ld. CIT(A) in detailed finding in para 12.1 allowed the ground of the assessee observing as under: para 12.1 allowed the ground of the assessee observing as under para 12.1 allowed the ground of the assessee observing as under
“12.1 Ground Nos. 9 & 10 is directed against interest 12.1 Ground Nos. 9 & 10 is directed against interest 12.1 Ground Nos. 9 & 10 is directed against interest levied u/s 234B & levied u/s 234B & 234D This ground of appeal relates 234D This ground of appeal relates to interest levied us 234B & 234D. It is held that the to interest levied us 234B & 234D. It is held that the to interest levied us 234B & 234D. It is held that the charging of interest being mandatory in nature and charging of interest being mandatory in nature and charging of interest being mandatory in nature and therefore, the AO has no discretion for not charging the therefore, the AO has no discretion for not charging the therefore, the AO has no discretion for not charging the interest u/s 234A, 234B, 234C & 234D, in view of the interest u/s 234A, 234B, 234C & 234D, in view of the interest u/s 234A, 234B, 234C & 234D, in view of the decision of Hon'ble Supreme Court in the case of CIT vs. sion of Hon'ble Supreme Court in the case of CIT vs. sion of Hon'ble Supreme Court in the case of CIT vs. Anjum M.H. Ghoswala 252 ITR Anjum M.H. Ghoswala 252 ITR-1. The AO, however, is 1. The AO, however, is directed to allow the consequential relief on account of directed to allow the consequential relief on account of directed to allow the consequential relief on account of the above findings in the previous grounds. This ground the above findings in the previous grounds. This ground the above findings in the previous grounds. This ground of appeal is decided accordingly. of appeal is decided accordingly.” 7.2 We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that dispute and perused the relevant material on record. We find that dispute and perused the relevant material on record. We find that the Tribunal in the case of the assessee for assessment year 2008- the Tribunal in the case of the assessee for assessment year 2008 the Tribunal in the case of the assessee for assessment year 2008
Everest Industries Ltd. 36 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
09 in ITA No. 1423/Mum/2020 has adjudicated the issue in favour 09 in ITA No. 1423/Mum/2020 has adjudicated the issue in favou 09 in ITA No. 1423/Mum/2020 has adjudicated the issue in favou of the assessee observing as under: of the assessee observing as under:
The grounds raised by the Revenue relates to The grounds raised by the Revenue relates to The grounds raised by the Revenue relates to finding of Ld. CIT(A) for excluding the ‘sales tax finding of Ld. CIT(A) for excluding the ‘sales tax finding of Ld. CIT(A) for excluding the ‘sales tax incentive’ amount while computing the book profit under incentive’ amount while computing the book profit under incentive’ amount while computing the book profit under section 115 JB of the Act. section 115 JB of the Act. 6. The briefly stated facts qua the issue in dispute The briefly stated facts qua the issue in dispute The briefly stated facts qua the issue in dispute are that case of the assessee was reopened on one of are that case of the assessee was reopened on one of are that case of the assessee was reopened on one of the ground of sales the ground of sales-tax exemption/incentive was tax exemption/incentive was wrongly reduced for the purpose of book profit under wrongly reduced for the purpose of book profit under wrongly reduced for the purpose of book profit under section 115JB of the Act by the Assessing Officer section 115JB of the Act by the Assessing Officer section 115JB of the Act by the Assessing Officer accepting it as a capital receipt. In the reassessment cepting it as a capital receipt. In the reassessment cepting it as a capital receipt. In the reassessment completed, the Assessing Officer observed that for the completed, the Assessing Officer observed that for the completed, the Assessing Officer observed that for the purpose of section115JB(2), every assessee being a purpose of section115JB(2), every assessee being a purpose of section115JB(2), every assessee being a company shall prepare its profit and loss account for the company shall prepare its profit and loss account for the company shall prepare its profit and loss account for the relevant previous year in accordance w relevant previous year in accordance with the provisions ith the provisions of Part II and III of Schedule VI to the Companies Act of Part II and III of Schedule VI to the Companies Act of Part II and III of Schedule VI to the Companies Act 1956. The first provisio to section 115JB of the Act, 1956. The first provisio to section 115JB of the Act, 1956. The first provisio to section 115JB of the Act, further provides that while preparing the annual further provides that while preparing the annual further provides that while preparing the annual accounts including the profit and loss account, the accounts including the profit and loss account, the accounts including the profit and loss account, the accounting policies, the ac accounting policies, the accounting standard and counting standard and method method method and and and rates rates rates adopted adopted adopted for for for calculating calculating calculating the the the depreciation shall be the same as adopted by the depreciation shall be the same as adopted by the depreciation shall be the same as adopted by the company for the purpose of preparing such accounts company for the purpose of preparing such accounts company for the purpose of preparing such accounts including the profit and loss account and laid before the including the profit and loss account and laid before the including the profit and loss account and laid before the company at its annual general b company at its annual general body meeting, to which ody meeting, to which permissible adjustment are to be made as mentioned in permissible adjustment are to be made as mentioned in permissible adjustment are to be made as mentioned in ‘Explanation ‘Explanation-1’ to section 115JB of the Act. According to 1’ to section 115JB of the Act. According to the Assessing Officer, the item of capital receipt is not the Assessing Officer, the item of capital receipt is not the Assessing Officer, the item of capital receipt is not covered in the ‘Explanation covered in the ‘Explanation-1’ to section 115 JB of the 1’ to section 115 JB of the Act. Thus, the assessee can reduce the amount for the s, the assessee can reduce the amount for the s, the assessee can reduce the amount for the purpose of computation of the book profit as mentioned purpose of computation of the book profit as mentioned purpose of computation of the book profit as mentioned in ‘Explanation in ‘Explanation-1’ of section 115JB of the Act only and 1’ of section 115JB of the Act only and cannot reduce any other amount, even the capital cannot reduce any other amount, even the capital cannot reduce any other amount, even the capital receipt for the purpose of computing book profit u receipt for the purpose of computing book profit u receipt for the purpose of computing book profit under section 115 JB of the Act. The Ld. Assessing Officer section 115 JB of the Act. The Ld. Assessing Officer section 115 JB of the Act. The Ld. Assessing Officer referred to the decision of the Hon’ble Bombay High referred to the decision of the Hon’ble Bombay High referred to the decision of the Hon’ble Bombay High Court in the case of CIT Vs Veekay Lal Investment Co. Court in the case of CIT Vs Veekay Lal Investment Co. Court in the case of CIT Vs Veekay Lal Investment Co. Ltd 249 ITR 597 (Bom); Hon’ble Kerala High Court in the Ltd 249 ITR 597 (Bom); Hon’ble Kerala High Court in the Ltd 249 ITR 597 (Bom); Hon’ble Kerala High Court in the case of NJ Jose and company Vs ACIT, case of NJ Jose and company Vs ACIT, 174 Taxman 174 Taxman
Everest Industries Ltd. 37 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
141 (Kerala) ; decision of the Tribunal in the case of 141 (Kerala) ; decision of the Tribunal in the case of 141 (Kerala) ; decision of the Tribunal in the case of Growth Avenue Securities 126 ITD 179 ( Delhi Growth Avenue Securities 126 ITD 179 ( Delhi Growth Avenue Securities 126 ITD 179 ( Delhi-Trib); decision of the Tribunal in the case of DCIT Vs Bombay decision of the Tribunal in the case of DCIT Vs Bombay decision of the Tribunal in the case of DCIT Vs Bombay Diamond Co. 32(1) ITCL 456 (Mum Diamond Co. 32(1) ITCL 456 (Mum-ITAT) ; decision of ITAT) ; decision of the Special bench of Tribunal, the Special bench of Tribunal, Hyderabad in the case of Hyderabad in the case of Rain Commodities Vs DCIT 4 ITR (Trib.) 551 (Hyd Rain Commodities Vs DCIT 4 ITR (Trib.) 551 (Hyd Rain Commodities Vs DCIT 4 ITR (Trib.) 551 (Hyd-Trib- SB) and decision of ITAT in the case of Sumer Builder SB) and decision of ITAT in the case of Sumer Builder SB) and decision of ITAT in the case of Sumer Builder 50 SOT 198 (Mumbai 50 SOT 198 (Mumbai -Trib). He accordingly rejected the Trib). He accordingly rejected the claim of the assessee of reducing the amount of sales claim of the assessee of reducing the amount of sales claim of the assessee of reducing the amount of sales- tax incentive tax incentive for the purpose of computation of the book for the purpose of computation of the book profit. 7. On further appeal, the Ld. CIT(A) adjudicated the On further appeal, the Ld. CIT(A) adjudicated the On further appeal, the Ld. CIT(A) adjudicated the appeal on 03/12/2019, wherein allowed part relief to appeal on 03/12/2019, wherein allowed part relief to appeal on 03/12/2019, wherein allowed part relief to the assessee. the assessee. 8. Before us, the Ld. Departmental Representative Before us, the Ld. Departmental Representative Before us, the Ld. Departmental Representative relied on the order of the Assess relied on the order of the Assessing Officer and ing Officer and submitted that provisions of law do not permit for submitted that provisions of law do not permit for submitted that provisions of law do not permit for excluding the sales incentive for the purpose of book excluding the sales incentive for the purpose of book excluding the sales incentive for the purpose of book profit from the profit computed as Part II and III of profit from the profit computed as Part II and III of profit from the profit computed as Part II and III of Schedule VI of Companies Act, 1956. The Ld. counsel of Schedule VI of Companies Act, 1956. The Ld. counsel of Schedule VI of Companies Act, 1956. The Ld. counsel of the assessee, on the other the assessee, on the other hand, submitted that hand, submitted that identical issue in the case of PCIT Vs Ankit Metal & identical issue in the case of PCIT Vs Ankit Metal & identical issue in the case of PCIT Vs Ankit Metal & Power Ltd (2019) 416 ITR 591 has been decided in Power Ltd (2019) 416 ITR 591 has been decided in Power Ltd (2019) 416 ITR 591 has been decided in favour of the assessee by Hon’ble Calcutta High Court. favour of the assessee by Hon’ble Calcutta High Court. favour of the assessee by Hon’ble Calcutta High Court. He also relied on the decision of the Coordinate bench of He also relied on the decision of the Coordinate bench of He also relied on the decision of the Coordinate bench of the Bombay Tribunal the Bombay Tribunal in the case of Ambuja Cement in the case of Ambuja Cement Limited Vs Add CIT (LTU) in ITA No. 5883/Mum/2012 Limited Vs Add CIT (LTU) in ITA No. 5883/Mum/2012 Limited Vs Add CIT (LTU) in ITA No. 5883/Mum/2012 and Prism Cement Ltd Vs DCIT in ITA No. 804 and and Prism Cement Ltd Vs DCIT in ITA No. 804 and and Prism Cement Ltd Vs DCIT in ITA No. 804 and 805/Mum/2018. 805/Mum/2018. 9. We have heard rival submission of the party on We have heard rival submission of the party on We have heard rival submission of the party on the issue in dispute and perused the relevant material the issue in dispute and perused the relevant material the issue in dispute and perused the relevant material on record. However, on perusal of the order of the Ld. d. However, on perusal of the order of the Ld. d. However, on perusal of the order of the Ld. CIT(A), we find that Ld. CIT(A) had adjudicated on the CIT(A), we find that Ld. CIT(A) had adjudicated on the CIT(A), we find that Ld. CIT(A) had adjudicated on the issue that sales issue that sales-tax incentive received by the assessee tax incentive received by the assessee under the Aegis of New Packages Scheme, 1993 was under the Aegis of New Packages Scheme, 1993 was under the Aegis of New Packages Scheme, 1993 was capital in nature. The issue of reduction of the capital in nature. The issue of reduction of the capital in nature. The issue of reduction of the same from the profit and loss account for the purpose of from the profit and loss account for the purpose of from the profit and loss account for the purpose of computation of the book profit has not been adjudicated computation of the book profit has not been adjudicated computation of the book profit has not been adjudicated by the Ld. CIT(A). But this being purely a legal issue by the Ld. CIT(A). But this being purely a legal issue by the Ld. CIT(A). But this being purely a legal issue and all facts having been reproduced by the Assessing and all facts having been reproduced by the Assessing and all facts having been reproduced by the Assessing
Everest Industries Ltd. 38 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
Officer, we proceeded to adjudicat Officer, we proceeded to adjudicate in view of no e in view of no objection of both the parties. objection of both the parties. 9.1 The Hon’ble Calcutta High Court in the case of The Hon’ble Calcutta High Court in the case of The Hon’ble Calcutta High Court in the case of Ankit Metal & Power Ltd (supra), has adjudicated the Ankit Metal & Power Ltd (supra), has adjudicated the Ankit Metal & Power Ltd (supra), has adjudicated the issue as under: issue as under: “27. In this case since we have already held that in 27. In this case since we have already held that in 27. In this case since we have already held that in relevant assessment year 2010 relevant assessment year 2010-11 the incentives 'Interest incentives 'Interest subsidy' and 'Power subsidy' is a 'capital receipt and does subsidy' and 'Power subsidy' is a 'capital receipt and does subsidy' and 'Power subsidy' is a 'capital receipt and does not fall within the definition of 'Income' under Section 2(24) not fall within the definition of 'Income' under Section 2(24) not fall within the definition of 'Income' under Section 2(24) of Income Tax Act, 1961 and when a receipt is not on in the of Income Tax Act, 1961 and when a receipt is not on in the of Income Tax Act, 1961 and when a receipt is not on in the character of income it cannot form part of the book character of income it cannot form part of the book character of income it cannot form part of the book profit under Section 115JB of the Act, 1961. In the case of under Section 115JB of the Act, 1961. In the case of under Section 115JB of the Act, 1961. In the case of AppolloTyres Lid. (supra) the income in question was AppolloTyres Lid. (supra) the income in question was AppolloTyres Lid. (supra) the income in question was taxable but was exempt under a specific provision of the Act taxable but was exempt under a specific provision of the Act taxable but was exempt under a specific provision of the Act as such it was to be included as a part of the book profit. as such it was to be included as a part of the book profit. as such it was to be included as a part of the book profit. But where a receipt i But where a receipt is not in the nature of income at all it s not in the nature of income at all it cannot be included in book profit for the purpose of cannot be included in book profit for the purpose of cannot be included in book profit for the purpose of computation under Section 115JB of the Income Tax Act, computation under Section 115JB of the Income Tax Act, computation under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest 1961. For the aforesaid reason, we hold that the interest 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question wo and power subsidy under the schemes in question wo and power subsidy under the schemes in question would have to be excluded while computing book profit under have to be excluded while computing book profit under have to be excluded while computing book profit under Section 115 JB of the Income Tax Act, 1961. Section 115 JB of the Income Tax Act, 1961.” 9.2 Further, the coordinate bench of the Tribunal in the Further, the coordinate bench of the Tribunal in the Further, the coordinate bench of the Tribunal in the case of Ambuja cements Ltd (supra) after considering the case of Ambuja cements Ltd (supra) after considering the case of Ambuja cements Ltd (supra) after considering the decision of the Hon’ble Bombay High Cou decision of the Hon’ble Bombay High Court in the case of rt in the case of Harinagar Sugar Mills ltd (supra) and decision of the Harinagar Sugar Mills ltd (supra) and decision of the Harinagar Sugar Mills ltd (supra) and decision of the Hon’ble Calcutta High Court in the case of Ankit Metals and Hon’ble Calcutta High Court in the case of Ankit Metals and Hon’ble Calcutta High Court in the case of Ankit Metals and power Ltd (supra), held as under: power Ltd (supra), held as under: “50. Ld. Ld. representatives fairly agree that the above representatives fairly agree that the above issues are now covered, in favour of issues are now covered, in favour of the assessee, by the assessee, by Hon'ble Calcutta High Court's judgment in the case of Hon'ble Calcutta High Court's judgment in the case of Hon'ble Calcutta High Court's judgment in the case of PCIT Vs Ankit metal & Power Lid 120197 416 ITR 591 PCIT Vs Ankit metal & Power Lid 120197 416 ITR 591 PCIT Vs Ankit metal & Power Lid 120197 416 ITR 591 (Call. by Hon 'ble jurisdictional High Court's judgment in (Call. by Hon 'ble jurisdictional High Court's judgment in (Call. by Hon 'ble jurisdictional High Court's judgment in the case of CIT Vs Harinagar Sugar Mills Lid [ITA No the case of CIT Vs Harinagar Sugar Mills Lid [ITA No the case of CIT Vs Harinagar Sugar Mills Lid [ITA No 1132 of 2014, dated 4* 1132 of 2014, dated 4* January 2017] and by a January 2017] and by a coordinate bench decision in the case of ACIT Vs JSW coordinate bench decision in the case of ACIT Vs JSW coordinate bench decision in the case of ACIT Vs JSW Steel Limited [(2019) 112 taxmann.com 55 (Mum)]. Steel Limited [(2019) 112 taxmann.com 55 (Mum)]. Steel Limited [(2019) 112 taxmann.com 55 (Mum)]. Learned Departmental Representative, however, relied Learned Departmental Representative, however, relied Learned Departmental Representative, however, relied upon the stand of the authorities below. upon the stand of the authorities below.
Everest Industries Ltd. 39 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
We find that a coordinate bench We find that a coordinate bench of this Tribunal, in of this Tribunal, in JSW Ltd's case (supra), has inter alia, JSW Ltd's case (supra), has inter alia, observed as follows: follows: 47. We further noted that Hon'ble Kolkata High Court, in 47. We further noted that Hon'ble Kolkata High Court, in 47. We further noted that Hon'ble Kolkata High Court, in the case of Pr. the case of Pr. CIT v. Ankit Metal & Power Lid. |20191 Power Lid. |20191 109 taxmann.com 93/266 Taxman 237 Ltd. had 109 taxmann.com 93/266 Taxman 237 Ltd. had 109 taxmann.com 93/266 Taxman 237 Ltd. had considered an identical issue and after considering the considered an identical issue and after considering the considered an identical issue and after considering the decision of Hon'ble Supreme Court in the case of Apollo decision of Hon'ble Supreme Court in the case of Apollo decision of Hon'ble Supreme Court in the case of Apollo Tyres Lid. (supra) held that when a receipt is not in the Tyres Lid. (supra) held that when a receipt is not in the Tyres Lid. (supra) held that when a receipt is not in the character of income as d character of income as defined under section 2(24) of efined under section 2(24) of the IT. Act, 1961, then it cannot form part of the book the IT. Act, 1961, then it cannot form part of the book the IT. Act, 1961, then it cannot form part of the book profit us 115JB of the IT. Act, 1961. The Hon'ble High profit us 115JB of the IT. Act, 1961. The Hon'ble High profit us 115JB of the IT. Act, 1961. The Hon'ble High court, further observed that sales tax subsidy received court, further observed that sales tax subsidy received court, further observed that sales tax subsidy received by the assessee is capital receipt and does not come by the assessee is capital receipt and does not come by the assessee is capital receipt and does not come within within definition of income under section 2(24) of the IT. definition of income under section 2(24) of the IT. Act, 1961 and when, a receipt is not a in the nature of Act, 1961 and when, a receipt is not a in the nature of Act, 1961 and when, a receipt is not a in the nature of income, it cannot form part of book profit us 115JB of income, it cannot form part of book profit us 115JB of income, it cannot form part of book profit us 115JB of the IT. Act, 1961. The Court, further observed that the the IT. Act, 1961. The Court, further observed that the the IT. Act, 1961. The Court, further observed that the facts of case before the Hon'ble Sup facts of case before the Hon'ble Supreme Court in the reme Court in the case of Apollo Tyres Ltd. (supra) were altogether case of Apollo Tyres Ltd. (supra) were altogether case of Apollo Tyres Ltd. (supra) were altogether difference, where the income in question was taxable, difference, where the income in question was taxable, difference, where the income in question was taxable, but was exempt under a specific provision of the Act, but was exempt under a specific provision of the Act, but was exempt under a specific provision of the Act, and as such it was to be included as a part of book and as such it was to be included as a part of book and as such it was to be included as a part of book profit, but where the receip profit, but where the receipt is not in the nature of t is not in the nature of income at all, it cannot be included in book profit for the income at all, it cannot be included in book profit for the income at all, it cannot be included in book profit for the purpose of computation u/s 115JB of the I.T. Act, 1961. purpose of computation u/s 115JB of the I.T. Act, 1961. purpose of computation u/s 115JB of the I.T. Act, 1961. 48. We further noted that the ITAT special bench of 48. We further noted that the ITAT special bench of 48. We further noted that the ITAT special bench of Kolkata Tribunal, in the care of Sutlej Cotton mills Lad, Kolkata Tribunal, in the care of Sutlej Cotton mills Lad, Kolkata Tribunal, in the care of Sutlej Cotton mills Lad, v. Asset. CITIES 3EnS I ID 22 kaan, SEy, held that d sset. CITIES 3EnS I ID 22 kaan, SEy, held that d sset. CITIES 3EnS I ID 22 kaan, SEy, held that d particular receipt, which is admittedly not an income particular receipt, which is admittedly not an income particular receipt, which is admittedly not an income cannot be brought to tax under the deeming provisions cannot be brought to tax under the deeming provisions cannot be brought to tax under the deeming provisions of section 115J of the Act, as it defies the basic intention of section 115J of the Act, as it defies the basic intention of section 115J of the Act, as it defies the basic intention behind introduction of provisions of s behind introduction of provisions of section 115JB of the ection 115JB of the Act. The ITAT Jaipur bench, in case of Shree Cement Act. The ITAT Jaipur bench, in case of Shree Cement Act. The ITAT Jaipur bench, in case of Shree Cement Led. (supra) had considered an identical issue and held Led. (supra) had considered an identical issue and held Led. (supra) had considered an identical issue and held that incentives granted to the assessee is capital receipt that incentives granted to the assessee is capital receipt that incentives granted to the assessee is capital receipt and hence, cannot he part of book profit computed us and hence, cannot he part of book profit computed us and hence, cannot he part of book profit computed us 11SJB or the Acr 11SJB or the Acr. Similarly. the ITAT Kolkata Bench, in . Similarly. the ITAT Kolkata Bench, in the case of Sipea India (P) Lid. v. De. CIT I2017 80 the case of Sipea India (P) Lid. v. De. CIT I2017 80 the case of Sipea India (P) Lid. v. De. CIT I2017 80 taxmann.com 87 (Trib.) had considered an identical taxmann.com 87 (Trib.) had considered an identical taxmann.com 87 (Trib.) had considered an identical issue and held that when, subsidy in question is not in issue and held that when, subsidy in question is not in issue and held that when, subsidy in question is not in
Everest Industries Ltd. 40 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
the nature of income, it cannot be regarded as income the nature of income, it cannot be regarded as income the nature of income, it cannot be regarded as income even for the purpose of book profit u/s 115JB of the Act, en for the purpose of book profit u/s 115JB of the Act, en for the purpose of book profit u/s 115JB of the Act, though credited in the profit and loss account and have though credited in the profit and loss account and have though credited in the profit and loss account and have to be excluded for arriving at the book profit us 115JB of to be excluded for arriving at the book profit us 115JB of to be excluded for arriving at the book profit us 115JB of the Act. the Act. 49. Insofar as, case laws relied upon by the 49. Insofar as, case laws relied upon by the 49. Insofar as, case laws relied upon by the department, we find that all th department, we find that all those case laws have been ose case laws have been either considered by the Tribunal or Hich Court and either considered by the Tribunal or Hich Court and either considered by the Tribunal or Hich Court and came to conclusion that in those cases the capital came to conclusion that in those cases the capital came to conclusion that in those cases the capital receipt is in the nature of income, but by a specific receipt is in the nature of income, but by a specific receipt is in the nature of income, but by a specific provision, the same has been exempted and hence, the provision, the same has been exempted and hence, the provision, the same has been exempted and hence, the came to the conclusion came to the conclusion that, once particular receipt is that, once particular receipt is routed through profit and loss account, then it should be routed through profit and loss account, then it should be routed through profit and loss account, then it should be part of book profit and cannot be excluded, while part of book profit and cannot be excluded, while part of book profit and cannot be excluded, while arriving at book profit u/s 115JB of the Act 1961. arriving at book profit u/s 115JB of the Act 1961. arriving at book profit u/s 115JB of the Act 1961. 50. In this view of the matter and considering the ratio 50. In this view of the matter and considering the ratio 50. In this view of the matter and considering the ratio of cas of case laws discussed hereinabove, we are of the e laws discussed hereinabove, we are of the considered view that when a particular receipt is considered view that when a particular receipt is considered view that when a particular receipt is exempt from tax under the Income tax law, them the exempt from tax under the Income tax law, them the exempt from tax under the Income tax law, them the same cannot be considered for the purpose of same cannot be considered for the purpose of same cannot be considered for the purpose of computation of book profit w/s 115JB of the IT.Act computation of book profit w/s 115JB of the IT.Act computation of book profit w/s 115JB of the IT.Act 1961. Hence, we 1961. Hence, we direct the Ld. AO to exclude sales tax direct the Ld. AO to exclude sales tax subsidy received by the assessee amounting to Rs. subsidy received by the assessee amounting to Rs. subsidy received by the assessee amounting to Rs. 36,15,49,828/ 36,15,49,828/- from book profits computed w/s 115JB from book profits computed w/s 115JB of the IT. Act, 1961. of the IT. Act, 1961. 52. We see no reasons to take any other view of the matter 52. We see no reasons to take any other view of the matter 52. We see no reasons to take any other view of the matter than the view so taken by the coo than the view so taken by the coordinate bench. Respectfully rdinate bench. Respectfully following the same, we uphold the plea of the assessee and following the same, we uphold the plea of the assessee and following the same, we uphold the plea of the assessee and direct the Assessing Officer to exclude the sales tax incentive direct the Assessing Officer to exclude the sales tax incentive direct the Assessing Officer to exclude the sales tax incentive subsidy for computing book profit under section 115 JB of the subsidy for computing book profit under section 115 JB of the subsidy for computing book profit under section 115 JB of the Act. The assessee gets the relief according Act. The assessee gets the relief accordingly.” 9.3 The issue in the decisions cited by the Assessing The issue in the decisions cited by the Assessing The issue in the decisions cited by the Assessing officer is of capital income under the capital gain, which is officer is of capital income under the capital gain, which is officer is of capital income under the capital gain, which is liable for tax but the capital receipt in the case of the liable for tax but the capital receipt in the case of the liable for tax but the capital receipt in the case of the assessee has been held as not as part of income at all and assessee has been held as not as part of income at all and assessee has been held as not as part of income at all and not liable for tax not liable for tax in the decision in the case Ankit Metal and in the decision in the case Ankit Metal and Powers ltd. (supra) , which has been followed in the case of Powers ltd. (supra) , which has been followed in the case of Powers ltd. (supra) , which has been followed in the case of Ambuja Cement Limited (supra). The issue in dispute being Ambuja Cement Limited (supra). The issue in dispute being Ambuja Cement Limited (supra). The issue in dispute being squarely covered by the decision of the coordinate bench of squarely covered by the decision of the coordinate bench of squarely covered by the decision of the coordinate bench of
Everest Industries Ltd. 41 ITA No. 1421 & 717/Mum/2020 1421 & 717/Mum/2020
the Tribunal (supra), the groun the Tribunal (supra), the grounds raised by the Revenue are ds raised by the Revenue are accordingly dismissed. accordingly dismissed.” 7.3 The issue in dispute being identical to the issue decided by the The issue in dispute being identical to the issue decided by the The issue in dispute being identical to the issue decided by the Tribunal (supra), we do not find any error in the order of the Ld. we do not find any error in the order of the Ld. we do not find any error in the order of the Ld. CIT(A) on the issue in dispute and accordingly CIT(A) on the issue in dispute and accordingly, we uphold the same we uphold the same. The ground No. 4 of the Revenue is accordingly dismissed. The ground No. 4 of the Revenue is accordingly dismissed. The ground No. 4 of the Revenue is accordingly dismissed.
In the result, the appeal of the Revenue is dismissed whereas In the result, the appeal of the Revenue is dismissed whereas In the result, the appeal of the Revenue is dismissed whereas the appeal of the assessee is dismissed as infructuous. the appeal of the assessee is dismissed as infructuous. the appeal of the assessee is dismissed as infructuous.
Order pronounced in the open Court on nounced in the open Court on 21/0 /08/2023. Sd/ Sd/- Sd/- (PAVAN KUMAR PAVAN KUMAR GADALE) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 21/08/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai
