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Income Tax Appellate Tribunal, DELHI
Before: SH. G.S.PANNU, HON’BLE & SH. ANUBHAV SHARMA
The Revenue has filed this appeal against order dated 14.12.2018 in appeal no. 202/2017-18 for the assessment year 2015-16 passed by Commissioner of Income Tax (Appeals)-12, New Delhi (hereinafter referred to as the First Appellate Authority in short ‘Ld. F.A.A.’) in regard to the assessment order dated 30.12.2017 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by ACIT, Circle 34(1), New Delhi (hereinafter referred to as ‘Ld. Assessing officer or in short Ld.AO’).
The facts in brief are the assessee is a proprietorship firm engaged in business of manufacturing etc. of all types of agro chemicals. It has started operations in 2008-09 at Jammu. The issue involved is whether the subsidy received on account of excise duty refund (excise roll back) by the assessee, in pursuance of the incentives announced and sanctioned vide Government of India, Ministry of Commerce and Industry, Memorandum no. 1(13)2000- NER dated June 14, 2002 and Central Excise Notification Nos. 56 and 57, dated Novermber 14, 2002 is capital or revenue receipts. The ld. AO had tried to distinguish the case of assessee from previous years and observed in para no. 4 and 5 as below :-
“4. In response, the AR of the assessee attended on 20.12.2017 and filed reply to the show cause notice. The reply of the assessee has been carefully examined and is not found tenable. In reply, the AR has only quoted the judgement of Hon’ble J&K High Court in the case of Shree Balaji Alloys which has already been discussed in para 3.2. However, no reply whatsoever has been given to the findings of the undersigned as mentioned in para 6, 6.2, 6.3 and 6.4 of the show cause notice. Therefore, the assessee has nothing to say in this regard which establishes beyond doubt that the claim of the assessee by treating the excise rollback subsidy as capital receipt does not hold ground and the assessee is also well aware of that.
In view of all the above facts and circumstances of the case, the undersigned is of the firm view that the true intent and purpose underlying in the new industrial policy and other concessions for the State of Jammu and Kashmir contemplated by the Office Memorandum of June 14, 2002 and statutory notifications issued in this behalf has not been correctly appreciated by the assessee firm. More so, so long as the assessee was enjoying the benefit of weighted deduction @ 100% of the profits derived from the undertaking, this element of subsidy, received in' earlier years, was continuously being treated by it as revenue in nature as this was not resulting into any statutory tax liability. The moment the assessee steps into the sixth year of its production from the date of its inception, it tries to take a contrary stand altogether. The action of the assessee, thus, clearly shows the intention of reducing its tax liability by treating the receipt of subsidy as capital in nature.”
The Ld. CIT(A) had allowed the appeal holding that the excise refund / subsidy received by the assessee was capital receipt, in nature.
Heard and perused the record.
5. On behalf of the revenue Ld. DR submitted assessee had himself first claimed the receipt to be revenue in nature and thereafter filed a revised return claiming it to be Capital receipt. It was submitted that Ld. CIT(A) has fallen in error in following the judgment of Hon’ble High Court of Jammu & Kashmir in CIT(A) vs. Sri Bala Ji Alloys and Anrs. which was rightly distinguished by Ld. AO.
On the other hand, Ld. Counsel for assessee heavily relied the judgment of ITAT Ahmedabad Bench in in DCIT vs. M/s. Munnjal Auto Industries and in assessee’s own case for assessment year 2013-14 of Delhi Bench to contend that as with regard to the assessee’s case, there is no error in findings of Ld. CIT(A).
Giving thoughtful consideration to the matter on record it can be observed that in assessee’s own case for assessment year 2013-14 a Co- ordinate bench decision in M/s. Crystal Crop Protection Pvt. Ltd. vs. DCIT dated 19.12.2019 in was relied which in turn had further relied the judgment of Hon’ble Jammu and Kashmir High Court in CIT vs. Shree Balaji Alloys CIT 333 ITR 335 which has been further sustained with Hon’ble Apex Court. The cumulative effect of same is that excise duty subsidy and interest subsidies given in pursuant of new industrial policy were held to be capital receipts. No distinction, as attempted by Ld. AO, can be drawn on the basis that as earlier income was subject to benefit of weighed deduction @ 100% of the profits derived from undertaking which no more was available, that would change the nature of receipt to revenue instead of Capital.
Consequently respectfully following the findings in regard to the assessee’s own case for assessment year 2013-14, the grounds cannot be sustained. The Appeal of revenue is dismissed.
Order pronounced in the open court on 15th June, 2022.