DCIT, CIRCLE - 19(1), DELHI vs. PC JEWELLER LIMITED, DELHI

O R D E R PER Ms. MADHUMITA ROY, JM:

The Revenue is in appeal and the assessee has filed cross-objections against respective orders of Ld. First Appellate Authority for A.Y. 2015-16 & 2016-17. Revenue’s appeal in & assessee’s cross- objection in CO No. 67/Del/2024 for A.Y. 2015-16 are against order dated 14.03.2024 (DIN & Order No. ITBA/APL/S/250/2023-24/1062638632(1) passed by the Ld. CIT(A)/JCIT(A), Ranchi, arising out of intimation dated 24.07.2016 (DIN: CPC/1516/A6/1544723246) passed by the CPC, Bangalore, under Section 143(1) of the Income Tax Act, 1961 (hereinafter assessee’s cross-objection in CO No. 96/Del/2024 for A.Y. 2016-17 are against order dated 15.05.2024 (DIN & Order No. ITBA/NFAC/S/250/2024- 25/1064909200(1) passed by the Ld. CIT(A)/NFAC, Delhi, arising out of assessment dated 26.12.2018 (Order No. ITBA/AST/S/143(3)/2018- 19/1014577646(1) passed by the ACIT, Circle 19(2), Delhi under Section 143(1) of the Act. Since some common issues are involved for adjudication, common order for the sake of convenience.

(Revenue’s appeal for A.Y. 2015-16):

2 The appeal filed by revenue assessee is time barred by 8 days. The learned DR during the course of hearing has made request for condonation of delay and learned AR has not seriously disputed the delay aspect. Thus delay of 8 days in filing the instant appeal by the revenue is condoned.

3. The Revenue has raised following grounds of appeal:

1. Whether on the facts and in the circumstances of the case, the Ld.CIT(A) was right in allowing the claim of the assessee in treating the share issue expenses as revenue in nature, which is in contravention to the provisions of Section 35D of the Act, relying on the decision of the Hon'ble ITAT in assessee's own case without appreciation that this issue is sub-judice before the Hon'ble High Court? 2. Whether on the facts of the case and in law, the Ld.CIT(A) was right in holding the excise duty subsidy as capital receipts whereas the same was received on revenue account and not for the purpose of acquiring any capital asset ? 3. Whether on the facts and in the circumstances of the case, the Ld.CIT(A) was right in accepting the additional ground for treatment of excise subsidy as capital receipt whereas the assessee company has itself been showing the same as revenue in nature in the AY 2010-11 to Α.Υ. 2014-15 and in the instant A.Y 2015-16 and also not revised the claim by way of filing of revised ITR ?

& 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 4. Whether on the facts of the case and in law, the Ld.CIT(A) was correct in condoning the delay of 1537 days without any reasonable cause? 4 The facts of the cases are that the assessee is a public limited company engaged in the business of manufacturing and trading of jewellery. It has filed his return of income for Assessment Year 2015-16 on 30.11.2015 declaring total income at ₹ 4,22,28,69,410/-under the normal provisions of the Act and book profit of ₹ 3,78,22,63,064/-under section 115JB of the Act. The Return of income filed by the assessee was processed under Section 143(1) of the Act by and under the intimation dated 24.07.2016 at the same return of income of ₹ 4,22,28,69,410/-under the normal provisions of the Act and book profit of ₹ 5,39,31,62,130/-under Section 115JB of the Act. Being aggrieved by and dissatisfied with the said order under intimation the assessee preferred an appeal and wherein and under the order dated 14.03.2024 Ld. CIT(A) allowed the appeal. Relevant to mention that the additional ground raised by the appellant before the Ld. CIT(A) to this effect that the excise duty exemption is a capital receipt was allowed by the Ld. CIT(A). Against the said order the revenue is in appeal before us.

5. The Revenue is in appeal in respect of the claim of expenditure incurred on initial public offer (IPO) under Section 35D of the Act in been allowed by the Ld. CIT(A) following the order passed by the ITAT in assessee’s own case. In this respect the assessee made the following submissions before the Ld. CIT(A):

“1.1 During the A.Y. 2013-14, the appellant raised Rs. 601.28 crores by issue of share capital to the public through Initial Public offer (IPO). In connection with the issue, the appellant incurred expenditure aggregating to Rs. 38 crores. 1.2 Out of the total proceeds of Rs. 601.28 crores, the appellant incurred Rs. 41.02 crores on setting up of new showrooms, Rs. 475.83 crores for the procurement of Inventory, Rs. 46.43 crores for General corporate purposes and balance Rs. 38 crores for the share issue expenses. 1.3 From the perusal of the above it can be seen that the appellant has utilized 92% of the receipts on account of public issue on working capital and balance 8% was spent on capital expenditure. 1.4The appellant claimed Rs. 60.80 lacs [1/5th of Rs. 3.04 crores (being 8% of the share issue expenses i.e. 38 crores)]to be allowed as deduction in each of the five successive previous years (commencing from A.Y. 2013-14) u/s 35D of the Act as an additional ground before Hon'ble ITAT. Hon'ble ITAT in the appellant's own case has allowed the aforesaid claim of the appellant vide order dated 07-12-2021. Copy of the order is attached as Annexure- 2. (Refer page no. 15 to 42 of PB). 1.5 The assessment year under consideration i.e. A.Y. 2015-16 is the 3rd year to claim 1/5th of the said expenditure as allowable in computing deduction u/s 35D of the Act. The appellant wishes to claim deduction of 1/5th of the said expenditure u/s 35D of the Act.”

6. Considering the order passed by the ITAT in assessee’s own case for assessment year 2013-14 and 2014-15 in and 6650/D/2017, wherein the judgment passed by the Hon’ble Apex Court was allowing the said claim with the following observation:

“The order of the Hon'ble ITAT in the appellant's own case filed by the appellant has been perused. The Hon'ble ITAT while deciding the same issue for previous AYs has referred to various judgments of coordinate branch ITAT, High Court and Supreme Court. The Hon'ble ITAT gave following decision on the issue:

"Hence, the claim of the assessee that the expenditure is in the nature of revenue expenses and hence allowable u/s 37(1) of the Act for the years in appeal in computing the total income under the normal provisions of the act as the fund raised is used as working capital by the company except an amount of Rs. 41.02 crores. As the assessee has utilised 92% of receipts on account of public issue on working capital and hence 92% of Rs.38 crores of share issue expenditure would be revenue expenditure and balance 8% of share issue expenditure which was spent on capital expenditure would not be treated as revenue expenditure. The proceeds utilized for capital expenditure, is allowable u/s 35D of the Act. Appeal of the assessee on this ground is allowed."

In view of the fact that the exactly similar issue has already been dealt in detail by Hon'ble ITAT as mentioned above, I agree with the decision taken by ITAT and hence the claim of appellant is accepted. In the result, ground no. 3 raised by the appellant is allowed.”

7. Having regard to the observation made by the Ld. CIT(A) keeping in view the order passed by the Coordinate Bench of ITAT in assessee’s own case and further the order passed by the Hon’ble Jurisdictional High Court and the Hon’ble Apex Court on identical issue, the order impugned is found to be just and proper so as to not warrant any interference. This ground of applied mutatis mutandis in Assessment Year 2016-17 having regard to the identical facts and circumstances of the matter.

“1.1 The appellant is a public limited company inter-alia engaged in the business of manufacturing and trading of jewellery. The appellant filed its return of income on 30-11-2015, declaring total income of Rs. 4,22,28,69,410/- under the normal provisions of the Income Tax Act, 1961 ("the Act") and book profits of Rs. 3,78,22,63,064/- u/s 115JB of the Act.

1.2 The aforesaid return of income was processed by Central Processing Centre, Bengaluru ("Ld. CPC") u/s 143(1) of the Act vide intimation dated 24-07-2016 at the same returned income of Rs. 4,22,28,69,410/- under the normal provisions of the Act and book profit of Rs. 5,39.31,62,130/- u/s 115JB of the Act thereby raising a demand of Rs. 10,68,47,020/- on account of short credit of Tax Deducted at Source of Rs. 5,62,830/- and short credit of Dividend Distribution Tax ("DDT") paid of Rs. 11,66,74,760/-..

2.0 Mr. Sharad Jain, the tax consultant of the appellant due to financial disputes with the appellant informed that the income declared by the appellant in the return of income has been accepted, no adjustment was made in the aforesaid intimation and not advised the appellant to file appeal before the Ld. Commissioner of Income Tax ["the CIT-(A)"]. (Appeals)

2.1 The appellant appointed new tax consultant from the month of September 2020, to review its Direct tax matters. On review of the aforesaid intimation by the appellant's new tax consultant, it was observed that a demand was raised amounting to Rs. 10,68,47,020/-. The new tax consultant advised the appellant to file an immediate appeal before Ld. CIT-(A) and also filed rectification application u/s 154 of the Act.

2.2. Further, the appellant has also raised some additional grounds before the Hon'ble ITAT in AY 2013-14 and AY 2014-15 regarding claim of deduction u/s 35D of the Act which has effect in the current year also. Later on, the Hon'ble Jurisdictional ITAT has accepted the said claim and appeal was allowed. To take the benefit of Section 35D of the Act appeal was filed.

2.3 Consequently, the appellant appealed before Ld. CIT-(A) on 07- 11-2020 and hence, the delay of 4 years and 3 months (1537 days). The period of delay is tabulated as under:- Sl. No. Particulars Date Period of delay 1 Date of receipt of Intimation 24-07-2016 issued u/s 143(1) of the Act. 2 Due date for filing of appeal 23-08-2016 3 Date of filing of appeal 07-11-2020 4 Total Days Delay 1537 5 Period of Delay 24-08-2016 to 1299 14.03.2020 6 Balance Period due to Covid 15-03-2020 to 238 19 Pandemic 07.11.2020 3.0 In respect of condonation of delay, reliance is placed on the order of Hon'ble Bombay High court in the case of M/s Vijay Vishin Meghani & Anr. Vs. DCIT (Income Tax Appeal No. 493 of 2015) wherein the Hon'ble High court relying on the order of M/s Concord of India Insurance Co. Ltd. vs. Smt. Nirmala Devi and others (AIR 1979 SC 1666) accepted the appeal with condonation of delay of 2984 days by taking plea that the 4.0 Further, reliance in this regard is placed on the order of Hon'ble Supreme court in Miscellaneous application no. 21 of 2022 regarding cognizance for Extension of Limitation has extended the period of limitation and held that the period from15-03-2020 till 28-02-2022 shall also stand excluded in computing the periods prescribed under Sections 23(4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws. Copy of the order is attached as Annexure-3.

5.0 Further, it is stated that the appellant has no intention to jeopardize the interest of revenue by delaying the filing of appeal and requests your goodself to condone the delay caused in filing of appeal.

2.1 Hon'ble Supreme Court has passed order on 10/01/2022 in In Re: Cognizance directed that for Extension of Limitation (Supreme Court of India) Miscellaneous Application No. 21 of 2022, date of order: 10/01/2022, wherein the Hon'ble Supreme Court has the period from 15/03/2020 to 28/02/2022 be excluded for the purpose of limitations as prescribed under various in various legislations. Relevant part of the order is reproduced below:

1. The order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings.

II. Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022.

& 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 III. In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply.

IV. It is further clarified that the period from 15.03.2020 till 28.02.2022 shall also stand excluded in computing the periods prescribed under Sections 23 (4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, buter limits (within which the court or tribunal can condone delay) and termination of proceedings.

This explanation was given in regard to delay of 238 days commencing from 15.3.2020 to 7.11.2020.

Nirmala Devi & Anr. (AIR 1979 SC 1666) accepted the appeal considering delay of 2984 days accepting the reason that the assessee was wrongly advised by his Chartered Account earlier not to file the appeal.

10. Having regard to this particular aspect of the matter and no malafide since being found in filing the appeal preferred by the assessee before Ld. CIT(A) which is also prima facie evident either from record or conduct of the assessee, in the interest of justice the Ld. CIT(A) found it best to decide the matter on merit instead dismissing it on the technical aspect of delay which in our considered opinion is found to be just and proper so as not to warrant interference. Thus this ground of appeal preferred by the revenue is found to be devoid of any merit and hence dismissed.

Delay filing of appeal before the Ld CIT(A) for AY 2016-17

12. The appeal preferred by the assessee before the Ld. CIT(A) is found to be barred by limitation for about 635 days which has been tabulated as follows before ld. CIT(A):

“1.2 The appellant appealed before Ld. CIT(A) on 06.10.2020 and hence, there is a delay of 1 year and 9 months (635 days). The period of delay is tabulated as under: Sl. No. Particulars Date Period of Delay 1 Date of receipt of order issued 26.12.2018 u/s 143(3) of the Act 2 Due date for filing of appeal 25.01.2019 3 Date of filing of appeal 06.10.2020 4 Total Days Delay 635 5 Period of Delay 26.10.2019 to 414 14.03.2020 6 Balance Period due to Covid- 15.03.2020 to 221 19 Pandemic 06.10.2020

13. The ld. CIT(A) considered the explanation rendered by the assessee in support of such delay. While condoning the delay ld. CIT(A) considering the explanation given by the assessee observed as follows:

1.3 Also, it is stated that the appellant has filed the appeal before Ld. CIT(A) in proceeding AY for A.Y. 2015-16 also with a delay of 4 years and 3 months (1537 days) due to the same reasons which has been condoned by the Ld. CIT(A) vide order dated 14.03.2024 Copy of the order has been attached as Annexure-2 for your kind reference.

2.0 In respect of condonation of delay, reliance is placed on the order of Hon'ble Bombay High court in the case of M/s Vijay Vishin Meghani &Anr. Vs. DCIT (Income Tax Appeal No. 493 of 2015) wherein the Hon'ble High court relying on the decision of Hon'ble Apex court in the case of M/s Concord of India Insurance Co. Ltd. Vs. Smt. Nirmala Devi and others (AIR 1979 SC 1666) accepted the appeal with condonation of delay of 2984 days bt taking plea that the assessee was wrongly advised by his chartered accountant earlier not to file an appeal. Copy of the order is attached as Annexure-3.

2.1 Further, reliance in this regard is placed on the order of Hon'ble Supreme court in Miscellaneous application no. 21 of 2022 regarding cognizance for extension of Limitation has extended the period of limitation and held that the period from 15.03.2020 till 28.02.2022 shall also stand exclude in computing the periods prescribed under Sections 23(4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 215 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and ant other laws. Copy of the order is attached as Annexure-4."

2.2 In view of the Hon'ble Apex Court order from 15-03-2020 to06- 10-2020) as prayed by the appellant is to be excluded from der above, the delay of 221 days (i.e. counting of delay.

2.3 For delay ofbalance period of 414 days (i.e. from 26.01.2019 to 14.03.2020) the appellant has relied on the order of Hon'ble Bombay High court in the case of M/s VijayVishin Meghani & Anr. vs. DCIT (Income Tax Appeal No. 493 of 2015) wherein the Hon'ble High court relying on the order of M/s Concord of India Insurance Co. Ltd. vs. Smt.Nirmala Devi & Anr. (AIR 1979 SC 1666) accepted the appeal with condonation of delay of 2984 days by taking plea that the assessee was wrongly advised by his chartered accountant earlier not to file an appeal.

2.4 I have gone through the explanation offered by the Appellant. No mala-fides in filing the appeal belatedly are prima-facie evident either from record or the conduct of the Appellant as evident from record. Hence, I feel it would be in the interest of justice to allow the matter to be contested on merits rather than dismiss it on technicalities for delay. Therefore, as an Appellate Authority, I would rather exercise my discretion to further the cause of justice. Furthering the cause of justice can on no account be held to be arbitrary or perverse.

“In the case of Improvement Trust, Ludhiana vs. Ujagar Singh &Ors. [2010 (6) TMI 660 - Supreme Court: Other Citation: 2010 (7) SCR 376, 2010 (6) SCC 786, 2010 (6) JT 205, 2010 (6) SCALE 173], it was averred/held, as follows, by the Hon'ble Supreme Court:

“ ….. After all, justice can be done only when the matter is fought on merits and in accordance with law rather than to dispose it of on such technicalities and that too at the threshold. ……….

Apart from the above, appellant would not have gained in any manner whatsoever, by not filing the appeal within the period of limitation. It is also worth noticing that delay was also not that huge, which could not have been condoned, without putting the respondents to harm or prejudice. It is the duty of the Court to see to it that justice should be done between the parties ………..

& 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 For the aforesaid reasons the impugned orders passed by Appellate Court, and order passed by the High Court, are hereby set aside and quashed. ……. “

2.5 In the case of Collector, Land Acquisition vs. Mst Mst. Katiji and Others [1987 (2)TMI 61 - Supreme Court, Other Citation: (1987) 167 ITR 471, 62 CTR 23, (1987) 66 STC 228(SC), 1987 (28) E.L.T. 185 (SC), 1987 SCC (2) 107, JT 1987 (1) 537, 1987 AIR 1353, 1987(2) SCR 387, 1987 (1) SCALE 413], it was averred/held, as follows, by the Hon'ble SupremeCourt:

“ ……… It is common knowledge that this court has been making a justifiably liberal approach in matters instituted in this court. But the message does not appear to have percolated down to all the other courts in the hierarchy. And such a liberal approach is adopted on principle as it is realized that:

1. Ordinarily, a litigant does not stand to benefit by lodging an appeal late.

2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties.

4. Every day's delay must be explained" does not mean that pedantic approach should be made. Why not every hour's delay, every second's delay. The doctrine must be applied in a rational, common sense and pragmatic manner.

& 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 5. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.

2.6 In the case of N Balakrishnan vs. M. Krishnamurthy [1998 (9) TMI 602 -Supreme Court; Other Citation: 2008 (228) E.L.T. 162 (SC), 1998 AIR 3222, 1998 (1) Suppl.SCR 403, 1998 (7) SCC 123, 1998 (6) JT 242, 1998 (5) SCALE 105], it was averred/held, as follows, by the Hon'ble Supreme Court:

“....9. It is axiomatic that condonation of delay is a matter of discretion of the court. Section 5 of the Limitation Act does not say that such discretion can be exercised only if the delay is within a certain limit. Length of delay is no matter; acceptability of the explanation is the only criterion. Sometimes delay of the shortest range may be un-condonable due to a want of acceptable explanation whereas in certain other cases, delay of a very long range can be condoned as the explanation thereof is satisfactory.

Once the court accepts the explanation as sufficient, it is the result of positive exercise of discretion and normally the superior court should not disturb such finding, much less in revisional jurisdiction, unless the exercise of discretion was on wholly untenable grounds or arbitrary or perverse. But it is a different matter when the first court refuses to condone the & 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 delay. In such cases, the superior court would be free to consider the cause shown for the delay afresh and it is open to such superior court to come to its own finding even untrammeled by the conclusion of the lower court.

The primary function of a court is to adjudicate the dispute between the parties and to advance substantial justice. The time-limit fixed for approaching the court in different situations is not because on the expiry of such time a bad cause would transform into a good cause.

11. Rules of limitation are not meant to destroy the rights of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury.

………… The law of limitation is thus founded on public policy. It is enshrined in the maxim interest "reipublicue up sit finislitium" (it is for the general welfare that a period be put to litigation). Rules of limitation are not meant to destroy the rights of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time. INCOME DEPARTMEN

12. A court knows that refusal to condone delay would result in foreclosing a suitor from putting forth his cause. There is no presumption that delay in approaching the court is always deliberate. ……….

2.7 The Hon'ble Supreme Court in B. Madhuri Goud v. B. Damodar Reddy (2012) 12 SCC 693, by referring various to earlier decisions of Superior Courts and held the following principal must be kept in mind while considering the application for condonation of delay,

(i) There should be a liberal, pragmatic, justice oriented, non- pedantic approach while dealing with an application for condonation of delay, for the courts are not supposed to legalise injustice but are obliged to remove injustice.

(ii) The terms "sufficient cause should be understood in their proper spirit, philosophy andpurpose regard being had to the fact that these terms are basically elastic and are to be applied inproper perspective to the obtaining fact-situation.

(iii) Substantial justice being paramount and pivotal the technical considerations should notbe given undue and uncalled for emphasis.

(iv) No presumption can be attached to deliberate cause of delay but, gross negligence on the part of the counsel or litigant is to be taken note of.

(v) Lack of bona fides imputable to a party seeking condonation of delay is a significant and relevant fact.

(vi) It is to be kept in mind that adherence to strict proof should not affect public justice and cause public mischief because the courts are required to be vigilant so that in the ultimate eventuate there is no real failure of justice.

& 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 (vii) The concept of liberal approach has to encapsulate the conception of reasonablenessand it cannot be allowed a totally unfettered free play.

(viii) There is a distinction between inordinate delay and a delay of short duration or fewdays, for to the former doctrine of prejudice is attracted whereas to the latter it may not be attracted. That apart, the first one warrants strict approach whereas the second calls for a liberal delineation.

(ix) The conduct, behavior and attitude of a party relating to its inaction or negligence are relevant factors to be taken into consideration. It is so as the fundamental principle is that the courts are required to weigh the scale of balance of justice in respect of both parties and the said principlecannot be given a total go by in the name of liberal approach.

(x) If the explanation offered is concocted or the grounds urged in the application are anciful, the courts should be vigilant not to expose the other side unnecessarily to face such litigation.

(xi) It is to be borne in mind that no one gets away with fraud, is representation or interolation by taking recourse to the technicalities of law of limitation.

(xii) The entire gamut of facts are to be carefully scrutinized and the approach should be based on the paradigm of judicial discretion which is founded on objective reasoning and not on individual perception.

(xiii) The State or a public body or an entity representing a collective cause should be given some acceptable latitude." In the circumstances it is submitted that it was because of the bonafide mistake on the part of the assessee that he has no knowledge about the completion of the CIT(A)'s order ex-parte and he did not inquire about the service of judgment. The appeal could not be filed in time. It is submitted that for something which happened due to inadvertence and beyond the control. Hence it is the prayer of the assessee as well as of the

15. The Revenue has further raised grounds in regard to the decision made by the Ld. First Appellate Authority in holding the excise duty subsidy as capital receipt. It is the case of the Revenue that the same was received by the assessee on revenue account and not for the purpose of acquiring any capital asset. The Revenue has further joined issue to this effect that the above ground raised by the assessee as an additional ground for treatment of excise subsidy as capital receipt whereas the same was itself shown as revenue in nature, by the assessee in the AYs 2010-11 to 2014-15 and in the instant AY 2015-16, particularly when no revised return of income was filed by the assessee for treating the excise subsidy as capital receipt. engaged in the business of manufacturing and trading of jewellery and has setup an undertaking at F-50 UPSIDC Industrial area Selaqui, Dehradun, Uttarakhand, 248011, the said undertaking commenced production with effect from 30-03-2010. Since the undertaking is located in the backward area, assessee was entitled to excise duty exemption under the Central Excise Notification No. 50/2003 - СЕ dated 10-06-2003; the assessee was entitled to 100% Excise duty exemption for a period of 10 years from the date of commencement of commercial production of the said undertaking.

The year under consideration is 6th year and the assessee has availed excise duty exemption of Rs. 87,49,36,993/-. This particular incentive has been included in the total income by the assessee and was offered to tax, which has been claimed to be treated as capital in nature by raising the additional ground before the Ld. CIT(A). It is relevant to mention that the assessee further claimed deduction under Section 80-IC of the Act and accordingly claimed deduction on the same amount and offered 70% for taxation as revenue receipt.

17. In support of its case, while raising the additional ground of appeal

before Ld. CIT(A), the assessee relied on various judgments, including – & 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 - Shree Balaji Alloys vs.- CIT 333 ITR 335; - M/s Dabur India Limited vs. Addl. CIT (ITA No. 3423/Del/2015); - M/s Greenply Industries Limited vs. ACIT (ITA No. 232/Gau / 2019); - M/s Ambuja Cements Limited vs. Addl. CIT (ITA No. 2384 / Mum / 2019); - M/s ACC Limited vs. Addl. CIT (ITA No. 6802/Del/2014).And - M/s Crystal Crop Protection (P) Ltd. vs. DCIT (ITA No. 1539/D2016)

18. Needless to mention that the same has also been relied upon by the Ld. Counsel for the assessee in support of his case before us at the time of hearing of the matter.

19. However, Remand report, therefore, was sought by ld. CIT(A) from the Ld. AO and the same was furnished by him and the following is reproduced by Ld. CIT(A) in his order: "The assessee is a public limited company engaged in the business trading of jewellery. The assessee has setup an undertaking at F-50 UPSIDC Industrial area Selaqui, Dehradun, Uttarakhand, 248011. This undertaking commenced production on 30-03-2010. As per the assessee since the said undertaking is located in the backward area, it was entitled to excise duty exemption under the Central Excise Notification No. 50/2003 - СЕ dated 10-06-2003. In terms of the said notification, the said undertaking was entitled 100% Excise duty exemption for a period of 10 years from the date of commencement of commercial production. During the year under consideration, being the 6th year, the assessee has availed excise duty exemption of Rs. 87,49,36,993/-. The incentive has been included in the total income by assessee and has offered to tax. The assessee has now raised the additional ground that the said incentive be treated as capital in nature. The assessee in its submission has filed various case laws in its favour, copy of the scheme under which exemption was granted, copy & 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 of the declaration under notification no. 50/2003, working of the said incentive, copy of the excise returns filed to substantiate its claim for treating the said incentive as capital receipt. From the perusal of the submissions of the assessee with respect to the said scheme, it appears that the objective of the scheme is to achieve industrialization in Uttarakhand and to generate employment opportunities.

In the year under consideration, the assessee has claimed deduction u/s 80-IC and accordingly claimed deduction on the said amount and offered 70% for taxation as revenue receipt. The assessee has now relied upon various judgments namely Shree Balaji Alloys -vs.- CIT 333 ITR 335, M/s Dabur India Limited vs. Addl. CIT (ITA No. 3423/Del/2015), M/s Greenply Industries Limited vs. ACIT (ITA No. 232 /Gau / 2019), M/s Ambuja Cements Limited vs. Addl. CIT (ITA No. 2384/ Mum/2019) and M/s ACC Limited vs. Addl. CIT (ITA No. 6802/Del/2014) while raising the additional ground of appeal.

However, it is important to note that the assessee has got its books of accounts audited from a qualified chartered accountant, it had verified the books of accounts as well as financial results and after due verification, it had filed its return of income. Hence, the recent claim of the assessee clearly establishes that it is nothing but change of opinion. The moot point to be decided in this case whether to classify the incentive under reference to a capital receipt not liable to tax or a case of revenue receipt to be taken into taxability under the Act.

Further in order to claim the subsidy as capital receipt as per the ratio laid down by various judgements, the assessee should have claimed it by way of filing return or revised return., whereas the assessee has not claimed it in original return nor has it filed any revised return. It is also pertinent to mention here that the Hon'ble Apex court in the case of Goetze (India) Limited vs. CIT (2006) 157 taxman 1 held that before the assessing officer the assessee cannot make a claim for deduction otherwise than by filing a return or revised return. Hence, there is no mistake in treating the subsidy as revenue receipt.

& 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 In view of the above, additional grounds raised by the assessee may not be admitted and the issue may be decided on the merits and facts of the case."

20. It is the case of the AO that books of account of the assessee were duly audited by a qualified Chartered Accountant and upon verification of the books of account and the financial results, the assessee has filed its return of income. Therefore, the claim of subsidy to be treated as capital receipt is nothing but a change of opinion. It was further pointed out by the Ld. AO in the remand report that the assessee should have claimed the said benefit by way of filing return or revised return. As the assessee has not claimed this deduction in the original return nor has filed revised return, relying upon the order passed by the Hon’ble Apex Court in the case of Goetze (India) Limited vs. CIT reported in (2006) 157 taxman 1, the Ld. AO commented that there was no mistake in treating the subsidy as revenue receipt by the Department in intimation u/s 143(1) and, therefore, this particular ground of appeal raised by the assessee before the Ld. CIT(A) may not be admitted. The assessee before the First Appellate Authority in support of his claim of excise subsidy to be treated as capital receipt via additional grounds of appeal submitted as follows:

“2.1 Before going further, your goodself would appreciate that the Ld. AO in the remand report has specifically stated that the subsidy & 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 has been granted for the with an objective to achieve industrialization in Uttarakhand and to generate employment opportunities. As the subsidy has been grated for industrialization and to generate employment opportunities as per the purpose test laid down by J&K High Court in the case of Shree Balaji Alloy -vs.- CIT (198 Taxmann 122) wherein excise duty subsidy and interest subsidy received in terms of New Industrial Policy for accelerated industries development and for generation of employment held to be capital receipt. Further, the same view has also been fortified by Hon'ble Apex Court in the case of CIT-vs. Shree Balaji Alloy. Copy of the order is attached as Annexure - 7 & 8 to the Paper Book Submission at Page No. 60 to 70). Hence, considering the same, the Ld. AO has also admitted that the same is on account of capital receipt.

2.2 The Ld. AO in its remand report at 4.3 has stated that "Assessee has got its books of accounts audited from a qualified chartered accountant, it had verified the books of accounts audited as well as financial results and after due verification, it had filed its return of income. Hence, the recent claim of the assessee clearly establishes that it is nothing but change of opinion."

2.3 In this regard, it is stated that Hon'ble Jammu and Kashmir High court in the case of M/s Shree Balaji Alloys vs. CIT (333 ITR 335) held that Excise Duty subsidy, Interest Subsidy and Insurance Subsidy received with the object of creating avenues for perpetual employment, to eradicate the social problem of unemployment in the state by accelerated industrial development is capital receipt. The same view has been upheld by Hon'ble Supreme court in Civil appeal no. 10061 of 2011 vide order dated 19-04-2016 in the case of CIT vs. Shree Balaji Alloys and others.

2.4 Further, on the identical issue, the Hon'ble Jurisdictional ITAT in the case of M/s Dabur India Limited vs. Addl. CIT (ITA No. 3423 / Del / 2015) vide order dated 24-11-2021 and Hon'ble Kolkata Tribunal in the case of Greenply Industries Limited vs. ACIT (ITA No. 232/ Gau/2019, date of order 30-03-2022) has allowed the claim of excise duty subsidy as Capital receipt not chargeable to tax under normal provision of the Act as well as in computing book profit u/s 115JB.

2.5 Considering the aforesaid decision of Hon'ble Jurisdictional ITAT in the case of M/s Dabur India Limited (supra), the appellant raised additional ground of appeal regarding claim of excise duty subsidy as capital receipt by way of letter dated 02-03-2023.

2.6 Therefore the Ld. AO is not correct in stating that the recent claim of the assessee is nothing but a change of opinion, as the appellant relying on the judgement of the Hon'ble Jurisdictional ITAT in the case of M/s Dabur India Limited (supra) has raised the aforesaid additional ground before your goodself. 3.0 Raising of claim by way of additional ground of appeal.

AO Remarks Appellant observations Ld. AO at Para No. 4.4 The appellant would like to state that, as has stated that, the per Hon'ble Apex Court decision in case claim of excise duty of M/s Goetze (India) Limited(supra) exemption as capital assessing officer does not have power to receipt was not claimed entertain fresh claim otherwise than by the assessee in the revised return. However, in the said original or revised order, i specifically stated that the return and considering appellate authorities has power admit the the decision of Hon'ble additional grounds raised for the first Apex Court in case of time in appellate proceedings. Further, M/sGoetze (India) above judgment has duly be considered in Limited vs. CIT, (157 the following cases wherein it was held Taxman 1)the assessee that C Taxman (A) /ITAT has power to cannot make a claim for admit new claim before CIT(A)/ITAT:- deduction otherwise CIT vs. M/s Pruthvi Brokers and than by filing a return Shareholders Private Limited (349 ITR or revised return. 0336) SesaGoaLtd. vs. Joint Commissioner of Income-tax ( 117 taxmann.com 96)

3.1 Further reliance in this regard is placed on the various decisions mentioned below in which the additional claim raised has been accepted: - & 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 3.2 Bombay High court in the case of CIT vs. M/s Pruthvi Brokers and Shareholders Private Limited (349 ITR 0336) wherein it was particularly held that "long line of authorities establish clearly that an assessee is entitled to raise additional grounds not merely in terms of legal submissions, but also additional claims not made in the return filed by it. From a consideration of decision of the Supreme Court rendered in the case of Jute Corpn. of India Ltd. v. CIT [1991] 187 ITR 688, it is clear that an assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. They have the jurisdiction to entertain the new claim. They may choose not to exercise their jurisdiction in a given case is another matter.

Your goodself would appreciate that the above judgment has been passed after considering the judgment of Goetze India (Supra). Copy of the order is attached as Annexure-1.

3.3 Further, reliance is also placed on the decision of Hon'ble Bombay high court in the case of Sesa Goa Ltd. vs. Joint Commissioner of Income-tax (117 Taxmann. Com 96) wherein after a detailed discussion is was held that "Although, it is true that the Appellant - Assessee did not claim any deduction in respect of amounts paid by it towards "cess" in their original return of income nor did the Appellant - Assessee file any revised return of income, according to us, this was no bar to the Commissioner (Appeals) or the ITAT to consider and allow such deductions to the Appellant - Assessee in the facts and circumstances of the present case. The record bears out that such deduction was clearly claimed by the Appellant - Assessee, both before the Commissioner (Appeals) as well as the ITAT.

3.4 Further, reliance is placed on the decision of Hon'ble Jurisdictional ITAT in the case of M/s Crystal Crop Protection (P.) Limited vs. DCIT. (ITA No. 1539 / Del /2016) wherein excise duty subsidy claim was first time made before Hon'ble ITAT and the same was accepted and adjudicated as Capital receipt. Later on, the same view was confirmed by Hon'ble High Court. Copy of the order of Hon'ble ITAT and Hon'ble High Court is attached as Anneuxre-3 & 4 for your kind perusal.

3.5 In view of above and earlier written submission, the appellant humbly requests your goodself to kindly admit the additional ground raised during the appellate proceedings and allow the claim of excise duty as capital receipt based on the merits of the case.”

21. The Ld. CIT(A) ultimately admitted the additional grounds of appeal with the following observation, particularly having regard to the judgment passed by the Hon’ble Apex Court in the case of M/s Goetze (India) Limited vs. CIT (157 Taxman 1):

“14. The additional ground pertaining to the claim of excise duty exemption as capital receipt has been supported by the appellant with various judgments. The admission of additional ground of appeal has been opposed by the AO relying on the decisions of M Goetze (India) Limited vs. CIT, (157 Taxman 1) only.

I have gone through the claims of appellant regarding admission of additional grounds and judgements in favor and the remand report of AO along with Hon’ble SC’s judgment in M/s Goetze (India) case. The major legal issue to be decide is that whether “additional ground taken by appellant for the first time before the appellate authority can be accepted or not” and "whether the decision of Hon'ble SC is a bar on the power of the appellate authority too accepting additional ground raised first time before him by appellant which he did not ITR".

& 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 In M/s Pruthvi Brokers and Shareholders Private Limited (349 ITR 0336)(2012), the Hon'ble HC of Bombay while deciding on the similar issue of claim of additional deduction under section 43B considering SC's decision in M/s Goetze provided held that “……It is clear to us that the Supreme Court did not hold anything contrary to what was held in previous judgments to the effect that even if a claim is not made before the assessing officer, it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment. In fact, the Supreme Court made it clear that the issue in the case was limited to the power of the assessing authority and that the judgment does not impinge on the power of the Tribunal u/s 254.........."

Therefore, in view of above judgement of SC and Bombay HC, the answer to both the legal queries comes out in favor of the appellant.

22. As far as, in support of its claim on merit, assessee has made following submissions before ld. CIT(A): “. On Merits The submission filed by the appellant is as under-

1. The appellant has set up an undertaking at F-50 UPSIDC Industrial Area Selaqui, Dehradun, Uttarakhand, 248011. The aforesaid undertaking commenced production on 30-03-2010. Since the said undertaking is located in the specified backward area, it was entitled to excise duty exemption under the Central Excise Notification No. 50/2003-CE dated 10-06-2003. A letter stating the entire fact that the assessee is eligible for exemption from payment of central excise for a period of 10 years filed before Deputy Commissioner, Custom & Central Excise, Dehradun is attached as Annexure-3. [Kindly refer page no. 43 of PB). Your goodself would appreciate that as per the & 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 provision of section 80-IC the appellant is also claiming deduction u/s 80IC of the Act on the said undertaking and the same has been allowed by the department for period of 10 years 2. In terms of the said notification, the said undertaking was entitled to 100% Excise Duty Exemption for a period of 10 years from the date of commencement of commercial production. During the year consideration, being the 6th year, the appellant has availed excise duty subsidy of Rs. 87.49,36,993/- Working of the said subsidy along with copies of quarterly Excise Return filed by the assessee before Commissioner, Custom and Central Excise is collectively attached as Annexure-485. [Kindly refer page no. 44 to 56 of PB).

1. Our Submission 1. In this regard, kindly note that the said incentive was given to the said undertaking located in the backward area of Uttarakhand in terms of the observation of the then Hon'ble Prime Minister for generation of employment and utilization of local resources. The said fact is evident from Office Memorandum dated 07.01.2003, Copy of the office memorandum and scheme is attached as Annexure-6 for your kind reference. (Kindly refer page no. 57 to 59 of PB] 2. On perusal of the above, it could be seen that incentive in the form of Excise Duty exemption had been given with an objective to achieve industrialization in the specified areas of Uttarakhand and to generate employment opportunities. 3. Since the objective for granting of incentive is development of industries andgeneration of employment in specified area, considering the purpose fest and spirit, Hon'ble High Court of Jammu & Kashmir in the case of Shree Balaji Alloys vs. CIT 333 ITR 335held that Excise Duty subsidy, Interest Subsidy and Insurance Subsidy received with the object of creating avenues for perpetual employment, to eradicate the social problem of unemployment in the state by accelerated industrial development is capital receipt Copy of the order of Hon'ble High Court is attached herewith Annexure-7. (Kindly refer Page No. 60 to 68)

Purpose of the policy i) Acceleration of 1) Acceleration of industrial development industrial development in the state of Jammu in the state of and Kashmir Uttarakhand. ii) Generation of ii) Generation of employment employment in the in the state of Jammu stateof Uttarakhand. and Kashmir Nature of receipt Treated as non- Should be treated as taxablereceipts nontaxable receipt (capital receipts) –by (capital receipts). Apex Court 1 1. Further, on the identical issue, Hon'ble Jurisdictional ITAT in the case of Mis Dabur India Limited vs. Addi. CIT [ITA No. 3423/Del /2015 and 3790/Del /2015] has allowed the claim of excise duty exemption. Copy of the order is attached as Annexure-9. [Kindly refer page no. 71 to 107 of PB) 2. Hon ble Gauhati ITAT in the case of Greenply Industries Limited vs. ACIT (ITA No. 232/Gau/2019] held that In the light of above decision as well as the Memorandum issued by the Ministry of Commerce and Industry, we find that the excise duty exemption is purely capital receipt and is neither chargeable to tax under the normal provisions of the Act nor is to be included as part of the book profit for computing the minimum alternative tax as per the provisions of section 115JB of the Act. Copy of the order is attached as Annexure - 10. (Kindly refer page no. 108 to 140 of PB). 1.

1. Further, Hon'ble Mumbai ITAT in the case of ACIT vs. Ambuja Cements Limited (ITA No. 2958/Mum/2019) dismissed the appeal of the revenue holding that the excise duty exemption claimed by the assessee is a capital receipt. Copy of the order is attached as Annexure-11 (Kindly refer page no. 141 to 2391 2. Hon'ble Mumbai ITAT in the case of M/s ACC Limited vs. Addl. CIT [ITA No. 6082/Mum/2014) taking the similar view on the identical issue has allowed the appeal of the assessee. Copy of the order is attached as Annexure-12, (Kindly refer page no. 240 to 453 of PB) 1 1. Also, the case of the appellant is identical to the aforesaid relied judgements ofvarious ITAT pertaining to claim of excise duty exemption and the same is demonstrated in the table as under: Name of the Notification Unit State Para Reference assessee under which Location incentive received Dabur India 49-50/2003 Baddi Himachal Pradesh Para No. 26 of Limited Annexure -9 Greenply 50/2003 Pant Nagar, Uttarakhand Para No. 6 of Annexure - 10 Industries Ltd. Rudrapur Ambuja 50/2003 Darlaghat Himachal Pradesh Para No. 17 of Annexure - 11 Cements Ltd. 50/2003 ACC limited Gagal Himachal Pradesh Para No. 39 of Annexure – 12 50/2003 M/s PC Selaqui, Uttarakhand Annexure – 4 Jeweller Dehradun Limited

1. Prayer 3.1 In view of the above, it is humbly stated that incentives availed in the form Excise duty exemption is to be treated Capital receipt and not chargeable to tax under the normal provisions of the Act.”

the appeal with the following observation:

“14 …. Further in another case the Bombay High Court in the case of Balmukund Acharya vs DCIT, CIT and UOI 310 ITR 310 (Bom) has held that "Tax can be collected only as provided under the Act. If any assessee, under a mistake, misconception or on not being properly instructed is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected."

In Sanchit Software & Solutions (P.) Ltd. vs CIT [2012] 349 ITR 404 (Bombay) it has been held that "In any civilized system, the assessee is bound to pay the tax which he liable under the law to the Government. The Government on the other hand is obliged to collect only that amount of tax which is legally payable by an assessee. The entire object of administration of tax is to secure the revenue for the development of the Country and not to charge assessee more tax than that which is due and payable by the assessee. It is in aforesaid circumstances that as far back as in 11/04/1955 the Central Board of Direct Tax had issued a circular directingAssessing Officer not to take advantage of assessee's ignorance and/or mistake."

The High Court of Madras in case CIT Vs M/s. Abhinitha Foundation Pvt Ltd. (T.C. (A) No. 811 of 2016 after reffering various Judgement of SC and other High Courts on similar issue held that ".........In sum, what emerges from a perusal of the ratio of the judgments cited above, in particular, the judgments rendered by the Supreme Court in GOETZE's case and National Thermal Power Co. Ltd.'s case, and those, rendered by the Division Bench of this Court in Ramco Cements Ltd. and CIT vs Malind Laboratories P. Ltd., as also the judgments of the Delhi High Court in Sam Global Securities Ltd.'s & 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 case and Jai Parabolic Springs Ltd.'s case, that, even if, the claim made by the assessee company does not form part of the original return or even the revised return, it could still be considered, if, the relevant material was available on record, either by the appellate authorities, (which includes both the CIT (A) and the Tribunal) by themselves, or on remand by the Assessing Officer....

14.1 Further, the AO in the remand report herself has outlined the about the scheme of incentive provided to manufacturing and trading entities for establishing their unit into the backward/ special status states. It would be against the objectives of the scheme if the benefits accruing to such units on account excise duty exemption are not allowed by another limb of state i.e. Income Tax Department.In view of the objective of the scheme (employment generation and development of remote/ backward areas) that the appellant's case is covered by the judicial precedents and also by the principle laid down by the Apex court in the case of Shree Balaji Alloys which has been consistently followed by the various high courts including jurisdictional high court. In all the decisions it has been held that 'purpose' of the incentive will decide the nature of the incentive. The said criteria have been fulfilled in the case of the appellant. Further, Hon'ble Delhi Tribunal in the case M/s Crystal Crop Protection (P.) Limited vs. DCIT. (ITA No. 1539/Del/2016) wherein excise duty subsidy claim was first time made before Hon'ble ITAT and the same was accepted and adjudicated as Capital receipt.

24 It is evident from perusal of aforesaid observation of ld. CIT(A), that he has allowed the claim of the assessee, after consideration of the Remand Report of Ld. AO, wherein he himself appreciated that the scheme of the judgment of Hon’ble Apex court in the case of Shree Balaji Alloys, which has been followed by other courts. Apart thereof he has also relied upon the decision of Coordinate Bench in the case M/s Crystal Crop Protection (P.) Limited vs. DCIT. (ITA No. 1539/Del/2016) to the proposition that excise duty subsidy claim can be made for the first time before the Hon'ble ITAT.

25 On perusal of the order passed by the Ld. CIT(A) and remand report along with grounds of appeal raised by revenue, we find it is an undisputed fact that appellant during the year under consideration was eligible for exemption from Excise duty as per notification dated 10.06.2003 bearing Notification No. 50/2003 “Goods Manufactured in specified areas in Uttarakhand and Himachal Pradesh – Exemption from Excise Duty” and during the year under consideration assessee has availed excise duty exemption of Rs. 87,49,36,993/-, which has been included in the total income by the assessee and has offered to tax subject to deduction u/s 80IC of the Act. The return of income filed by assessee was processed u/s 143(1) of the Act, wherein other issues arose were challenged by the assessee before Ld. CIT(A). It is only during the course of appellate proceedings, appellant has claimed the excise duty exemption of Rs. 87,49,36,993/- which receipt and not revenue receipt. Ld. CIT(A) after receiving remand report from ld. AO on the instant issue, admitted the additional ground of appeal and allowed the claim of assessee. Further revenue has challenged the decision of ld. CIT(A), accepting the additional ground for treatment of excise subsidy as capital receipt, whereby the assessee itself shown the same as revenue in nature in preceding assessment years and instant year and has not revised the claim by way of filing of revised ITR.

26 At the outset it is observed that the revenue in both the ground of appeals has stated the exemption from excise duty notified by the Central Government vide Notification dated 10.06.2003 bearing Notification No. 50/2003 “Goods Manufactured in specified areas in Uttarakhand and Himachal Pradesh – Exemption from Excise Duty”, as excise subsidy.

However, both the words ‘exemption’ and ‘subsidy’ have different meanings, which has been considered and held as antonymous by Coordinate Benches and High Courts, while deciding the issue identical to issue under consideration.

27 The Ld. CIT(A) has admitted the additional ground raised by assessee before him, wherein it claimed exemption from excise duty as per in the return of income, by relying upon the judgment of the Hon’ble High Court of Bombay in the case of Commissioner of Income-tax, Central-I, Mumbaiv.Pruthvi Brokers & Shareholders, wherein Hon’ble Court has considered the judgment of Hon’ble Apex Court in the case of M/s Goetze (India) limited vs. CIT (157 Taxman 1).

28. In fact, in the case of Jute Corporation of India Ltd. Vs CIT vide order dated 04.09.1990 (1991 AIR 241), the Hon’ble Apex Court while adjudicating on the issue of additional ground held that the declaration of law is clear that the power of the Appellate Commissioner is co-terminus with that of the Income Tax Officer. If that be so, there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income Tax Officer.

No exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. Even otherwise, an Appellate Authority while hearing appeal against the order of a subordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitation if any prescribed by the statutory provisions.In the absence of any statutory plenary powers which the subordinate authority may have in the matter.The Hon’ble Apex Court has also held that if the Appellate Commissioner is satisfied he would be acting within his jurisdiction in considering the question so raised in all its aspects. Of course, while permitting the assessee to raise an additional ground, the Appellate Commissioner should exercise his discretion in accordance with law and reason. He must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The satisfaction of the Appellate Assistant Commissioner depends upon the facts and circumstances of each case and no rigid principles or any hard and fast rules can be laid down for this purpose.

29. Having regard to the observation made by the Ld. CIT(A) and the judgment of Hon’ble High Court of Bombay and Hon’ble Apex Court, we are concurrent with the decision of the learned CIT(A) in accepting the additional ground of appeal. Thus, this ground of appeal as raised by the Revenue, therefore, fails.

30 Now the main issue whether the Excise Duty subsidy and interest subsidy can be treated as capital receipt is to be examined. As noted above vide ground 2 of appeal, revenue has challenged the decision of ld. CIT(A) on the issue that excise duty subsidy is not for the purpose of acquiring any capital asset and it was received on revenue account, therefore ld. CIT(A) has erred in holding it as capital receipts. Thus to decide the issue, it is pertinent to analyse the notification dated 10.06.2003 bearing Notification No. 50/2003 “Goods Manufactured in specified areas in Uttarakhand and Himachal Pradesh – Exemption from Excise Duty, issued by Central Govt, which reads as under:

“NOTIFICATION NO.50/2003-C.Ε. GOODS MANUFACTURED IN SPECIFIED AREAS IN UTTARAKHAND AND HIMACHAL PRADESH - EXEMPTION FROM EXCISE DUTY NOTIFICATION NO.50/2003-C.E., DATED 10-6-2003 [AS AMENDED BY NOTIFICATIONS NO.54/2003-C.E., DATED 20-6-2003; NO.76/2003-C.E., DATED 5-11-2003; NO.27/2004-C.E., DATED 9-7-2004; NO.27/2005-C.E., DATED 19-5-2005; NO.34/2005-C.E., DATED 30-9-2005; NO.13/2006-C.E., DATED 1-3-2006; NO.38/2006-C.E., DATED 2-8-2006; NO.48/2006-C.Ε., DATED 30-12-2006; NO.1/2008-C.E., DATED 18-1-2008; NO.27/2009-C.E., DATED 7-12-2009; NO.6/2016-C.E., DATED 1-3-2016 AND NO.37/2016-C.E., DATED 31-12-2016, W.E.F. 1-1-2017] In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and sub-section (3) of section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the goods specified in Annexure-I appended hereto, and cleared from a unit located in the Industrial Growth Centre or Industrial Infrastructure Development Centre or Export Promotion Industrial Park or Industrial Estate or Industrial Area or Commercial Estate or Scheme Area, as the case may be, specified in (J Annexure-II and Annexure III appended hereto, from the whole of the duty of excise or additional duty of excise, as the case may be, leviable thereon under any of the said Acts:

Provided that the exemption contained in this notification shall apply subject to the following conditions, namely:-

(i) The manufacturer who intends to avail of the exemption under this notification shall exercise his option in writing before effecting the first clearance and such option shall be effective from the date of exercise of the option and shall not be withdrawn during the remaining part of the financial year;

(ii) The manufacturer shall, while exercising the option under condition (i), inform in writing to the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be, with a copy to the Superintendent of Central Excise giving the following particulars, namely :- (a) name and address of the manufacturer; (b) location/locations of factory/factories; (c) description of inputs used in manufacture of specified goods; (d) description of the specified goods produced; (e) date on which option under this notification has been exercised; (iii) The manufacturer may, for the current financial year, submit his option in writing on or before the 30th day of November, 2003.]

2. The exemption contained in this notification shall apply only to the following kinds of units, namely :-

(a) new industrial units set up in areas mentioned in Annexure-II and Annexure-III, which have commenced commercial production on or after the 7th day of January, 2003, but not later than the 4[31st day of March, 2010 (b) industrial units existing before the 7th day of January, 2003 in areas mentioned in Annexure-II, but which have i undertaken substantial expansion by way of increase in installed capacity by not less than twenty- five per cent. 3 on or after the 7th day of January, 2003, but have commenced commercial production from such expanded capacity, not later than the 31st day of March, 2010.

3. The exemption contained in this notification shall apply to any of the said units for a period not exceeding ten years from the date of publication of this notification in the Official Gazette or from the date of commencement of commercial production, whichever is later.

4. The exemption contained in this notification shall not apply to such goods which have been subjected to only one or more of the following processes,

namely, preservation during storage, cleaning operations, packing or repacking of such goods 1 in a unit container or labeling or relabelling of containers, sorting, declaration or alteration of retail sale price and have not been subjected to any other process or processes amounting to manufacture in the State of Uttarakhand or Himachal Pradesh.

Sl. Good or Activity not to be exempted Excise Sub-class No. classificatio under NIC n classification Chapter/He 1998 ading/Sub- heading/tari ff item 1 Tobacco and tobacco products including 2401 to 1600 cigarettes and pan masala 2403 and 2106 2 Thermal Power Plant (coal and oil based) 40102/40103

3 Coal washeries or dry coal processing 4 Inorganic chemicals excluding medicinal grade 28 oxygen (2804 4010), medicinal grade hydrogen peroxide (2847 00 00), compressed air [2853 90 301 5 Organic chemicals excluding Provitamins 29 24117 or 29 vitamins, hormones (2936 or 2937ides (2938), sugars (2940 00 00) Sugar reproduction by synthesis not allowed as also downstream industries for sugar

6 Tanning and dyeing extracts, tanins and 32 24113/24114 their 32 derivatives, dyes, colours, paints and varnishes, putty, fillers and other mastics, inks 7 Marble and mineral substances not 2502 00 00 14106/14107 classified elsewhere 2503 to 2522, 2525 to 2530

8 Flour mill or rice mill 1101 00 00 15311

9 Foundries using coal 10 Mineral fuels, mineral oils and products of 27 their 27 distillation; Bituminous substances: Mineral waxes 11 Synthetic rubber products 4002 24131 12 Cement clinkers and asbestos, raw 2523 10 00, including fibre 2524 13 Explosive (including industrial explosives, 3601 to 24292 detonators and fuses, fireworks, matches, 3606 propellant powders and other goods of heading No. 36.01 to 36.06) 14 Mineral and chemical fertilizers 3102 to 2412 3105 15 Insecticides, fungicides, herbicides and 3808 24211/24219 pesticides (basic manufacture and formulation) 16 Fibre glass and articles thereof 7019 26102 17 Manufacture of pulp-wood pulp, 17 21011 mechanical or chemical (including dissolving pulp) 18 Branded aerated water or soft drinks 2201 to 20 15541/15542 (non-fruit based) 2202 10 10 19 Paper 4801 Writing or printing paper for printing of 4802 educational textbooks 4802 Paper or paperboard, in the manufacture of which, - (1) the principal process of lifting the pulp is done by hand; and (ii) if power driven sheet forming 4802 equipment is used, the Cylinder Mould Vat does not exceed 40 inches Maplitho paper supplied to a Braille press 48014804 against an indent placed by the National Institute for Visually Handicapped, Dehradun Newsprint, in rolls or sheets

Kraft paper supplied to a Braille press against an indent placed by the National Institute for Visually Handicapped, Dehradun

Sanitary towel and tampons, napkins and 4818 napkin liners tor babies and similar sanitary articles Cigarette paper, whether or not cut to size 4813 or in the form of booklets or tubes

Grease-proof paper 4806 20 00 Toilet or facial tissues and other goods 4803 Paper and paper board, laminated 4807 internally with bitumen, tar or asphalt [4809 90 Carbon or similar copying paper 00] Products consisting of sheets of paper or 48114100, paperboard, 4811 49 00, impregnated, coated, or covered with 4811 51 00, plastics and other goods of tariff item or 4811 59 4811 41 00, 4811 49 00, 4811 51 00 or 00 4811 59 00 (excluding floor coverings on 4811 60 00 a base of paper or of paperboard, whether or not cut to size) Paper and paperboard, coated, impregnated or covered with wax and other goods of tariff item 4811 60 00 20 Plastics and articles thereof 3909 to 3915 21 [Industries, notified under the Doon Valley notification [S.O. 102(E), dated the 1st February, 1989 as amended from time to time, issued by the Ministry of Environment and Forests, in the Doon Valley area of the State of Uttarakhand] & 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 ANNEXURE II 1. STATE OF UTTARAKHAND (1) DISTRICT-ALMORA (A) Existing Industrial Estates …….. .

Furthermore, the Ld. AO in remand report has accepted that it appears that the objective of the scheme is to achieve industrialization in Uttarakhand and to generate employment opportunities. In fact, Ld. AO in Remand Report has not even rebutted the case laws submitted by assessee in its by revised return, which we have already decided that the additional claim can be validly made even for the first time before First Appellate Authority.

“20. Therefore, in view of the clear legal position adumbrated by the Hon'ble Supreme Court of India on the issue in question, that to determine the nature and intent of the incentives as to whether those were revenue Receipts or Capital Receipts, the purpose underlying the incentives was the determinative test, there may not be any necessity of referring to the judgments of other High Courts of the Country relied upon by the appellants' learned counsel, some of which had been considered by the Hon'ble Supreme Court of India in the above referred cases.

31. The finding of the Tribunal that the incentives were Revenue Receipt is, accordingly, set aside holding the incentives to be Capital Receipt in the hands of the assessees.

& 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 32. In view of our above finding on the first issue, there is no need to opine on the second issue, which was raised in the alternative.

33. These Appeals, therefore, succeed and are, accordingly, allowed setting aside the orders impugned in the Appeals, made by the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar on the appellants' Appeals.

34. The appellants' Appeals before the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar against the orders of the Commissioner of Income-tax (Appeals), and Income-tax Officers, shall, therefore, revive for passing appropriate consequential orders thereon, in accordance with law, in view of the findings recorded in these Appeals. No orders as to costs.”

33. On appeal by the department the Hon’ble Supreme Court while dismissing the appeal held as follows:

“The issue raised in these appeals is covered against the Revenue by the decision of this Court in “Commissioner of Income Tax, Madras Vs. Ponni Sugars and Chemicals Ltd.”,306 ITR 392/174 Taxman 87, or in the alternate, in“Commissioner of Income Tax Vs. M/s Meghalaya Steels Ltd.,[2016] 383 ITR 217/238 Taxman 559/67 taxmann.com 158 (SC)). The appeals are, therefore, dismissed.”

34. In fact, other Coordinate Bench has also decided the issue identical to the issue under consideration, in the following decisions:

i) The ACIT vs Gravita Metal Inc. (ITA No. 594/Asr/2019) placed at pages 74-90 of Paper Book filed by assessee. “14. Now, we are taking up the assessee appeal in the appellant has challenged the decision of the Ld. CIT(A) that he has erred in confirming the action of the Ld. AO in making addition ofRs.1,85,49,324/- u/s 2(24)(xviii) of the Income Tax Act, & 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 1961 being 36% of Excise Duty Exemption availed by the assessee firm. He contended that the action of Ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. He pleaded that relief may be granted by deleting entire suchaddition made by Ld. AO and partly confirmed by the Ld. CIT(A).

15. The Ld. CIT(A) has discussed that as per section 2(24)(xviii) only two exceptions are available w.e.f. 01.04.2016 as mentioned in clause (a) & (b),i.e. subsidy or grant or reimbursement received to meet actual cost of asset as per Explanation 10 to section 43(1) and subsidy or grant by Central Government for the purpose of corpus of a trust. The exemption granted to the assessee does not fall in the category of exceptions. Therefore, any subsidy, grant, cash incentive, duty drawback, waiver, concession &reimbursement referred to in section 2(24)(xviii) is income and onlybecause the word ‘exemption’ is not mentioned therein, it is not open forthe taxing authority or the tax payers to interpret the same as per theirconvenience. The Ld. CIT(A) viewed that central excise refund is in the nature of subsidy and thus held that 36% of the excise duty which isrefundable to the assessee is income u/s 2(24)(xviii) and accordingly,upheld the addition to the extent of Rs.1,85,49,324/-.

Exemption: Freedom from a general duty or service; immunity from a general burden, tax, or charge. Immunity from service of process or from certain legal obligations, as jury duty, military service, or the payment of taxes.'‘Subsidy: A grant of money made by government in aid of the & 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 promoters of any enterprise, work, or improvement in which the government desires to participate, or which is considered a proper subject for government aid, because such purpose is likely to be of benefit to the public’

& 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 “10. The next contention of the appellant is that in view of insertion of Clause (xviii) to Section 2(24) of the Act, introduced by the Finance Act, 2015, any subsidy, grant, cash incentive, duty drawback, waiver, concession and reimbursement referred to in the said clause is considered as income and only because the word 'exemption' is not mentioned therein, it is not open for the tax payers to interpret the same as per their own convenience.

13. Viewed thus, we do not find any merit in the appeal and the same is, accordingly, dismissed along with connected CM(s), if any.”

40 We have heard the rival submissions made by the respective parties.

On this issue of newly inserted clause to section 2(24) of the Act, by Finance Act’ 2015, w.e.f. 01.04.2016, as applicable to Assessment Year 2016-17; which reads as under:

“Definitions.

“10. Reverting to the facts of the present case, we find that in view of the above referred judgment, the whole purpose and the grant of subsidy under PSI 2007 by Government of Maharashtra was to promote industrial growth in the less developed areas of the State and also to provide employment in the area. Once this purpose is established the subsidy has to be a capital receipt. However, the position has changed w.e.f. 01.04.2016 relevant to A.Y. 2017-18 onwards with the amended provision of sub-clause (xviii) to sec. 2(24) of the Act. However, at present, we are concerned with A.Y. 2011-12 to 2015-16. Therefore, the amended provision of sec. 2(24) sub-clause (xviii) is not applicable to the years under consideration and thus as a natural consequence the subsidy received by the assessee would therefore, not form part of its total income. In view of the aforestated facts and circumstances and the judicial pronouncements, we do not find any reason to interfere with the findings of the Id. CIT(A) and the & 3084/Del/2024 C.O. Nos. 67 & 96/Del/2024 reliefs provided to the assessee is sustained. Therefore, the appeal of the Revenue in IT(SS) A No. 07/PUN/2021 for A.Y. 2011-12 is dismissed.”

CO No. 67/Del/2024 (Assessee’s cross objection for A.Y. 2015-16): & CO No. 96/Del/2024 (Assessee’s cross objection A.Y. 2016-17):

At the time of hearing of the instant appeal the Ld. Counsel appearing for the assessee submitted before us that the issue is covered by an under the judgment passed by the Hon’ble Guahati High Court in the case of CIT vs. Greenply industries Ltd, reported in 172 taxmann.com 294 holding that the excise duty exemption being capital in nature not chargeable to tax under the normal provisions of the Act cannot be included as part of book profits for computing the Minimum Alternate Tax under Section 115 JB of the Act, a raised objections to such, however not been able to cite any judgment contrary to the ratio laid down by the Hon’ble Guahati High Court as discussed hereinabove.

“32. Dr. Saraf, learned senior counsel for the sole respondent, in this connection, has relied upon the decision of the High Court of Judicature of Bombay in the case of Commissioner of Income Tax-IV v. Harinagar Sugar Mills Ltd. [order, dated 04.01.2017, in Income Tax Appeal No. 1132/2014]. The High Court of Bombay, in the said decision, on consideration of a similar issue, proceeded to draw the following conclusions:

"(a) The issue raised in this question is consequential to question no.(f). We have already held that the subsidy received by the respondent-assessee from the State of Bihar was in the nature of capital receipt. Hence the same cannot be added to arrive at book profits of the respondent-assessee under Section 115J of the Act.

(b) However, it is pertinent to note that the question as proposed also seeks addition to book profits on account of excess depreciation along with subsidy received by the respondent-assessee. It is settled position in law as held by the Apex Court in Apollo Tyres Ltd. v/s. CIT 122 Taxman 562/255 ITR 273 (SC) that the Assessing Officer while computing the book profit under Section 115J of the Act has only a power to examine whether the books of account have been maintained in accordance with the provisions of the Companies Act and have been duly audited. The book profits as reflected in the duly audited account have to be accepted by the Assessing Officer and the only limited power he has to increase/decrease the book profit as arrived at by the assessee is only in terms of the Explanation to Section 115J of the Act. In addition to the criteria listed in ITB 35.2 (a) (d), the following criteria shall apply.

In the present case, the Revenue is not invoking the explanation to Section 115J of the Act to vary the book profit declared in the audited accounts of the respondent-assessee. Thus, the question as proposed herein does not give rise to any substantial question of law as it also stands concluded against the Revenue by the decision of the Apex Court in Apollo Tyres Ltd. (supra)."

Court we do not find any point to deviate from the same and respectfully relying upon the same we hold that excise duty exemption being purely a capital receipt not chargeable to tax as under the normal provision of the Act cannot be included in the book profit for computation for MAT under Section 115 JB of the Act. This cross objection raised by the assessee, is, therefore allowed.