DY. C.I.T. CIR-.2, NAGPUR vs. M/S SANVIJAY ROLLING & ENGINEERING LTD., NAGPUR

These three appeals for the assessment years 2013-14, 2014-15 and 2015-16 have been filed by the Revenue against the order of Commissioner of Income Tax (Appeals)-4, Nagpur for the respective assessment years. Commissioner of Income Tax (Appeals) dated 05-07-2016 for the assessment year 2013-14. ITA No.

The brief facts of the case as emanating from records are : The assessee company has set up an industrial undertaking which falls under mega project in terms of Package Scheme of Incentive, 2001 announced by Government of Maharashtra. Under the aforesaid scheme, incentive was given for setting up industrial units under specified zones. The industrial unit set up by the assessee falls in Zone D of Package Scheme of Incentive. Under the scheme, Industrial Promotion Subsidy was granted to the assessee during impugned assessment years. The assessee claimed the subsidy granted by the State Government as capital receipt, not exigible to tax. Per contra, the Assessing Officer held that incentive received by the assessee in the form of subsidy is a revenue receipt and added the same in the hands of assessee. Apart from addition on account of subsidy, the Assessing Officer inter alia made addition of Rs.10,01,398/- on account of prior period expenditure.

Shri K.P. Dewani appearing on behalf of the assessee submitted that the issue, Whether the subsidy received under Industrial Promotion Scheme is revenue or capital receipt has been considered by the Co-ordinate Bench of Tribunal in assessee’s own case titled Assistant Commissioner of Income Tax Vs. M/s. Sanvijay Rolling and Engineering Ltd. in for the assessment year 2012-13 decided on 30-03-2017. The ld. AR further contended that the Commissioner of Income Tax (Appeals) in assessee’s own case for assessment year 2012-13 has held that the subsidy received by the assessee under Industrial Promotion Scheme is capital receipt. The Commissioner of Income Tax (Appeals) while coming to such a conclusion has placed reliance on various case laws and after analyzing the facts and various decisions has decided the issue in favour of assessee. Similar view has been taken by the Commissioner of Income Tax (Appeals) in assessment year 2013-14.

On the other hand Shri U.U. Kasar representing the Department vehemently defended the assessment order and prayed for reversing the findings of Commissioner of Income Tax (Appeals). The ld. DR submitted that the incentive received by the assessee in the form of subsidy is a revenue receipt and hence is taxable in the hands of the assessee.

We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. We have also considered the decisions on which the ld. AR of the assessee has placed reliance. The first ground of appeal by the Revenue is against the findings of Commissioner of Income Tax (Appeals) holding sales tax incentive received by the assessee under Industrial Promotion Subsidy Scheme as capital receipt. We find that the Co-ordinate Bench of Tribunal in assessee’s own case for assessment year 2012-13 in (supra) has considered identical issue and held the incentive received under the aforesaid scheme as capital in nature. Since, the scheme which is subject matter of dispute before us is the same which was subject matter of considered by the Co-ordinate Bench of Tribunal in the preceding assessment year and not contrary decision or distinguishing fact has been brought to our acknowledge by the Revenue with respect to aforesaid incentive scheme, following the order of Co-ordinate Bench, we hold that the incentive received by the assessee under Industrial Promotion Scheme of the State Government is capital in nature. Accordingly, ground No. 1 of the appeal by Revenue is dismissed being devoid of any merit.

The second ground of appeal

The contention of the assessee is that the liability in respect of aforesaid expenditure was settled and crystallized during the period relevant to the assessment year under appeal. The assessee had purportedly received vouchers and bills pertaining to the earlier assessment years in the period relevant to assessment year under appeal. The same bills after examination were accepted by the assessee during the period relevant to the assessment year under appeal. The Hon’ble Bombay High Court in the case of M/s. Ballarpur Industries Ltd. Vs. Commissioner of Income Tax (supra) had occasion to deal with the issue of allowability of prior period expenditure which crystallized in the subsequent assessment year. The Hon’ble High Court allowed the expenditure by holding as under : “5. We put a specific question to Shri Bhattad to point out any decision holding that if the statutory expenses covered by Section 43(B) are not actually paid during the year in which those are required to be paid then even if such expenses are actually paid in the subsequent year, the deduction can not be claimed. No such decision is brought to our notice. If the expenses are covered by Section 43(B), there cannot be disputed about its claim for deduction and merely because the deduction was not claimed in the previous year, it would not prevent the assessee from claiming it in the assessment year during which the payment was actually made. The substantial question of law we therefore, answered accordingly.”

It is an undisputed fact that the expenditure was not claimed by the assessee in the earlier assessment years as the liability to pay the expenditure crystallized during the period relevant to the assessment year under appeal, even though the expenditure relates to the earlier assessment year. Since, the expenditure crystallized during the period relevant to assessment year under appeal, the said expenditure though relating to earlier assessment year is allowable. We do not find any infirmity in the order of Commissioner of Income Tax (Appeals) in allowing such expenditure. Accordingly, ground No. 2 of appeal by Revenue is dismissed being without merit.

In the result, the appeal of Revenue is dismissed.

The Revenue in appeal has assailed the findings of Commissioner of Income Tax (Appeals) on following grounds : “

The ld. AR submitted that the ground Nos. 1 and 2 raised in the appeal by Revenue are identical to the one raised in 2013-14. The facts in both the assessment years are also identical. Therefore, the submissions made in respect of issues raised in assessment year 2013-14 would equally hold good for assessment year 2014-15.

In respect of ground No. 3 of the appeal the ld. AR submitted that there was delay in payment of Provident Fund and ESIC. However, the aforesaid payments were made before due date of filing return of income for the impugned assessment year. The Hon’ble Bombay High Court in the case of Commissioner of Income Tax Vs. Ghatge Patil Transports Ltd. reported as 368 ITR 749 has held that where the such statutory payments are made before the due date of filing return of income the same is allowable. The Commissioner of Income Tax (Appeals) has allowed relief to the assessee after examining the facts of the case and by following the decision of Hon’ble Supreme Court of India in the case of Commissioner of Income Tax Vs. Alom Extrusions Ltd. reported as 319 ITR 306 and the decision of Hon’ble Bombay High Court in the case of Commissioner of Income Tax Vs. Ghatge Patil Transports Ltd. (supra).

The ld. DR fairly admitted that the facts in the present assessment year are identical to the facts in assessment year 2013-14 and the ground of appeal Nos. 1 and 2 are identical to the one raised in appeal by the Revenue for assessment year 2013-14. However, the ld. DR vehemently defended the assessment order and prayed for reversing the findings of Commissioner of Income Tax (Appeals).

The Revenue in appeal has assailed the findings of Commissioner of Income Tax (Appeals) on following grounds : “

Both the sides are unanimous in stating that the facts in the assessment year under appeal are identical to the facts in the preceding assessment years i.e. assessment years 2013-14 and 2014-15. We have already given detailed findings on the identical grounds of appeal and identical set of facts in assessee’s own case for assessment years 2013-14 and 2014-15. Since, the facts are identical our detailed findings given in the aforesaid assessment years would mutatis mutandis apply to the present grounds raised in the appeal by the Revenue. Consequently, all the three grounds raised by the Revenue in appeal are dismissed.

In the result, all the three appeals by the Revenue are dismissed.