M/S. JINDAL PHOTO LTD.,NEW DELHI vs. ACIT, NEW DELHI

1. This is a bunch of nine separate appeals by same assessee preferred against separate orders of the ld. CIT(A) pertaining to different Assessment Years 2006-07 to A.Y 2014-15.

The common issue raised in the present appeals relate to the claim of non-taxability of sales tax subsidy/incentive from the purview of taxable income.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T 3.1 The above nine appeals may be categorized into three groups i.e., AY 2006-07, 2007-08 and 2008-09 in 1st group; AY 2009-10, 2010- 11 and 2011-12 in 2nd group and 2012-13, 2013-14 and 2014-15 in the 3rd group. We will address each group of appeals one by one.

3.2 The 1st category is of cases of completed/unabated assessment years.For these years, the assessee has not made the claim for exclusion of sales tax subsidy from taxable income, in either original or in revised ROI. The assessee also did not claim the sales tax subsidy as non-taxable in the return filed u/s 153A. The claim for exclusion of sales tax subsidy from taxable income is made by way of revised computation of income during the proceedings u/s 153A.

3.3 The 2nd category is of cases of abated assessment years.

For these years, the assessee has not made the claim for exclusion of sales tax subsidy from taxable income, in either original or in revised ROI. The assessee also did not claim the sales tax subsidy as non- taxable in the return filed u/s 153A. The claim for exclusion of sales tax subsidy from taxable income is made by way of revised computation of income during the proceedings u/s 153A.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T 3.4 The 3rd category is of cases where the assessee’s claim for exclusion of sales tax subsidy, has been made in the revised ROI u/s 153Ain AY 2012-13 and in original ROI for AY 2013-14 and AY 2014-15.

“1. That the CIT(A) erred on facts and in law in not holding that the action of the assessing officer in not entertaining the appellant's claim for exclusion of sales tax subsidy/ incentives amounting to Rs. 17,91,14,076 received in respect of sales made in the Union Territory of Dadra & Nagar Haveli, from the taxable income, as the same constituted capital receipt not liable to tax under the provisions of the Income Tax Act, 1961 ('the Act'), was bad in law. 1.1 That the CIT(A) erred on facts and in law in holding that the above claim was not legally admissible on the ground that: a) the claim was made in proceedings initiated under section 153A pursuant to search carried out under section 132, which is for the benefit of the Revenue;

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T b) there was no incriminating material found during the search and hence closed assessment cannot be disturbed by initiating the proceedings under section 153A; and c) revised return under section 139(5) of the Act was not filed for making the claim.

2. That the CIT(A) erred on facts and in law in holding that the sales tax subsidy/ incentive received by the appellant under the Scheme was revenue receipt instead of capital receipt as contended by the appellant. The appellant craves leave to add to, alter, amend or vary from the aforesaid grounds of appeal at or before the time of hearing.”

ITA No. 5254/DEL/2015 [A.Y 2009-10] [A.Y 2010-11] [A.Y 2011-12]

“1. That the CIT(A) erred on facts and in law in not holding that the action of the assessing officer in not entertaining the appellant's claim for exclusion of sales tax subsidy/ incentives amounting to Rs. 18,23,49,384/- received in respect of sales made in the Union Territory of Dadra & Nagar Haveli, from the taxable income, as the same constituted capital receipt not liable

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T to tax under the provisions of the Income Tax Act, 1961 ('the Act'), was bad in law. 1.1 That the CIT(A) erred on facts and in law in holding that the above claim was not legally admissible on the ground that: a) the claim was made in proceedings initiated under section 153A pursuant to search carried out under section 132, which is for the benefit of the Revenue; b) there was no incriminating material found during the search and hence closed assessment cannot be disturbed by initiating the proceedings under section 153A; and c) revised return under section 139(5) of the Act was not filed for making the claim.

1.2. Without prejudice, the CIT(A) erred on facts and in law in not allowing the above claim without appreciating that regular assessment proceedings for the captioned assessment year was abated pursuant to the search and there was only one assessment which was framed by the assessing officer under section 153A of the Act.

2. That the CIT(A) erred on facts and in law in holding that the sales tax subsidy/ incentive received by the appellant under the Scheme was revenue receipt instead of capital receipt as contended by the appellant.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T The appellant craves leave to add to, alter, amend or vary from the aforesaid grounds of appeal at or before the time of hearing.”

ITA No. 5257/DEL/2015 [A.Y 2012-13] [A.Y 2013-14] [A.Y 2014-15]

6. The Grounds raised by the assessee in these three appeals for AY 2012-13 to 2014-15are identical except for figures mentioned. For the sake of brevity, grounds for AY 2012-13 are read as under:

1. That the CIT(A) erred on facts and in law in not holding that the action of the assessing officer in not entertaining the appellant's claim for exclusion of sales tax subsidy/ incentives amounting to Rs. 26,87,35,340 received in respect of sales made in the Union Territory of Dadra & Nagar Haveli, from the taxable income, as the same constituted capital receipt not liable to tax under the provisions of the Income Tax Act, 1961 ('the Act'), was bad in law. 1.1 That the CIT(A) erred on facts and in law in holding that the sales tax subsidy/ incentive received by the appellant under the Scheme was revenue receipt instead of capital receipt as contended by the appellant. The appellant craves leave to add, alter, amend or vary from the aforesaid grounds of appeal at or before the time of hearing.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T For the 1st category of cases, the relevant facts for assessment 7. year(s) 2006-07 to 2008-09 is tabulated as under:

Particulars AY 2006-07 AY 2007-08 AY 2008-09 Original Return of Rs.15,38,38,581 Rs.23,31,26,599 Rs.29,54,61,385 income (ROI) filed [ROI filed on [ROI filed on [ROI filed on 13.11.2006] 10.03.2008] 25.09.2008] Regular assessment Notice dtd. Time limit for Time limit for proceedings u/s 23.03.2011 issued issuance of issuance of notice 143(3) of the Act u/s 143(2) notice u/s u/s 143(2) expired. pending Asst. u/s 143(3) at 143(2) expired. Rs 15,62,29,979 on 22.12.2008 Reopened u/s 148 Notice dt. NA NA 18.01.2010 Assessment u/s Rs 26,01,59,915 NA NA 143(3)/147 dt. After appeal to HC Rs 15,62,29,979 NA NA Search and seizure 14.11.2011 operation u/s 132 of the Act in case of [Return filed u/s 153A on 20.12.2012] appellant ROI filed u/s 153A Rs 15,38,38,581 on Rs 23,31,26,599 Rs 29,54,61,385 on 20.12.2012 on 20.12.2012 20.12.2012 Asst. u/s 153A Rs 15,62,29,979 dt Rs 23,51,08,517 Rs 29,82,03,317 on 28.03.2014 on 27.03.2014 27.03.2014 Revised total income Rs.6,08,51,188 Rs.10,16,74,128 Rs.16,91,24,741 declared in computation of income filed before AO vide letter dtd 23.07.2013, claiming exclusion of sales tax subsidy/incentive Amount of sales tax Rs.17,91,14,076 Rs.19,59,81,455 Rs.20,40,99,735 incentive claimed as exclusion

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T 8. For the 2nd category of cases, the relevant facts for assessment year(s) 2009-10 to 2011-12 is tabulated as under:

Particulars AY 2009-10 AY 2010-11 AY 2011-12 Original Return of Rs.22,36,03,487 Rs.16,30,95,797 Rs.24,35,67,212 income (ROI) filed [ROI filed on [ROI filed on [ROI filed on 25.09.2009] 18.09.2010] 15.09.2011] Regular assessment Notice dtd. Notice dtd. Time limit for proceedings u/s 23.03.2011 29.08.2011 issued issuance of notice 143(3) of the Act issued u/s 143(2) u/s 143(2) u/s 143(2) not yet pending expired.

Search and seizure 14.11.2011 operation u/s 132 of the Act in case of [Return filed u/s 153A on 20.12.2012] appellant Revised total income Rs.5,08,57,276 Rs.58,43,371 Rs.5,95,54,355 declared in the computation of income filed before AO vide letter dtd 23.07.2013, claiming exclusion of sales tax subsidy/incentive Amount of sales tax Rs.18,23,49,384 Rs.17,65,66,394 Rs.19,07,45,614 incentive claimed as exclusion

For the 3rd category of cases, the relevant facts for assessment 9. year(s) 2012-13 to 2014-15 is tabulated as under:

Particulars AY 2012-13 AY 2013-14 AY 2014-15 Original Return of Rs.24,33,88,700 (Rs.27,20,62,644) Rs.27,78,67,489

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T income (ROI) filed [ROI filed on [ROI filed on [ROI filed on 24.09.2012] 20.09.2013] 19.09.2014] Return filed in Rs.24,33,88,700 response to notice [Assessee u/s 153A dt requested on 30.10.2012 20.12.2012 to treat ROI filed on 24.09.2012 as return u/s 153A] Exclusion of sales tax Claim made in Claim made in original return of income subsidy from taxable revised ROI only income made in filed on revised 24.09.2013 return of income Amount of sales tax Rs.26,87,35,340 Rs. 36,87,96,698 Rs.23,40,73,591 incentive claimed as exclusion Regular assessment concluded u/s 143(3) of the Act

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T revised return to claim the sales tax subsidy as non-taxable/capital receipts. The assessee also did not claim the sales tax subsidy as non- taxable in the return filed u/s 153A. It was only by way of revised computation of income, during the proceedings u/s 153A, the assessee claimed the sales tax subsidy as non-taxable. It is an undisputed fact that the above three AYs were completed/unabated assessment years.

In impugned order(s) dated 28.03.2014 u/s 153Ain category 1st 13. and 2nd, the aforesaid claim not made in original/revised ROI,was rejected by AO applying the ratio of Goetze (India) Ltd. vs. CIT

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T reported in 284 ITR 323(SC). The AO further held that fresh claim cannot be entertained in 153A proceedings. On appeal, the CIT(A), vide consolidated order dated 11.05.2015, upheld order of the AO on grounds that claims are not admissible in the light of the decision in Goetze (supra); and on merits held that sales tax subsidy received qualified as revenue receipt and hence taxable relying on, relying on Sahney Steel & Press Works Ltd vs. CIT in 228 ITR 253 (SC).

14. The 3rd category involving AY 2012-13, the assessee in its original return filed under section 139(1) dated 24.09.2012 did not claim any exemption for sales tax subsidy as capital receipt. The assessee also did not claim any exemption for sales tax subsidy as capital receipt in its return filed in response to notice u/s 153A dated 30.10.2012. The claim for exclusion of the sales tax subsidy as non-taxable was made for the first time by filing revised return u/s 139(5) for AY 2012-13 on 24.09.2013.

14.1 For AY 2012-13, being the search year, the assessment was completed as regular assessment u/s 143(3).In impugned order(s) dated 28.03.2014 for AY 2012-13, the claim for exclusion of the sales tax subsidy as non-taxable made in revised ROI u/s 139(5) for AY 2012-

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T 13,was rejected by AO on the ground that the claim was neither made in the original return filed u/s 139(1) nor in return filed in response to the notice u/s 153A. The AO further held that the 153A proceedings are initiated only for the benefit of revenue. On appeal, CIT(A), vide consolidated order dated 11.05.2015, entertained claim made in the revised ROI but on merits held that sales tax subsidy received qualified as revenue receipt and hence taxable relying on Sahney Steel & Press Works Ltd vs. CIT reported in 228 ITR 253 (SC).

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T received any subsidy from the sales tax department and therefore, claim of the assessee is not only imaginary/notional but false also. The Ld.CIT(A) also followed his predecessor’s decision in earlier assessment years, where it was held that the nature of sales tax subsidy qualified as revenue receipt and hence taxable relying on Sahney Steel & Press Works Ltd vs. CIT reported in 228 ITR 253 (SC). The ld CIT(A) however held that the nature of receipt is academic as the assessee has not included any sales tax in the gross sales and the income has not been increased on account of claim of such alleged notional subsidy.

15.1. Aggrieved, the assessee is in appeal before us.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T

The ld AR of the assessee, with regard to 2nd and 3rd category of 17. cases, put forward two broad contentions as follows:

The aforesaid action of AO/CIT(A) is not sustainable in law for the following reasons:

(a) On admissibility of claim - Legal claim in abated proceedings is admissible; (b) On Merits-Sales tax subsidy/incentive qualifies as capital receipt, not liable to tax.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T that the decision in the case of National Thermal Power Company Ltd. v CIT: 229 ITR 383 dealing with powers of appellate authority to admit new claims did not relate to the power of the assessing authority to entertain a claim otherwise than by way of revised return. It is argued that in fact Supreme Court clarified that power of Tribunal u/s 254 of the Act to permit new claim was not impinged.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T CIT vs. Aspentech India 5.

a) CIT vs. Geo Industries and Insecticides (1) Pvt Ltd: 234 ITR 541 (Mad) b) Wipro Ltd vs. DCIT: 96 TTJ 211 (Bang) ITO vs. Sadha Ram & Co: 153 Taxman 55 (Am) c) Chicago Pneumatic India Ltd. vs. DCIT 15 5ОТ 252 (2007) (Del)

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T

• CIT vs. Ramco International: 221 CTR 491 (P&H) • CIT vs. Hero Honda Finlease Lad: 115 TTJ 752 (Del TM) • SNC-Lavalin Acres Inc: 110 TTJ 13 (Del.) • Sirpur Paper Mills Ltd. vs. ACTT:

(Hyd) • Chicago Pneumatic India P. Ltd. vs. DCIT (2007) 15 SOT 252 (Mum) • Emerson Net Work Power India (P) Ltd. vs. ACIT 2009122 TTJ 67 (Mum Tri.) • Ogilvy and Mather (P) Ltd. vs. Addl. CIT: (ITAT Mum) • DCIT vs. Tata Asset Management Ltd.: ITA No. 4665/Mum/2010 (ITAT Mum) • Asian Paints Ltd. vs. ACIT: ITA No. 5092/M/2007 (Mum)

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T declaration in writing to the assessing officer before the due date for furnishing the return of income under section 139(1) of the Act.

Contrary to the said statutory timeline/ mandate, the assessee filed a belated declaration dated 24-10-2002 before the Assessing Officer (AO) opting not to avail the benefit under section 10B vide revise return of income on 23-12-2002, which was beyond the due date prescribed in section 10B(8).

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T V. G.M. Knitting Industries (P) Ltd: [2015] 376 ITR 456 (SC) wherein the Court held that deduction under section 32 and deduction under section 80IA can be claimed even though Form 10CCB was not filed with the return of income but was filed during the course of assessment.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T 29. It is further submitted that the assessing officer was bound to consider the claim on merits for inter alia, the following reasons: a. First and foremost, the issue is relevant only for assessment years 2009-10 to 2012-13, since for assessment years 2013-14 and 2014-15, the AO considered the claim on merit; b. Secondly, for assessment years 2009-10 to 2011-12, the original regular assessment merged with the 153A proceedings and therefore, the scope of 153A assessment included the issues that could have been considered in regular 143(3) proceedings; c. Thirdly, for assessment year 2012-13, being the search year, the proceedings were, in fact, regular assessment proceedings and not regular assessment as merged with the 153A proceedings and therefore, AO ought to have considered the additional claim made; d. Fourthly, it is respectfully submitted that the purpose of assessment is to compute the correct taxable income of the assessee as per the provisions of the Act and even if the subsidy incentive was wrongly offered for tax in the return of income by the assessee, which was clearly not liable to tax, the assessing officer was duty bound to consider and allow such claim suo-motu, while framing the assessment.

In any case, once the claim was made, the AO ought to have considered to determine correct taxable income. [refer Circular No.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T 14 (XL-35) dated 11.04.1955; CIT vs. Mahindra Mills. 24 ITR 56 (SC), CIT vs. Simon Carves Ltd.: 105 ITR 212 (SC); CIT vs.

Mahalaxmi Sugar Mills Co. Ltd.: 160 ITR 920 (SC), Anchor Pressings (P) Ltd. vs. CIT and Ors.: 161 ITR 159 (SC), National Thermal Power Limited vs. CIT: 229 ITR 383(SC), CIT vs. Bharat General Reinsurance: 81 ITR 303 (Del) Chokshi Metal Refinery vs. CIT: 107 ITR 63 (Guj)];

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T regular assessment proceedings. In fact, once the proceedings under section 153A is initiated, pursuant to search under section 132 of the Act, the assessing officer/CIT(A) is bound to consider the additional revised claim raised by the appellant during the course of assessment proceedings.

CIT vs. Kabul Chawla: 380 ITR 573 (Del) [affirmed in PCIT vs. Abhisar Buildwell (P.) Ltd: 454 ITR 212 (SC)] - All Cargo Global Logistics Ltd. vs. DCIT: 137 ITD 26 (Mumbai) CIT vs. Continental Warehousing Corporation (Nava Sheva) Ltd.: 374 ITR 645 Therefore, the ld AR submitted that it is entitled to raise fresh legal claim in 153A proceedings, since the claim could have been raised in regular assessment proceedings.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T submitted that to incentivize industries and for employment generation, the Administrator of Dadra and Nagar Haveli, in larger public interest, vide Notifications dtd. 04.01.1984, provided incentive in the form of exemption from payment of sales tax to industries engaged in manufacture and sale of goods at UT of Dadra and Nagar Haveli for a period of 15 years, which was further extended from time to time.

pgs 68-93 @ 75 of supp PB- II explaining the industrial scenario in detail, including the fact that initially incentives were extended in the form of cash subsidies, which was later extended in the form of sales tax exemption; • Letter dtd. 30.11.2013 of Administrator of UT of Dadra & Nagar

Haveli (@pgs 58-60 @ 58 of supp PB-II), which categorically states that Sales Tax Exemption was introduced in 1984 with a view to encourage industrialization and provide employment opportunities for the local population;

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T • Certificate of exemption dated 08.03.2002 obtained by the appellant for PPD Unit, which provides conditions to be fulfilled for being entitled to the sales tax exemption (@ page 42 of main

PB for AY 2009-10) • Sales Tax Act was implemented, and the Industrial Units were eligible for sales tax exemption for a period of 15 years (@ page

44-45 of main PB for AY 2009-10)

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T 36. The ld AR concluded his argument by stating that the finding of AO/CIT(A) are erroneous in view of following:

(a) Nature of subsidy is determined on application of "purpose test" and not the manner and/or timing of its receipt [refer Ponni

Sugar (supra)];

(b) Fact whether there is obligation as to utilisation of incentive/ subsidy or not is not relevant to determine nature [refer

Chaphalkar Brothers (supra)];

(c) Mere fact that subsidy is granted in the form of exemption, cannot be regarded as notional in nature [refer Ponni Sugar (supra), Chaphalkar Brothers (supra) and Reliance Industries (supra)]; (d) Manner of accounting is irrelevant [refer CIT v. Triveni Engineering: 239 CTR-216 (Del)]

Ltd. vs. Commissioner of Income-tax [2006] 157 Taxman 1 (Supreme

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T Court)[24-03-2006]; Orissa Rural Housing Development Corpn. Ltd. v. Assistant Commissioner of Income-tax, Circle 1(1), [2012] 17 taxmann.com 186 (Orissa High Court) and Menezes Fernandes Enterprises vs. Income-tax Officer, Ward-4, Margao, Goa [2013] 30 taxmann.com 388 (Bombay High Court) [21-01-2013].

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T during search, whereas section 147 deals with assessment/reassessment of escaped income and relied on Commissioner of Income-tax vs. Sun Engineering Works (P.) Ltd.

[1992] 64 Taxman 442 (Supreme Court) [17-09-1992]; DCIT Vs Sew Infrastructure Ltd ITAT Hyderabad (Special Bench) dated 07.10.2024 and Charchit Agarwal vs. Assistant Commissioner of Income-tax, Central Circle 12, New Delhi [2009] 34 SOT 348 (ITAT Delhi B Bench)

[28-08-2009].

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T

Wipro Finance case, the issue of making the fresh claim for the first time before the tribunal was not even the main question before the Hon'ble SC as evident from the opening sentence of Para 10 wherein Hon'ble Court has noted that the learned ASG appearing for the department had faintly argued this aspect. ii) In the Wipro Finance Case, the fresh claim was made for the first time before the Tribunal unlike the present case wherein the claim was made before the AO itself albeit other than by way of a valid revised return. Hence, the crucial facts of the Wipro Financecase are distinguishable from the facts of the present case.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T iii) In the Wipro Finance case, Hon'ble Court, observing the express recording by the ITAT to the effect that no objection was given by the representative of the department to allowing the appellant to setup the fresh claim for the first time before the Tribunal, held that the objections now taken up by the department before the Apex Court could not be countenanced.

Whereas in the instant appeals, the fresh claim has vehemently been objected to by the CIT(DR) as well as rejected by both the AO as well as the CIT(A). iv) Further even on merits of this aspect, it is important to note that the judgment in Wipro Finance Ltd. (supra) nowhere over rules or contradicts the earlier judgment in Goetze (India) ltd. (supra). Even in the Wipro Finance decision Hon'ble Apex

Court has referred to its observations in Goetze case only qua the difference in powers of the A.O and the Tribunal u/s 254 in admitting fresh claims made otherwise than by a valid ITR/ revised ITR.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T 229 ITR 383. In the NTPC case, the claim was not at all made before the AO and was for the very first time made before the ITAT which was held to be allowable by the Hon'ble Supreme Court in view of the specific facts & circumstances of that case. Same was the situation in Wipro Finance case too. Whereas in the Goetze case, the claim was made before the AO itself during the course of assessment proceedings, unlike in NTPC case, and the disallowance of the claim by the AO was upheld by the Tribunal also. It is very important to note that in the Goetze case, Hon'ble Supreme Court upheld the disallowance of fresh claim by the AO and did not direct the Tribunal to admit the claim despite the assessee raising NTPC plea. It shows the Hon'ble Apex Court has not accepted the argument that NTPC ratio is to mean that in each & every case, the Tribunal has unfettered powers to admit fresh claims. The relevant facts of the present case at hand are identical to the facts in the Goetze case and not to the facts of the NTPC case or Wipro Finance case as in the present case also the claim was made by the assessee before the AO itself, by way of a letter during assessment proceedings, and was not made for the first time before the Tribunal. The contention of the assessee that though the AO cannot accept the fresh claim, ITAT can very well do it, goes

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T directly in teeth of the judgment in the Goetze case and renders it to nullity, which is not permissible.

(a) Claim is made for the first time before the Tribunal (b) There must be a bonafide and good reasons as to why the claim could not have been raised earlier by the assessee (c) The claim should purely be a question of law arising from the facts which are already on record in the assessment proceedings.

(a) Claim was made before the AO himself during the course of assessment proceedings u/s 153A. Hence it is not a case of fresh claim made for the first time before the Tribunal.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T (b) the question involved is a mixed question of law as well as facts.

The very amount of the sale tax subsidy/incentive received by the assessee is nowhere available in the ITR or audited financial statements. Therefore, even the factual accuracy of the claim remains unverified.

(c) the assessee has not explained any reason, let alone any good reason, for not making the claim in any of the ITRs filed since commencement of the Dadra & Nagar Haveli Government's sale tax incentive scheme way back 1984 till A.Y 2012-13. The claim was not made by the assessee even in the returns filed in response to notice issued u/s 153A after the search dated 14.11.2011. The lame explanation sought to be offered by the assessee that the fresh claim was made on the advice of some new Counsel hired by the assessee post search action u/s 132 cannot be considered to be any good reason to justify admission of the claim.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T context it is important to note that, as per the Goetze ratio, the AO, undisputedly, did not have any power to admit the fresh claim of the sale tax incentive being a capital receipt made by the assessee for the first time during the course of assessment proceedings u/s 153A and, thus, applying the ratio of the decision in Jute Corporation (supra), even the Tribunal does not have any power to admit this claim in appeal before it because it is a settled position of law that what cannot be done directly cannot be allowed to be done indirectly too because otherwise it would defeat the very purpose of the restriction placed on admissibility of claims made other than by way of a valid return or revised return by the Goetze ratio and would render the judgment in Goetze case to nullity.

(i) In the present case, as elaborately discussed supra, in so far as AYs 2006-07 to 2008-09 are concerned, the fresh claim made before the assessing officer in the assessment proceedings u/s 153A is liable to be rejected at the threshold itself, being unabated assessment.

(ii) For the AY 2009-10 to 2011-12, following the above discussions, it is reiterated that unlike in NTPC case and Wipro Finance Ltd case, the Page 34 of 63

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T fresh claim in the instant case was made by the assessee for the first time not before the Hon'ble Tribunal but before the A.O itself during the course of assessment proceedings u/s 153A and thus, the judgment in Goetze case, and not the judgment in NTPC case or Wipro Finance case, is directly and squarely applicable to the facts of the present case and cannot be rendered nugatory by the Hon'ble Tribunal by admitting the claim which was rightly denied by the AO following the Goetze judgment. The AO cannot be held to have faulted in following the binding judgment of the Hon'ble Apex Court in Goetze case.The ld DR reiterated the importance of strict adherence to the specific statutory timelines prescribed u/s 139(1) and 139(5) as held by the Hon'ble Apex Court in the Wipro Ltd. (supra) judgment already discussed above.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T from payment of sales tax to industries engaged in manufacture and sale of goods at UT of Dadra and Nagar Haveli for a period of 15 years from the date of first sale of the goods manufactured, which was further extended from time to time. The ld DR firmly emphasized that since the sales tax exemption begins from the date of first sale, the subsidy received is not for the purpose of establishing a capital asset/capital expenditure but for the purpose of running a business.

The Ld DR emphatically stressed that on the facts of the case, the decision of hon’ble Supreme Court in the case of Sahney Steel & Press Works Ltd. vs. CIT.[1997] 94 Taxman 368 (Supreme Court) [19-09- 1997] and CIT V. Ponni Sugar and Chemicals Limited: 306 ITR 392 squarely apply.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T letter mentioning industrialization and employment opportunities for the local populationwas only in the context of seeking extension of Subsidy scheme for a further period of 15 years.The ld DR submitted that it can not change the fact that the sales tax subsidy commenced from the date of first sale and was for the purpose of assistance given to the assessee for carrying on the business of the assessee.

G. Electronics India Pvt. Ltd Vs Addl. CIT Range-4, New Delhi [2010] 39 SOT 275 (ITAT Delhi D Bench) where sales tax was held to be incidental to sale and hence trading receipts under UP Industrial Policy, 1989 which granted subsidy to new industries to encourage

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T setting up of new industrial units. Similarly, in Maruti Suzuki India Ltd. Vs Addl. CIT (ITA No.-6021/Del/2012) dt.09.11.2017, ITAT Delhi I Bench, it was held that where the subsidy is not related to repayment of loan, is only in the nature of revenue receipts.

"in case no incriminating material is unearthed during the search, the Assessing Officer cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the Assessing Officer in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A."

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T course of search. The appeal of the assessee for these AYs fails on this count. We further note that on identical facts in one of the group cases of Jindal Poly Films Ltd in ITA 3360/Del/2016 for AY 2007-08, the coordinate Bench of ITAT has given a finding that for non-abated assessment year, no additional claim can be made u/s 153A. The grounds no. 1 and its sub-grounds of appeal for the above three AYs are dismissed. Though the admission of claim itself has been dismissed, however adjudication on ground 2 related to the merits of the claim will be discussed in later part of the order.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T response to which the assessee filed returns declaring the sales tax subsidy as its income. It was only during the assessment proceedings under section 153A that the assessee claimed the sales tax subsidy as non-taxable by way of revised computation of income. In such a situation we are called upon to decide whether the assessee can make a fresh claim other than by way of filing Revised return u/s 139(5) and whether an additional claim/deduction be made in the proceedings under section 153A.

Further, there must be a bonafide and good reasons as to why the claim could not have been raised earlier by the assessee. Further, in the NTPC case, theHon'ble Court, observed that the Revenue gave no objection to the assessee to setup the fresh claim for the first time before the Tribunal.In the instant case, we find that the claim is firstly made before the AO who rejected the claim. The claim was further put before the CIT(A) but in vain. The claim was made in the ITAT in the Page 40 of 63

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T normal course of appeal proceedings and therefore was not either fresh claim nor was for the first time before the ITAT. Furthermore, the allowability of claim of sales tax subsidy being capital in nature was not automatic and was in serious dispute with the Revenue.In view of this crucial factor, the decision of NTPC and Jute Corporation and Wipro Finance Ltd regarding plenary powers of ITAT u/s 254, do not apply. We are of the considered view that as the claim for exclusion of the sales tax subsidy was made for the first time before the AO, therefore, the decision of the Hon’ble Supreme Court in the case of Goetze India Ltd squarely apply.The assessee agitated this issue before the CIT(A) in regular appeal which was adjudicated by him and rejected, hence the issue was before ITAT in normal course. In view of the above, the assessee can not be allowed a claim without revising the return u/s 139(5) within the due date and mandatory time limits.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T 6274 of 2013 dated 04.10.2024 where it upheld the decision of Madras High Court that after the revised return was barred by time there was no provision to consider the claim made by the assessee. The hon’ble Supreme Court also noted that the case of NTPC was one where the Department gave no objection for enabling the assessee to setup a fresh claim which makes the instant case distinguishable on facts as in the instant case, the Revenue has raised objection to the claim at every stage, be it the AO, CIT(A) or the Departmental Representative before the ITAT. We are of the opinion that when there is no provision in the Act where the assessee can claim expenses/deduction outside the Return filed u/s 153A, the same has to be rejected. Our conclusions are duly supported by the decision of the Hon’ble Supreme Court in the case of Commissioner of Customs (Imports), Mumbai Vs.

Dilip Kumar and Company(AIR 2018 Supreme Court 3606) that the provisions for exemption/deduction has to strictly construed and any perceived ambiguity would necessarily accrue to the benefit of the Revenue.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T assessment and the assessment under Section 153A merges into one and only one assessment for each assessment year shall be made as held in the case of Kabul Chawla Vs. CIT reported in [2015] 61 Taxmann.com 412, approved by the Hon'ble Supreme Court in the case of PCIT Vs. Abhisar Buildwell (P.) Ltd (supra). The question that arises is whether the assessee can make fresh claim, by way of computation of income, during the proceedings under section 153A and not by way of the original/revised return.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T 57. The Special Bench, Hyd emphasized that the assessee has to provide information in the Return for consideration. In the instant case, the exemption of sales tax subsidy was not claimed in the return filed either u/s 139(1) or 139(5) or 153A and hence the claim is not available for the AO to consider. Further dealing with the identical question of entitlement to make a fresh claim, it held as under:

“24. Having said so, now let us come back to the question in the present appeals i.e., whether an assessee can make a claim for deduction under Chapter VI-A of the Income Tax Act, 1961, for the first time in the return of income filed in response to the notice issued under Section 153A of the Act, pursuant to search conducted under Section 132 of the Act. This legal position is no longer res integra. The Hon'ble High Court of Rajasthan in the case of Jai Steel (India) Vs. ACIT had considered an identical question of law in light of search conducted u/s 132 of the Act and the fresh claim made by an assessee for the first time in the return filed u/s 153A of the Act and after considering the relevant facts and also by analyzing various case laws, including the decision of Hon'ble Delhi High Court in the case of CIT Vs. Anil Kumar Bhatia reported in (2012) 211 Taxmann.com 453 (supra), which is in favour of the revenue held that it is not open for the assessee to seek deductions or claim expenses which have not been claimed in the original return for which assessment has already been completed only because assessment u/s 153A in pursuance of search or requisition is required to be made. Even otherwise, if we go by plain reading of provisions of Section 153A, it is analogous to erstwhile provisions of Section 158B(1) of the Act. From the above provisions, it is undisputedly clear that the purpose of assessment in relation to search cases is to assess undisclosed income, if any, on the basis of incriminating material found as a result of the search, but not to disturb the completed/unabated assessment. Further, if we go by the argument of the counsel for the Page 44 of 63

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T assessee, in light of the provisions of Section 153A(1)(a) of the Act, once return is filed in response to a notice under Section 153A of the Act, the said return shall be treated as return which was furnished under Section 139 of the Act, in our considered view, it defeats the whole purpose of initiation of search and consequent assessments. In our considered view, although provisions of Section 153A make it very clear that return filed in response to a notice under Section 153A of the Act, partakes the nature of return filed u/s 139 of the Act, said interpretation cannot be enlarged so as to say that even in case where the assessee has filed a regular return under Section 139 and not made any claim towards deduction and further for the first time, the assessee has made a claim of deduction under Section 80IA(4) in the return of income filed in response to notice under Section 153A of the Act, also to be considered as if the assessee has made a claim on or before filing the return under Section 139(1), and further, it is contrary to the scheme of regular assessment and search assessment and is devoid of merits.……….Further, once the assessment is abated, the original return which has been filed loses its originality, and the subsequent return filed u/s 153A of the Act takes the place of the original return. In such cases, the return of income filed u/s 153A(1) of the Act, would be construed to be one filed u/s 139(1) of the Act and the provisions of the Act, shall apply to the same and accordingly, all legitimate claims would be open to the assessee to raise in the return of income filed u/s 153(A)(1) of the Act.”

Emphasis supplied

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T decision of Rajasthan High Court in Jai Steel has been endorsed by the Supreme Court in Abhisar Buildwell as follows:

“26. We further note that, although the ratio laid down by the Hon'ble Supreme Court in the case of PCIT Vs. Abhisar Buildwell (P.) Ltd (supra) is in the context of additions made by the AO in the assessments which are unabated/concluded on the date of the search in the absence of any incriminating material found as a result of the search, the Hon'ble Apex Court has in fact approved the ratio laid down by the Hon'ble High Court of Rajasthan in the case of Jai Steel (India) Vs. ACIT, which directly addresses the issue of a fresh claim made by the assessee for the first time in the return of income filed in response to the notice issued under Section 153A of the Act. From the observation of the Hon'ble Supreme Court in Para 8, it is clear that it has approved the ratio laid down by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of PCIT Vs. Saumya Constructions reported in (2016) 387 ITR 529 (Guj) and the Hon'ble High Court of Rajasthan has followed or considered the ratio of these two cases while deciding the issue in the case of Jai Steel (India) Vs. ACIT (supra)”.

58. The Special Bench, on the issue of nature of assessment u/s 153A, referring to the CIT V D.G. Shirke Construction Technology Pvt Ltd (2017) 79 taxmann.com 306(Bom) and Karnataka High Court in G.M.R. Infrastructure Ltd V DCIT in ITA 1036/2017 dated 06.07.2021 held that:

29……..in the case of Jai Steel (India), Jodhpur Vs. ACIT (supra) has held that the assessment or reassessment made in pursuance to section 153A of the Act, is not a denovo assessment and, therefore, it was not open to the Page 46 of 63

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T assessee to claim and be allowed such deduction or allowance of expenditure which it had not claimed in the original assessment proceedings which in the case of assessee stood completed vide order dated 15.01.2009 passed under section 143(1) of the Act. If we go by the observations of the Hon'ble High Court of Bombay and Hon'ble High Court of Karnataka in the above-mentioned case, it is only in the context of abated assessments which are pending as on the date of search under section 132 of the Act, the return filed in response to notice under section 153A of the Act partakes the nature of return filed under section 139 of the Act and the assessee can make/lodge any claim which otherwise, it would have raised in the return of income to be filed under Section 139 of the Income Tax Act, 1961. In other words, in case of unabated/concluded assessments like the AO, who cannot make additions in the absence of any incriminating material, the assessee cannot make any fresh claim, including the claim of deduction under Chapter VI-A of the Act. Therefore, we are of the considered view that the assessee cannot make any fresh claim of deduction or allowance of the expenditure for the first time in the return of income filed under section 153A of the Income Tax Act, 1961.

“31…….According to the provisions of Sections 147 and 153A of the Act, although both operate in different fields, the purpose is the same. Section 147 deals with income escaping assessment, and Section 153A deals with assessment consequent to search and seizure under Section 132, where any money, bullion, jewellery, valuable article or things found as a result of the search. Therefore, in our considered view, when the Hon'ble Supreme Court, in very categorical terms, held in light of the provisions of Section 147 of the Act that said provisions are for the benefit of revenue, and the Page 47 of 63

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T assessee cannot make any fresh claim of deduction towards any income or expenditure, then going by the scheme of assessment under Section 153A, there is no doubt that said provisions are only for the purpose of detection of undisclosed money, bullion, jewellery, or any other article or thing and said provisions are also for the benefit of revenue, and the assessee cannot take to its advantage. Therefore, the reliance placed by the revenue on the decision of the Hon'ble Supreme Court in the case of CIT Vs. Sun Engineering Works (P) Ltd (supra) is justified. Thus, we reject the arguments taken by the learned counsel for the assessee.”

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T Supreme Court decision Commissioner of Customs (Imports), Mumbai Vs. Dilip Kumar and Company(supra).We again are fortified by the decision of Special Bench as follows:

“32……At this stage, we are taking support from the decision of the Hon'ble Supreme Court in the case of Commissioner of Customs (Imports), Mumbai Vs. Dilip Kumar and Company, (supra) wherein the Hon'ble Supreme Court clearly held that beneficial provisions like, deductions/ exemptions provisions are required to be strictly interpreted and any perceived ambiguity would necessarily ensure to the benefit of the revenue. We further note that the Hon'ble Supreme Court, in the case of PCIT Vs. Wipro Ltd (supra) has also considered the interpretation of provisions of Section 10B of the Act and held that such an option should be exercised before the due date under Section 139(1) by way of filing a declaration. Although the said decision was in the context of withdrawal of exemption under Section 10B of the Act, in our considered view, when it comes to the interpretation of exemption and deduction provisions, the said provisions should be strictly interpreted so as to achieve the larger intent of the Legislature. Therefore, we are of the considered view that the arguments of the learned counsel for the assessee that when the appellant filed its return of income in response to a notice under Section 153A of the Act, it partakes the nature of the return filed under Section 139 of the Act and thus, all the conditions prescribed under Section 80A(5) and Section 80AC are satisfied is contrary to law and devoid of merit and cannot be accepted.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T the basis of “purpose” for which it is granted as held by Hon’ble Supreme Court in the case of Sahney Steel and Press Works versus CIT 228 ITR 253 and CIT versus Ponni Sugar and Chemicals Ltd 306 ITR 392. We have given our careful thought on the various decisions relied upon by the rival sides.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T bringing into existence any new asset. The subsidies in that case were granted year after year only after setting up of the new industry and only after commencement of production and, therefore, such a subsidy could only be treated as assistance given for the purpose of carrying on the business of the assessee. Consequently, the contentions raised on behalf of the assessee on the facts of that case stood rejected and it was held that the subsidy received by Sahney Steel could not be regarded as anything but a revenue receipt. Accordingly the matter was decided against the assessee. The importance of the judgment of this Court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. 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 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 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 must be utilized for repayment of loans taken by the assessee to set up new 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 to run the business more profitably then the receipt is on revenue account. 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 unit then the receipt of the subsidy was on capital account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant. Emphasis applied

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T “purpose test” as delineated by the Supreme Court in the case of Sahney Steel (supra) and Ponni Sugar. The assessee further relied on the Letter dtd. 30.11.2013 of Administrator of UT of Dadra & Nagar Haveli which states that Sales Tax Exemption was introduced in 1984 with a view to encourage industrialization and provide employment opportunities for the local population. The assessee also relied on the State Industrial Profile of Dadra & Nagar Haveli for FY 2015-16 explaining the industrial scenario in detail.

This certificate was valid from 14.04.2001 to 13.04.2016.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T Scheme as it only supplies information regarding industrialization profile of the UT territory.What is of significant relevance is the Exemption Notification from which we have to decipher the “purpose” for which the incentive is given. The said Notification states that it is issued in ‘public interest’ and every unit would be entitled to avail the incentive on goods manufactured in the UT area and would be available from the First sale. In view of the above discussion, we are not inclined to accept the assessee’s proposition that the sales tax exemption scheme was primarily for the purpose of establishment and construction of industrial units. We are inclined to agree with the CIT(A) that the ‘public interest’ referred to in the said notification of 1984 and 1999, do not mean exemption to be a ‘capital receipt’ as all incentives whether revenue or capital are given by the government for public interest only. The mere term ‘public interest’ is not sufficient to determine the ‘purpose test’ as enumerated in the case of Sahney Steel and Ponni Sugars (supra).

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T simply provides that the industry/Units will be exempted from payment of sales tax levied under the Sales Tax Act on sale of goods manufactured, processed or assembled for a period of 15 years from the date of First sale or from the date of 1st consignment branch/transfer. We therefore are of the considered view that the Scheme is applicable only after the unit is setup and the manufacturing activity has started and the sale of goods manufactured, has commenced. We therefore find that the subsidy of sales tax has been given to the assessee for assisting the assessee in carrying out the business operation and for the purpose of trade as the sales tax subsidy is related to trading receipts on revenue account. Our view is fortified by the conditions imposed on the assessee by the said scheme which related to maintenance of sales/purchase and stock register and cash/credit/memos for sales of finished good. In view of the same, the Sales Tax Subsidy would therefore constitute revenue receipt as held in the held by Supreme Court in the case of Sahney Steel and Press Worksand Ponni Sugar(supra).

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T in carrying out its business. The sales tax subsidy was not for the purpose of repayment of loan taken by the assessee or to set up units or for substantial expansion of existing units. The Scheme nowhere indicates that it is to meet a part of the cost or it was granted for production of or bringing into existence any assets. The facts of the case shows that the subsidy was given to meet recurring expenses and not for acquiring capital asset. The subsidy in this case were granted year after year from 2002 to 2016, only after setting up the new industry and only after commencement of production and,therefore,such a subsidy could only be treated as assistance given for the purpose of carrying on business of assessee. Further, we find that the assessee was free to use the money in its business entirely as it liked. The Scheme does not obligate the assessee to use the incentive for a particular purpose. The decision in the Sahney Steeltherefore, squarely applies on the facts of the instant case and therefore we hold that the sales tax subsidy received by the assessee can only be treated as revenue receipt and be included as taxable income. The decision in the case of Ponni Sugar, where the incentive/subsidy was held as capital receipt as the assessee was obliged to utilize the incentive for the purpose of repayment of loan for setting up new units, also supports the same view.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T 68. The decision of the Special Bench Mumbai in the case of DCIT V Reliance, reliedupon by the assessee, is of no assistance to the assessee as in that case the assessee became entitled to the sales tax incentive even before the commencement of production. So is the case of CIT Vs Rasoi Ltd relied upon by the assessee, where Calcutta High Court held that the subsidy was for expansion of assessee capacities, modernization, and improving marketing capabilities and thus was on capital account. Similarly, in Shree Balaji Alloys case decided by the J&K High Court, it was held that the subsidy given was for setting up new unit in J & K. The case of CIT V Chaphalkars Brothers, where the Bombay High Court held that development of multiplex theatre complexes which are capital intensive in nature and hence the amount of entertainment tax collected and retained, was held as capital in nature, is also of no help to the assessee.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T Strips Ltd, in respect of policy and its objective, very succinctly held that where manufacturing unit is already set up, the sales tax retained by the assessee is revenue in nature and industrialization of the State and generation of employment are only a by-product. It held as under:

“26. How a state frames its policy to achieve its objectives and attain larger developmental goals depends upon the experience, vision and genius of its representatives. Therefore, to say that the indication of the limit of subsidy as the capital expended, means that it replenished the capital expenditure and therefore, the subsidy is capital, would not be justified. The specific provision for capital subsidy in the main scheme and the lack of such a subsidy in the supplementary scheme (of 1991) meant that the recipient, i.e. the assessee had the flexibility of using it for any purpose. Unlike in PonniSugars (supra), the absence of any condition towards capital utilization meant that the policy makers envisioned greater profitability as an incentive for investors to expand units, for rapid industrialization of the state, ensuring greater employment. Clearly, the Emphasis supplied. subsidy was revenue in nature.”

CIT Range-4, New Delhi [2010] 39 SOT 275 (ITAT Delhi D Bench) sales Page 58 of 63

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T tax collected under the Uttar Pradesh State Industrial Policy, 1989 was considered as part of trading receipts as sales tax element was embedded in sale price and was collected in ordinary course of trading activities. In the case of Maruti Suzuki India Ltd. Vs Addl. CIT (ITA No.- 6021/Del/2012) dt.09.11.2017, ITAT Delhi I Bench, it was held that where any subsidy given to the assessee post accomplishment of the project or expansion there, without any obligation to utilize the subsidy only for repayment of term loans undertaken by the assessee for setting up new units/expansion of existing business, or to liquidate the cost incurred in creating the capital asset or its expansion, is only in the nature of the revenue receipt and is liable to be brought to tax.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T 2014-15. The above claim filed are in accordance with the provisions of law. The claim however is liable to be rejected in view of the above decision arrived by us that the sales tax subsidy received by the assessee is in the nature of revenue receipt and therefore taxable.

There is no change in facts and the scheme of the sales tax subsidy of the Dadra and Nagar Haweli of 1984 and 1999 in the 3rd category of cases for AYs 2012-13 to 2014-15. The grounds of appeal of the assessee no. 1 and 1.1 are dismissed.

73. We, however find that for the AY 2013-14 and 2014-15, the CIT(A) has held that the assessee has not charged/collected any sales tax from the customers and therefore, sales tax is not included in the gross sales shown in the P&L account and that the assessee has not received any subsidy from the sales tax department and therefore, claim of the assessee is not only imaginary/notional but false also.

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T deducted from the total income in the computation of income. In AY 2014-15, the sales tax subsidy was routed through P&L a/c and was directly reduced from the sales. These aspect needs further verification and therefore to the limited extent of this issue, the matter is set aside to the AO to determine whether the sales tax subsidy claim is notional. If it is notional, the allowance of such claim can not arise. Where the sales tax subsidy is routed through P&L a/c, the same will be considered on revenue account.

It is submitted that in the case of Jindal Poly Film Ltd, the AO has accepted that the incentive/subsidy is capital in nature. We however find that the case of Jindal Poly Film Ltd pertained to the Incentive Scheme of Maharashtra 1993 and the case of Jindal Poly Film Ltd for AY 2007-08 to 2009-10 was decided by the ITAT Delhi vide its order where it held that sales tax subsidy was capital receipt following the Hon’ble Delhi High Court decision in the case of Indo Rama Synthetics Ltd. The Hon’ble Delhi High Court in the case of Indo Rama Synthetics Ltd, had analyzed the Maharashtra 1993 Scheme and held that where the sole purpose of the scheme was to set up new units and/or expand existing Page 61 of 63

ITA No. 5251 to 5257/DEL/2015 [A.Y 2006-07 to A.Y 2012-13] [A.Y 2013-14]; [A.Y 2014-15] M/s Jindal Photo LtdVs.The A.C.I.T units in underdeveloped and developing areas, the sales tax receipts are of capital nature. The case at hand is governed by the Scheme of Dadra and Nagar Haweli of 1984 and 1999 which is substantially different from the Maharashtra Scheme 1993. The Scheme of Dadra and Nagar Haweli do not stipulate any purpose of setting up new units and/or expand existing units in underdeveloped or developing areas. In our considered view therefore, the facts of the instant case being distinguishable from the facts of Jindal Poly Film Ltd, the decision of the coordinate Bench would not apply.

The order is pronounced in the open court on 21.05.2025