JINDAL PHOTO LTD.,NEW DELHI vs. ACIT, CC- 30, NEW DELHI

Since the underlying facts are common in all the appeals of the assessee and pertain to same assessee, they were heard together and are disposed of by this common order for the sake of convenience and brevity.

The facts of the case in brief is that the assessee is a company engaged in the business of manufacturing and trading of photo sensitized goods. There was a search on the assessee on 14.11.2011.

The Grounds raised by the assessee in these three appeals for AY 2006-07, 2007-08 and 2008-09 are identical except for figures mentioned. For the sake of brevity, grounds of AY 2006-07 are read as under:

The Grounds raised by the assessee in these three appeals for AY 2009-10 to 2011-12 are identical except for figures mentioned. For the sake of brevity, grounds for AY 2009-10 are read as under:

Briefly to get a bird’s eye view of the above 9 appeals for various AYs is that the claim of the assessee to exclude the sales tax subsidy granted to it by the State Government from its taxable income, for AYs 2006-07 to 2014-15,be allowed on account of the same being a capital receipt.

As mentioned above, there are three categories of claims in the above 9 appeals. The 1st category involving AY 2006-07 to 2008-09, are cases where the assessee in its original returns declared the sales tax subsidy as income. The assessee for these three years did not file any Page 10 of 63 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.

The 2nd category involving AY 2009-10 to 2011-12, are also cases where the assessee in its original returns declared the sales tax subsidy as income. The assessee, for these three years did not file any revised return to claim the sales tax subsidy as non-taxable. 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.The above three years were pending assessment and therefore stood abated.

The 3rd category involving AY 2013-14 and AY 2014-15, the assessee in its original return filed under section 139(1) itself claimed the exemption for sales tax subsidy as capital receipt. The two years i.e.,AY 2013-14 and AY 2014-15, were completed as regular assessment u/s 143(3).In impugned order(s) dated29.01.2016 for AY 2013-14, and 29.12.2016 for AY 2014-15,the claim for exclusion of the sales tax subsidy as non-taxable being capital receipts, was rejected by AO on the ground that the same is revenue receipts. On appeal, CIT(A), vide orders dated 24.08.2016 for AY 2013-14 and 24.05.2017 for AY 2014-15, 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. The ld CIT(A) held that the assessee has not Page 13 of 63 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.

Before us, the ld AR of the assessee, with regard to 1st category of cases, submitted that the action of the Assessing Officer is not based on judicious appreciation of facts and position of law. The ld AR however, without conceding, stated that in the 1st category of cases pertaining to the AYs 2006-07, 2007-08 and 2008-09are cases of completed/unabated assessment and in view of the decision of Supreme Court in the case of PCIT vs. Abhisar Buildwell (P.) Ltd: 454 ITR 212 (SC), stated that for the above three AYs, no assessment can be made in absence of any incriminating materials.

With regard to admissibility of claim, the ld AR submitted that the reliance placed by AO/CIT(A) on decision of Goetz (supra) is highly misplaced since SC judgment was in context of power of AO to entertain a fresh claim made otherwise than by revised return. The Supreme Court, however, made it clear that the decision in Goetze India Limited (supra) was restricted to the power of Assessing Authority to entertain a claim for deduction otherwise than by a revised return and the same, did not impinge on the power of the Tribunal u/s 254 of the Act to permit a new claim. Further, the ld. counsel for the assessee submitted that the Supreme Court also held 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.

That apart, the ld. counsel for the assessee 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 deduction was not claimed in the return of income by the assessee, which was clearly allowable in law to the assessee, the assessing officer was duty bound to consider and allow such claim suo-motu, while framing the assessment and relied on the Circular No. 14 (XL-35) dated 11.04.1955 issued by the Board of Revenue under the Income-Tax Act, 1922. The ld AR relied on the following decisions, where Courts have held that the AO is duty bound to grant benefits and reliefs during assessment, even if not claimed in ROI. Reliance in this regard is placed on the following decisions:

The ld. counsel for the assessee relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Mahindra Mills: 243 ITR 56, which approved the aforesaid Circular. Further reliance was placed on the following decisions:

The ld AR submitted that the Delhi High Court in the case of CIT vs. Jai Parabolic Springs Ltd: 306 ITR 42 has held that the Tribunal has the power to adjudicate a fresh claim raised for the very first time.

Further, the Delhi High Court in the case of CIT Vs Aspentech allowed the clam of commission made by the assessee by way of revised computation filed before the assessing officer relying on NTPC (supra) and Jute Corporation (supra).To the same effect are the following decisions:

On the issue of applicability of the decision of the Supreme Court in case of PCIT v. Wipro Ltd.: [2022] 446 ITR 1 (SC) on the facts of this case, the ld AR filed a submission stating that the same is distinguishable and submitted that in the Wipro Ltd case the Assessee was a 100% export-oriented unit and engaged in the business of running a call center and IT Enabled and Remote Processing Services. Assessee filed return of income on 31-10-2001 declaring loss of Rs. 15,47,76,990 and claimed exemption under section 10B of the IT Act and also annexed a note clarifying that the company is a 100% export-oriented unit and entitled to claim exemption under section 10B of the IT Act and therefore, no loss is being carried forward.

Pertinently, sub-section (8) of section 10B provides an option to the assessee to withdraw/opt out of claim of deduction by furnishing a Page 18 of 63 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.

In the background facts, the apex Court held that in order to opt out of section 10B, the assessee is required to fulfil the twin conditions, namely, (i) furnishing a declaration to the assessing officer in writing that the provisions of section 10B(8) may not be made applicable to him, and (ii) the said declaration to be furnished before the due date of filing the return of income under sub-section (1) of section 139 of the IT Act. Therefore, since the said mandatory statutory conditions are not complied with, the Court held that the assessee cannot opt out of section 10B(8) and cannot claim benefit of carry forward of loss.

The ld AR submitted that in coming to the aforesaid conclusion, the Supreme Court, in fact, distinguished its decision in the case of CIT 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.

To summarize, the ld AR stated that the aforesaid judgement has been rendered by the Supreme Court in the context of specific statutory timeline for withdrawal of claim as mandated under section 10B(8), which cannot be applied in other case, much less in the case like the present one where there is no specific statutory time limit for claiming non-taxability of subsidy incentive.

The ld AR is placed specific reliance upon the decision of the three Judge Bench of the Apex Court in the case of Wipro Finance Ltd. vs. CIT: [2022] 443 ITR 250 (SC) where the Supreme Court held that limitation, if any, imposed in Goetze (India) Ltd (supra) would apply to the "assessing authority", but not impinge upon the plenary powers of the ITAT bestowed under section 254 of the Act. 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.

Regarding the issue of fresh claim being made during proceedings u/s 153A initiated pursuant to search, it was submitted that even under the provisions of section 153A of the Act, where assessment is made pursuant to the search proceedings, there is no bar for an assessee to make a legitimate claim. It was submitted that it is now well settled proposition of law that the restrictions on the power of the Revenue in the course of proceedings under section 153A of the Act, in respect of non-abated/concluded assessments, is in respect of addition/disallowance, which cannot be made de hors any incriminating material found/unearthed during the course of search, however there is no restriction against the assessee making a claim legitimately allowable under the provisions of the Act, merely on the ground that the proceedings in question are search assessment and not Page 22 of 63 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.

With respect to the contention of fresh claim ought to be considered in abated proceedings pursuant to search, the ld AR stated that abated proceedings merges with 153A proceedings and therefore, scope of 153A proceedings extend to scope of abated proceedings, as held in following:

With respect to merits of the case, the ld AR submitted that the assessee has three manufacturing units located at Union Territory (UT) of Dadra and Nagar Haveli, namely, Unit-1, Unit-II and PPD Unit. It is Page 23 of 63 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.

The aforesaid "purpose”, being industrial development, create employment opportunities and to ensure optimum utilization of human and state resources, is evident from the following: • State Industrial Profile of Dadra & Nagar Haveli for FY 2015-16 @

The ld AR argued that where grant of subsidy is for meeting capital expenditure, for achieving a national objective/purpose inpublic interest, the same would be in the nature of capital receipt not liable to tax and relied on the following decisions: • CIT V. Ponni Sugar and Chemicals Limited: 306 ITR 392 • CIT vs. Chaphalkar Brothers: 351 ITR 309 (Bom HC) affirmed by SC vide order dated 07.12.2017 in 400 ITR 279 (SC) • Shree Balaji Alloys vs. CIT: 333 ITR 335 (J&K) - SLP dismissed • DCIT vs. Reliance Industries Limited: 88 ITD 273 (Mum SB)

The ld AR emphasized that in the context of the very same units which were subsequently demerged to Jindal Poly Films Ltd, AO in AY 2016-17 vide order dated 30.10.2023, accepted that the incentive/subsidy is capital in nature. 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:

Per contra, the ld DR argued that in the present case for the aforesaid AYs 2006-07 to 2011-12, no fresh claim or additional deduction or exemption can be made other than by way of filing revised return u/s 139(5) and relied on the decision of Goetze (India)

The ld DR further argued that no fresh claim for any deduction or allowance is admissible during proceedings u/s 153A and stated that in case of completed/unabated assessment years 2006-07 to 2009-10, no fresh claim is admissible and relied on Principal Commissioner of Income-tax, Central-3 vs. Abhisar Buildwell (P.) Ltd. [2023] 149 taxmann.com 399 (Supreme Court) [24-04-2023]; Jai Steel (India), Jodhpur vs. Assistant Commissioner of Income-tax [2013] 36 taxmann.com 523 (Rajasthan High Court) [24-05-2013] and Suncity Alloys (P.) Ltd. vs. Assistant Commissioner of Income-tax [2009] 124 TTJ 674 (ITAT Jodhpur Bench) [19-08-2009].

The ld DR forcefully further argued that the proceedings u/s 153A are for the benefit of Revenue and not assessee. The ld DR submitted that section 153A is at par with section 147 since object of section 153A is to bring under tax undisclosed income which is found 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.

In the rejoinder to the ld AR efforts to distinguish the case of Wipro Ltd (supra), the ld DR submitted that the Hon'ble Apex Court in the Wipro Ltd.(supra) case has categorically held that statutory timelines are mandatorily required to be followed especially while claiming exemptions from taxability. The time limits for filing of return u/s 139(1) or filing of revised return u/s 139(5) are both mandatory and specific statutory time limits and, hence, any claim for exemption from taxability not made in either of these returns is liable to be rejected as per the unambiguous ratio of the judgment in Wipro Ltd. case. Therefore, the contention of the Ld. Counsel that the judgment in the Wipro Ltd is not applicable to the present case is not tenable and, hence, liable to be rejected.

With regard to the ld AR reliance upon the judgment of the Hon'ble Supreme court in the case of Wipro Finance Ltd Vs. CIT[2022] 443 ITR 250 (SC) in support of its argument that the decision of the Hon'ble Apex Court in the case of Goetze (India) Ltd. vs. Commissioner of Income-tax [2006] 157 Taxman 1 does not place any restrictions on powers of the Tribunal in admitting fresh claims not made by way of any valid return/revised return of income, the ld DR made the following submissions: i) At the outset, it is pertinent to note that in the above

The ld DR averred that it is evident that the Hon'ble Court in the case of Goetze has commented on the power of the ITAT u/s 254 only in the context of its own earlier decision in NTPC Ltd. Vs. CIT [1998] 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 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.

The ld DR further emphasized that in the NTPC case too, Hon'ble Apex Court has nowhere held that the Tribunal has unfettered powers to admit each and every fresh claim made otherwise than by way of a valid ITR. The NTPC judgement lays down following conditions for admission of fresh claim by the Tribunal:

The ld DR submitted that none of the above conditions are found fulfilled in the present case at hand as discussed below:

It was further submitted that in the NTPC judgment, Hon'ble Supreme Court has referred to and reiterated its earlier decision in Jute Corporation of India Ltd Vs. CIT [1991] 187 ITR 688 wherein the Hon'ble Apex court observed that an appellate authority has all the powers which the original authority may have in the matter. In this Page 33 of 63 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.

The ld DR finally concluded by stating that :

With regard to the merits of the claim of sales tax subsidy being a capital receipts for the AYs 2012-13 to 2014-15, the ld DR stated that the sales tax incentive/ subsidy should be held to be Revenue receipt liable to tax under the provisions of the Act. The ld DR submitted that the assessee has received the sales tax subsidy on the basis of Notifications dtd. 04.01.1984 of Administration of Dadra and Nagar Haveli (UT), which in public interest, provided exemption 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 further argued that the original scheme vide notification dated 04.01.1984, the public purpose did not include the purpose of creating industrialization and employment. It was only vide the letter dtd. 30.11.2013 of the Administrator of UT of Dadra & Nagar Haveli to JS, MHA, Govt of India, New Delhi, the concept of industrialization and employment opportunities for the local populationwas introduced. Moreover, this letter can not be considered as Public Scheme under which the sales tax subsidy was envisaged. This Page 36 of 63 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.

The ld DR further relied on CIT vs. Meghalaya Steels Ltd. [2016] 67 taxmann.com 158 (Supreme Court) [09-03-2016] where Hon'ble Supreme Court held that the subsidy/incentive on transport, power, insurance has direct nexus with profits of assessee’s business and are in the nature of Revenue Receipt and thus, to be included in taxable income. The ld DR relied on CIT vs. Bhushan Steels & Strips Ltd. [2017] 83 taxmann.com 204 (Delhi High Court) [13-07-2017] where sales tax subsidy was held as revenue in nature. The same was in CIT vs. Varinder Agro Chemicals Ltd. [2007] 290ITR 147 (Punjab & Haryana High Court)[17-08-2006]. The ld DR referred to the case of L.

We have heard the rival submissions and have perused the relevant material on record. Having heard the rival submission we find that the facts of the case for AYs 2006-07, 2007-08 and 2008-09 are squarely covered by the decision of the hon’ble Supreme Court in the case of Abhisar Buildwell (supra). The hon’ble court has laid down the law as under:

In view of the facts that the AYs 2006-07, 2007-08 and 2008-09 are unabated assessment years and the AO cannot assess or reassess taking into consideration other material, no adjustment in the income can be made in absence of any incriminating material found during the Page 38 of 63 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.

In this context, the decision in the case of Wipro Ltd is of great relevance. Though it was in the context of specific statutory timeline for withdrawal of claim as mandated under section10B(8), it laid down the importance of fulfillment of statutory conditions namely filing of return under section 139(1) for claiming exemption/deductions. This proposition was further strengthened by the Hon’ble Supreme Court in the later decision in the case of Shriram Investment in Civil appeal no Page 41 of 63 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.

With regard to the issue of merger of original regular assessment with 153A proceedings in abated /incomplete assessment, there is no dispute. It is no longer res-integra that in respect of abated/incomplete assessments, the jurisdiction to make original 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.

We find that the issue of making fresh claim u/s 153A has been succinctly addressed by the Special Bench of ITAT Hyderabad in the case of DCIT Vs Sew Infrastructure Limited, Hyderabad ITAT (Hyd- SB) decided on 7 October, 2024. The Special Bench after analyzing catena of cases and the decision of Kabul Chawla (supra) and PCIT Vs. Abhisar Buildwell (P.) Ltd (supra) and Jai Steel India Ltd (Raj) held that “…..when a search is conducted under Section 132, all pending assessments within the block of six assessment years immediately preceding the assessment year in which such search is conducted abates and the Assessing Officer shall have jurisdiction to assess or reassess the total income of those assessment years on the basis of incriminating material found as a result of the search and any other material or information provided in the returns. 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:

The Special Bench time and again emphasized that in cases of abated assessment, the assessee is entitled to make fresh claim in the return filed u/s 153A. In the instant case, the facts shows that the assessee never made any claim for sales tax subsidy exemption in the return filed u/s 153(A).The Special Bench further found that the Page 45 of 63 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:

The Special bench, on the issue of the provision of section 153A being analogous to the provision of section 147 in so far as being beneficial to the Revenue, following the decision of Supreme Court in the case of Sun Engineering Works Pvt Ltd[1992] 198 ITR 297 held that :

Thus, the gist of the decision in the case of Sew Infrastructure Limited, Hyderabad is that the assessment/reassessment u/s 153A is not a de-novo assessment and as the assessment emanates from the provisions relating to search u/s 132, it essentially has be related to disclosed and undisclosed income and should have nexus or relevance with seized material as held by the Hon’ble Delhi High Court in the case of Kabul Chawla. We are further of the considered view that the provisions of section 153A is for the benefit of Revenue and it does not envisage a de-novo assessment. Though the assessee may claim any deduction u/s 153A in abated/incomplete assessment, it has to make the claim in the return filed u/s 153A. To reiterate, there is no provision in the Act, where the assessee can claim expenses/deduction outside the Return filed u/s 153A as the provisions for exemption/deduction has to strictly construed in the light of the Page 48 of 63 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:

Coming to the issue on merits of claim of exemption of sales tax subsidy being in the nature of capital/revenue receipt, we are conscious of the fact that the nature of a subsidy has to be decided on Page 49 of 63 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.

In Ponni Sugar (supra), the Hon’ble Supreme Court elaborating the judgment in the case of Sahney Steels(supra)laid down the law in regard to the “purpose test” for determining the nature of incentive being capital or revenue in nature as follows:

With law on the subject delineated as above, we now come to the facts of the instant case. We find, on facts,that the assessee has largely relied on the Notification dtd. 04.01.1984 granting exemption from payment of sales tax in “public interest” in the context of Page 51 of 63 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.

We find that the said notification was followed by another similar notification dated 31st December 1999. The assessee, under this notification, obtained Certificate of exemption from payment of sales tax dated 08.03.2002 for PPD Unit for manufacture/process/assembled in the Union Territory of Dadra & Nagar Haveli. The condition imposed for the said exemption was that assessee shall issue serially cash/ credit/memos for sales of finished goods which will contain the demon address of the purchaser, descriptions of goods sold and its value, exemption certificate number, date and signature of seller. The condition also stipulated that the assessee shall maintain sales and purchase and stock register for the said manufactured product as such.

We find that the assessee has heavily relied on the letter of 2013, written by Administrator of Union territory of the Dadra and Nagar Haveli, to JS, MHA New Delhi seeking to extend the date of grant of exemption for the proposition that this letter expresses the “purpose” of the Exemption Notification of 1984 which was to encourage industrialization and provide employment opportunities for the local population. We find that in this letter, the Administrator has narrated the result of the initiative taken for sales tax exemption vide notification in 1984 that led to increase in industrial Units in the area and there was large investment made in the area. We are of the considered view that this letter, on which the assessee is drawing support from, is essentially an internal correspondence within two government authorities describing the outcome of the incentive scheme of 1984 and 1999 and on the basis of the outcome, the Administrator is seeking to extend the duration of exemption for another 15 years. We are of the considered opinion that this internal correspondence cannot be considered as a public document or a public scheme as juxtaposed to Scheme notified and published in official Gazette vide Notification of 1984 and 1999. We are also of the view that the State profile also cannot be considered as part of Exemption 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).

Coming to the fact of incentive Scheme as per the notification of 1984 and 1999, we do not find that the Scheme, as such, anywhere mentions the term industrialization or improvement in infrastructure facility or creation of employment etc or any purpose of incentive being used towards loan payment or creation of any asset. The Scheme 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).

We are of the considered view that the “purpose” of the scheme for which the subsidy was given in the instant case was not to enable the assessee to set up a new unit or to expand existing unit. In our considered view the purpose of the Scheme was to assist the assessee 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. 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.

On the other hand, the case of Meghalaya Steels relied upon by the revenue are squarely applicable where the Hon’ble Supreme Court held that where subsidies were reimbursed to assessee for elements of cost relating to manufacture or sale of their products and, thus, there was certainly a direct nexus between profits of assessee's business and reimbursement of such subsidies, the subsidy partakes the nature of revenue. The Hon’ble Delhi High Court in the case of Bhushan Steel 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:

The hon’ble Delhi Court above clearly held that in absence of any specific condition towards capital utilization in the Scheme, the subsidy/incentive received would be for enhanced profitability of the assessees and hence revenue in nature, a stipulation totally applicable to the facts of the instant case. The decision of CIT vs. Varinder Agro Chemicals Ltd relied upon by the Revenue also supports the Revenue case where Sales tax subsidy received by assessee was considered as a revenue receipt. Similarly in L. G. Electronics India Pvt. Ltd Vs Addl.

In view of the discussion as above, we are of the considered view that the sales tax subsidy received by the assessee is in the nature of revenue receipt and the AO has correctly considered the same as revenue receipt. Considering the same, the ground of appeal of the assessee number 1 and 2 in the 2nd category of cases is dismissed.

As far as the 3rd category of cases are concerned for assessment year 2012-13 to AY 2014-15, the assessee has claimed the exemption of sales tax subsidy from its taxable income, have been claimed in the revised return for AY 2012-13 and in original return for AY 2013-14 and Page 59 of 63 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.

We have examined the audited accounts from where it emerges that the assessee has adopted two different approach in recognizing the sales tax subsidy in AY 2013-14 and AY 2014-15.In AY 2013-14, the audited accounts show that the sales tax subsidy was apparently included in the total sales in the profit & Loss account but was Page 60 of 63 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.

The assessee has relied on the AO’s own decision in the case of Jindal Poly Film Ltd for AY 2016-17 where these units were demerged.

In the result, all the appeals of the assessee in [A.Y 2006-07], [A.Y 2007-08], ITA No. 5253/DEL/2015 [A.Y 2008-09], [A.Y [A.Y 2010-11], ITA No. 5256/DEL/2015 [A.Y 2011-12], [A.Y 2012-13], 2014-15] stands dismissed.