M/S MAKHAN CEMENT INDUSTRIES vs. COMMISSIONER OF INCOME TAX AMRITSAR & ORS

ITA/94/2014HC Punjab & HaryanaPHHC01109660201406 April 2015Author: MR. JUSTICE A.B. CHAUDHARI,MR. JUSTICE M.M. AGGARWAL5 pages
AI SummaryDismissed

What were the facts?

The assessee, M/s Maken Cement Industries, filed an appeal before the Punjab and Haryana High Court against an order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year 2002-03. The ITAT had upheld the addition of Rs. 16,11,477/- to the assessee's income, representing a transport subsidy claimed under a scheme by the Jammu & Kashmir Government. The assessee had initially claimed this subsidy as income and sought deduction under Section 80-IB of the Income Tax Act. The Assessing Officer reopened the case, noting the assessee's mercantile system of accounting and crediting Rs. 21,28,603/- to a subsidy receivable account. The CIT(A) partly allowed the appeal, excluding the unreceived portion of the subsidy from tax. However, the ITAT reversed this, considering the subsidy as income based on the mercantile system and lack of documentary evidence for the unreceived amount.

What did the High Court hold?

The High Court held that the substantial question of law sought to be raised by the assessee was not permissible. The Court noted that the assessee had adopted the mercantile system of accounting and had initially sought the benefit of Section 80-IB of the Act. The plea that only the received amount of Rs. 5,17,123/- was taxable was not the specific case taken before the Assessing Authority or the Tribunal. Furthermore, the necessary documentary evidence, such as a certificate from the General Manager, District Industries Centre, was not filed for the relevant assessment year. The Court found that the stand taken before the High Court was contrary to the stand taken before the lower authorities. Therefore, the judgment in Messrs. Shoorji Vallabhdas's case was not applicable as the facts were different. The appeal was dismissed as no substantial question of law arose.

What were the issues?

1. Whether, in the facts and circumstances, the ITAT erred in holding that a transport subsidy of Rs. 16,11,477/-, which was allegedly not received by the assessee but for which a claim was lodged, could be treated as income accrued and taxed in the assessee's hands? Assessee's Contention: The assessee argued that the subsidy amount of Rs. 16,11,477/- was never received, and only Rs. 5,17,123/- was received out of the total claim of Rs. 21,18,637/-. Therefore, the balance could not be added to income. Reliance was placed on the Transport Subsidy Scheme, 1971, which states that freight charges are to be determined on the basis of transport rates fixed by authorities or actual freight paid, whichever is less. The assessee cited Commissioner of Income-Tax, Bombay City Vs. Messrs. Shoorji Vallabhdas and Co. (1962) 46 ITR 144 (SC) for the proposition that hypothetical income not accrued or received is not taxable. Revenue's Contention: The revenue contended that it was not the assessee's case before the lower authorities that the amount was never received. The assessee had adopted the mercantile system of accounting and credited the subsidy receivable account. The Assessing Officer had added the amount as income, considering it incidental to the industrial undertaking but not eligible for deduction under Section 80-IB. The revenue argued that the stand taken before the High Court was contrary to the initial submissions.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 80-IB,Section 143(1)

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: 06.04.2015 M/s Maken Cement Industries, Kathua %.Appellant Vs.

Commissioner of Income Tax, Amritsar and another %.Respondents CORAM: HON'BLE MR.JUSTICE S.J.VAZIFDAR, ACTING CHIEF JUSTICE HON’BLE MR.JUSTICE GURMEET SINGH SANDHAWALIA Present: Ms. Radhika Suri, Senior Advocate with Ms. Rajni Paul, Advocate for the appellant.

Mr. Dinesh Goyal, Advocate for the respondents. **** G.S.SANDHAWALIA, J.

The present appeal has been filed by the assessee under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) against the order dated 8.11.2012 (Annexure A/4) passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as “the Tribunal”) in ITA No.70 (Asr)/2011 for the assessment year 2002-03.

The appellant sought to raise the following substantial question of law for the consideration of this Court:- “i)

Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal has fallen in error in holding that the transport subsidy amounting to Rs.16,11,477/- which was never received by the as

The order continues below.

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