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Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI KULDIP SINGH & SHRI OM PRAKASH KANT
PER OM PRAKASH KANT, AM PER OM PRAKASH KANT, AM The appeal of the assessee for The appeal of the assessee for assessment year 2013 assessment year 2013-14 is directed against the order dated 27.07.2021 passed by the Ld. directed against the order dated 27.07.2021 passed by the Ld. directed against the order dated 27.07.2021 passed by the Ld. Commissioner of Income Commissioner of Income-tax (Appeals)-51 [in short ‘the Ld. CIT(A)’]. 51 [in short ‘the Ld. CIT(A)’].
M/s AYM Syntex Ltd. 3 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
The cross appeals of the assessee and the Revenue for assessment cross appeals of the assessee and the Revenue for assessment cross appeals of the assessee and the Revenue for assessment years 2014-15 & 2015 15 & 2015-16 are directed against the two separate ted against the two separate orders, both dated 27.10.2021 both dated 27.10.2021, passed by the Ld. CIT(A) passed by the Ld. CIT(A)-51, Mumbai. In these appeals, common issue Mumbai. In these appeals, common issue-in-dispute are involved dispute are involved, therefore, same were heard together and disposed off by way of this same were heard together and disposed off by way of this same were heard together and disposed off by way of this consolidated order for convenience consolidated order for convenience and avoid repetition of facts. and avoid repetition of facts.
The grounds of assessee for assessment year 2013-14 are The grounds of assessee for assessment year 2013 The grounds of assessee for assessment year 2013 reproduced as under : reproduced as under :
1.a) On the facts and in the circumstances of the case and in law, On the facts and in the circumstances of the case and in law, On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in confirming the addition to the extent the Id. CIT(A) erred in confirming the addition to the extent the Id. CIT(A) erred in confirming the addition to the extent 9,35,400/- mad made by the AO to the income of the Appellant by way e by the AO to the income of the Appellant by way of disallowing administrative expenses on flat rate claimed to have of disallowing administrative expenses on flat rate claimed to have of disallowing administrative expenses on flat rate claimed to have been incurred relating to exempt income invoking provisions of been incurred relating to exempt income invoking provisions of been incurred relating to exempt income invoking provisions of section 14A. b) The Id. CIT(A) failed to appreciate that having regard to the b) The Id. CIT(A) failed to appreciate that having regard to the b) The Id. CIT(A) failed to appreciate that having regard to the accounts there is no reason and basis in reaching to dis accounts there is no reason and basis in reaching to dis accounts there is no reason and basis in reaching to dis- satisfaction with the correctness of the claim of the Appellant that satisfaction with the correctness of the claim of the Appellant that satisfaction with the correctness of the claim of the Appellant that no expenditure was incurred in relation to dividend income which no expenditure was incurred in relation to dividend income which no expenditure was incurred in relation to dividend income which does not form part of the total income. does not form part of the total income. c) In reaching to the conclusion and confirming such addition the In reaching to the conclusion and confirming such addition the In reaching to the conclusion and confirming such addition the Id. CIT(A) omitted to consider relevant factors, considerations, Id. CIT(A) omitted to consider relevant factors, considerations, Id. CIT(A) omitted to consider relevant factors, considerations,
M/s AYM Syntex Ltd. 4 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
principles and evidences while he was overwhelmed, influenced principles and evidences while he was overwhelmed, influenced principles and evidences while he was overwhelmed, influenced and prejudiced by irre and prejudiced by irrelevant considerations and factors.
2.a) On the facts and in the Rs.16,84,368/ 2.a) On the facts and in the Rs.16,84,368/-circumstances of the circumstances of the case and in law, the Id. CIT(A) erred in not allowing reduction of case and in law, the Id. CIT(A) erred in not allowing reduction of case and in law, the Id. CIT(A) erred in not allowing reduction of interest subsidy of interest subsidy of ₹91,04,692/- under TUF Scheme, being capital under TUF Scheme, being capital receipt. from the book receipt. from the book profit u/s.115JB although the Id. CIT(A) has profit u/s.115JB although the Id. CIT(A) has allowed such reduction from total income accepting such interest allowed such reduction from total income accepting such interest allowed such reduction from total income accepting such interest subsidy being capital receipt. subsidy being capital receipt.
b) The issue of interest subsidy under TUF Scheme covered by the The issue of interest subsidy under TUF Scheme covered by the The issue of interest subsidy under TUF Scheme covered by the decision is of Juridictional Tribunal in the case decision is of Juridictional Tribunal in the case of Alok Industries of Alok Industries Ltd. v/s. DCIT (ITA No.1017/Mum/2017, dated 21 Ltd. v/s. DCIT (ITA No.1017/Mum/2017, dated 21-5-2018). 2018).
The Id. CIT(A) erred in holding that levy of interest u/s.234C of 3. The Id. CIT(A) erred in holding that levy of interest u/s.234C of 3. The Id. CIT(A) erred in holding that levy of interest u/s.234C of mandatory. The Appellant denies its the Income Tax Act, 1961 the Income Tax Act, 1961 is mandatory. The Appellant denies its liability for such interest. liability for such interest.
The Id. CIT(A) 4. The Id. CIT(A) erred in holding that the ground raised disputing erred in holding that the ground raised disputing initiation of penalty proceedings u/s.271(1)(c) is premature. initiation of penalty proceedings u/s.271(1)(c) is premature. initiation of penalty proceedings u/s.271(1)(c) is premature. The Appellant denies its liability for such penalty. Appellant denies its liability for such penalty.
2.1 The grounds of assessee for AY 2014 The grounds of assessee for AY 2014-15 are reproduced as 15 are reproduced as
under:
1.a) On the facts and i On the facts and in the circumstances of the case and in law, n the circumstances of the case and in law, the Id. CIT(A) erred in not reduction of allowing interest subsidy of the Id. CIT(A) erred in not reduction of allowing interest subsidy of the Id. CIT(A) erred in not reduction of allowing interest subsidy of 1,72,22,271/-under TUF Scheme, being capital receipt, from the under TUF Scheme, being capital receipt, from the under TUF Scheme, being capital receipt, from the book profit u/s.115JB although the Id. CIT(A) has allowed such book profit u/s.115JB although the Id. CIT(A) has allowed such book profit u/s.115JB although the Id. CIT(A) has allowed such reduction from t reduction from total income accepting such interest subsidy being otal income accepting such interest subsidy being capital receipt. capital receipt.
M/s AYM Syntex Ltd. 5 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
b) The issue of interest subsidy under TUF Scheme is covered by The issue of interest subsidy under TUF Scheme is covered by The issue of interest subsidy under TUF Scheme is covered by the decision of Juridictional Tribunal in the case of Alok Industries the decision of Juridictional Tribunal in the case of Alok Industries the decision of Juridictional Tribunal in the case of Alok Industries Ltd. v/s. DCIT (ITA No.1017/Mum/2017, dated 21 Ltd. v/s. DCIT (ITA No.1017/Mum/2017, dated 21-5-2018). 2018).
The Id. CIT(A) erred in holding that levy of interest u/s.234C of The Id. CIT(A) erred in holding that levy of interest u/s.234C of The Id. CIT(A) erred in holding that levy of interest u/s.234C of the Income Tax Act, 1961 is mandatory. The Appellant denies its the Income Tax Act, 1961 is mandatory. The Appellant denies its the Income Tax Act, 1961 is mandatory. The Appellant denies its liability for such interest. liability for such interest.
The Id. CIT(A) erred in holding that the ground raised disputing The Id. CIT(A) erred in holding that the ground raised disputing The Id. CIT(A) erred in holding that the ground raised disputing initiation of penalty pro initiation of penalty proceedings u/s.271(1)(c) is premature. The ceedings u/s.271(1)(c) is premature. The Appellant denies its liability for such penalty. Appellant denies its liability for such penalty.
2.2 The grounds raised by the Revenue for AY 2014 The grounds raised by the Revenue for AY 2014-15 are The grounds raised by the Revenue for AY 2014
reproduced as under: reproduced as under:
"The Ld. CIT(A) has erred in restricting the Rs. 2, disallowance u/s. "The Ld. CIT(A) has erred in restricting the Rs. 2, disallowance u/s. "The Ld. CIT(A) has erred in restricting the Rs. 2, disallowance u/s. 14A of the Income 14A of the Income Tax Act r.w.r. 8D(2)(iii), to the extent of exempt Tax Act r.w.r. 8D(2)(iii), to the extent of exempt income received by the assessee during the year under income received by the assessee during the year under income received by the assessee during the year under consideration without appreciating the Circular No. 5 of 2014 consideration without appreciating the Circular No. 5 of 2014 consideration without appreciating the Circular No. 5 of 2014 dated 11.02.2014 of dated 11.02.2014 of CBDT"
The Ld. CIT(A) erred in deleting the disallowance of Rs. The Ld. CIT(A) erred in deleting the disallowance of Rs. 681255/ 681255/- under rule 8D(2 8D(2)(iii) of the Income Tax Rules 1962, on the ground iii) of the Income Tax Rules 1962, on the ground that the assessee himself disallowed Rs. 7,34,844/ that the assessee himself disallowed Rs. 7,34,844/- without realizing the fact that in the computation under rule 8D(2) of realizing the fact that in the computation under rule 8D(2) of realizing the fact that in the computation under rule 8D(2) of Income Tax Rules 1962, the AO allocated Rs. Income Tax Rules 1962, the AO allocated Rs. 7,34,844/- - towards direct expenses and the disallowance of Rs. 6,81.2551 direct expenses and the disallowance of Rs. 6,81.2551- is in excess is in excess o! airect expens o! airect expenses computed as per rule 8D(2) of Income Tax Rules Income Tax Rules 1961 and since the 1961 and since the Ld. CIT(A) himself upheld the disallowance CIT(A) himself upheld the disallowance
M/s AYM Syntex Ltd. 6 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
under rule 8D(2)(iii) on merit, the same should have be under rule 8D(2)(iii) on merit, the same should have be under rule 8D(2)(iii) on merit, the same should have been confirmed
The Ld. CIT(A), has erred in considering the subsidy received in CIT(A), has erred in considering the subsidy received in CIT(A), has erred in considering the subsidy received in the form of Technology the form of Technology Upgradation Fund as a capital receipt, Upgradation Fund as a capital receipt, without appreciating the fact that the assessee has not proved without appreciating the fact that the assessee has not proved without appreciating the fact that the assessee has not proved that the application of the money received was fo that the application of the money received was for the purpose of r the purpose of acquiring a capital asset.' acquiring a capital asset.'
The Ld.CIT(A) has erred in directing the assessing officer to The Ld.CIT(A) has erred in directing the assessing officer to The Ld.CIT(A) has erred in directing the assessing officer to delete the adjustment to book profit on account of disallowance delete the adjustment to book profit on account of disallowance delete the adjustment to book profit on account of disallowance u/s. 14A r.w.r Rs. 3,08, 8D without appreciating the provision of u/s. 14A r.w.r Rs. 3,08, 8D without appreciating the provision of u/s. 14A r.w.r Rs. 3,08, 8D without appreciating the provision of clause) to secti to section 115JB of the IT Act."
2.3 The ground raised by the assessee for AY 2015 The ground raised by the assessee for AY 2015-16 are The ground raised by the assessee for AY 2015
produced as under:
1.a) On the facts and in the circumstances of the case and in law, On the facts and in the circumstances of the case and in law, On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in not reduction of allowing interest subsidy of the Id. CIT(A) erred in not reduction of allowing interest subsidy of the Id. CIT(A) erred in not reduction of allowing interest subsidy of 1,86,78,619/-under under TUF Scheme, being capital receipt, from the TUF Scheme, being capital receipt, from the book profit u/s.115JB although the Id. CIT(A) has allowed such book profit u/s.115JB although the Id. CIT(A) has allowed such book profit u/s.115JB although the Id. CIT(A) has allowed such reduction from total income accepting such interest subsidy being reduction from total income accepting such interest subsidy being reduction from total income accepting such interest subsidy being capital receipt. capital receipt. b) The issue of interest subsidy under TUF Scheme is covered by The issue of interest subsidy under TUF Scheme is covered by The issue of interest subsidy under TUF Scheme is covered by the decision of Juridictional Tribunal in the case of Alok Industries the decision of Juridictional Tribunal in the case of Alok Industries the decision of Juridictional Tribunal in the case of Alok Industries Ltd. v/s. DCIT (ITA No.1017/Mum/2017, dated 21 Ltd. v/s. DCIT (ITA No.1017/Mum/2017, dated 21-5-2018). 2018).
The Id. CIT(A) erred in holding that levy of interest u/s.234C of The Id. CIT(A) erred in holding that levy of interest u/s.234C of The Id. CIT(A) erred in holding that levy of interest u/s.234C of the Income Tax Act, 1961 is mandatory. The Appellant denies i the Income Tax Act, 1961 is mandatory. The Appellant denies i the Income Tax Act, 1961 is mandatory. The Appellant denies its liability for such interest. liability for such interest.
M/s AYM Syntex Ltd. 7 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
The Id. CIT(A) erred in holding that the ground raised disputing The Id. CIT(A) erred in holding that the ground raised disputing The Id. CIT(A) erred in holding that the ground raised disputing initiation of penalty proceedings u/s.271(1)(c) is premature. The initiation of penalty proceedings u/s.271(1)(c) is premature. The initiation of penalty proceedings u/s.271(1)(c) is premature. The Appellant denies its liability for such penalty. Appellant denies its liability for such penalty. 2.4 The grounds raised by the Revenue for The grounds raised by the Revenue for AY 2015 AY 2015-16 are reproduced as under: reproduced as under:
"The LD.CIT(A), "The LD.CIT(A), has erred in consideringthe subsidy received in the subsidy received in the form of Technology Upgradation Fund as a capital receipt, the form of Technology Upgradation Fund as a capital receipt, the form of Technology Upgradation Fund as a capital receipt, without appreciating the fact that the assessee has not proved without appreciating the fact that the assessee has not proved without appreciating the fact that the assessee has not proved that the application of the that the application of the money received was for the purpose of money received was for the purpose of acquiring a capital asset. acquiring a capital asset. 2. The Ld. CIT(A) has erred in directing the assessing officer to The Ld. CIT(A) has erred in directing the assessing officer to The Ld. CIT(A) has erred in directing the assessing officer to delete the adjustment to book profit on account of disallowance delete the adjustment to book profit on account of disallowance delete the adjustment to book profit on account of disallowance u/s. 14A r.w.r 8D without appreciating the provision of clau 8D without appreciating the provision of clau 8D without appreciating the provision of clause (f to section 115JB of the IT Act." section 115JB of the IT Act." 3. The appeal for assessment year 2014 The appeal for assessment year 2014-15 covers 15 covers, grounds raised in other years and therefore both the parties agreed to argue in other years and therefore both the parties agreed to argue in other years and therefore both the parties agreed to argue the appeals for AY 2014 the appeals for AY 2014-15 as lead case and to follow the decision of 15 as lead case and to follow the decision of the same in other years. Accordingly, we take up the appeals for AY ars. Accordingly, we take up the appeals for AY ars. Accordingly, we take up the appeals for AY 2014-15 for adjudication as under. 15 for adjudication as under.
M/s AYM Syntex Ltd. 8 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
Briefly stated, facts of the case are that the assessee-company Briefly stated, facts of the case are that the assessee Briefly stated, facts of the case are that the assessee was engaged in the business of manufacturing and processing was engaged in the business of manufacturing and processing was engaged in the business of manufacturing and processing of synthetic yearn and trading. For the year synthetic yearn and trading. For the year under consideration, the under consideration, the assessee filed return of income on 29.11.2014 declaring total assessee filed return of income on 29.11.2014 declaring total assessee filed return of income on 29.11.2014 declaring total income at ₹ Nil after set off of business losses. The return of income Nil after set off of business losses. The return of income Nil after set off of business losses. The return of income filed by the assessee was selected for scrutiny and statutory notices filed by the assessee was selected for scrutiny and statutory notices filed by the assessee was selected for scrutiny and statutory notices under the Income-tax Act, 19 tax Act, 1961 (in short ‘the Act’) were issued and 61 (in short ‘the Act’) were issued and complied with. In the assessment completed on 23.12.2016, the complied with. In the assessment completed on 23.12.2016, the complied with. In the assessment completed on 23.12.2016, the Assessing Assessing Assessing Officer Officer Officer made made made various various various disallowances disallowances disallowances including including including disallowance u/s 14A and treating the disallowance u/s 14A and treating the technology upgradation fund upgradation fund subsidy of ₹1,72,22,271/ 1,72,22,271/- as revenue in nature.
On further appeals, the Ld. CIT(A) allowed the appeal partly in On further appeals, the Ld. CIT(A) allowed the appeal partly in On further appeals, the Ld. CIT(A) allowed the appeal partly in favour of the assessee. Aggrieved with the finding of the Ld. CIT(A), favour of the assessee. Aggrieved with the finding of the Ld. CIT(A), favour of the assessee. Aggrieved with the finding of the Ld. CIT(A), both the parties are in appeal before the Tribunal raising the both the parties are in appeal before the Tribunal raising the both the parties are in appeal before the Tribunal raising the grounds as reproduced above. grounds as reproduced above.
M/s AYM Syntex Ltd. 9 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
The Revenue in Ground No. 1 of the appeal is aggrieved by the nue in Ground No. 1 of the appeal is aggrieved by the nue in Ground No. 1 of the appeal is aggrieved by the deletion of disallowance made by the Assessing Officer under Rule deletion of disallowance made by the Assessing Officer under Rule deletion of disallowance made by the Assessing Officer under Rule 14A r.w.r. 8D of the Income 14A r.w.r. 8D of the Income-tax Rules, 1961 (in short ‘the Rules’). tax Rules, 1961 (in short ‘the Rules’).
6.1 Brief facts qua the issue Brief facts qua the issue-in-dispute are that the assessee show dispute are that the assessee shown receipt of exempted income of ₹3,73,165/- from its investment in from its investment in shares mutual fund etc. and in the return of income filed made shares mutual fund etc. and in the return of income filed made shares mutual fund etc. and in the return of income filed made suo motu disallowance of motu disallowance of ₹7,34,844/- u/s 14A of the Act. During the u/s 14A of the Act. During the assessment proceedings, the Assessing Officer was of the v assessment proceedings, the Assessing Officer was of the v assessment proceedings, the Assessing Officer was of the view that assessee failed to link the investment in shares assessee failed to link the investment in shares & mutual fund etc. mutual fund etc. with its own fund/surplus with its own fund/surplus fund available at it disposal and available at it disposal and therefore, invoking provisions of section 14A of the Act r.w.r. 8D therefore, invoking provisions of section 14A of the Act r.w.r. 8D therefore, invoking provisions of section 14A of the Act r.w.r. 8D of the Rules, he made three disallowances. Firstly, disallowance of disallowance of expenditure directly directly related to exempted income under Rule related to exempted income under Rule 8D(2)(i) of ₹7,34,844/ 7,34,844/-. Secondly, the Proportionate interest the Proportionate interest expenditure under Rule expenditure under Rule 8D(2)(ii) amounting to ₹ ₹2,25,345/- and
M/s AYM Syntex Ltd. 10 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
thirdly, administrative expenses under Rule 8D(2)(iii) amounting to administrative expenses under Rule 8D(2)(iii) amounting to administrative expenses under Rule 8D(2)(iii) amounting to ₹6,81,255/-.
On further appeal, the Ld. CIT(A) deleted the addition for On further appeal, the Ld. CIT(A) deleted the addition for On further appeal, the Ld. CIT(A) deleted the addition for proportionate interest expenses under Rule 8D(2)(ii) observing as proportionate interest expenses under Rule 8D(2)(ii) observing as proportionate interest expenses under Rule 8D(2)(ii) observing as under:
“7.4 The AO has computed the disallowance of in The AO has computed the disallowance of interest as per Rule terest as per Rule 8D(2)(i) at Rs 2,25,345/ 8D(2)(i) at Rs 2,25,345/-. On this disallowance out of interest, the . On this disallowance out of interest, the assessee has submitted that it had sufficient surplus interest free assessee has submitted that it had sufficient surplus interest free assessee has submitted that it had sufficient surplus interest free funds to make the said exempt investments and therefore, as per funds to make the said exempt investments and therefore, as per funds to make the said exempt investments and therefore, as per the ratio of decisions of the jurisd the ratio of decisions of the jurisdictional High Court in the cases ictional High Court in the cases of Reliance Utilities & Power Ltd (313 ITR 340) and HDFC Bank of Reliance Utilities & Power Ltd (313 ITR 340) and HDFC Bank of Reliance Utilities & Power Ltd (313 ITR 340) and HDFC Bank (ITA No 330/2012), no disallowance out of interest can be made (ITA No 330/2012), no disallowance out of interest can be made (ITA No 330/2012), no disallowance out of interest can be made by invoking rule 8D(2)(ii). by invoking rule 8D(2)(ii). 7.5 It is observed that in the case of CIT Vs HDC Bank Limited (ITA It is observed that in the case of CIT Vs HDC Bank Limited (ITA It is observed that in the case of CIT Vs HDC Bank Limited (ITA No 330 of 2012), Jurisdictional High Court has held that no 330 of 2012), Jurisdictional High Court has held that no 330 of 2012), Jurisdictional High Court has held that no disallowance u/s 14A can be made in respect of interest paid on disallowance u/s 14A can be made in respect of interest paid on disallowance u/s 14A can be made in respect of interest paid on borrowing, if assessee's own funds and non borrowing, if assessee's own funds and non-interest bearing funds interest bearing funds exceeds investment in tax exceeds investment in tax-free securities. It further held that in free securities. It further held that in principle, if there are funds available, both interest free and over rinciple, if there are funds available, both interest free and over rinciple, if there are funds available, both interest free and over draft and / or loans taken, then a presumption would arise that draft and / or loans taken, then a presumption would arise that draft and / or loans taken, then a presumption would arise that investments would be out of the interest free funds generated or investments would be out of the interest free funds generated or investments would be out of the interest free funds generated or available with the company if the interest free funds were available with the company if the interest free funds were available with the company if the interest free funds were sufficient to meet the investment. Similarly, in the case of Reliance sufficient to meet the investment. Similarly, in the case of Reliance sufficient to meet the investment. Similarly, in the case of Reliance Utilities and Power Lid (313 IT 340 (Bom), Jurisdictional High Utilities and Power Lid (313 IT 340 (Bom), Jurisdictional High Utilities and Power Lid (313 IT 340 (Bom), Jurisdictional High
M/s AYM Syntex Ltd. 11 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
court has also held that where an assessee has his own funds as court has also held that where an assessee has his own funds as court has also held that where an assessee has his own funds as well as borrowed funds, a presumption can be made that the well as borrowed funds, a presumption can be made that the well as borrowed funds, a presumption can be made that the advances for non advances for non-business purposes have been made out of the business purposes have been made out of the own funds and that the borrowed funds have not been used for this own funds and that the borrowed funds have not been used for this own funds and that the borrowed funds have not been used for this purpose. In view of the said two decisions of Hon'ble jurisdictional purpose. In view of the said two decisions of Hon'ble jurisdictional purpose. In view of the said two decisions of Hon'ble jurisdictional High Court, the contention of the assessee that if sufficien High Court, the contention of the assessee that if sufficien High Court, the contention of the assessee that if sufficient surplus interest free funds are available at its disposal, no disallowance interest free funds are available at its disposal, no disallowance interest free funds are available at its disposal, no disallowance out of interest can be made u/s 14A is acceptable in principle. out of interest can be made u/s 14A is acceptable in principle. out of interest can be made u/s 14A is acceptable in principle.
7.6 It is further observed that the surplus interest free funds It is further observed that the surplus interest free funds It is further observed that the surplus interest free funds available at the disposal of the assessee as on 31. available at the disposal of the assessee as on 31.03.2014 is of Rs 03.2014 is of Rs 112.96 crores which comprises of share capital of Rs 39.23 crores 112.96 crores which comprises of share capital of Rs 39.23 crores 112.96 crores which comprises of share capital of Rs 39.23 crores and reserves & surplus of Rs 73.72 crores. On the other hand, the and reserves & surplus of Rs 73.72 crores. On the other hand, the and reserves & surplus of Rs 73.72 crores. On the other hand, the investments made by the assessee which result into exempt income investments made by the assessee which result into exempt income investments made by the assessee which result into exempt income is of Rs 18.70 crores only. Therefore, as is of Rs 18.70 crores only. Therefore, as per the ratio of the decision per the ratio of the decision of the Jurisdictional High Court in the cases cited by the assessee, of the Jurisdictional High Court in the cases cited by the assessee, of the Jurisdictional High Court in the cases cited by the assessee, no disallowance us 14A can be made out of interest expenditure. no disallowance us 14A can be made out of interest expenditure. no disallowance us 14A can be made out of interest expenditure. Therefore, the action of the AO of computing disallowance out of Therefore, the action of the AO of computing disallowance out of Therefore, the action of the AO of computing disallowance out of interest expenditure as per interest expenditure as per Rule 8D(2)(il) is incorrect. Accordingly, Rule 8D(2)(il) is incorrect. Accordingly, the entire addition made by the AO out of interest expenditure the entire addition made by the AO out of interest expenditure the entire addition made by the AO out of interest expenditure after invoking rule 8D(2)(ii) is deleted. after invoking rule 8D(2)(ii) is deleted.” 7.1 Regarding the disallowance under Rule 8D(2)(iii), the Ld. Regarding the disallowance under Rule 8D(2)(iii), the Ld. Regarding the disallowance under Rule 8D(2)(iii), the Ld. CIT(A) noted that suo moto disallowance made b that suo moto disallowance made by the assessee of y the assessee of ₹7,34,844/- was more than the exempted income of was more than the exempted income of ₹3,73,165/-. was more than the exempted income of Therefore, following the decision of the Hon’ble Bombay High Court Therefore, following the decision of the Hon’ble Bombay High Court Therefore, following the decision of the Hon’ble Bombay High Court
M/s AYM Syntex Ltd. 12 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
in the case of Nirved Traders (WP ITA No. 149 of 2017 dated Nirved Traders (WP ITA No. 149 of 2017 dated Nirved Traders (WP ITA No. 149 of 2017 dated
23.04.2019), deleted the addition observing s und deleted the addition observing s under : er :
“7.7 The AO has computed the disallowance of indirect expenses The AO has computed the disallowance of indirect expenses The AO has computed the disallowance of indirect expenses other than interest as per Rule 8D(2)(il) at Rs 6,81,255/ other than interest as per Rule 8D(2)(il) at Rs 6,81,255/ other than interest as per Rule 8D(2)(il) at Rs 6,81,255/-, It is noted that the significant investments have been made by the noted that the significant investments have been made by the noted that the significant investments have been made by the assessee. For taking these investment decisions of acquisitio assessee. For taking these investment decisions of acquisitio assessee. For taking these investment decisions of acquisitions / disposals time and cost of the top management of the assessee disposals time and cost of the top management of the assessee disposals time and cost of the top management of the assessee company would have been utilized. In this context, attention is company would have been utilized. In this context, attention is company would have been utilized. In this context, attention is invited to the decision of ITAT, Mumbai in the case of Dufon invited to the decision of ITAT, Mumbai in the case of Dufon invited to the decision of ITAT, Mumbai in the case of Dufon Laboratories P Ltd (50 Taxmann.com 143) (Mum Trib), wherein it Laboratories P Ltd (50 Taxmann.com 143) (Mum Trib), wherein it Laboratories P Ltd (50 Taxmann.com 143) (Mum Trib), wherein it is held that decisions related to acquisition as well as disposal of s held that decisions related to acquisition as well as disposal of s held that decisions related to acquisition as well as disposal of investments are taken by the Top Management and which would investments are taken by the Top Management and which would investments are taken by the Top Management and which would only be upon expending time and resources. Accordingly, in a case only be upon expending time and resources. Accordingly, in a case only be upon expending time and resources. Accordingly, in a case wherein during the year fresh investments had been made and / wherein during the year fresh investments had been made and / wherein during the year fresh investments had been made and / or disposed off, the Hon'ble ITAT, Mumbai confirmed the disposed off, the Hon'ble ITAT, Mumbai confirmed the disposed off, the Hon'ble ITAT, Mumbai confirmed the disallowance made by the AO u/s 14A out of administrative disallowance made by the AO u/s 14A out of administrative disallowance made by the AO u/s 14A out of administrative expenses. The relevant portion of the decision of the Hon'ble ITAT, The relevant portion of the decision of the Hon'ble ITAT, The relevant portion of the decision of the Hon'ble ITAT, Mumbai in the case of Dufon Mumbai in the case of Dufon Laboratories (supra) is reproduced Laboratories (supra) is reproduced as under:
"In the facts of the present case, we observe movement in the In the facts of the present case, we observe movement in the In the facts of the present case, we observe movement in the investment which is stated to be in mutual funds, port folio, so that investment which is stated to be in mutual funds, port folio, so that investment which is stated to be in mutual funds, port folio, so that there has been acquisition as well as disposal of investments there has been acquisition as well as disposal of investments there has been acquisition as well as disposal of investments during the year. Infact, even as stated by the Tribunal per its during the year. Infact, even as stated by the Tribunal per its during the year. Infact, even as stated by the Tribunal per its said order, the decision order, the decision-making in its respect (investment) is located making in its respect (investment) is located with the higher echelons of the management, and which would with the higher echelons of the management, and which would with the higher echelons of the management, and which would only be upon expending time and resources. The assessee has only be upon expending time and resources. The assessee has only be upon expending time and resources. The assessee has clearly not discharged the said initial onus in the instant case clearly not discharged the said initial onus in the instant case clearly not discharged the said initial onus in the instant case, so
M/s AYM Syntex Ltd. 13 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
that the Revenue could not be faulted with the applying rule 8D, that the Revenue could not be faulted with the applying rule 8D, that the Revenue could not be faulted with the applying rule 8D, which infact stands applied by the assessee as well, albeit in part." which infact stands applied by the assessee as well, albeit in part." which infact stands applied by the assessee as well, albeit in part." 7.8 In view of the above discussion, a disallowance as computed In view of the above discussion, a disallowance as computed In view of the above discussion, a disallowance as computed under Rule 8D(2)(ill) being Rs.6,81,255/ under Rule 8D(2)(ill) being Rs.6,81,255/- is required to be made. required to be made. 7.9 However, it is noted that the Bombay High Court, in the case of However, it is noted that the Bombay High Court, in the case of However, it is noted that the Bombay High Court, in the case of Nirved Traders (WPITA No. 149 of 2017 dated 23.04.2019) has Nirved Traders (WPITA No. 149 of 2017 dated 23.04.2019) has Nirved Traders (WPITA No. 149 of 2017 dated 23.04.2019) has held that the disallowance us. 14 held that the disallowance us. 14-A is required to be limited to the A is required to be limited to the tax-exempt income earned during the ye exempt income earned during the year. The assessee has The assessee has earned a tax exempt income of Rs.3,73,165/ earned a tax exempt income of Rs.3,73,165/- during the year. during the year. Since, the assessee has already disallowed Rs.7,34,844/ Since, the assessee has already disallowed Rs.7,34,844/ Since, the assessee has already disallowed Rs.7,34,844/- on its own, a further disallowance is not called for. As such, the addition own, a further disallowance is not called for. As such, the addition own, a further disallowance is not called for. As such, the addition made by the AO stands deleted. made by the AO stands deleted. The ground raised by the assessee by the assessee stands allowed.” stands allowed.” 8. Before us, the Ld. Departmental Representative (DR) relied on Before us, the Ld. Departmental Representative (DR) relied on Before us, the Ld. Departmental Representative (DR) relied on the order of the Assessing Officer and submitted that addition made the order of the Assessing Officer and submitted that addition made the order of the Assessing Officer and submitted that addition made by the Assessing Officer should be sustained and order of the Ld. by the Assessing Officer should be sustained and order of the Ld. by the Assessing Officer should be sustained and order of the Ld. CIT(A) on the issue-in in-dispute be set aside. The Ld. dispute be set aside. The Ld. DR also pointed out that addition which was sustained by the AO in assessment addition which was sustained by the AO in assessment addition which was sustained by the AO in assessment order included separate addition under Rule 8D(2)(iii) other than order included separate addition under Rule 8D(2)(iii) other than order included separate addition under Rule 8D(2)(iii) other than the suo moto disallowance by the assessee. Therefore, the Ld. CIT(A) the suo moto disallowance by the assessee. Therefore, the Ld. CIT(A) the suo moto disallowance by the assessee. Therefore, the Ld. CIT(A) is not justified in deleting the addition u/s 14A r.w.r. 8D of the Rules. justified in deleting the addition u/s 14A r.w.r. 8D of the Rules. justified in deleting the addition u/s 14A r.w.r. 8D of the Rules.
M/s AYM Syntex Ltd. 14 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
On the other hand, the Ld. Counsel of the assessee relied on the On the other hand, the Ld. Counsel of the assessee relied on the On the other hand, the Ld. Counsel of the assessee relied on the order of the Ld. CIT(A). The Ld. Counsel of the assessee has also filed order of the Ld. CIT(A). The Ld. Counsel of the assessee has also filed order of the Ld. CIT(A). The Ld. Counsel of the assessee has also filed a paperbook containing pages 1 to 286. a paperbook containing pages 1 to 286.
We have heard rival submissions of the parties on the issue ave heard rival submissions of the parties on the issue-in- ave heard rival submissions of the parties on the issue dispute and perused the relevant material on record. We find that dispute and perused the relevant material on record. We find that dispute and perused the relevant material on record. We find that the assessee has made suo moto disallowance of the assessee has made suo moto disallowance of ₹7,34,844/ 7,34,844/- against the exempted income of the exempted income of ₹3,73,165/-. The Ld. Assessing Officer The Ld. Assessing Officer rejected the disallowance computed by the assessee mainly on the jected the disallowance computed by the assessee mainly on the jected the disallowance computed by the assessee mainly on the ground that there was no direct link of the investment made in ground that there was no direct link of the investment made in ground that there was no direct link of the investment made in shares/mutual funds out of own funds or surplus funds available on shares/mutual funds out of own funds or surplus funds available on shares/mutual funds out of own funds or surplus funds available on the disposal of the assessee. The Ld. Assessing Officer treated the disposal of the assessee. The Ld. Assessing Officer treated the disposal of the assessee. The Ld. Assessing Officer treated the suo moto disallowance of suo moto disallowance of ₹7,34,844/- made by the assessee a made by the assessee as incurred directly against the earning of exempted income. This incurred directly against the earning of exempted income. This incurred directly against the earning of exempted income. This finding of the Assessing Officer is fallacious without any evidence on finding of the Assessing Officer is fallacious without any evidence on finding of the Assessing Officer is fallacious without any evidence on record that said expenditure was connected directly with record that said expenditure was connected directly with record that said expenditure was connected directly with the earning of exempted income. Further, under Rule 8D(2)(ii), the earning of exempted income. Further, under Rule 8D(2)(ii), the earning of exempted income. Further, under Rule 8D(2)(ii), the
M/s AYM Syntex Ltd. 15 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
Assessing Officer disallowed Assessing Officer disallowed proportionate interest expenses proportionate interest expenses incurred for investment on borrowed funds in mutual funds/shares. incurred for investment on borrowed funds in mutual funds/shares. incurred for investment on borrowed funds in mutual funds/shares. The said disallowance has been deleted by the Ld. CIT(A) foll The said disallowance has been deleted by the Ld. CIT(A) foll The said disallowance has been deleted by the Ld. CIT(A) following the decision of the Hon’ble the decision of the Hon’ble Jurisdictional High Court in the case of High Court in the case of Reliance Utilities & Power Ltd. (supra) and HDFC Bank (supra) Reliance Utilities & Power Ltd. (supra) and HDFC Bank (supra) Reliance Utilities & Power Ltd. (supra) and HDFC Bank (supra) as the surplus funds constituting share capital of as the surplus funds constituting share capital of ₹39.23 crores and 39.23 crores and reserve and surplus of reserve and surplus of ₹73.73 crores available with the assessee are 73.73 crores available with the assessee are found to be much more than the investment of found to be much more than the investment of ₹ ₹18.70 crores in exempted income yielding assets. Since, the Ld. CIT(A) followed exempted income yielding assets. Since, the Ld. CIT(A) followed exempted income yielding assets. Since, the Ld. CIT(A) followed binding precedent of Hon’ble Jurisdictional High Court, we do not binding precedent of Hon’ble Jurisdictional High Court, we do not binding precedent of Hon’ble Jurisdictional High Court, we do not find any error in the order of the Ld. CIT(A) on the issue he order of the Ld. CIT(A) on the issue-in-dispute. he order of the Ld. CIT(A) on the issue
10.1 Further, regarding the disallowance under Rule 8D(2)(iii) for Further, regarding the disallowance under Rule 8D(2)(iii) for Further, regarding the disallowance under Rule 8D(2)(iii) for administrative expenses is concerned, the Assessing Officer has administrative expenses is concerned, the Assessing Officer has administrative expenses is concerned, the Assessing Officer has made disallowance of made disallowance of ₹6,81,255/-. The Ld. CIT(A), however, in view . The Ld. CIT(A), however, in view of the decision of the Hon’ble Bombay High Court in the case of e decision of the Hon’ble Bombay High Court in the case of e decision of the Hon’ble Bombay High Court in the case of Nirved Traders (supra) Nirved Traders (supra) wherein it is held that disallowance u/s wherein it is held that disallowance u/s
M/s AYM Syntex Ltd. 16 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
14A is to be limited to the extent of tax exempted income earned 14A is to be limited to the extent of tax exempted income earned 14A is to be limited to the extent of tax exempted income earned during the year, sustained the during the year, sustained the suo moto disallowance of disallowance of ₹7,34,844/- and deleted the remaining disallowance made by the Assessing and deleted the remaining disallowance made by the Assessing and deleted the remaining disallowance made by the Assessing Officer u/s 14A of the Act. Since, the Ld. CIT(A) has followed the Officer u/s 14A of the Act. Since, the Ld. CIT(A) has followed the Officer u/s 14A of the Act. Since, the Ld. CIT(A) has followed the binding precedent of the Hon’ble Jurisdictional High Court, binding precedent of the Hon’ble Jurisdictional High Court, binding precedent of the Hon’ble Jurisdictional High Court, therefore, we do not find any error in the order of the Ld. CIT(A) therefore, we do not find any error in the order of the Ld. CIT(A) therefore, we do not find any error in the order of the Ld. CIT(A) on the issue-in-dispute. Accordingly, the ground No. 1 of the appeal of dispute. Accordingly, the ground No. 1 of the appeal of dispute. Accordingly, the ground No. 1 of the appeal of the Revenue is dismissed. the Revenue is dismissed.
The ground No. 2 of the appeal of the Revenue relates to The ground No. 2 of the appeal of the Revenue relates to The ground No. 2 of the appeal of the Revenue relates to treating the subsidy receipt in the form of treating the subsidy receipt in the form of Technology Upgradation Technology Upgradation Fund (TUF) by the assessee as by the assessee as capital receipt. The facts qua the capital receipt. The facts qua the issue-in-dispute are that in the revised computation, the assessee dispute are that in the revised computation, the assessee dispute are that in the revised computation, the assessee made claim of deduction made claim of deduction of interest subsidy of interest subsidy of ₹1,72,22,271/- received from the Government of India under Technology received from the Government of India under Technology received from the Government of India under Technology Upgradation Fund Scheme (TUFS) as be Upgradation Fund Scheme (TUFS) as being in the nature of capital ing in the nature of capital expenditure. The Assessing Officer following the f ssessing Officer following the f ssessing Officer following the finding of his
M/s AYM Syntex Ltd. 17 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
predecessor, rejected the claim of the assessee. The Ld. CIT(A) rejected the claim of the assessee. The Ld. CIT(A) rejected the claim of the assessee. The Ld. CIT(A) however allowed the claim of the assessee. however allowed the claim of the assessee.
We have heard rival submissions of the parties on t We have heard rival submissions of the parties on the issue-in- We have heard rival submissions of the parties on t dispute and perused the relevant material on record. The finding of dispute and perused the relevant material on record. The finding of dispute and perused the relevant material on record. The finding of the Ld. CIT(A) on the issue the Ld. CIT(A) on the issue-in-dispute is reproduced as under: dispute is reproduced as under:
“8.9 Before me, the assessee has claimed that it is engaged in the Before me, the assessee has claimed that it is engaged in the Before me, the assessee has claimed that it is engaged in the business of manufacturing and processing of sy business of manufacturing and processing of synthetic yarn. nthetic yarn. During the previous year the Appellant company received interest During the previous year the Appellant company received interest During the previous year the Appellant company received interest subsidy of Rs. 1,72,22,271/ subsidy of Rs. 1,72,22,271/- from the Government of India under from the Government of India under the credit Linked Capital Subsidy Scheme under Technology the credit Linked Capital Subsidy Scheme under Technology the credit Linked Capital Subsidy Scheme under Technology Upgradation Fund Scheme of Ministry of Textiles, Govern Upgradation Fund Scheme of Ministry of Textiles, Govern Upgradation Fund Scheme of Ministry of Textiles, Government of India. The purpose of the Scheme under which the subsidy is given India. The purpose of the Scheme under which the subsidy is given India. The purpose of the Scheme under which the subsidy is given was to sustain and prove the competitiveness and overall long was to sustain and prove the competitiveness and overall long was to sustain and prove the competitiveness and overall long term viability of the textile industry. The concerned Ministry of term viability of the textile industry. The concerned Ministry of term viability of the textile industry. The concerned Ministry of Textile adopted the TUFS Scheme, envisaging technology Textile adopted the TUFS Scheme, envisaging technology Textile adopted the TUFS Scheme, envisaging technology upgradation of the industry. The subsidy was not given for upgradation of the industry. The subsidy was not given for upgradation of the industry. The subsidy was not given for running the business. Hence interest subsidy is a capital receipt. running the business. Hence interest subsidy is a capital receipt. running the business. Hence interest subsidy is a capital receipt. 8.10 In order to support its view, the assessee has relied on various .10 In order to support its view, the assessee has relied on various .10 In order to support its view, the assessee has relied on various judicial pronouncements pronouncements - i. In the case of Gloster Jute Mills Ltd. 67 SOT 21 (Kol.) the ITAT i. In the case of Gloster Jute Mills Ltd. 67 SOT 21 (Kol.) the ITAT i. In the case of Gloster Jute Mills Ltd. 67 SOT 21 (Kol.) the ITAT was of the view that in order to sustain competitiveness in the was of the view that in order to sustain competitiveness in the was of the view that in order to sustain competitiveness in the domestic as well international market and overall long domestic as well international market and overall long domestic as well international market and overall long-term viability of the industry, the concerned Ministry adopted the TU viability of the industry, the concerned Ministry adopted the TU viability of the industry, the concerned Ministry adopted the TUFS
M/s AYM Syntex Ltd. 18 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
scheme envisaging Technology Upgradation of the Industry. scheme envisaging Technology Upgradation of the Industry. scheme envisaging Technology Upgradation of the Industry. Hence, the subsidy received in this regard falls into capifal field. Hence, the subsidy received in this regard falls into capifal field. Hence, the subsidy received in this regard falls into capifal field.
ii. the Hon'ble Punjab & Haryana High Court in the case of CIT vs. . the Hon'ble Punjab & Haryana High Court in the case of CIT vs. . the Hon'ble Punjab & Haryana High Court in the case of CIT vs. Shri Sham Lal Bansal in ITA No. 472 of 2010, wherein it ha Shri Sham Lal Bansal in ITA No. 472 of 2010, wherein it ha Shri Sham Lal Bansal in ITA No. 472 of 2010, wherein it had been held that interest subsidy received under TUF Scheme is capital in held that interest subsidy received under TUF Scheme is capital in held that interest subsidy received under TUF Scheme is capital in nature.
iii. The Hon'ble Supreme Court in the case of CIT vs. Ponni Sugars . The Hon'ble Supreme Court in the case of CIT vs. Ponni Sugars . The Hon'ble Supreme Court in the case of CIT vs. Ponni Sugars & Chemicals Ltd. reported in (2008) 306 ITR 392 (SC) has held & Chemicals Ltd. reported in (2008) 306 ITR 392 (SC) has held & Chemicals Ltd. reported in (2008) 306 ITR 392 (SC) has held that it is the purpose of the incentive which that it is the purpose of the incentive which decides its nature and decides its nature and not the modality or the source thereof. not the modality or the source thereof.
iv. Hon'ble Calcutta High Court in the case of CIT vs. Rasol Ltd. iv. Hon'ble Calcutta High Court in the case of CIT vs. Rasol Ltd. iv. Hon'ble Calcutta High Court in the case of CIT vs. Rasol Ltd. (2011) 335 ITR 438 (Cal.), has held that subsidy received for (2011) 335 ITR 438 (Cal.), has held that subsidy received for (2011) 335 ITR 438 (Cal.), has held that subsidy received for expansion of capacities modernization and improving the expansion of capacities modernization and improving the expansion of capacities modernization and improving the marketing capabilities to tide over the crises for promotion of g capabilities to tide over the crises for promotion of g capabilities to tide over the crises for promotion of industry in the state is to be treated as capital in nature industry in the state is to be treated as capital in nature
v. In the case of Shree Balaji Alloys & Ors. VS. CIT (2011) 333 ITR v. In the case of Shree Balaji Alloys & Ors. VS. CIT (2011) 333 ITR v. In the case of Shree Balaji Alloys & Ors. VS. CIT (2011) 333 ITR 335 (J&K), it has been held that excise duty refund and interest 335 (J&K), it has been held that excise duty refund and interest 335 (J&K), it has been held that excise duty refund and interest subsidy received for the purpose of eradication of unemployment received for the purpose of eradication of unemployment received for the purpose of eradication of unemployment in the state by acceleration of industrial development and in the state by acceleration of industrial development and in the state by acceleration of industrial development and removing backwardness of the area that lagged behind in removing backwardness of the area that lagged behind in removing backwardness of the area that lagged behind in industrial development is to be treated as capital receipt. industrial development is to be treated as capital receipt.
vi. It is claimed that a vi. It is claimed that an identical issue under the Technology n identical issue under the Technology Upgradation Fund Upgradation Fund Scheme (in short 'TUFS) of Ministry of Textiles Scheme (in short 'TUFS) of Ministry of Textiles was considered by the Hon'ble Punjab & Haryana High Court in was considered by the Hon'ble Punjab & Haryana High Court in was considered by the Hon'ble Punjab & Haryana High Court in the case of Shamlal Bansal ITA 472 dated the case of Shamlal Bansal ITA 472 dated 2010. Relying on the 2010. Relying on the Supreme Court decision in the Supreme Court decision in the case of Ponni Sugars Chemicals Ltd, Chemicals Ltd, the issue was decided in favour of the assessee the issue was decided in favour of the assessee.
M/s AYM Syntex Ltd. 19 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
vii. In the case of SHIVALIK PRINTS LTD. V. Addl. CIT Range 8, In the case of SHIVALIK PRINTS LTD. V. Addl. CIT Range 8, In the case of SHIVALIK PRINTS LTD. V. Addl. CIT Range 8, New Delhi (ITA No. 4698 / Del / 2011), the Bench held that the New Delhi (ITA No. 4698 / Del / 2011), the Bench held that the New Delhi (ITA No. 4698 / Del / 2011), the Bench held that the objective of the subsidy scheme was to enha objective of the subsidy scheme was to enhance the technology nce the technology apparatus of the assessee by assisting in acquinng machinery and apparatus of the assessee by assisting in acquinng machinery and apparatus of the assessee by assisting in acquinng machinery and since it was the intention of the subsidy for the purpose for which since it was the intention of the subsidy for the purpose for which since it was the intention of the subsidy for the purpose for which it was given was for TUF Scheme by the Ministry of Textiles to the it was given was for TUF Scheme by the Ministry of Textiles to the it was given was for TUF Scheme by the Ministry of Textiles to the assessee, so the AO and the CIT (A) e assessee, so the AO and the CIT (A) erred in determining that the rred in determining that the receipt is revenue and that the receipt is a profit substitute of the receipt is revenue and that the receipt is a profit substitute of the receipt is revenue and that the receipt is a profit substitute of the assessee. A similar decision has been taken in the case of DCIT assessee. A similar decision has been taken in the case of DCIT assessee. A similar decision has been taken in the case of DCIT Circle 9(1),. New Delhi v. Sutlej Circle 9(1),. New Delhi v. Sutlej Textiles and Industries Ltd d.
8.11 It is noted that the issu It is noted that the issue of interest subsidy granted under e of interest subsidy granted under TUFS scheme has been held to be in the nature of capital receipt TUFS scheme has been held to be in the nature of capital receipt TUFS scheme has been held to be in the nature of capital receipt by all the judicial authorities. It is noted that in addition to the by all the judicial authorities. It is noted that in addition to the by all the judicial authorities. It is noted that in addition to the decisions quoted by the assessee, the Rajashthan High Court, in the decisions quoted by the assessee, the Rajashthan High Court, in the decisions quoted by the assessee, the Rajashthan High Court, in the case of Nitin Spin case of Nitin Spinners Ltd., [2020] 116 taxmann.com 26 ners Ltd., [2020] 116 taxmann.com 26 (Rajasthan), has taken the view that the amount of such subsidy is (Rajasthan), has taken the view that the amount of such subsidy is (Rajasthan), has taken the view that the amount of such subsidy is capital in nature. The High Court has observed that: capital in nature. The High Court has observed that:
This Court notices that the Punjab and Haryana High Court took 6. This Court notices that the Punjab and Haryana High Court took 6. This Court notices that the Punjab and Haryana High Court took into account the previous binding into account the previous binding ruling of the Supreme Court in ruling of the Supreme Court in CIT v. Ponni Sugars & Chemicals Ltd. CIT v. Ponni Sugars & Chemicals Ltd. [2008) 174 Taxman 87/306 [2008) 174 Taxman 87/306 /TR 392 and Sahney Steel & Press Works Ltd. v. CIT /TR 392 and Sahney Steel & Press Works Ltd. v. CIT [1997) 94 [1997) 94 Taxman 368/228 ITR 253. In these circumstances, the Court is of Taxman 368/228 ITR 253. In these circumstances, the Court is of Taxman 368/228 ITR 253. In these circumstances, the Court is of the opinion that the amount was recei the opinion that the amount was received as capital stream and ved as capital stream and therefore, not taxable. therefore, not taxable.
A similar view was taken by the Calcutta High Court in CIT v. 7. A similar view was taken by the Calcutta High Court in CIT v. 7. A similar view was taken by the Calcutta High Court in CIT v. Gloster Jute Mills Ltd Gloster Jute Mills Ltd [2018] 96 taxmann.com 303/257 Taxman [2018] 96 taxmann.com 303/257 Taxman 512/2019) 416 ITR 458. 512/2019) 416 ITR 458.
M/s AYM Syntex Ltd. 20 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
8.12 In light of the overwhelming judicial pronouncements 8.12 In light of the overwhelming judicial pronouncements 8.12 In light of the overwhelming judicial pronouncements in favour of the assessee on this issue, the ground is decided in favour favour of the assessee on this issue, the ground is decided in favour favour of the assessee on this issue, the ground is decided in favour of the assessee and is allowed. The AO is directed to exclude the of the assessee and is allowed. The AO is directed to exclude the of the assessee and is allowed. The AO is directed to exclude the amount of TUF subsidy from the income of the assessee. amount of TUF subsidy from the income of the assessee. amount of TUF subsidy from the income of the assessee. Ground no. 4(a) to 4(c) is decided in favour of the assessee a no. 4(a) to 4(c) is decided in favour of the assessee and is allowed. nd is allowed.” 12.1 We find that the TUF scheme was launched by the Ministry of We find that the TUF scheme was launched by the Ministry of We find that the TUF scheme was launched by the Ministry of Textile of the Central Government and tile of the Central Government and the Ld. CIT(A) not only relied the Ld. CIT(A) not only relied on the various decision of the High Court but also relied on the on the various decision of the High Court but also relied on the on the various decision of the High Court but also relied on the decision in the case of decision in the case of Nitin Spinners Ltd. (supra) of Rajasthan High d. (supra) of Rajasthan High Court.
Before us, the Ld. DR could not brought Before us, the Ld. DR could not brought on record on record any contrary decision of any High Court or the Jurisdictional High Court. decision of any High Court or the Jurisdictional High Court. decision of any High Court or the Jurisdictional High Court. Therefore, we do not find any error in the order of the Ld. CIT(A) in Therefore, we do not find any error in the order of the Ld. CIT(A) in Therefore, we do not find any error in the order of the Ld. CIT(A) in following the decisio following the decision of the Hon’ble Rajasthan High Court in the n of the Hon’ble Rajasthan High Court in the case of Nitin Spinners Ltd. (supra) Nitin Spinners Ltd. (supra) wherein the interest subsidy wherein the interest subsidy claim under the very same scheme has been held in the nature of claim under the very same scheme has been held in the nature of claim under the very same scheme has been held in the nature of capital receipt. The ground No. 2 of the appeal of the Revenue is . The ground No. 2 of the appeal of the Revenue is . The ground No. 2 of the appeal of the Revenue is accordingly dismissed. issed.
M/s AYM Syntex Ltd. 21 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
The Ground No. 1 of the appeal of the The Ground No. 1 of the appeal of the assessee assessee is also interconnected to the Ground No. 2 of the connected to the Ground No. 2 of the appeal of the Revenue. appeal of the Revenue. The assessee submitted before the Assessing Officer to exclude the The assessee submitted before the Assessing Officer to exclude the The assessee submitted before the Assessing Officer to exclude the amount of interest subsidy on TUFS fund for computing book profit amount of interest subsidy on TUFS fund for computing book profit amount of interest subsidy on TUFS fund for computing book profit u/s 115JB of the Act. The assessee for the first time made claim u/s 115JB of the Act. The assessee for the first time made claim u/s 115JB of the Act. The assessee for the first time made claim before the Ld. CIT(A) for allowing before the Ld. CIT(A) for allowing the amount of interest subsidy the amount of interest subsidy under book profit for the purpose of u/s 115JB being in the nature book profit for the purpose of u/s 115JB being in the nature book profit for the purpose of u/s 115JB being in the nature of capital receipt. The Ld. CIT(A) rejected the additional claim of the of capital receipt. The Ld. CIT(A) rejected the additional claim of the of capital receipt. The Ld. CIT(A) rejected the additional claim of the assessee relying on the alternative remedy available u/s 119(2)(b) assessee relying on the alternative remedy available u/s 119(2)(b) assessee relying on the alternative remedy available u/s 119(2)(b) of the Act which wa of the Act which was not availed by the assessee. The relevant s not availed by the assessee. The relevant finding of the Ld. CIT(A) is reproduced as under: finding of the Ld. CIT(A) is reproduced as under:
“8.16 The ground no. 2 of the additional grounds is taken for 8.16 The ground no. 2 of the additional grounds is taken for 8.16 The ground no. 2 of the additional grounds is taken for adjudication first. Section adjudication first. Section 139 of the Act governs the filing of 139 of the Act governs the filing of return of income. Sub return of income. Sub-section (5) of section 139, permits a person, section (5) of section 139, permits a person, who has filed the return ‹ of income as required under section who has filed the return ‹ of income as required under section who has filed the return ‹ of income as required under section 139(1) or in pursuance of notice under sub 139(1) or in pursuance of notice under sub-section (1) of section section (1) of section 142, to file a revised 142, to file a revised return, if the assessee discovers any omission return, if the assessee discovers any omission or wrong statement therein. The revised return is to be filed at any or wrong statement therein. The revised return is to be filed at any or wrong statement therein. The revised return is to be filed at any time before the expiry of one year from the end of the relevant time before the expiry of one year from the end of the relevant time before the expiry of one year from the end of the relevant
M/s AYM Syntex Ltd. 22 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
assessment year or before the completion of assessment, assessment year or before the completion of assessment, assessment year or before the completion of assessment, whichever is earlie whichever is earlier.
8.17 An assessee, after filing the return of income may, at a later An assessee, after filing the return of income may, at a later An assessee, after filing the return of income may, at a later stage, realize that a claim allowable under the Act has been stage, realize that a claim allowable under the Act has been stage, realize that a claim allowable under the Act has been omitted or the quantum thereof is not correct. If the return has omitted or the quantum thereof is not correct. If the return has omitted or the quantum thereof is not correct. If the return has been filed by the due date as prescribed and a period of on been filed by the due date as prescribed and a period of on been filed by the due date as prescribed and a period of one year from the end of the relevant assessment year has not elapsed, he from the end of the relevant assessment year has not elapsed, he from the end of the relevant assessment year has not elapsed, he may revise the return by filing a revised return. However, in this may revise the return by filing a revised return. However, in this may revise the return by filing a revised return. However, in this case, it is an admitted fact that the assessee has not claimed the case, it is an admitted fact that the assessee has not claimed the case, it is an admitted fact that the assessee has not claimed the deduction in the return of income, neither filed a deduction in the return of income, neither filed any revised return ny revised return of income. The claim has not even been made before the assessing The claim has not even been made before the assessing The claim has not even been made before the assessing officer.
8.18 In the case of Jute Corporation of India Ltd V. CIT [53 Taxman 8.18 In the case of Jute Corporation of India Ltd V. CIT [53 Taxman 8.18 In the case of Jute Corporation of India Ltd V. CIT [53 Taxman 85 (SC)], the Hon'ble Apex Court has held that the CIT(A) has a 85 (SC)], the Hon'ble Apex Court has held that the CIT(A) has a 85 (SC)], the Hon'ble Apex Court has held that the CIT(A) has a power coterminous with the Asses power coterminous with the Assessing Officer. Furthermore, in the sing Officer. Furthermore, in the case of Goetze (India) Ltd. v. CIT 284 ITR 323 (SC), it was held by case of Goetze (India) Ltd. v. CIT 284 ITR 323 (SC), it was held by case of Goetze (India) Ltd. v. CIT 284 ITR 323 (SC), it was held by the Hon'ble Apex Court that the claim of deduction not made in the the Hon'ble Apex Court that the claim of deduction not made in the the Hon'ble Apex Court that the claim of deduction not made in the return cannot be entertained by the Assessing Officer otherwise return cannot be entertained by the Assessing Officer otherwise return cannot be entertained by the Assessing Officer otherwise than by filing a revise than by filing a revised return. In the case of the assessee, it is d return. In the case of the assessee, it is evident that the claim of the deduction made by the assessee is a evident that the claim of the deduction made by the assessee is a evident that the claim of the deduction made by the assessee is a fresh claim and not a revised claim. The assessee has not claimed fresh claim and not a revised claim. The assessee has not claimed fresh claim and not a revised claim. The assessee has not claimed the deduction in the return of income, neither filed any revised the deduction in the return of income, neither filed any revised the deduction in the return of income, neither filed any revised return of income claiming the said deduction. In this regard, I am me claiming the said deduction. In this regard, I am me claiming the said deduction. In this regard, I am of the considered view that this claim of the assessee tantamount of the considered view that this claim of the assessee tantamount of the considered view that this claim of the assessee tantamount to revision of the Return of Income itself. If I go into the facts of the to revision of the Return of Income itself. If I go into the facts of the to revision of the Return of Income itself. If I go into the facts of the case, it is clear that assessee wants to get relief in the form case, it is clear that assessee wants to get relief in the form case, it is clear that assessee wants to get relief in the form of rectification of mistake in the return of income in respect of a rectification of mistake in the return of income in respect of a rectification of mistake in the return of income in respect of a claim which itself is of a doubtful nature. claim which itself is of a doubtful nature. The mechanism is The mechanism is
M/s AYM Syntex Ltd. 23 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
provided in Section 139(5) of the Act which state that an assesses provided in Section 139(5) of the Act which state that an assesses provided in Section 139(5) of the Act which state that an assesses can revise return of income at any time before expiry of on can revise return of income at any time before expiry of on can revise return of income at any time before expiry of one year from the relevant Assessment Year or before completion of from the relevant Assessment Year or before completion of from the relevant Assessment Year or before completion of assessment, whichever is earlier. The current A.Y. is A.Y.2015 assessment, whichever is earlier. The current A.Y. is A.Y.2015 assessment, whichever is earlier. The current A.Y. is A.Y.2015-16 and the time limit for revising return expired on 31.03.2017. The and the time limit for revising return expired on 31.03.2017. The and the time limit for revising return expired on 31.03.2017. The Parlament in their wisdom has envisaged he sing rolumn expi Parlament in their wisdom has envisaged he sing rolumn expi Parlament in their wisdom has envisaged he sing rolumn expired on 31.03.2017, The some mistakes which may adversely affect him on 31.03.2017, The some mistakes which may adversely affect him on 31.03.2017, The some mistakes which may adversely affect him and provided a mechanism to correct the same by way of provision and provided a mechanism to correct the same by way of provision and provided a mechanism to correct the same by way of provision of revised return but put a time limit to the same. Accepting this of revised return but put a time limit to the same. Accepting this of revised return but put a time limit to the same. Accepting this submission will amount to circumventing this provision a submission will amount to circumventing this provision a submission will amount to circumventing this provision and further pars: Accepting position of advantage against other further pars: Accepting position of advantage against other further pars: Accepting position of advantage against other assessees having made mistakes but their cases are not under assessees having made mistakes but their cases are not under assessees having made mistakes but their cases are not under appeal, which would not be proper. appeal, which would not be proper.
8.19 In this regard, it is pertinent to note that the Act provides 8.19 In this regard, it is pertinent to note that the Act provides 8.19 In this regard, it is pertinent to note that the Act provides another mechanism to get the r another mechanism to get the relief in such situations by way of elief in such situations by way of provision of Section 119(2)(b), which provides that the Board may provision of Section 119(2)(b), which provides that the Board may provision of Section 119(2)(b), which provides that the Board may authorize an Income authorize an Income-tax authority to admit an application or tax authority to admit an application or claim for any relief under the Act after the expiry of period claim for any relief under the Act after the expiry of period claim for any relief under the Act after the expiry of period provided under the Act. Thus, in provided under the Act. Thus, in effect the assessee is seeking a effect the assessee is seeking a relief from the CIT(A) by way of submission in respect of which he relief from the CIT(A) by way of submission in respect of which he relief from the CIT(A) by way of submission in respect of which he has been time barred by the law and beyond time line of revised has been time barred by the law and beyond time line of revised has been time barred by the law and beyond time line of revised return. The remedy is available with the higher authority as return. The remedy is available with the higher authority as return. The remedy is available with the higher authority as prescribed in section 119(2)(b prescribed in section 119(2)(b) of the Act. Thus, accordingly, this ) of the Act. Thus, accordingly, this relief will tantamount to circumventing both the time limits relief will tantamount to circumventing both the time limits relief will tantamount to circumventing both the time limits prescribed by the law and the higher authority with whom the prescribed by the law and the higher authority with whom the prescribed by the law and the higher authority with whom the power vests. Therefore, in my considered view, otherwise also power vests. Therefore, in my considered view, otherwise also power vests. Therefore, in my considered view, otherwise also power didn't vest even with the AO power didn't vest even with the AO, therefore he cannot be issued a , therefore he cannot be issued a direction to exercise a power which does not vest with him. direction to exercise a power which does not vest with him. direction to exercise a power which does not vest with him.
M/s AYM Syntex Ltd. 24 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
8.20 In CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd.(supra), it 8.20 In CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd.(supra), it 8.20 In CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd.(supra), it was held by the Hon'ble Bombay High Court that the appellate was held by the Hon'ble Bombay High Court that the appellate was held by the Hon'ble Bombay High Court that the appellate authorities have the discretion wh authorities have the discretion whether or not to permit such ether or not to permit such additional claims to be raised. In this case, in the given facts and additional claims to be raised. In this case, in the given facts and additional claims to be raised. In this case, in the given facts and circumstances of the case, I am of the considered view that the circumstances of the case, I am of the considered view that the circumstances of the case, I am of the considered view that the additional claim of the assessee which was a fresh claim and not a additional claim of the assessee which was a fresh claim and not a additional claim of the assessee which was a fresh claim and not a revised claim could not be e revised claim could not be entertained as alternative mechanism ntertained as alternative mechanism for recourse is available in the Act itself which could be availed of for recourse is available in the Act itself which could be availed of for recourse is available in the Act itself which could be availed of as prescribed in section 119(2)(b) of the Act. Ground no. 2 is as prescribed in section 119(2)(b) of the Act. Ground no. 2 is as prescribed in section 119(2)(b) of the Act. Ground no. 2 is accordingly dismissed. accordingly dismissed.”
14.1 However, the Ld. CIT(A) also disallowed the claim of the However, the Ld. CIT(A) also disallowed the claim of the However, the Ld. CIT(A) also disallowed the claim of the
assessee on merit observing as under: on merit observing as under:
8.21 Without prejudice to the above, the matter is examined on 8.21 Without prejudice to the above, the matter is examined on 8.21 Without prejudice to the above, the matter is examined on merits. The issue of adjustments which can be made to the book merits. The issue of adjustments which can be made to the book merits. The issue of adjustments which can be made to the book profits under section 115JB of the Act is no longer res judicata. The profits under section 115JB of the Act is no longer res judicata. The profits under section 115JB of the Act is no longer res judicata. The Hon'ble Supreme Court h Hon'ble Supreme Court has confirmed in many cases that section as confirmed in many cases that section 115JB is a complete code in itself and the book profits of an 115JB is a complete code in itself and the book profits of an 115JB is a complete code in itself and the book profits of an assessee can only be altered in line with the items enumerated in assessee can only be altered in line with the items enumerated in assessee can only be altered in line with the items enumerated in the section itself (Apollo Tyres Limited the section itself (Apollo Tyres Limited [2002] 122 Taxman 562 [2002] 122 Taxman 562 (SC) / 255 ITR 273 (SC). (SC) / 255 ITR 273 (SC).
8.22 In its submission, the assessee has relied on the above decision In its submission, the assessee has relied on the above decision In its submission, the assessee has relied on the above decision of the Supreme Court to conclude that an item which cannot be of the Supreme Court to conclude that an item which cannot be of the Supreme Court to conclude that an item which cannot be brought to tax under section 4 cannot be brought to tax under section 4 cannot be brought to tax under brought to tax under section 115JB. For this, reliance has also been placed on the section 115JB. For this, reliance has also been placed on the section 115JB. For this, reliance has also been placed on the decision of the Bombay ITAT in the case of Alok Industries Ltd decision of the Bombay ITAT in the case of Alok Industries Ltd decision of the Bombay ITAT in the case of Alok Industries Ltd (supra) wherein it has been held that once a receipt cannot be (supra) wherein it has been held that once a receipt cannot be (supra) wherein it has been held that once a receipt cannot be
M/s AYM Syntex Ltd. 25 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
taxed under section 4 of the Act, there cannot arise any taxability taxed under section 4 of the Act, there cannot arise any taxability taxed under section 4 of the Act, there cannot arise any taxability under section 115B of the Act. The decision of the Hon'ble Sup under section 115B of the Act. The decision of the Hon'ble Sup under section 115B of the Act. The decision of the Hon'ble Supreme Court has been examined and no such intent is visible in the Court has been examined and no such intent is visible in the Court has been examined and no such intent is visible in the decision. Once the accounts of the assessee have been prepared in decision. Once the accounts of the assessee have been prepared in decision. Once the accounts of the assessee have been prepared in accordance with the Companies Act and is certified by the accordance with the Companies Act and is certified by the accordance with the Companies Act and is certified by the auditors, the AO or the assessee, both are precluded from making auditors, the AO or the assessee, both are precluded from making auditors, the AO or the assessee, both are precluded from making any changes to the book profits so determined unless mandated by ny changes to the book profits so determined unless mandated by ny changes to the book profits so determined unless mandated by the section itself. the section itself. Since the profits of the company under section Since the profits of the company under section 115JB are to be determined as per companies Act the income as 115JB are to be determined as per companies Act the income as 115JB are to be determined as per companies Act the income as defined under section 2(24) of the Act has no relevance to such defined under section 2(24) of the Act has no relevance to such defined under section 2(24) of the Act has no relevance to such determination. determination.
8.23 It is noted that Section 4, being a charging section allows levy It is noted that Section 4, being a charging section allows levy It is noted that Section 4, being a charging section allows levy of tax in accordance with the provisions of the Act and at no point of tax in accordance with the provisions of the Act and at no point of tax in accordance with the provisions of the Act and at no point mandates that no tax can be levied on capital receipts. For the mandates that no tax can be levied on capital receipts. For the mandates that no tax can be levied on capital receipts. For the sake of clarity, the provisions of sec sake of clarity, the provisions of section 4 of the Act are tion 4 of the Act are reproduced below: reproduced below:
(1) Where any Central Act enacts that income 4. (1) Where any Central Act enacts that income-tax shall be tax shall be charged for any assessment year at any rate or rates, income charged for any assessment year at any rate or rates, income charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in at that rate or those rates shall be charged for that year in at that rate or those rates shall be charged for that year in accordance with, and subject accordance with, and subject to the provisions (including to the provisions (including provisions for the levy of additional income provisions for the levy of additional income-tax) of, this Act] in tax) of, this Act] in respect of the total income of the previous year of every person: respect of the total income of the previous year of every person: respect of the total income of the previous year of every person:
Provided that where by virtue of any provision of this Act income Provided that where by virtue of any provision of this Act income Provided that where by virtue of any provision of this Act income- tax is to be charged in res tax is to be charged in respect of the income of a period other than pect of the income of a period other than the previous year, income the previous year, income-tax shall be charged accordingly. tax shall be charged accordingly.
M/s AYM Syntex Ltd. 26 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
(2) In respect of income chargeable under sub (2) In respect of income chargeable under sub-section (1), income section (1), income- tax shall be deducted at the source or paid in advance, where it is tax shall be deducted at the source or paid in advance, where it is tax shall be deducted at the source or paid in advance, where it is so deductible or pay so deductible or payable under any provision of this Act.
8.24 The total income as mentioned in Section 4 has to be 8.24 The total income as mentioned in Section 4 has to be 8.24 The total income as mentioned in Section 4 has to be computed in accordance with the provisions of the Act. There is no computed in accordance with the provisions of the Act. There is no computed in accordance with the provisions of the Act. There is no blanket prohibition with respect to non blanket prohibition with respect to non-taxation of capital items. taxation of capital items. While observing that incom While observing that income in normal parlayance does not e in normal parlayance does not include receipts on capital account, the Hon'ble Bombay High include receipts on capital account, the Hon'ble Bombay High include receipts on capital account, the Hon'ble Bombay High Court in the case of Vodafone India Services (P.) Ltd. v. Union of Court in the case of Vodafone India Services (P.) Ltd. v. Union of Court in the case of Vodafone India Services (P.) Ltd. v. Union of India, [ 2014 ] 50 taxmann.com 300 (Bombay). observed that India, [ 2014 ] 50 taxmann.com 300 (Bombay). observed that India, [ 2014 ] 50 taxmann.com 300 (Bombay). observed that there are several instances in the Ac there are several instances in the Act where such receipts on t where such receipts on capital account have been brought to tax, for instance section 68 capital account have been brought to tax, for instance section 68 capital account have been brought to tax, for instance section 68 of the Act, some provisions of section 56 of the Act, the provisions of the Act, some provisions of section 56 of the Act, the provisions of the Act, some provisions of section 56 of the Act, the provisions related to charge of income on capital gains, these are all related related to charge of income on capital gains, these are all related related to charge of income on capital gains, these are all related to charge of tax on capital to charge of tax on capital account. The inference to be drawn is account. The inference to be drawn is that a capital account receipt can be brought to tax if the law so that a capital account receipt can be brought to tax if the law so that a capital account receipt can be brought to tax if the law so mandates. It is noted that section 115JB, which has been accepted mandates. It is noted that section 115JB, which has been accepted mandates. It is noted that section 115JB, which has been accepted by judicial authorities as a complete code in by judicial authorities as a complete code in itself mandates that a mandates that a book profit, onc , once computed under Companies Act and certified certified by the auditor, cannot be alfered it especomputed under com ancome the auditor, cannot be alfered it especomputed under com ancome the auditor, cannot be alfered it especomputed under com ancome inciluded in such account, unless the items are covered under the inciluded in such account, unless the items are covered under the inciluded in such account, unless the items are covered under the Explanation 1 contained in this section, As such, the claim of the Explanation 1 contained in this section, As such, the claim of the Explanation 1 contained in this section, As such, the claim of the assessee that section 4 of the Act excludes receipts on capital at section 4 of the Act excludes receipts on capital at section 4 of the Act excludes receipts on capital account from taxation is totally misplaced and deserves to be account from taxation is totally misplaced and deserves to be account from taxation is totally misplaced and deserves to be outrightly rejected. rejected.
8.25 The assessee has brought to my notice the contents of 8.25 The assessee has brought to my notice the contents of 8.25 The assessee has brought to my notice the contents of Explanation 1 wherein certain income of an assessee is requir Explanation 1 wherein certain income of an assessee is requir Explanation 1 wherein certain income of an assessee is required to
M/s AYM Syntex Ltd. 27 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
be excluded while computing the book profit. For clarity, the be excluded while computing the book profit. For clarity, the be excluded while computing the book profit. For clarity, the relevant provisions are reproduced below: relevant provisions are reproduced below:
Explanation 1: Explanation 1:………………………
………………………………………. ……………………………………….
if any amount referred to in clauses (a) to (i) is debited to the if any amount referred to in clauses (a) to (i) is debited to the if any amount referred to in clauses (a) to (i) is debited to the statement of profit and loss] or if any statement of profit and loss] or if any amount referred to in clause amount referred to in clause (i) is not credited to the statement of profit and loss), and as (i) is not credited to the statement of profit and loss), and as (i) is not credited to the statement of profit and loss), and as reduced by,-
i. the amount withdrawn from any reserve or provision (excluding i. the amount withdrawn from any reserve or provision (excluding i. the amount withdrawn from any reserve or provision (excluding a reserve created before the 1st day of April. 1997 otherwise than a reserve created before the 1st day of April. 1997 otherwise than a reserve created before the 1st day of April. 1997 otherwise than by way of a debi by way of a debit to the 60(statement of profit and loss]), if any t to the 60(statement of profit and loss]), if any such amount is credited to the 60[statement of profit and loss): such amount is credited to the 60[statement of profit and loss): such amount is credited to the 60[statement of profit and loss):
Provided that where this section is applicable to an assessee in any Provided that where this section is applicable to an assessee in any Provided that where this section is applicable to an assessee in any previous year, the amount withdrawn from reserves created or previous year, the amount withdrawn from reserves created or previous year, the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year made in a previous year relevant to the assessment year made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 shall not be commencing on or after the 1st day of April, 1997 shall not be commencing on or after the 1st day of April, 1997 shall not be reduced from the book profit unless the book profit of such year reduced from the book profit unless the book profit of such year reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which has been increased by those reserves or provisions (out of which has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation or id amount was withdrawn) under this Explanation or id amount was withdrawn) under this Explanation or Explanation below the second proviso to section 115JA, as the case Explanation below the second proviso to section 115JA, as the case Explanation below the second proviso to section 115JA, as the case may be; or
ii. the amount of income to which any of the provisions of section the amount of income to which any of the provisions of section the amount of income to which any of the provisions of section 10 (other than the provisions contained in clause (38) ther 10 (other than the provisions contained in clause (38) ther 10 (other than the provisions contained in clause (38) thereof) or section 11 or section 12 apply, if any such amount is credited to section 11 or section 12 apply, if any such amount is credited to section 11 or section 12 apply, if any such amount is credited to the statement of profit and loss; or the statement of profit and loss; or ……………………………………………. …………………………………………….
M/s AYM Syntex Ltd. 28 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
8.26 The assessee has tried to lead me to its assertion that all The assessee has tried to lead me to its assertion that all The assessee has tried to lead me to its assertion that all capital receipts need to be excluded while computing book capital receipts need to be excluded while computing book capital receipts need to be excluded while computing book profits by claiming that item (il) above excludes items by claiming that item (il) above excludes items of income which of income which are not taxable under the Income Tax Act. I am not convinced by are not taxable under the Income Tax Act. I am not convinced by are not taxable under the Income Tax Act. I am not convinced by such submission. The item (i) above specifies the items of income such submission. The item (i) above specifies the items of income such submission. The item (i) above specifies the items of income which are specifically included within the ambit of th which are specifically included within the ambit of the clause i.e. e clause i.e. items of income falling within section 10. section 11 or section 12 items of income falling within section 10. section 11 or section 12 items of income falling within section 10. section 11 or section 12 of the Act. There is no implication in the above clause indicating of the Act. There is no implication in the above clause indicating of the Act. There is no implication in the above clause indicating that all such income which is on capital account should be that all such income which is on capital account should be that all such income which is on capital account should be excluded while computing the book profit. It is excluded while computing the book profit. It is the cardinal the cardinal principal of interpretation of taxing statutes that nothing can be principal of interpretation of taxing statutes that nothing can be principal of interpretation of taxing statutes that nothing can be added or deducted to such provisions through added or deducted to such provisions through surmise and surmise and speculation.
8.27 The provisions of Income Tax statue are not to be interpreted The provisions of Income Tax statue are not to be interpreted The provisions of Income Tax statue are not to be interpreted liberally or through surmises. In the liberally or through surmises. In the case of Dilip Kumar & case of Dilip Kumar & Company. (2018) 95 taxmann.com 327 (SC). the five member Company. (2018) 95 taxmann.com 327 (SC). the five member Company. (2018) 95 taxmann.com 327 (SC). the five member Bench of the Hon'ble Court was unequivocal about such a Bench of the Hon'ble Court was unequivocal about such a Bench of the Hon'ble Court was unequivocal about such a approach. The Hon'ble Court held that: The Hon'ble Court held that:
After thoroughly examining the various precedents some of 41. After thoroughly examining the various precedents some of 41. After thoroughly examining the various precedents some of which were cited bef which were cited before us and after giving our anxious ore us and after giving our anxious consideration, we would be more than justified to conclude and consideration, we would be more than justified to conclude and consideration, we would be more than justified to conclude and also compelled to hold that every taxing statue including, also compelled to hold that every taxing statue including, also compelled to hold that every taxing statue including, charging, computation and exemption clause fat the threshold charging, computation and exemption clause fat the threshold charging, computation and exemption clause fat the threshold stage) should be interpreted strictly stage) should be interpreted strictly. Further, in case of ambiguity . Further, in case of ambiguity in a charging provisions, the benefit must necessarily go in favour in a charging provisions, the benefit must necessarily go in favour in a charging provisions, the benefit must necessarily go in favour of subjecV/assessee, but the same is not true for an exemption of subjecV/assessee, but the same is not true for an exemption of subjecV/assessee, but the same is not true for an exemption notification wherein the benefit of ambiguity must be strictly notification wherein the benefit of ambiguity must be strictly notification wherein the benefit of ambiguity must be strictly interpreted in favour of the R interpreted in favour of the Revenue/State.
M/s AYM Syntex Ltd. 29 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
8.28 Item (I) to Explanation 1 of section 115JB, at no place, allows 8.28 Item (I) to Explanation 1 of section 115JB, at no place, allows 8.28 Item (I) to Explanation 1 of section 115JB, at no place, allows all capital items included in the P&L account to be excluded from all capital items included in the P&L account to be excluded from all capital items included in the P&L account to be excluded from computation of book profits. The Section is absolutely clear. The computation of book profits. The Section is absolutely clear. The computation of book profits. The Section is absolutely clear. The Hon'ble Supreme Court has also a clear ma Hon'ble Supreme Court has also a clear mandate that the book ndate that the book profits of the company have to be computed in accordance with profits of the company have to be computed in accordance with profits of the company have to be computed in accordance with the provisions of section 115JB and the authorities cannot travel the provisions of section 115JB and the authorities cannot travel the provisions of section 115JB and the authorities cannot travel beyond. The Hon'ble Supreme Court also holds that the statute is beyond. The Hon'ble Supreme Court also holds that the statute is beyond. The Hon'ble Supreme Court also holds that the statute is to be interpreted strictly at the threshold to be interpreted strictly at the threshold stage. (Apollo stage. (Apollo Tyres(Supra))
8.29 In light of the above clear guidance given by the statute as 8.29 In light of the above clear guidance given by the statute as 8.29 In light of the above clear guidance given by the statute as well as the Highest Court of the Country, the provisions cannot be well as the Highest Court of the Country, the provisions cannot be well as the Highest Court of the Country, the provisions cannot be interpreted on the basis of intent and logic. There is no logic in interpreted on the basis of intent and logic. There is no logic in interpreted on the basis of intent and logic. There is no logic in taxation. As far as sectio taxation. As far as section 115JB of the Act is concerned, the profit n 115JB of the Act is concerned, the profit is required to be determined in accordance with Companies Act is required to be determined in accordance with Companies Act is required to be determined in accordance with Companies Act and not Income Tax Act. Hence, the presumption of the assessee and not Income Tax Act. Hence, the presumption of the assessee and not Income Tax Act. Hence, the presumption of the assessee that such income is to be determined in line with section 4 and that such income is to be determined in line with section 4 and that such income is to be determined in line with section 4 and section 2(24) as far as section 2(24) as far as section 115JB is concerned is not found section 115JB is concerned is not found tenable. The reliance placed by the assessee on the decision of the tenable. The reliance placed by the assessee on the decision of the tenable. The reliance placed by the assessee on the decision of the Supreme Court referred above is not found to be correct. In light of Supreme Court referred above is not found to be correct. In light of Supreme Court referred above is not found to be correct. In light of the clear and unambiguous language of the section, there is no the clear and unambiguous language of the section, there is no the clear and unambiguous language of the section, there is no need for relyin need for relying on indirect judicial pronouncements cited by the g on indirect judicial pronouncements cited by the assessee. It is also noted that the decisions cited by the assessee did assessee. It is also noted that the decisions cited by the assessee did assessee. It is also noted that the decisions cited by the assessee did not take into account the five member Supreme Court Bench not take into account the five member Supreme Court Bench not take into account the five member Supreme Court Bench decision in the case of Dilip Kumar & Company (supra) which is a decision in the case of Dilip Kumar & Company (supra) which is a decision in the case of Dilip Kumar & Company (supra) which is a milestone as far as interpretation of taxation statutes is as far as interpretation of taxation statutes is as far as interpretation of taxation statutes is concerned.
M/s AYM Syntex Ltd. 30 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
8.30 In light of the above discussion, the additional ground no. 1 8.30 In light of the above discussion, the additional ground no. 1 8.30 In light of the above discussion, the additional ground no. 1 raised by the raised by the assessee is decided against the assessee and is assessee is decided against the assessee and is dismissed.” 15. Before us, the Ld. Counsel of the assessee submitte Before us, the Ld. Counsel of the assessee submitted that in the Before us, the Ld. Counsel of the assessee submitte case of Alok Industries Ltd. v/s. DCIT (ITA No.1017/Mum/2017, Alok Industries Ltd. v/s. DCIT (ITA No.1017/Mum/2017, Alok Industries Ltd. v/s. DCIT (ITA No.1017/Mum/2017, dated 21-5-2018), the Co , the Co-ordinate Bench of the Tribunal has held ordinate Bench of the Tribunal has held that once a receipt cannot be taxed u/s that once a receipt cannot be taxed u/s 4 of the Act, then no 4 of the Act, then no tax liability can be raised can be raised u/s 115JB of the Act and JB of the Act and therefore, he submitted that following the ratio of the binding precedent, the submitted that following the ratio of the binding precedent, the submitted that following the ratio of the binding precedent, the finding of the Ld. CIT(A) on the issue finding of the Ld. CIT(A) on the issue-in-dispute might be set aside. dispute might be set aside. The Ld. Counsel also referred to the decision of Tribunal in the case The Ld. Counsel also referred to the decision of Tribunal in the case The Ld. Counsel also referred to the decision of Tribunal in the case of Shree Pushkar Chemicals & Fertiliz Shree Pushkar Chemicals & Fertilizers Ltd. 192 ITD 618 ers Ltd. 192 ITD 618.
On the contrary, the Ld. DR relied on the order of the lower On the contrary, the Ld. DR relied on the order of the lower On the contrary, the Ld. DR relied on the order of the lower authorities.
We have heard the rival submissions of the parties on the We have heard the rival submissions of the parties on the We have heard the rival submissions of the parties on the issue-in-dispute and perused the relevant material on record. The dispute and perused the relevant material on record. The dispute and perused the relevant material on record. The only issue-in-dispute befor dispute before us is whether the interest subsidy in e us is whether the interest subsidy in
M/s AYM Syntex Ltd. 31 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
respect of TUFS which has already been held by respect of TUFS which has already been held by respect of TUFS which has already been held by us, as capital receipt, is eligible for deduction out of the book profit to be is eligible for deduction out of the book profit to be is eligible for deduction out of the book profit to be computed as per the provisions of section 115JB of the Act. The Ld. computed as per the provisions of section 115JB of the Act. The Ld. computed as per the provisions of section 115JB of the Act. The Ld. Counsel of the assesse Counsel of the assessee has relied on the decision of the Co e has relied on the decision of the Co-ordinate Bench in the case of Bench in the case of Alok Industries (supra). The Ld. Counsel has Alok Industries (supra). The Ld. Counsel has also filed one more decision of the Co also filed one more decision of the Co-ordinate Bench of the ordinate Bench of the Tribunal in the case of Shri Pushkar Chemicals & Fertilizer Ltd. 192 Tribunal in the case of Shri Pushkar Chemicals & Fertilizer Ltd. 192 Tribunal in the case of Shri Pushkar Chemicals & Fertilizer Ltd. 192 ITD 618. The relevant part of the said decision is reproduced as relevant part of the said decision is reproduced as relevant part of the said decision is reproduced as under :
“8.3.13 Attention is drawn on the following decisions of the 13 Attention is drawn on the following decisions of the 13 Attention is drawn on the following decisions of the Tribunal / High Courts / Apex Court in the submission filed, Tribunal / High Courts / Apex Court in the submission filed, Tribunal / High Courts / Apex Court in the submission filed, wherein it has been held that subsidy treated as capital receipt wherein it has been held that subsidy treated as capital receipt wherein it has been held that subsidy treated as capital receipt shall not taxable even in book profit u/s. 115JB: t taxable even in book profit u/s. 115JB: i. In CIT v. Harinagar Sugar Mills Ltd (ITA No In CIT v. Harinagar Sugar Mills Ltd (ITA No. 1132 of 2014, dated . 1132 of 2014, dated 04-01- 20 17) (Born) (HC) wherein it has been held that, 20 17) (Born) (HC) wherein it has been held that, a) The issue raised in this question i a) The issue raised in this question is consequential to question s consequential to question no.(i). We have already held that the subsidy received by the no.(i). We have already held that the subsidy received by the no.(i). We have already held that the subsidy received by the respondent assessee from the State of Bihar was in the nature of respondent assessee from the State of Bihar was in the nature of respondent assessee from the State of Bihar was in the nature of capital receipt. Hence the same cannot be added to arrive at book capital receipt. Hence the same cannot be added to arrive at book capital receipt. Hence the same cannot be added to arrive at book profits of the respondent assessee profits of the respondent assessee under Section 1151 of the Act. of the Act.
M/s AYM Syntex Ltd. 32 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
(b) Thus, the question as proposed herein does not give rise to any (b) Thus, the question as proposed herein does not give rise to any (b) Thus, the question as proposed herein does not give rise to any substantial question of law as it also stands concluded against the substantial question of law as it also stands concluded against the substantial question of law as it also stands concluded against the Revenue.
ii. Recently in PCIT v. Ankit ii. Recently in PCIT v. Ankit Metal & Power Ltd. (ITA 155 of 2018, Metal & Power Ltd. (ITA 155 of 2018, dated 0907-20 19) it has been held that, But where a receipt is not 20 19) it has been held that, But where a receipt is not 20 19) it has been held that, But where a receipt is not in the nature of income at all it cannot be included in book profit in the nature of income at all it cannot be included in book profit in the nature of income at all it cannot be included in book profit for the purpose of computation under for the purpose of computation under Section 115JB of the Income of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest Tax Act, 1961. For the aforesaid reason, we hold that the interest Tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be and power subsidy under the schemes in question would have to be and power subsidy under the schemes in question would have to be excluded while computing book profit under excluded while computing book profit under Section 115JB Section 115JB of the Income Tax Act, 1961. Income Tax Act, 1961.
In Alok Industries Ltd v. DCIT (ITA No In Alok Industries Ltd v. DCIT (ITA No 1017/Murn/2017, dated 21 1017/Murn/2017, dated 21- 0520 18) it has been held that, .....Once the subsidy received cannot 0520 18) it has been held that, .....Once the subsidy received cannot 0520 18) it has been held that, .....Once the subsidy received cannot be taxed under be taxed under section 4, there cannot arise any taxability , there cannot arise any taxability under section 11 section 11 53B of the Act, which merely provides for an of the Act, which merely provides for an alternate mechanism for computation of income and tax thereon. alternate mechanism for computation of income and tax thereon. alternate mechanism for computation of income and tax thereon.
More importantly, the decision of the Jaipur Tribunal in the 29. More importantly, the decision of the Jaipur Tribunal in the 29. More importantly, the decision of the Jaipur Tribunal in the case of Shree Cement Ltd. (ITA No. 614 / JP /_2010) has case of Shree Cement Ltd. (ITA No. 614 / JP /_2010) has case of Shree Cement Ltd. (ITA No. 614 / JP /_2010) has exhaustively discussed the issue under consideration and also exhaustively discussed the issue under consideration and also exhaustively discussed the issue under consideration and also referred to the order of Rajasthan High Court wherein the ground o the order of Rajasthan High Court wherein the ground o the order of Rajasthan High Court wherein the ground taken u by the revenue on this issue was not admitted as not taken u by the revenue on this issue was not admitted as not taken u by the revenue on this issue was not admitted as not having a substantial having a substantial question of law. Thus, it can be concluded question of law. Thus, it can be concluded that this issue is now being settled by a judgment of the Rajas than that this issue is now being settled by a judgment of the Rajas than that this issue is now being settled by a judgment of the Rajas than High Court. It also distinguished the decision of urt. It also distinguished the decision of Apollo Tyres Ltd. Apollo Tyres Ltd. vs. CIT 255 ITR 273 and 255 ITR 273 and Rain Commodities Ltd. vs. DCIT Rain Commodities Ltd. vs. DCIT 41 DTR 449. Also very recently, Ma 449. Also very recently, Madras HC in the case of Metal & dras HC in the case of Metal & Chromium Plater (P) Ltd. (ITA No. 359 of 2008) has also decided Chromium Plater (P) Ltd. (ITA No. 359 of 2008) has also decided Chromium Plater (P) Ltd. (ITA No. 359 of 2008) has also decided the said issue in the favour of the assessee. The case of Krishi the said issue in the favour of the assessee. The case of Krishi the said issue in the favour of the assessee. The case of Krishi
M/s AYM Syntex Ltd. 33 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
Rasayan Exports Put. Ltd. us. ACIT (ITA No. 883 /Kol./2014 is on Rasayan Exports Put. Ltd. us. ACIT (ITA No. 883 /Kol./2014 is on Rasayan Exports Put. Ltd. us. ACIT (ITA No. 883 /Kol./2014 is on the similar interest subsidy wh the similar interest subsidy which was required to be excluded ich was required to be excluded from Book profit. We accordingly direct AO to exclude the the from Book profit. We accordingly direct AO to exclude the the from Book profit. We accordingly direct AO to exclude the the subsidy while computing book profit u/s. 115JB. subsidy while computing book profit u/s. 115JB.
iv. In Shivalik Venture Pvt. Ltd. v. DCIT (ITA No In Shivalik Venture Pvt. Ltd. v. DCIT (ITA No. 2008/Mum/2 . 2008/Mum/2012, dated 19-08-2015) it has been held that, 2015) it has been held that,
26.... it is seen that the legislature seeks to maintain parity 26.... it is seen that the legislature seeks to maintain parity 26.... it is seen that the legislature seeks to maintain parity between the computation of "total income" and "book profit", in between the computation of "total income" and "book profit", in between the computation of "total income" and "book profit", in respect of exempted category of income. If the said logic is respect of exempted category of income. If the said logic is respect of exempted category of income. If the said logic is extended further, an extended further, an item of receipt which does not fall under the item of receipt which does not fall under the definition of "income" at all and hence falls outside the purview of definition of "income" at all and hence falls outside the purview of definition of "income" at all and hence falls outside the purview of the computation provisions of Income tax Act, cannot also be the computation provisions of Income tax Act, cannot also be the computation provisions of Income tax Act, cannot also be included in "book profit" u/s 115JB of the Act. Hence, we find merit included in "book profit" u/s 115JB of the Act. Hence, we find merit included in "book profit" u/s 115JB of the Act. Hence, we find merit issions made by the assessee on this legal point. in the submissions made by the assessee on this legal point. issions made by the assessee on this legal point.
In view of the foregoing discussions, we find merit in the 28. In view of the foregoing discussions, we find merit in the 28. In view of the foregoing discussions, we find merit in the contention of the assessee that the profit arising on transfer of contention of the assessee that the profit arising on transfer of contention of the assessee that the profit arising on transfer of capital asset to its wholly owned Indian subsidiary company is capital asset to its wholly owned Indian subsidiary company is capital asset to its wholly owned Indian subsidiary company is liable to be excluded from the Net profit.... since the said profit xcluded from the Net profit.... since the said profit xcluded from the Net profit.... since the said profit does not fall under the definition of "income" at all and since it does not fall under the definition of "income" at all and since it does not fall under the definition of "income" at all and since it does not enter into the computation provisions at all, there is no does not enter into the computation provisions at all, there is no does not enter into the computation provisions at all, there is no question of including the same in the Book Profit as per the question of including the same in the Book Profit as per the question of including the same in the Book Profit as per the scheme of the provisions of sec. 115JB of the Act. of the provisions of sec. 115JB of the Act.
8.3.14 I have considered the submission and the contention of the 8.3.14 I have considered the submission and the contention of the 8.3.14 I have considered the submission and the contention of the appellant carefully, since the subsidy received is capital in nature appellant carefully, since the subsidy received is capital in nature appellant carefully, since the subsidy received is capital in nature and not chargeable to tax in computing the total income as per and not chargeable to tax in computing the total income as per and not chargeable to tax in computing the total income as per the normal pro the normal provisions of the Act, the said subsidy is not termed as visions of the Act, the said subsidy is not termed as Income to be fall under the Income to be fall under the section 4 of the Income-tax Act being tax Act being
M/s AYM Syntex Ltd. 34 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
the charging section. As stated by the Apex Court Padmaraje R. the charging section. As stated by the Apex Court Padmaraje R. the charging section. As stated by the Apex Court Padmaraje R. Kadambande (supra) Kadambande (supra) wherein it has been held that Capital wherein it has been held that Capital Receipts are not income within the definition of Receipts are not income within the definition of section 2(24) section 2(24) of the Act and hence are not at all chargeable under the entire the Act and hence are not at all chargeable under the entire the Act and hence are not at all chargeable under the entire Income- tax Act. Further, recently Hon' tax Act. Further, recently Hon'ble Calcutta High Court in ble Calcutta High Court in the case of Ankit Metals (supra), Hon'ble Rajasthan High Court in the case of Ankit Metals (supra), Hon'ble Rajasthan High Court in the case of Ankit Metals (supra), Hon'ble Rajasthan High Court in the case of Shri Cement Ltd (supra) and Jurisdictional High Court the case of Shri Cement Ltd (supra) and Jurisdictional High Court the case of Shri Cement Ltd (supra) and Jurisdictional High Court in the case of Harinagar Sugar Mills Ltd (supra) and Jurisdictional in the case of Harinagar Sugar Mills Ltd (supra) and Jurisdictional in the case of Harinagar Sugar Mills Ltd (supra) and Jurisdictional Tribunal in the case of Alok Tribunal in the case of Alok Industries Limited (supra) considering Industries Limited (supra) considering the various decisions on the said issue has specifically held that, the various decisions on the said issue has specifically held that, the various decisions on the said issue has specifically held that, once the subsidy are treated as capital receipt and, not chargeable subsidy are treated as capital receipt and, not chargeable subsidy are treated as capital receipt and, not chargeable to tax has also to be excluded from computing the book profit u/s to tax has also to be excluded from computing the book profit u/s to tax has also to be excluded from computing the book profit u/s 115JB of the In 115JB of the Income-tax. Respectfully following the said decisions, tax. Respectfully following the said decisions, it is held that subsidy in nature of capital receipt should also be it is held that subsidy in nature of capital receipt should also be it is held that subsidy in nature of capital receipt should also be excluded from computing the Book Profit u/s 115JB of the Income excluded from computing the Book Profit u/s 115JB of the Income excluded from computing the Book Profit u/s 115JB of the Income- tax. This ground of appeal is thus allowed.” ound of appeal is thus allowed.” 17.1 The issue-in-dispute dispute before us being identical to the issue before us being identical to the issue-in- dispute before the Tribunal in the case of Shri Pushkar Chemi dispute before the Tribunal in the case of Shri Pushkar Chemi dispute before the Tribunal in the case of Shri Pushkar Chemicals & Fertilizers Ltd. (supra), Fertilizers Ltd. (supra), respectfully following the finding of the following the finding of the Tribunal, we set aside the order of the Ld. CIT(A) on the issue Tribunal, we set aside the order of the Ld. CIT(A) on the issue Tribunal, we set aside the order of the Ld. CIT(A) on the issue-in- dispute and direct the Ld. Assessing Officer to exclude the amount of d direct the Ld. Assessing Officer to exclude the amount of d direct the Ld. Assessing Officer to exclude the amount of interest subsidy which has also been interest subsidy which has also been held by us as capital receipt by us as capital receipt,
M/s AYM Syntex Ltd. 35 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
from the book profit for the purpose of section 115JB of the Act. The from the book profit for the purpose of section 115JB of the Act. The from the book profit for the purpose of section 115JB of the Act. The ground No. 1 of the appeal of the assessee is accordingly ground No. 1 of the appeal of the assessee is accordingly ground No. 1 of the appeal of the assessee is accordingly allowed.
The ground No. 3 of the appeal of the Revenue relates to The ground No. 3 of the appeal of the Revenue relates to The ground No. 3 of the appeal of the Revenue relates to deletion of adjustment of disallowance u/s 14A for the purpose of deletion of adjustment of disallowance u/s 14A for the purpose of deletion of adjustment of disallowance u/s 14A for the purpose of book profit u/s 115JB of the Act. The relevant finding of the Ld. book profit u/s 115JB of the Act. The relevant finding of the Ld. book profit u/s 115JB of the Act. The relevant finding of the Ld. CIT(A) on the issue-in in-dispute is reproduced as under dispute is reproduced as under:
10.3 While adjudicating the issue as to whether the disallowance “10.3 While adjudicating the issue as to whether the disallowance 10.3 While adjudicating the issue as to whether the disallowance computed us 14A as per the regular provisions of the IT Act can be computed us 14A as per the regular provisions of the IT Act can be computed us 14A as per the regular provisions of the IT Act can be added while computing the book profits as per added while computing the book profits as per 115JB, the Hon'ble ITAT, Mumbai in the case of JSW Energy Ltd 115JB, the Hon'ble ITAT, Mumbai in the case of JSW Energy Ltd 115JB, the Hon'ble ITAT, Mumbai in the case of JSW Energy Ltd (60 Taxmann.com 303), observed that it is a well (60 Taxmann.com 303), observed that it is a well (60 Taxmann.com 303), observed that it is a well-settled proposition of law that the AO does not have much scope to tinker proposition of law that the AO does not have much scope to tinker proposition of law that the AO does not have much scope to tinker with the accounts of the assessee which have been prepared in with the accounts of the assessee which have been prepared in with the accounts of the assessee which have been prepared in accordance with the provisions of the Companies Act, 1956 and e with the provisions of the Companies Act, 1956 and e with the provisions of the Companies Act, 1956 and which have been approved by the Registrar of Companies. The which have been approved by the Registrar of Companies. The which have been approved by the Registrar of Companies. The Hon'ble ITAT thereafter went on to hold that if the assessee has Hon'ble ITAT thereafter went on to hold that if the assessee has Hon'ble ITAT thereafter went on to hold that if the assessee has not debited any expenditure relating to the earning of exempt not debited any expenditure relating to the earning of exempt not debited any expenditure relating to the earning of exempt income, the prov income, the provisions of section 14A cannot be imported into isions of section 14A cannot be imported into computation of book profits u/s 115JB since clause (f) of computation of book profits u/s 115JB since clause (f) of computation of book profits u/s 115JB since clause (f) of explanation to section 115JB only refers to those amounts which explanation to section 115JB only refers to those amounts which explanation to section 115JB only refers to those amounts which have been debited by the assessee to its P & L account. have been debited by the assessee to its P & L account. have been debited by the assessee to its P & L account. Accordingly, the Hon'ble ITAT he Accordingly, the Hon'ble ITAT held that if no expenditure related ld that if no expenditure related to earning of exempt income has been debited / claimed by the to earning of exempt income has been debited / claimed by the to earning of exempt income has been debited / claimed by the
M/s AYM Syntex Ltd. 36 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
assessee in its accounts, the disallowance computed us 14A cannot assessee in its accounts, the disallowance computed us 14A cannot assessee in its accounts, the disallowance computed us 14A cannot be added while computing the book profits u/s 115JB. The appeal be added while computing the book profits u/s 115JB. The appeal be added while computing the book profits u/s 115JB. The appeal filed by the Department agains filed by the Department against the decision of the Hon'ble ITAT in t the decision of the Hon'ble ITAT in the case of JSW Energy Ltd has been dismissed by the Hon'ble the case of JSW Energy Ltd has been dismissed by the Hon'ble the case of JSW Energy Ltd has been dismissed by the Hon'ble Jurisdictional High Court. Jurisdictional High Court. 10.4 On this issue, recently the Spl Bench of ITAT, Delhi vide its On this issue, recently the Spl Bench of ITAT, Delhi vide its On this issue, recently the Spl Bench of ITAT, Delhi vide its order dated 16.06.2017 in the case of Vireet Investments P Ltd order dated 16.06.2017 in the case of Vireet Investments P Ltd order dated 16.06.2017 in the case of Vireet Investments P Ltd (82 Taxmann.com 415) after considering the various decisions on this Taxmann.com 415) after considering the various decisions on this Taxmann.com 415) after considering the various decisions on this issue has also taken a similar view that disallowance u/s 14A issue has also taken a similar view that disallowance u/s 14A issue has also taken a similar view that disallowance u/s 14A cannot be added while computing the book profits us 115JB. This cannot be added while computing the book profits us 115JB. This cannot be added while computing the book profits us 115JB. This view has also been taken by the Hon'ble Delhi High Court in t view has also been taken by the Hon'ble Delhi High Court in t view has also been taken by the Hon'ble Delhi High Court in the case of Bhushan Steel Ltd in ITA No 593/2015. Respectfully case of Bhushan Steel Ltd in ITA No 593/2015. Respectfully case of Bhushan Steel Ltd in ITA No 593/2015. Respectfully following the said decisions of the Hon'ble Delhi High Court, Spl following the said decisions of the Hon'ble Delhi High Court, Spl following the said decisions of the Hon'ble Delhi High Court, Spl Bench ITAT Delhi and the decision of ITAT, Mumbai wherein the Bench ITAT Delhi and the decision of ITAT, Mumbai wherein the Bench ITAT Delhi and the decision of ITAT, Mumbai wherein the appeal of the Department has been dismissed, the contention of appeal of the Department has been dismissed, the contention of appeal of the Department has been dismissed, the contention of the assessee that the disallowance made u/s 14A cannot be assessee that the disallowance made u/s 14A cannot be assessee that the disallowance made u/s 14A cannot be considered while computing the book profits us 115JB is accepted. considered while computing the book profits us 115JB is accepted. considered while computing the book profits us 115JB is accepted. Accordingly, the addition made by the AO of the disallowance us Accordingly, the addition made by the AO of the disallowance us Accordingly, the addition made by the AO of the disallowance us 14A while computing the book profits u/s 115JB, is deleted. 14A while computing the book profits u/s 115JB, is deleted. 14A while computing the book profits u/s 115JB, is deleted. Ground No. 6 raised by the assessee is allowed. 6 raised by the assessee is allowed.” 19. We find that the Ld. CIT(A) followed the decision of the Special We find that the Ld. CIT(A) followed the decision of the Special We find that the Ld. CIT(A) followed the decision of the Special Bench of the Tribunal in the case of the Bench of the Tribunal in the case of the Vireet Investment Pvt. Ltd. Vireet Investment Pvt. Ltd. (supra) on the issue on the issue-in-dispute which being a binding precedent, dispute which being a binding precedent, we do not find any error in the order of the Ld. CIT(A) on the issue any error in the order of the Ld. CIT(A) on the issue- any error in the order of the Ld. CIT(A) on the issue in-dispute. We may also note that the disallowance made by the dispute. We may also note that the disallowance made by the dispute. We may also note that the disallowance made by the
M/s AYM Syntex Ltd. 37 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
Assessing Officer u/s 14A has already been deleted by us while Assessing Officer u/s 14A has already been deleted by us while Assessing Officer u/s 14A has already been deleted by us while computing income under the regular provisions of the Act. The computing income under the regular provisions of the Act. The computing income under the regular provisions of the Act. The ground No. 3 of the appeal of the Revenue is accordingly dismissed. f the appeal of the Revenue is accordingly dismissed. f the appeal of the Revenue is accordingly dismissed.
As far as appeal of the assessee for AY 2013 As far as appeal of the assessee for AY 2013-14 is concerned 14 is concerned, in ground No. 1, the assessee ground No. 1, the assessee is aggrieved with the disallowance u/s aggrieved with the disallowance u/s 14A of the Act. However, during the course of the hearing, the Ld. 14A of the Act. However, during the course of the hearing, the Ld. 14A of the Act. However, during the course of the hearing, the Ld. Counsel of the assessee did not press this ground and therefore Counsel of the assessee did not press this ground and therefore Counsel of the assessee did not press this ground and therefore same is dismissed as infructuous. same is dismissed as infructuous.
The ground No. 2 is identical to the ground No. 2 of the appeal The ground No. 2 is identical to the ground No. 2 of the appeal The ground No. 2 is identical to the ground No. 2 of the appeal of the assessee in assessment year 2014 of the assessee in assessment year 2014-15 and therefore, following 15 and therefore, following our finding, the groun our finding, the ground is allowed in favour of the assessee. The d is allowed in favour of the assessee. The ground No. 3 is consequential whereas ground No. 4 is premature ground No. 3 is consequential whereas ground No. 4 is premature ground No. 3 is consequential whereas ground No. 4 is premature and therefore both are dismissed as infrucutous. and therefore both are dismissed as infrucutous.
The grounds raised by the Revenue and assessee in cross raised by the Revenue and assessee in cross raised by the Revenue and assessee in cross appeals for 2015-16 are decided mutati 16 are decided mutatis mutandis to the grounds s mutandis to the grounds adjudicated in cross appeals for assessment year 2014 adjudicated in cross appeals for assessment year 2014 adjudicated in cross appeals for assessment year 2014-15.
M/s AYM Syntex Ltd. 38 ITA Nos. 2340, 2341, 2550/M/2021 & Ors ITA Nos. 2340, 2341, 2550/M/2021 & Ors
In the result, all the three appeals of the assessee are partly In the result, all the three appeals of the assessee are partly In the result, all the three appeals of the assessee are partly allowed whereas appeal allowed whereas appeals of the Revenue are dismissed. of the Revenue are dismissed.
Order pronounced in the open Court in 29 nced in the open Court in 29/09 /09/2022. Sd/- Sd/ Sd/- (KULDIP SINGH KULDIP SINGH) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 29/09/2022 Dragon Legal/Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, BY ORDER, //True Copy// (Sr. Private Secretary) (Sr. Private Secretary) ITAT, Mumbai ITAT, Mumbai