Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, BENCH ‘A’ KOLKATA
Before: Hon’ble Shri P.M.Jagtap, AM & Smt. Madhumita Roy, JM ]
ORDER
PER MADHUMITA ROY, JM:
The instant appeal has been preferred by the Revenue against the order dated 17.11.2016 passed by the Commissioner of Income Tax-(A)-10, Kolkata arising out of an order dated 16.12.2011 passed by the Ld. Addl. Commissioner of Income Tax, Range-10, Mumbai u/s 143(3) of the Income Tax Act, 1961 (Act) (hereinafter referred to as the ‘ Act’ ) for the A.Y.2008-09 with the following grounds :- “1. On the facts and circumstances of the Case whether the Id. CIT(A) was correct in not giving a clear cut finding as to the exact character of such remission in sales tax liability as it is not ascertainable whether the said subsidy was allowed under the West Bengal Industrial Incentive Scheme, 1999 as a subsidy for expansion of business / capacity enhancement or for fresh infusion into working capital to improve the financial health of the company? Was he not incorrect by not analysing the nature of subsidy and finding out what was the character of such subsidy that is it will be capital in nature if it is for expansion of business /capacity enhancement and will be revenue in nature if the said subsidy is meant to be utilized as working capital? It is needless to mention that the aid issue was not examined by the A,O. during the course of Assessment proceedings.
2. Was not the Ld CIT(A) incorrect by not adhering to the decision of the Hon 'ble Supreme Court in the case of Goetze (I) Ltd. Vs. CIT 284 ITR 323 whereby the Hon'ble Court held that the deduction claimed by wav of a letter before the A.O. could be disallowed on the ground that there is no provision in the Act to M/s. Indian Oil Petronas Pvt. Ltd. A.Y.2008-09 2
make amendment in the return without filing a revised return? Was he not incorrect by not following the observation of the Hon'ble Court which further held that the decision was limited to power of the assessing Authority to entertain claim of deduction otherwise than by a revised return and did not impinge on the power of the Tribunal?
That the appellant craves to add, delete or modify any of the grounds of appeal before or at the time of hearing.”
The fact of the case is this that the assessee during the appellate proceedings before the ld. CIT(A) took additional grounds of appeal
for exclusion of capital subsidy of Rs.40,44,40,974/- received during the year under consideration by way of remission of sales tax from the profit of the business as well as book profit u/s 115JB of the Act. Since such subsidy received by way of sales tax remission under the West Bengal Incentive Scheme 1999 for setting up an industrial unit is in the nature of capital receipt the same is not taxable under the Income Tax Act, 1961. Consequently the assessee prayed for deduction of the subsidy of such amount from the assessable profits of business since it is not in the nature of income under the provisions of Income Tax Act. In this respect the assessee submitted a letter being no.INC- 1999(128)/General/991 to the Eligibility Certificate. The relevant portion thereof is as follows :- “We are sending herewith eligibility certificate bearing no.INC(99)/EC-87(B) dated 4th June 2002 under W.B. Incentive Scheme, 1999 for the following incentives :- a)Sales Tax Remission : Remission of Sales Tax for a period of 11. (eleven) years from the date of commencement of production of the expansion unit subject to a ceiling of 125% of the gross value of the fixed capital assets of the approved project as per clause 10.1.1(ii), 10.1.6 and 10.1.7 of the scheme, subject to ceiling of Rs.75.00 crore as per clause 10.17.”
3. The ld. CIT(A) requested the ld. AO to send his observations and objections of the admissibility of the additional grounds in response thereof the AO has raised his objection that the assessee raised the said issue for the first time that it has received capital subsidy of Rs.40,44,40,974/- by way of sales tax remission under the West Bengal Incentive Scheme 1999 and therefore not taxable under the Income Tax Act, M/s. Indian Oil Petronas Pvt. Ltd. A.Y.2008-09 3 1961, such provision is not available under the said Act. The AO further added that the assessee neither filed any revised return nor made any such claim before him during the scrutiny proceedings. The AO stated in his remand report that since there is no deduction nor an exemption the assessee is not entitled to any relief as prayed for.
In reply to the remand report the assessee has submitted that the additional grounds so raised appear to be legal in nature and there is no restriction upon the powers of the jurisdiction of the appellate authorities to consider and adjudicate upon the claims which was not before the AO by filing the return or the revised return. The CIT(A) ultimately held that the assessee is entitled to make fresh claim for deduction or relief before the appellate authority irrespective of the claim not being made by filing revised return of income before the AO.
The question today before us is this that whether the assessee can raise the ground as above before the appellate authority for the first time without raising the same before the AO by filing the revised return of income during the assessment proceedings. If the answer is in the affirmative then the next question will arise as to whether the assessee is entitled for exclusion of capital subsidy receipt by way of sales tax remission from the profit of the business as well as book profit u/s 115JB of the Act since the same has been received under the West Bengal Incentive Scheme 1999. At the time of hearing of the matter the ld. DR argued in support of the order passed by the AO. He further added that the assessee has not raised the issue by filing the revised return of income before the AO during the assessment proceedings and therefore it is not permissible to raise the same before the appellate authority under the statute. He further urged that there is no deduction nor exemption made by the AO in regard to the amount and therefore raising the issue before us is an academic discussion only. On the other hand, the ld. Counsel appearing for the assessee vehemently argued in support of the order passed by the ld. CIT(A). He relied upon the judgement of CIT vs Prithvi Brokers & Shareholders Pvt. Ltd. (252 CTR 151) where the Hon’ble Bombay High Court was pleased to hold that the Hon’ble Supreme M/s. Indian Oil Petronas Pvt. Ltd. A.Y.2008-09 4 Court in the case of Goetz India Ltd had not held that the claims not made before the AO cannot be entertained or adjudicated by the appellate authorities. The ld. Counsel further relied upon the decision made by the Co-ordinate bench of this ld. Tribunal in the case of DCIT vs Ramesh Chandra Kedia in where the Ld. Tribunal held that the CIT(A) was justified in entering new claim for exemption in respect of gain realized on transfer of the agricultural land.
We have heard the ld. Counsels appearing for the parties. We have perused the materials available on records. The ld. Tribunal considering the judgment of the Hon’ble Supreme Court in National Thermal Power Co.Ltd. vs CIT (229 ITR 383), Jute Corporation of India vs CIT (187 ITR 688) both passed by the Hon’ble Supreme Court as well as order passed by the Hon’ble Calcutta High Court in the case of Mayank Poddar HUF vs CWT (262 ITR 633) held in favour of the assessee by observing that if in law the assessee was not liable to be assessed on capital gains arising on transfer of agricultural land then the assessee’s claim for its non assessability cannot be denied merely because in the return filed the assessee had mistakenly offered to pay tax on such income. It appears that the ratio laid down in the above judgments have decided the matter once for all. These judgements affirm the jurisdiction of the appellate authority in entertaining fresh claims raised before it for the first time even if the same is not made before the AO by filing the return or the revised return. We find that the instant case is squarely covered by the ratio laid down in the above judgments and we hold that the ld. CIT(A) has rightly exercised his jurisdiction in entertaining the additional grounds of exclusion of capital subsidy of Rs.40,44,40,974/- received by way of sales tax remission under the West Bengal Incentive Scheme 1999 during the year under consideration.
6.1. We now come to answer the second question as to whether the assessee is entitled to claim exclusion of remission of sales tax receipt by way of incentive/subsidy from the State Government. As regards the point of claim of the assessee towards exclusion of remission of sales tax by way of sales tax remission M/s. Indian Oil Petronas Pvt. Ltd. A.Y.2008-09 5 under the West Bengal Incentive Scheme, 1999 is concerned the ld. DR reiterated his submissions that since there is no addition or deletion made by the AO such claim of the assessee is not required to be entertained and thus prays for rejection of the order passed by the ld. CIT(A). On the other hand, the ld. Counsel appearing on behalf of the assessee strongly argued that the amounts so received as subsidy by way of remission of sales tax from the profit of the business as well as book profit u/s 115JB of the Act under the West Bengal Incentive Scheme 1999 is in the nature of capital receipt and the same is not chargeable to tax. In support of his arguments he has relied upon the judgement of the Hon’ble Calcutta High Court in the case of CIT vs Rasoi Ltd. (335 ITR 438) wherein the Hon’ble High Court pleased to hold that the sales tax subsidy granted by the West Bengal Government was capital receipt and not revenue. The court in the said judgment observed that the scheme was put to grant the subsidy by way of financial assistance for promotion and expansion of manufacturing units and not taxable under the computation provisions of Income Tax Act, 1961. We find that the instant case is identical in nature and thus squarely covered by the said judgements. It is pertinent to mention here that similar identical claim for exclusion of sales tax remission granted by the State of West Bengal from the taxable profit of the business of the assessee was rejected by the AO in A.Y.2009-10 and 2010-11. But in the appellate proceedings the ld. CIT(A)-4 for A.Y.2009-10 and 2010-11 in Appeal No.976/CIT(A)-4/14-15 and Appeal No.1132/CIT(A)-4/14-15 respectively taking into consideration of the facts of the case the judicial precedents on this issue held that the sales tax subsidy received by the assessee from West Bengal Government was in the nature of capital receipt and therefore not liable to tax under the deeming provisions of section 115JB of the Act.
6.2. The Co-ordinate Bench of this Tribunal in the appeal against the order passed by the appellate authority for A.Y.2009-10 preferred by the Revenue in assessee’s own case reiterated the same view in favour of the assessee dismissing the said appeal with the following observations : “5.We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the solitary issue involved in this M/s. Indian Oil Petronas Pvt. Ltd. A.Y.2008-09 6 appeal of the Revenue relating to the assessee's claim for exclusion of sales tax subsidy on the ground that it is capital receipt not chargeable to tax is squarely covered in favour of the assessee, inter alia, by the decision of the Hon'ble Calcutta High Court in the case of CIT -vs.- Rasoi Limited [335 ITR 438], on which reliance has been placed by the Id. CIT(Appeals) in his impugned order while giving relief to the assessee on this issue. Even the Id. D.R. has not been able to dispute this position. He, however, has supported the additional ground filed by the Revenue raising the issue of violation of Rule 46A of Income Tax Rules by the Id. CIT(Appeals) and contended that when the fresh claim made by the assessee for exclusion of sales tax subsidy, otherwise than by filing a revised return, was not entertained by the Assessing Officer by relying on the decision of the Hon'ble Supreme Court in the case of Goetz India Limited (supra), the Id. CIT(Appeals) ought to have given opportunity the Assessing Officer to examine the said claim of the assessee as required by Rule 46A of the Income Tax Rules. We, however, find merit in the contention raised by the Id. counsel for the assessee in this regard that there being no additional evidence filed by the assessee before the Id. CIT(Appeals) in support of its claim for exclusion of sales tax subsidy, Rule 46A has no application and the Id. CIT(Appeals) was not required to give any opportunity to the Assessing Officer to verify the claim of the assessee. The Id. CIT (D.R.) has urged that such opportunity even otherwise deserves to be given to the Assessing Officer in the interest of substantial justice. It is, however, observed that the Id. CIT(Appeals), who is having co-terminus powers to that of the Assessing Officer, has already examined this issue in detail in the light of the material available on record including the scheme of the West Bengal Government under which the amount of sales tax subsidy in question was received by the assessee and after having satisfied himself on merit, he has allowed the claim of the assesee for exclusion of sales tax subsidy by treating the same as capital receipt not chargeable to tax. Moreover, as already noted by us, this issue is squarely covered in favour of the assessee by the decision of the Hon'ble Calcutta High Court in the case of Rasoi Limited (supra) and since the Id. CIT(Appeals) has given relief to the assessee on this issue by relying on the said decision of the Hon'ble jurisdictional High Court, we are of the view that no cause of justice is going to be served by sending the-matter back to the Assessing Officer for examination. We, therefore, uphold the impugned order of the Id. CIT(Appeals) allowing the claim of the assessee for exclusion of sales tax subsidy by treating the same as capital receipt not liable to tax and dismiss this appeal of the Revenue.”
6.3. We find no merit in the arguments made by the ld. DR. We therefore find no reason to deviate from the observations made by the ld. CIT(A) taking into consideration the entire aspect of the matter particularly when the assessee has got relief in the subsequent assessment years in the appellate proceedings in view of the M/s. Indian Oil Petronas Pvt. Ltd. A.Y.2008-09 7 judgment passed by the Co-ordinate Bench of this ld. Tribunal, the Jurisdictional High Court as well as the Hon’ble Supreme Court and we thus upheld the order passed by the ld. CIT(A). Therefore the appeal preferred by the revenue is dismissed.
In the result the appeal of the revenue is dismissed.
Order pronounced in the Court 31.05.2018.