DCIT, CC-4(2), KOLKATA, KOLKATA vs. M/S LUX INDUSTRIES LTD., KOLKATA

1. The appeal filed by the revenue is against the order of Ld. CIT(A)-18, Kolkata dated 21.01.2016 for AY 2010-11.

The only effective revised ground of appeal

We have heard rival submissions and gone through the order of Ld. CIT(A). We note that assessee company was a beneficiary of West Bengal Industrial Promotion (Assistance to Industrial Units) Scheme w.e.f. 01.01.2010 and though in the original return filed reflected the incentive from govt. scheme as revenue receipt, however, after taking note of the decision of the Hon’ble jurisdictional High Court in Rasoi Ltd. (supra) revised its return of income within the due date as prescribed u/s. 139(5) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”). Though the AO accepted the revised return of the assessee, however, did not allow the revised claim of the assessee that the incentive from Govt. was capital. On appeal, Ld. CIT(A) allowed the claim of the assessee. The revenue is aggrieved that from the impugned order of the Ld. CIT(A), it is not evident that the incentive scheme of the Govt. of West Bengal was in fact for the expansion of existing unit or establishment of new unit by the assessee and whether the assessee had in fact undertaken any expansion of existing unit or established any new unit for qualifying the incentive scheme of the Govt. of West Bengal. From a perusal of the order impugned, it is not at all clear as to the objective of the scheme announced by the Govt. of West Bengal. From a perusal of the order of both Ld. CIT(A) and AO it is not evident as to the object of the assistance under the subsidy scheme which the assessee claimed as incentive in its revised return of income. The nature of the incentive of Govt. of West Bengal can be ascertained only by taking note of the objective for which the subsidy scheme is made by the Govt. If the object of the subsidy scheme was to enable the assessee to run the business more profitably the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit, the receipt of subsidy was on capital account. However, the Govt. scheme on the basis of which the assessee sought the revised claim though acknowledged by the AO to have been filed before him, neither the AO nor the Ld. CIT(A) has made any factual discussion as to the object of the subsidy/assistance granted to the assessee from the Govt. of West Bengal. It has been brought to our notice during hearing that AO himself has allowed the claim of assessee on this issue for AY 2011-12. However, no copy of AO’s order for AY 2011-12 has been placed on record. Therefore, for the ends of justice and fair play, we set aside the order of the Ld. CIT(A) and remand the issue back to the file of AO to adjudicate de novo the issue after hearing the assessee. The assessee is at liberty to produce documents to substantiate its claim. We hasten to add that AO’s view that since the assessee has claimed the incentive in its original return as ‘revenue receipt’, therefore, it was cited as one of the reasons for not allowing the claim by the AO, which reasoning is flawed because firstly revised return is allowable as per sec. 139(5) of the Act, if it is filed within the prescribed time as per the Act. Secondly, there cannot be any estoppel against law. Thirdly, the law declared by the Hon’ble jurisdictional High Court is binding on all authorities including the AO. Merely because the assessee has made a wrong claim based on misconception of law, cannot be a ground to deny the right claim as per law.