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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: MS. SUCHITRA KAMBLE & SHRI BHAGIRATH MAL BIYANI
PER SUCHITRA KAMBLE - JM:
This appeal is filed by the assessee against the order dated 25.11.2019 passed by the Ld. DCIT-1(1), Indore for A.Y. 2015-16.
The grounds of appeal raised by the assessee read as under: “1. The Ld. AO and Hon’ble DRP erred in making an addition of INR 29,49,00,133 in respect of the subsidies received from Government of Maharashtra under the Packaged Scheme of Incentives, 2007 by treating the same as revenue receipt. The Appellant prays that the addition made by Ld. AO and Hon’ble DRP be deleted and the Ld. AO be directed to treat the amount of INR 29,49,00,133 as a capital receipt and being covered by Explanation 10 to section 43(1) of the Act. The appellant craves leave to further add, alter, amend, substitute or withdraw all or any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal
ITA No.45/Ind/2021 Bridgestone India Pvt. Ltd. vs. ACIT Asst.Year –2015-16 - 2 – hearing to enable the Hon’ble Income Tax Appellate Tribunal to decide the issue according to law.”
The assessee has filed the appeal before the Tribunal belatedly stating therein the affidavit for condonation of delay filed by the Managing Director of the assessee that the staff of the assessee erroneously filed the appeal documents before the CIT(A) instead of same before the Tribunal. The delay is a mistake of staff and the same should be condoned. The Ld. D.R. opposed the delay condonation application.
We have heard both the parties and perused all the relevant material available on record the delay on part of the assessee is not intentional but due to the mistake in filing the appeal with the proper authorities by the concerned staff. Therefore, the delay is condoned.
The assessee is engaged in the business of Tyre and Allied Products manufacturing. The assessee has taken Radial Tyre Manufacturing Technology and use of Bridgestone brand of manufactured products for its entrepreneurial venture in India. The assessee filed original return of income on 27.11.2015 declaring total income at Rs. NIL. On perusal of Form 3CEB filed by the assessee the Assessing Officer observed that during the assessment year under consideration, the assessee had entered into international transactions with its various Associates Enterprises (AEs). Accordingly, after seeking the prior approval of the Pr. Commissioner of Income Tax-I, the case was referred to the Transfer Pricing Officer (TPO) under Section 92CA of the Act vide letter dated 18.10.2017. The Transfer Pricing Officer (TPO) after examining assessee’s transfer pricing documentation and economic analysis has passed an order dated 30.10.2018
ITA No.45/Ind/2021 Bridgestone India Pvt. Ltd. vs. ACIT Asst.Year –2015-16 - 3 – under Section 92CA(3) of the Act determining the “Arm’s Length Price” difference of Rs. 41,57,14,947/- in respect of royalty payment of its AE and Rs. 39,63,921/- in respect of international transactions relating to trading activities of the assessee. Thus, total upward adjustment of Rs. 41,96,78,868/- was made to the total income of the assessee in the said order passed by the TPO. The draft assessment order under Section 14393) r.w.s. 144C of the Income Tax Act, 1961 was passed on 18.12.2018. Thereafter, the assessee objected to the draft assessment order before Dispute Resolution Panel (DRP) under Section 144C of the Act. The DRP issued direction vide order dated 27.09.2019. After taking cognizance of the TPO and DRP’s direction the Assessing Officer made addition of Rs. 29,49,00,133/- as addition of subsidies received from Government of Maharashtra under PSI, 2007.
Being aggrieved by the assessment order the assessee filed appeal before us.
The Ld. A.R. submitted that assessee entered into Memorandum of Understanding (MOU) with Government of Maharashtra on 24.06.2010 to set up a manufacturing unit at Chakan for manufacturing of steel belt radial tyre for PSR and TBR, inner tubes and flaps and accordingly the said manufacturing unit at Chakan was designated as Mega Project under PSI, 2007. The assessee submitted following details as to the subsidy under Package Scheme of Incentives (PSI), 2007 of Government of Maharashtra:
ITA No.45/Ind/2021 Bridgestone India Pvt. Ltd. vs. ACIT Asst.Year –2015-16 - 4 – Industrial Promotion Subsidy Financial Year 2014-15 Nature Amount Treatment in books of accounts Electricity Subsidy Reduced from electricity expenses Subsidy by way of refund Rs.33,37,15,833/- Charged to P&L of VAT and CST paid to GOM (Government of Maharashtra)
The Ld. A.R. submitted that subsidy received by assessee under PSI, 2007 is a capital receipt and thus non-taxable. The assessee vide written submitted dated 12.12.2018 filed by the opinion of Senior Advocate, has opined that subsidy received by assessee under PSI, 2007 is of capital nature and hence non-taxable. The Ld. A.R. relied upon following decision:
(i) CIT vs. Ponny Sugars & Chemicals Ltd. (2008) 174 Taxmann 87 (SC) (ii) Kedarnath Jute Manufacturing Co. Ltd. 82 ITR 363 (iii) ACIT vs. Mahindra Vehicles Manufactures ltd. (ITA No. 6919&6920/Mum/2016) (iv) Innoventive Industries Ltd. vs. DCIT (ITA No. 215/PN/2014) (v) Bhagyalaxmi Rolling Mills Pvt. Ltd. vs. DCIT (ITAT No. 3428/Mum/2016)
The Ld. A.R. also filed PSI, 2007 of Government of Maharashtra, MOU it entered with Government of Maharashtra & Eligibility Certificate (EC) for Mega Project under PSI, 2007. The assessee also referred to Explanation 10 Section 43(1) of the Act in support of the arguments. The Assessing Officer observed that the subsidies received as per MOU was related to electricity duty payment exemption, 100% exemption from payment of stamp duty,
ITA No.45/Ind/2021 Bridgestone India Pvt. Ltd. vs. ACIT Asst.Year –2015-16 - 5 – industrial promotion subsidy, less the amount of benefits availed in form of exemption of payment of Electricity Duty & Stamp Duty, but limited to 100% eligible investments or to the extent of taxes payable to the Government of Maharashtra, whichever is lower. All form of subsidies are subject to different type frames, beginning from the date of commencement of commercial production in the Eligible Unit. The Ld. A.R. also relied upon the decision of the Mumbai Tribunal in case of ACIT vs. Mahindra Vehicles Manufactures Ltd. (ITA Nos. 6919 & 6920/Mum/2016) and the decision of Hon’ble Supreme Court in case of Sahany Steel (supra), Ponni Sugars (supra) and Bhushan Steels & Stripes Ltd. (2017) 83 taxmann.com 204 (Delhi) subsidies received under PSI, 2007 are not capital in nature and thus the assessee’s contention were rejected. The Assessing Officer made addition of Rs. 29,49,00,133/- thereby allowing set up of Rs. 3,88,15,700/- under Industrial Promotion Subsidy of Rs. 33,37,15,833/-. The Ld. A.R. further submitted that the addition made by the Assessing Officer is not just and proper.
The Ld. D.R. submitted that the assessee himself has made contradictory claim when the receivables are declared. In fact, in Profit & Loss the assessee has declared the said subsidy as revenue and therefore, it is the assessee’s contradictory claim which should not be entertained and disturbed the 20 years of assessee’s own system of accounting. The Ld. D.R. relied upon the assessment order and the order of the DRP.
We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee is receiving subsidies related to electricity duty payment exemption, 100% exemption
ITA No.45/Ind/2021 Bridgestone India Pvt. Ltd. vs. ACIT Asst.Year –2015-16 - 6 – from payment of stamp duty and industrial promotion subsidy comprising of tax payable to the State Government during the period of 20 years starting from the date of commencement of commercial production. It is not the case of the Revenue that the assessee is not eligible for Mega Project under the Package Scheme of Incentives 2007 notified by the Government of Maharashtra from 30.03.2007 till 29.08.2009. Ld. AR at the time of hearing has produced the eligibility certificate for Mega Project new unit issued by Government of Maharashtra, Directorate of Industries dated 26.12.2013. The MOU between the Government of Maharashtra and the assessee company was signed on 26.04.2010 in respect of the proposed project of BSID on the basis of the level of proposed incentives. The said MOU is in respect of manufacturing of Steel Belt Radial Tyre for PSR and TBR, inner tubes and flaps. The disbursement of ITAs for the period 01.04.2014 to 31.03.2015 was issued by Government of Maharashtra to the assessee company on 25.05.2016. The letter dated 11.12.2018 addressed by the assessee to the Assessing Officer mentioned that based on the PSI Scheme, MOU, EC, facts and judicial precedents, the amount of IPS subsidy being of a capital nature has correctly been reduced from the costs as per Explanation 10 of Section 43(1) of the Act. The contention of the Ld. DR that the assessee consistently has treated the subsidies as Revenue in its recorded accounting system, do not nullify the actual intention of the Package Scheme of Incentives 2007 which is in capital nature. The assessee was eligible to claim subsidy and accordingly has taken benefit thereby deducting the same required to obtain eligibility certificate and in the present case the eligibility certificate was issued w.e.f. the date of commencement of commercial production by the assessee. Thus, the
ITA No.45/Ind/2021 Bridgestone India Pvt. Ltd. vs. ACIT Asst.Year –2015-16 - 7 – assessee was eligible to claim the benefit of Package Scheme of Incentives for the period of 20 years. The decision of Hon’ble Supreme Court in the case of Ponni Sugars & Chemicals Limited (supra) has categorically mentioned that if the test laid down in the judgement of Sahney Steel & Press Works Limited, the assessee was free to use the money in its business entirely as it liked but in the present case the receipt of the subsidies/incentives are in respect of electricity duty exemption for the period of 15 years, 100% exemption from payment of stamp duty and industrial promotion subsidy. Therefore, the said subsidies are capital in nature as the assessee has utilised the said subsidy for setting up new unit/expansion of existing business. Thus, the decision of Hon’ble Supreme Court is squarely applicable in the present case and hence the appeal of the assessee is allowed.
In result, the appeal of the assessee is allowed.
Order pronounced on 08/12/2022 by placing the result on the Notice Board as per Rule 34(4) of the Income Tax (Appellate Tribunal) Rule, 1963. This Order pronounced in Open Court on 08/12/2022
Sd/- Sd/- Sd/- Sd/- (BHAGIRATH MAL BIYANI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 08/12/2022 TANMAY, Sr. PS TRUE COPY
ITA No.45/Ind/2021 Bridgestone India Pvt. Ltd. vs. ACIT Asst.Year –2015-16 - 8 –
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Indore 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,
(Sr. Private Secretary) ITAT, Indore
Date of dictation 07.11.2022 2. Date on which the typed draft is placed before the Dictating Member 07.11.2022 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 08.12.2022 5. Date on which the fair order is placed before the Dictating Member for pronouncement .12.2022 6. Date on which the fair order comes back to the Sr.P.S./P.S .12.2022 7. Date on which the file goes to the Bench Clerk .12.2022 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order……………………………………v b