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Income Tax Appellate Tribunal, KOLKATA BENCH “A” KOLKATA
Before: Shri N.V.Vasudevan & Shri Waseem Ahmed
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the assessee is against the order of Commissioner of Income Tax, Kolkata-I u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 28.03.2013. Assessment was framed by ITO Ward-3(1), Kolkata vide his order dated 29.12.2010 for assessment year 2008-09. The grounds raised by the assessee per its appeal are as under:- “1. The order of the Ld. CIT passed u/s 263 is bad in law and on facts and is liable to be quashed.
2. That the order of the Ld. CIT passed u/s 263 is void Authorities Below initio inasmuch as it lacks proper and valid jurisdiction under the law and the same is liable to be quashed.
3. For that the Ld. CIT erred in exercising the power of revision for the purpose of directing the AO to hold another investigation when the order of the AO was neither erroneous nor prejudicial to the interest of the revenue.
A.Y.2008-09 Digboi Carbon Pvt. Ltd. v. CIT-I Kol. Page 2 4. That the Ld. CIT erred in preferring to take a different view as a basis for an action u/s 263 when the AO had taken a particular view in respect of allowability of the subsides and incentives as deduction u/s 80IC after considering the material on record and after due investigation.
5. That the Ld. CIT was not justified in exercising the power of revision on a debatable issue.”
The common issues raised by assessee is that Ld. CIT u/s 263 of the Act erred in exercising his revisionary power by directing the Assessing Officer to frame the fresh assessment although the order of AO was neither erroneous nor prejudicial to the interest of the Revenue.
The fact in brief are that assessee in the present case is a Limited Company and is engaged in manufacturing business of “calcined petroleum coke”. The assessee filed its return of income dated 20.09.2008 declaring “nil” income. The assessee for the year under consideration has claimed deduction u/s 80IC(2)(a)(iii) of the Act for an amount of ₹2,82,71,598/-. The AO for the year assessed the income under section 143(3) of the Act. However the Ld. CIT u/s. 263 observed that assessee has shown certain income by way of subsides as detailed under :- S.No. Nature of subsidy Amount (Rs) 1 Transport subsidy 89,91,720/- 2 Power subsidy 2,70,601/- 3 Insurance subsidy 6,89,518/- 4 Central interest subsidy 1,84,380/- 5 Capital subsidy 30,00,000/- 1,31,36,219/- In the opinion of Ld. CIT, these subsidies as discussed aforesaid are not eligible for deduction u/s 80IC of the Act but Assessing Officer while framing the assessment u/s. 143(3) of the Act has allowed the same as deduction u/s. 80IC of the Act. Accordingly, Ld. CIT opined that assessee has been under assessed and accordingly issued a notice on 26.03.2013 for seeking clarification about the subsidies received by assessee. In compliance to the notice, assessee submitted that the subsidies are eligible for deduction u/s 80IC of the Act in the light of Co-ordinate Bench “C” of this Tribunal in the A.Y.2008-09 Digboi Carbon Pvt. Ltd. v. CIT-I Kol. Page 3 case of Guwahati Carbon Ltd. v. ITO in ITA No.1193/Kol/2006 dated 31.03.2006. However, Ld. CIT rejected the plea of assessee by observing that “in one of the group concern case of the assessee i.e. in M/s Brahmputra Carbon Ltd. for AY 2005-06, in ITA No. 282/Kol/2010, Hon'ble ITAT Kolkata decided the issue of subsidy in favour of the Department by placing the reliance on the decision of Hon'ble Gauhati High Court in the case of CIT vs. Meghalaya Steels Ltd. 332 ITR 91 (Guh)”. Accordingly, Ld. CIT passed his order u/s 263 of the Act directing the AO to frame the assessment de novo as per the contents of this order passed u/s. 263 of the Act.
Aggrieved by the order of ld. CIT, the assessee preferred an appeal before us. Shri Subash Agarwal, Ld. Authorized Representative appeared on behalf of assessee and Shri Rajat Subhra Biswas, Ld. Departmental Representative appeared on behalf of Revenue.
Before us Ld. AR filed paper book which is running pages 1 to 57. The ld. AR also filed copies of judgments of Hon'ble Supreme Court and Hon'ble Gauhati High Court which are running into pages from 1 to 53 respectively. The ld. AR submitted that the assessee during the year has received various kinds of subsidies as enumerated above. Out of the five subsidies – 4 subsidies namely transport, power, insurance and interest subsidies are duly covered by the judgment of Hon'ble Supreme Court in the case of CIT v. Meghalaya Steels Ltd. (2016) 67 taxmann.com 158 (SC) for the deduction under section 80IC of the Act, the head-note of the order is reproduced below:- “Section 80-IB, read with section 80-IC, of the Income-tax Act, 1961 – Deductions – Profits and gains from industrial undertakings other than infrastructure development undertakings (Computation of deduction) – Assessment year 2004-05 – Assessee claimed deduction for (a) transport subsidy; (b) interest subsidy; (c) power subsidy; and (d) insurance subsidy, treating them as profits derived from business – Revenue contended that subsidies so received had no close and direct nexus with assessee’s business and thus could not be treated as profits derived from business – A.Y.2008-09 Digboi Carbon Pvt. Ltd. v. CIT-I Kol. Page 4 Whether subsidies were reimbursed to assessee for elements of cost relating to manufacture or sale of their products and, thus, thee was certainly a direct nexus between profits of assessee’s business and reimbursement of such subsidies – Held, yes – Whether therefore, deduction was admissible on such subsidies – Held, yes [Para 18] [In favour of assessee] Section 28(i), read with section 56, of the Income-tax Act, 1961 – Business income – Chargeable as (Subsidy) – Assessment year 2004-05 – Whether head “income from other sources” is a residuary head of income that can be availed only if income does not fall under any of other four heads of income – Held, yes – Whether subsidies for reimbursement of cost incurred in production of goods are includible under head “profits and gains of business or profession” and, therefore, cannot be included under head “income from other sources” - Held, yes [Para 28] In favour of assessee] The ld. AR further submitted that the all the aforesaid subsidies are governed by North East Industrial and Investment Promotion policy (NEIIPP), 2007, File No. 10(3)/2007-DBA-II/NER, issued by Government of India, Ministry of Commerce and Industry, dated 1-4-2007 with the purpose of Industrial Promotion in North East Region. The industry of the assessee is situated in Dist. Tinsukia, Assam. The copy of the scheme as discussed aforesaid is placed at page 47 of the paper book. The capital subsidy of ₹ 30 lacs was given under the said scheme by Govt. of India for the promotion of North-East Region. As the purpose of all the subsidies were common and therefore the treatment of capital subsidy under the Income Tax Act should be at par with other subsidies. He further submitted that order 263 of the Act passed by Ld. CIT was relied upon the judgment of Hon'ble Gauhati High Court in the case of CIT v. Meghalaya Steels Ltd. (2013) 34 taxmann.com 34 (Guh) has decided the issue in favour of assessee on a later date vide order dated 29.05.2013. Ld. AR further drew our attention on the office Memorandum issued by the Ministry of Commerce and Industry, New Delhi dated 01.04.2007, wherein the scheme for various subsidies including capital investment subsidy was mentioned. He requested the Bench to decide the issue on merits.
On the other hand, Ld. vehemently relied on the order of Ld. CIT. A.Y.2008-09 Digboi Carbon Pvt. Ltd. v. CIT-I Kol. Page 5 6. We have heard rival parties and perused the materials available on record. From the aforesaid discussion, we find that the present issue has already been decided in favour of assessee and against the Revenue by the judgment of Hon'ble Supreme Court in the case of Meghlaya Steels Ltd. (supra). However we find that the decision of Hon'ble Supreme Court does not talk about capital subsidy which was received by assessee. In the instant case, however, we find that subsidies are governed by the Ministry of Commerce and Industry by Office Memorandum issued on 01.04.2007, Govt. of India. By virtue of O.M. the subsidies provided are for excise duty exemption, income tax exemption, capital investment subsidy, interest subsidy, insurance subsidy and transport subsidy etc. We further find that all the subsidies are governed by the aforesaid Industrial Policy therefore in our considered view the incentive given on the capital subsidy to assessee will also be eligible under deduction u/s. 80IC of the Act. Therefore, we set aside the order passed by Ld. CIT u/s 263 of the Act and hold the same as not sustainable. This ground of assessee’s appeal is allowed.