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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri N. V. Vasudevan, JM & Shri M. Balaganesh, AM]
ORDER
Per Shri M. Balaganesh, AM:
This appeal by assessee is arising out of order of CIT(A), Asansol vide Appeal No. 132/CIT(A)/ASL/Wd-1(4)/ASL/2008-09 dated 08.05.2013. Assessment was framed by ITO, Wd-1(4), Asansol, u/s. 143(1) of the Income tax Act, 1961 (hereinafter referred to as the “Act”) for AY 2006-07 vide his order dated 19.12.2008.
The assessee has raised the following revised grounds:
GROUND NO. 1 – That the Commissioner of Income Tax (Appeal) has erred in law and on facts of the case in not accepting assessee's claim that amount of Rs. 42,04,928/- received from Government as Interest subsidy under West Bengal Incentive Scheme, 2000 cannot form part of assesses Total Income, the same being of capital in nature. GROUND NO. 2- That without any prejudice to ground No. 1 above, the CIT(A) has, likewise, further erred in dismissing the assessee's alternative claim that a sum of Rs. 625,266/- included in the total sum of Rs. 42,04,928/- of Interest Subsidy having neither been received nor accrued, should not part of total taxable income. GROUND NO. 3- That the CIT(A) has, likewise further erred in law and on facts of the case in not accepting assessee's claim that amount of Rs. 9,59,9761- as Electricity Subsidy under West Bengal Incentive Scheme, 2000 cannot form part of assesses Total Income, the same being of capital in nature.
The only issue to be decided is as to whether the subsidy received by the assessee from government under West Bengal Incentive Scheme, 2000 could be considered as capital receipt in the facts and circumstances of the case.
2 Bhagwagti Sponge Pvt. Ltd.. AY 2006-07 4. The assessee is a company and is engaged in the manufacture of sponge iron at its plant at Jamuria in the district of Burdwan in West Bengal. For the year under consideration, the assessee company filed its Original Return of Income on 29-11-2006 declaring a total income of Rs (-) 2,82,39,180/-. The said income was arrived at by the above assessee on the basis of Book Loss of Rs. 37,19,841/- as per the Company’s Profit & Loss Account for the year ended 31-03-2006. The said Book Loss of Rs.37,19,841/- as per Company's Profit & Loss Account for the year ended 31-03-2006, which is based on the books of the assessee maintained in regular course of the assessee, was arrived at after deducting the amount of subsidies of Rs. 51,64,604/- receivable by the Assessee Company from Government of West Bengal in terms of West Bengal Incentive Scheme, 2000. This Scheme has been formulated by the Government of West Bengal with a view to promoting industries in the State. The assessee company was incorporated for the purpose of setting up of a Sponge Iron Plant and immediately after the incorporation, the assessee company applied for an eligibility certificate in terms of the abovesaid incentive scheme. By letter no. INC-2000(386)/II/GENCS/3285 dt 16.12.2004, the West Bengal Industrial Development Corporation Limited (a Government of West Bengal Undertaking), being the "Authorised Agent” of the Government of West Bengal in terms of the said incentive scheme, informed the company that the unit of the assessee for the Project of Sponge Iron at Location lkrah, P.O. Jamuria Hat, P.S. Jamuria has been declared eligible for different incentives, subject to certain conditions, and an Eligibility Certificate No. INC-2000/EC-291(B) dated 16.12.2004 was issued to the Company. One of the conditions for grant of incentives was that the incentives granted to the unit shall be recoverable in case the assessee company fails to abide by the conditions as mentioned in Condition (III). As per the said Eligibility Certificate, the company was eligible for the subsidies which was to be computed on different criteria. For easy computation the subsidies are named :- a) State Capital Investment Subsidy (b) Interest Subsidy (c) Waiver of Electricity Duty (d) Employment Generation Subsidy In terms of promises of the Government of West Bengal as contained in the Eligibility Certificate, the assessee at the time of finalization of the accounts, computed on its own, amounts of the subsidies based on the criteria laid down in the scheme. The company arrived at the following figures of the subsidies.
Sl. No. Account Head Amount (Rs.) 1. Subsidy on Interest on Term Loan-1 35,79,662 2. Subsidy on Interest on Term Loan-2 6,25,266 3. Subsidy on Electricity Duty 9,59,976 --------------- 51,64,904 --------------- The assessee thereafter, inadvertently credited the above amount of the subsidies to the account heads of interest and Electricity Charges in its books of account as per following details and debited the Profit & Loss Account for the year ended 31.03.2006 with the net figures of the expenses as per following details:
Sl. A/c Head – A/c Head- A/c. Head No. Interest on Interest on Electricity Term Loan-1 Term Loan- Charges 2 1. Total amount of Expenditure 71,59,323 25,01,063 71,86,879 2. Less: 3. Amount of Subsidy computed 35,79,662 6,25.266 9,59,976 4. Net amount debited to Profit & Loss Account 35,79,661 18,75,797 62,26,903
Total net expenditure under the head “Interest” – Rs.54,55,459 Based on the above said net figures, the accounts of the company were finalized. The Returned Income under the Income-tax Act, 1961 was finalized on that basis. This fact is evident from the books of accounts and Profit & Loss Account for the year ended 31.03.2006. As a result of such adjustments, the expenditure under the above heads was reduced. As a result thereof, the total loss suffered by the company got reduced and the Return of Income was filed accordingly showing lower amount of loss, which otherwise should have been filed at a higher figure of loss.
4 Bhagwagti Sponge Pvt. Ltd.. AY 2006-07 The assessee later claimed that such credit of subsidies to different account heads were made out of ignorance as according to assessee, such subsidies are capital receipts and not revenue receipts, and therefore are not taxable. As the subsidies receivable were credited under the respective head of expenses and were not excluded while making computation of Income for the purposes of the Income Tax Act, 1961 the Return of Income was filed at a lower amount of loss.
The assessee argued that The West Bengal Incentive Scheme, 2000 as formulated by the Government of West Bengal for the growth of industries in the State of West Bengal. This fact is clear in the foreword attached to the Scheme itself. In the Foreword, the Government of West Bengal states that as there is strong need for fiscal support for the promotion of industry in the State Government decided to introduce the “West Bengal Incentive Scheme, 2000”. ' Thereafter, it went on to divide the entire State into 3 (three) categories for the purpose of the incentives. Districts have been grouped as 'A' (Calcutta Municipal Corporation). “B” (Howrah. Hooghly, North 24- Parganas, South 24- Parganas, Burdwan, Nadia & Midnapore districts) and 'C' (Murshidabad, Birbhum. Purulia, Bankura, Malda, Coach Behar, North Dinajpur, South Dinajpur, Jalpaiguri and Darjeeling districts) and quantified the amount of "fiscal support" payable in each of the categories. It means that the State Government wants to extend the help to the industries in the Capital Field not in operational field. The amount payable by the State Government is not to subsidize the operation of the unit, but to help in recovering the cost of the project. Had it not been so, the wording would have been different. This is more clear from the fact that the incentive are payable for a limited period but not over the entire period of the life of the industry. Moreover, these subsidies are recoverable by the Government of West Bengal in the case of the failure of the assessee company to comply with the terms and conditions attached with the gram or such subsidies.
Under these circumstances, it was argued that when the subsidy is in the field of capital support, taxing the same would be wrong and not in accordance with the law and therefore, needs to be excluded while computing the income under the Income Tax Act.
5 Bhagwagti Sponge Pvt. Ltd.. AY 2006-07 5. Ld. AO treated the subsidy as revenue in nature and brought the same to tax ignoring the revised return filed by the assessee. On first appeal, the Ld. CIT(A) upheld the addition made by the AO and held that in view of the decision of Hon’ble Supreme Court in the case of Goetze India Ltd. Vs. CIT reported in (2006) 284 ITR 323 (SC), revised return filed beyond the time limit prescribed u/s. 139(5) of the Act could not be acted upon. Aggrieved, assessee is in appeal before us.
We have heard rival submissions and perused the materials available on record. The facts stated hereinabove remain undisputed and hence, the same are not reiterated herein for the sake of brevity. The Ld. AR argued that the issue involved is squarely covered by the decision of Hon’ble jurisdictional High court in the case of G.A No. 2042 of 2011 in ITAT No. 201 of 2011, CIT Vs. M/s. Strassenburg Pharmaceuticals Ltd. dated 21.07.2011. Apart from that he also placed reliance on the decision of Coordinate Bench of this Tribunal in the case of Hydro Carbons & Chemicals Vs. ACIT in to 1986/Kol/2009 for AYs 2001-02 to 2005-06 dated 29.04.2011. He also placed reliance on the decision of Coordinate Bench of Mumbai Tribunal in the case of Associated Cement Cos. Ltd. Vs. Addl. CIT in ITA No. 7594/Mum/2004 dated 29.08.2012 in support of his contention. We find that the Ld. CIT(A) had not considered the claim of the assessee on merits in view of the fact that the revised return was filed by the assessee beyond the prescribed period u/s. 139(5) of the Act. The Ld. CIT(A) had applied the decision of Goetze India Ltd., supra and accordingly, rejected the claim of the assessee. But we find from the last paragraph of the decision of Goetze India Ltd., supra, wherein the Hon’ble Apex court observed that revised return though filed belatedly could be considered by the appellate authority and hence, we find that the assessee is entitled to make its claim by way of revised return. However, we find that the Ld. CIT(A) had not adjudicated the claim of the assessee on merits. Hence, we deem it fit and appropriate in the interest of justice and fair play to set aside the issue to the file of the Ld. CIT(A) to consider the claims made by the assessee in the revised return and adjudicate the same on merits. The assessee is also at liberty to file all the submissions and the case laws in support of its contention. Accordingly, the appeal of assessee is allowed for statistical purposes.
In the result, the appeal of assessee is allowed for statistical purposes.