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Income Tax Appellate Tribunal, DELHI BENCH ‘E’ : NEW DELHI
Before: SH. ANIL CHATURVEDI & SH.ANUBHAV SHARMA
The appeal is preferred by the Revenue against the order dated 19.03.2018 of CIT(A)-12, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in appeal No. 490/16-17 arising out of an appeal before it against the assessment order dated 30.12.2016 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the ACIT, Circle—34(1), New Delhi (hereinafter referred as the Ld. AO).
The facts in brief are the assessee filed return declaring income of Rs. 55,70,20,510/- which was taken up for complete scrutiny for the reason high interest expenditure against new capital added in work in progress or addition made to fixed assets, Mismatch in sales turnover reported in audit report and 4426.Del.2018 M/s Modern Paper ITR & Mismatch in amount paid to related persons u/s 40A(2)(b) reported in audit report and ITR. Assessee is engaged in the business of manufacturing, formulating producing, refining, processing, buying, selling, export and import of all types of agrochemicals. The firm started its manufacturing operation in the year 2008-09 at Jammu. The Firm manufactures pesticides, insecticides, fungicides, weedicides etc. During the financial year 2013-14, the assessee has shown total turnover of Rs. 336,61,83,231/- thereby having a Gross Profit of 23.8% as compared to the total turnover of Rs. 171,66,04,388/- thereby having a Gross Profit Rate of 27.45% in the immediately preceding year. In addition to this, the assessee is also deriving other income of Rs. 11,02,862/-. The assessee firm filed its original return of income on 29/11/2014 showing total income of Rs. 55,70,20,510/-. However, the assessee filed revised return of income on 20.02.2016 showing total income of Rs. 35,68,53,500/- thereby leading to a decrease of total income by Rs. 20,01,67,010/-.
2.1 The main issue in this case is that a subsidy of Rs. 26,68,89,345/- on account of excise duty refund is received by the assessee, in pursuance of the incentives announced and sanctioned vide Government of India, Ministry of Commerce and Industry (Department of Industrial Policy and Promotion’s ) Office Memorandum No. 1(13)2000-NER dated June 14,2002 and Central Excise Notification Nos. 56 and 57, dated November 14, 2002 and other notifications issued on the subject, pertaining to the industrial policy introduced in the State of Jammu and Kashmir. The dispute under consideration is the determination as to whether the said subsidy is capital or revenue in nature.
Ld. AO has observed in para 2.3.7 as follows :-
“2.3.7 More so, so long as the assessee was enjoying the benefit of weighted deduction @ 100% of the profits derived from the undertaking, this element of subsidy, received in earlier years, was continuously being treated by it as revenue in nature as this was not resulting into any statutory tax 2
4426.Del.2018 M/s Modern Paper liability. The moment the assessee steps into the sixth year of its production from the date of its inception, it tries to take a contrary stand altogether. The action of the assessee, thus, clearly shows the intention of reducing its tax liability by treating the receipt of subsidy as capital in nature. 3.1 And made addition which was sustained by ld. CIT(A) and the assessee is in appeal raising following grounds :-
“1. The Ld. CIT(A) has erred in deleting the addition made by the AO on the basis of judgments of various courts submitted by the assessee without considering the fact that these judgments were also provided during the assessment proceedings and the AO considered the same and gave a detailed explanation in para 2.3 and 2.4.
2. The Ld. CIT(A) has erred in deleting the addition without appreciating the fact that the assessee in the earlier years considered the same receipt as revenue in nature and took the benefit of weighted deduction @100%.
3. The Ld. CIT(A) has erred in allowing the claim of the assessee of excise duty refund of Rs. 26,68,89,345/- as capital receipt instead of revenue receipt.
The appellant craves leave for permission to modify any of the grounds of appeal
/raise additional grounds of appeal at the time of hearing. The appellant reserves the right to add, amend or alter the grounds of appeal on or before the date of appeal is finally heard for disposal.”
5. Heard and perused the record.
6. In regard to the assessee’s own case for A.Y. 2015-16 the Co-ordinate Bench of this Tribunal on which one of us was quorum, considered the matter and observed as follows :-
“6. On the other hand, Ld. Counsel for assessee heavily relied the judgment of ITAT Ahmedabad Bench in in DCIT vs. M/s. Munnjal Auto Industries and in assessee’s own case for assessment year 2013-14 of Delhi Bench to contend that as with regard to the assessee’s case, there is no error in findings of Ld. CIT(A).
4426.Del.2018 M/s Modern Paper