2022 (9) TMI 840 - HC - Income Tax

Appeal Dismissed: Interest Subsidy & Excise Refund Treated as Capital Receipts for Book Profit

PRINCIPAL COMMISSIONER OF INCOME TAX-4, KOLKATA Versus M/s. KRISHI RASAYAN EXPORTS PVT. LTD.

The High Court dismissed the revenue's appeal, upholding the Tribunal's decision to treat interest subsidy and excise refund as capital receipts for ... MAT Computation u/s 115JB - interest subsidy and excise refund - Whether would be treated as capital receipt or revenue receipt for the purpose of computation of book profit under the provision of Section 115JB? - HELD THAT:- The substantial question of law involved in this appeal is squarely covered in favour of the assessee and against the revenue in the light of the decision of M/s. Chaphalkar Brothers Pune2017 (12) TMI 816 - SUPREME COURT] held that the finding of the Jammu and Kashmir High Court on the facts of the incentive subsidy contained in that case is absolutely correct. In that once the object of the subsidy was to industrialize the State and to generate employment in the State, the fact that the subsidy took a particular form and the fact that it was granted only after commencement of production would make no difference. Identical issue was also considered in Ankit Metal And Power Ltd. [2019 (7) TMI 878 - CALCUTTA HIGH COURT] wherein apart from considering the effect of the subsidy the Court also considered as to whether when a receipt is not in the character of income as defined under Section 2(24) of the Act, whether it can be said to form part of the book profit under Section 115 JB. Decided against revenue. Issues involved:1. Interpretation of whether interest subsidy and excise refund should be treated as capital or revenue receipt for computing book profit under Section 115JB of the Income Tax Act, 1961.2. Validity of the Tribunal's decision to entertain a claim for treating incentive subsidies as capital receipts without filing a revised return.Analysis:1. The High Court analyzed whether interest subsidy and excise refund should be classified as capital or revenue receipt for computing book profit under Section 115JB of the Income Tax Act, 1961. The Court referred to the decision of the Supreme Court in Commissioner of Income-Tax-I, Kolhapur vs. M/s. Chaphalkar Brothers Pune, (2018) 400 ITR 279 (SC) where it was held that incentives aimed at accelerating industrial development and generating employment should be considered as capital receipts. The Court also cited the case of Principal Commissioner of Income-Tax vs. Ankit Metal And Power Ltd., (2019) 416 ITR 591 (Cal) which emphasized that if a receipt does not fall within the definition of income under Section 2(24) of the Act, it cannot form part of the book profit under Section 115JB. Consequently, the Court concluded that the interest and power subsidy should be excluded from computing book profit under Section 115JB.2. The Court deliberated on the Tribunal's decision to entertain the claim for treating incentive subsidies as capital receipts without filing a revised return. The Revenue contended that the Tribunal's action was not justified, relying on the decision in Goetze (India) Ltd. v. CIT. However, the Court differentiated this case by emphasizing that the power of the assessing authority to entertain a claim is distinct from the power of the Appellate Tribunal under section 254 of the Income-tax Act, 1961. Citing the decision in CIT v. Britannia Industries Ltd., the Court affirmed that the Tribunal has the authority to entertain deduction claims not raised before the Assessing Officer by filing a revised return. Consequently, the Court dismissed the Revenue's appeal, affirming the Tribunal's decision to treat the subsidies as capital receipts.In conclusion, the High Court dismissed the appeal filed by the revenue, upholding the Tribunal's decision to treat the interest subsidy and excise refund as capital receipts for computing book profit under Section 115JB. The Court also affirmed the Tribunal's authority to entertain claims for deduction without a revised return, ultimately ruling in favor of the assessee based on the legal precedents and interpretations provided.