2023 (2) TMI 1363 - HC - Income Tax

Calcutta HC Rules Revenue's Appeal Moot, Upholds Tribunal's Order on Subsidy Classification for 2002-03 Tax Deduction.

COMMISSIONER OF INCOME TAX KOLKATA Versus ITC BHADRACHALAM PAPER BOARDS LTD

COMMISSIONER OF INCOME TAX KOLKATA Versus ITC BHADRACHALAM PAPER BOARDS LTD - TMI Issues:1. Classification of subsidy as revenue or capital receipt for taxation.2. Effect of subsequent orders on the appeal filed by the revenue.3. Clarification on the deduction claimed by the assessee for the assessment year 2002-03.Analysis:The High Court of Calcutta addressed the appeal filed by the revenue against the order of the Income Tax Appellate Tribunal regarding the classification of a subsidy amount as a revenue or capital receipt for taxation purposes. The Assessing Officer initially treated the subsidy as a revenue receipt, a decision upheld by the Commissioner of Income Tax (Appeals). However, the Tribunal, on appeal by the assessee, reversed this decision, leading to the revenue's appeal before the High Court.The Court noted that subsequent developments, including a judicial order declaring the assessee ineligible for the subsidy and requiring refund, impacted the tax treatment of the subsidy amount. The assessee claimed a deduction for the refunded amount in the assessment year 2002-03, which was initially rejected but later allowed by the Tribunal in a separate proceeding. The Court highlighted that allowing the revenue's appeal in the current case would lead to inconsistent decisions, as it would conflict with the deduction granted to the assessee for the refund in the assessment year 2002-03.In light of these developments, the Court decided that the appeal need not be examined for its correctness due to the Tribunal's order in the assessment year 2002-03, which had already resolved the issue. The Court clarified that the order in the present appeal need not be enforced, and the deduction granted in the subsequent assessment year effectively restored the Commissioner of Income Tax (Appeals) decision from 1997.The Court further emphasized that the order impugned in the current appeal was no longer relevant due to the subsequent deduction granted to the assessee, which rendered the earlier order redundant. As a result, the appeal was disposed of, leaving the substantial question of law unanswered. The Court's decision provided clarity on the tax treatment of the subsidy amount and the impact of subsequent orders on the appeal filed by the revenue.