Capital receipt treatment of sales tax incentive extends to MAT computation, with cross objection delay condoned for reasonable cause.
Sales tax incentive was treated as a capital receipt not chargeable to tax, following earlier Tribunal rulings on the same assessee's claim and similar coordinate bench decisions. The Tribunal further held that a receipt lacking the character of income should not enter book profit computation under section 115JB unless the statute specifically so provides, and directed exclusion of the incentive from net profit for MAT purposes. The delay in filing the cross objection was also condoned on the basis of reasonable cause, as the factual claim was already on record and the omission was attributed to counsel's mistake.
Issues: (i) Whether the delay in filing the cross objection deserved to be condoned; (ii) Whether sales tax incentive constituted a capital receipt not chargeable to tax; (iii) Whether such sales tax incentive was to be excluded while computing book profit under section 115JB.
Issue (i): Whether the delay in filing the cross objection deserved to be condoned
Analysis: The cross objection was filed belatedly, but the record showed that the assessee had noted the capital nature of the sales tax incentive in the return, the claim had been omitted earlier due to counsel's mistake, and the factual basis for the claim was already available on record. The explanation was found to constitute reasonable cause for the delay.
Conclusion: The delay in filing the cross objection was condoned and the cross objection was admitted.
Issue (ii): Whether sales tax incentive constituted a capital receipt not chargeable to tax
Analysis: The issue was covered by earlier Tribunal decisions in the assessee's own case and by other coordinate bench rulings treating similar sales tax incentive as capital in nature. The consistent view was followed, and no contrary infirmity was found in the appellate order.
Conclusion: Sales tax incentive was held to be a capital receipt not liable to tax.
Issue (iii): Whether such sales tax incentive was to be excluded while computing book profit under section 115JB
Analysis: The Tribunal applied the principle that a receipt which is capital in nature and does not possess the character of income should not form part of book profit for MAT purposes. Reliance was placed on coordinate bench authorities holding that capital receipts are of the ambit of section 115JB computation unless expressly brought to tax.
Conclusion: The sales tax incentive was directed to be excluded from net profit while computing book profit under section 115JB.
Final Conclusion: The revenue's challenge failed, while the assessee obtained relief on the MAT computation issue after the delay in the cross objection was condoned.
Ratio Decidendi: A capital receipt which lacks the character of income is not includible in book profit under section 115JB unless the statute expressly provides otherwise, and delay in filing a cross objection may be condoned where the explanation shows reasonable cause and the underlying claim is supported by the record.