TaxTMI 
TaxTMI 
2015 (7) TMI 1298
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....at Rs. 74,15,531/- can not be allowed in assessment framed u/s 143(3) r.w..s. 153A of I.T. Act, 1961. 2. The learned A.O. erred in assessing sales tax incentive availed as revenue receipt and not accepting the claim of assessee for the same being capital receipt at the hands of the assessee. 3. The learned A.O. ought to have accepted the claim of assessee that sales tax incentive availed at Rs. 74,15,531/- under scheme of incentive by Government of Maharashtra is capital receipt and not chargeable to tax. 4. The assessee denies liability to be assessed to interest u/s 234C of the I.T. Act, 1961 without prejudice, the levy of interest is unjustified, unwarranted and excessive. 3. Facts in brief as emerged from the corresponding assessment order for assessment year 2003-04 passed under section 143(3) read with section 153A dated 28-12-2010 were that the assessee company is in the business of manufacturing of refined oil and vanaspati ghee. As per the assessment order, a regular return was filed under section 139 of I.T. Act on 1st December, 2003 declaring an income of Rs. 22,30,259/-. There was an action under section 132(1) of the I.T. Act conducted on ....
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.... decision in the case of CIT v/s. Sun Engineering Works Pvt. Ltd. [1992] 198 ITR 297 (SC)." 4.1 After discussing the claim of the assessee, the Assessing Officer has held that the claim was made by the assessee when the proceedings under section 153A of I.T. Act were initiated, which was a fresh claim of deduction, hence not to be allowed in the light of the decision of M/s Sun Engineering Works 198 ITR 297 (SC). With the result the amount of income which was declared by the assessee as per the return was accepted. The assessee preferred an appeal before the first appellate authority against the disallowance of sales tax incentive. 5. Before the learned CIT(Appeals) it was reiterated that the sales-tax incentive was received in number of years and the bifurcation of the same was as under : A.Y. Sales Tax incentive 2004-05 56,96,658 2005-06 31,81,935 2006-07 97,80,596 2007-08 23,74,833 2008-09 52,12,917 2009-10 1,07,39,201 5.1 The assessee has pleaded that under the Scheme of incentive of Government of Maharashtra, the assessee has got the benefit of sales-tax incentive. On identical facts, the ITAT, Special Bench in the case ....
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....rs were imposed on the appellate authorities and accordingly, the claim of sales tax incentive received should be allowed as capital receipt. On this aspect also, I discharge with the submissions of the appellant. In the case of M/s Reliance Industries Ltd., the Spl. Bench juxtaposed the decisions of the Supreme Court in Goetze (India) Ltd. and National Thermal Power Company Ltd. going by the fact that the Assessing Officer during remand proceedings found that only part of the expenditure disallowed can be upheld. However, that is not the case of the appellant in the present case. 6. From the side of the appellant, learned A.R. Mr. K.P. Dewani appeared. He has pleaded that the Maharashtra Government has given a scheme in the form of Sales-tax incentive for setting up industry and Wind Mill in the State. He has argued that although it is correct that the proceedings under section 153A are revenue beneficial but side by side when the statute has provided to abate other revenue proceedings then the assessee has an option to raise all the issues which he can raise during the assessment proceedings as if the proceedings are the regular assessment proceedings. 6.1 Learned A.R. has ....
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....resh claim under section 153A after duly considering the decision of M/s Sun Engineering Works (supra). He has also pleaded that the learned CIT(Appeals) has wrongly placed reliance on the decision of K. Sudhakar S. Shanbhag 241 ITR 865 (supra) because the said decision also related to the assessment proceedings initiated under section 148 of the I.T. Act. In any case, the established principle is that as per the process of assessment a correct income is to be determined and a justified tax liability is to be imposed on the assessee. Since it was an undisputed position of law that the sales tax incentive was not exigible to income-tax, therefore, the Assessing Officer was expected to allow the same. According to him, even CBDT Circular dated 01-04-1955 has mandated that only a legitimate tax is to be levied on the assessee. He has drawn our attention on few evidences viz., "eligibility certificate" for sales-tax incentive under PSI-93 issued by the General Manager, District Industries Centre, Amravati and eligibility certificate for sales tax incentive by way of exemption, in respect of "Wind Farm Project" under "Power Generation Promotion Policy of Government of Maharashtra" issue....
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....tion 153A, that too was legally incorrect. 9. In the light of the above factual and legal discussion, we have heard both the sides at length. On careful examination of the grounds as raised before us, we have noted that basically two substantive issues have been raised before us. The first one is that the Assessing Officer has rejected the claim of the assessee in respect of sales-tax subsidy on the pretext that the proceeding was started under section 153A of I.T. Act, which was a "revenue beneficial" assessment, hence new claim of exemption could not be entertained and the assessee is not eligible to raise a fresh claim of exemption. The second one is that if a view is taken that even if an assessment is framed under section 153A/143(3) the assessee is eligible to claim a statutory exemption, then under such circumstances whether the assessee is entitled for the said claim in respect of the sales-tax incentive received and duly credited in profit & loss account. Therefore, the first step is to examine whether the impugned claim can be entertained and if it goes in favour of the assessee then the next step is to examine the eligibility of the claim. 9.1 As far as the basic f....
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..... Ltd. bearing ITA No. 4238/Mum/2010 order dated 30-08-2011 has made an observation quota "A close look at the above provision manifests that the Assessing Officer is required to make assessment afresh and compute the 'total income' in respect of each of the relevant six assessment years. As there is no specific inhibition on the jurisdiction of the Assessing Officer in not including any new income to such fresh total income pursuant to search which was not added during the original assessment, in the like manner, there is no restriction on the assessee to claim any deduction which was not allowed in the original assessment. The requirement of section 153A is to compute the total income of each of such assessment years. Such determination of the total income has to be done afresh without any reference to what was done in the original assessment. Of course, the AO is entitled to make any addition in the fresh assessment, which he made in the original assessment, provided he is satisfied with the merits of the addition. But mere fact that there was some addition in the original assessment, would not preclude the assessee from contesting the addition in the subsequent proceedings. As ....
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....s of the Act without imposing any fetters. If it is so then naturally an assessee has options, one is to file correct statement of income and if any information was left out earlier then the said omission or mistake could be rectified. Since as per the language of section 153A the process of assessment is started with the filing of the return, as it happens in the course of normal assessment, then the second option is also available to a tax payer to place any claim or information before the Assessing Officer during the course of such assessment proceedings. Therefore, even under section 153A the Assessing Officer is not supposed to stop the assessee from claiming a fresh rebate. There is no such indication under the provisions of section 153A through which it could be adjudged that the assessee was precluded from not claiming any fresh rebate. Rather the respected Mumbai Bench has opined that the assessee could not be stopped from claiming a fresh deduction, but even the assessee is also not stopped for arguing the matter on merits. In this cited decision a conclusion was drawn that even any deduction is claimed by the assessee in the proceedings under section 153A, that could not....
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.... the above discussion after discussing the issue in detail, the Mumbai Bench has come to the conclusion that there is difference in wordings u/s 158B(b) and section 153A of the Act. Provisions u/s 153A are successor of special procedure for assessment of search cases under Chapter XIV B starting with Section 158B. Chapter XIV-B required the assessment of "undisclosed income" as a result of search, which has been defined in Section 158B(b) whereas Section 153A dealing with assessment in case of search w.e.f. 1.6.2003 requires the A.O. to determine "total income" and not "undisclosed income" under these background, the Bombay Bench of the Tribunal has held that when the A.O. has to compute the total income of the assessee on the basis of return filed after considering the submissions made during the course of hearing before him, there cannot be any scope for arguing that the assessee has been rendered powerless to even lodge a claim in respect of which deduction was not allowed earlier. The A.O. is fully empowered to consider the question of deductibility as per the provision of the Act. If after going through such claim, he feels that addition is called for, he will obviously made a....
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....evenue a vehement argument has been raised that in the case of Sun Engineering Works 198 ITR 297 (SC) it was held that in a reassessment proceedings it is not open to the assessee to press for a review all the concluded items unconnected with escapement of income. This aspect has also been considered by the ITAT, Mumbai in the case of M/s Eversmile Construction (supra) and held, rightly so, that the Hon'ble Supreme Court was considering the provisions of section 147 of I.T. Act. In that context the Hon'ble Court has expressed that once an assessment is validly reopened, it is not open to an assessee to seek a review of the concluded items. The Tribunal has said that it is not pertinent to note that the conditions for taking action are altogether different than the conditions under which the provisions of section 153A are to be applied. The distinction drawn by Mumbai Tribunal is worth reproduction : " The reliance of the learned Departmental Representative on the judgment of the Hon'ble Supreme Court in the case of CIT v/s. Sun Engineering Works Pvt. Ltd. (1992) 198 ITR 297 (SC) is misconceived. The reason for the same is that in that case the Hon'ble Supreme Court was con....
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....by the lower authorities in this regard is, therefore, reversed and connected ground No. 1 is allowed. 11. Once we have taken a view that a legally admissible claim could be entertained while framing the assessment under section 153A, hence after crossing this bridge now we have to examine that whether the claim of "capital receipt of sale-tax incentive" is eligible under the facts and circumstances of the case. 12. From the side of the assessee, learned A.R. has informed at the outset that the relevant details were duly furnished before the Assessing Officer and apparently he had not expressed any disagreement about the eligibility of the claim. The Assessing Officer has not expressed in the assessment order that the exemption of sales tax incentive was not to be granted on both the grounds that it is not to be claimed under section 153A proceedings, as well as, on the other reason that the scheme under which sales-tax incentive was received was not eligible to hold as capital receipt. The Assessing Officer has not questioned the eligibility of the sales tax incentives but only questioned the admissibility of a fresh claim under section 153A. According to the learned A.R. th....
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....on that the thrust of the scheme was that the assessee would become entitled for the sales tax incentive even before the commencement of the production, which implied that the object of the incentive was to fund a part of the cost of the setting up of the factory in the notified backward area. The Tribunal had at more than one place stated that the thrust of the Maharashtra Scheme was the industrial development of the backward districts as well as generation of employment thus, establishing a direct nexus with the investment in fixed capital assets. It had been found that the entitlement of the industrial unit to claim eligibility for the incentive arose even while the industry was in the process of being set up. According to the Tribunal, the scheme was oriented towards and was subservient to the investment in fixed capital assets. The sales tax incentive was envisaged only as an alternative to the cash disbursement and by its very nature was to be available only after production commenced. Thus, in effect, it was held by the Tribunal that the subsidy in the form of sales tax incentive was not given to the assessee for assessing it in carrying out the business operations. The obje....
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....Chemicals 306 ITR 392 (SC) and the decision of Sahney Steel and Press Works Ltd. 228 ITR 253 (SC) has been discussed. It was opined that the test is that the collector of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy was granted. Likewise in the case of CIT v/s. Kirloskar Oil Engines 364 ITR 88 (Bom.) the said two decisions, namely, Sahney Steel and Press Works (supra) and Ponni Sugara and Chemicals (supra) have been discussed and commented that the Supreme Court had emphasized that collector of receipt in the hands of the assessee had to be determined with respect to purpose for which subsidy was given. If object of subsidy scheme was to enable the assessee to run business more profitability, then receipt was to be considered as on "revenue account". But if object of assistance under subsidy scheme was to enable the assessee to set up new unit, then receipt of subsidy is to be considered on "capital account". In the said case it was found by the Hon'ble Bombay High Court that under the incentive package offered by the State Government was for the purpose of setting up a new industry in the State. The assessee ....