TaxTMI 
TaxTMI 
2019 (1) TMI 1195
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....n of income which is highly unjustified , unwarranted , unsustainable , not proper on facts and not in accordance with the provisions of law. The Ld. CIT(A) has failed to appreciate that the Tara Coal Block has been allotted to the CG Govt. only and the Grant has been received with a specific direction to be utilized for specific purpose of Development of Coal Block and in terms of the provisions of Chhattisgarh Mineral Development Fund Act, 2003 read with Chhattisgarh Mineral Development Fund Rules, 2004, the funds received therein could not have been utilized for other purposes except Development of Tara Coal Block and hence, he ought to have held the grant received as Capital Receipt not chargeable to tax applying the purposive test laid down by the Hon'ble Supreme Court in various judgments. Hence, it is prayed that the addition of Rs. 82,30,00,000/- may please be deleted. Ground No. 2 That the appellant craves leave to add, amend, alter or delete all or any of the grounds of appeal at the time of hearing of the appeal." 2. The brief facts in this case are that certain subsidies had been received by assessee which is a corporation of Chhattisgarh G....
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....nly planters did not pay any duty for rubber exported. During relevant year certain amounts were credited against assessee corresponding to amount of rubber produced by it and payments were made from said amounts to assessee against expenditure incurred on maintenance of plantations. It was decided by the Apex Court that the receipts by the assessee were revenue receipts which were liable to be included in its assessable income. What is not a revenue receipt can be understood by the decision of Kerala H.C in the case of [1989] 46 Taxman 1 (Kerala) Commissioner of Income Tax Vs. Ruby Rubber Works Ltd. In that case replanting subsidy was received from Rubber Board under Replanting Subsidy Scheme of 1967 by Assessee Company. Fact was that during the accounting periods relevant to the assessment years 1971-72 and 1974-75, the assessee company received replanting subsidy from the Rubber Board under the Replanting Subsidy Scheme, 1967. The ITO held that the subsidy amount was not agricultural income and as the business carried on by the assessee was rubber manufacture and any expenditure incurred for the rubber plantation was also a business expenditure, the subsidy received, th....
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....cisions of all lower authorities. Therefore, the order of the Assessing Officer is hereby sustained and appeal is dismissed." 3. That before us, the assessee has made following submissions: "1. The Appellant herein is a Government Company as defined under the provisions of section 619 of the erstwhile Companies Act, 1956 (section 2(45) of the Companies Act, 2013) formulated, owned & controlled by the Government of Chhattisgarh (hereinafter referred to as "the CG Govt., with 99.99% shares being held by the CG Govt.), for Development of Mining, Marketing & Procurement of Minerals, regulating the Mining Activity In the State of Chhattisgarh, undertaking scientific exploration, commercial exploitation and viable trading of minerals In the State, either singly or In joint venture, to search for major and minor minerals, to acquire mining rights for exploration and exploitation of minerals, development of mines and other ancillary activities. The Appellant Company filed its return of income under the provisions of section 139(1) of the Income Tax Act, 1961 (In short "the Act") for the assessment year under reference on 26th November, 2014 declaring a Total Loss of Rs....
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....e from the Mineral Development Fund, sanction and release of fund, maintenance of account etc. [Copy of the CMDFA &CMDFR at Page No.36 to 42 PS] 4. That in pursuance of the aforesaid allotment/handling over of the Tara Coal Block and with the objective of Development of the aforesaid Tara Block for the purpose of extraction of coal, the Mineral Resources Department, CG Govt. had sanctioned and disbursed by way of Grant/Financial Assistance to the extent of Rs. 179.4228 Cr. From Assessment Year 2006-07 onwards ( including a sum of Rs. 82.30 Cr. Received in the assessment year under appeal). It is further submitted that the Details of receipts of Financial Assistance from MDF for Development of Tara Coal Block indicating Date of sanction/approval order, Order No., Financial Assistance Received ( in Rs.) and purpose for which financial assistance was sanctioned as compiled is enclosed herewith. That the Financial Assistance has been sanctioned/granted from MDF as per the provisions of CMDFA for the following purposes (indicative only) : a) Development of Tara Coal Block - Exploration, Rehabilitation & Reestablishment; b) Development of Tara....
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....there is no user for the purpose of meeting out any operational or routine expenditure of the appellant corporation which could be termed as revenue expenditure in terms of the provisions of the law. 6. It is further submitted that in accordance with the CMDFA r.w. CMDFR, an Advisory Committee was required to be constituted under section 6 of the CMDFA comprising of various Government Representatives including the Hon'ble Chief Minister. The objective of constitution of the aforesaid Advisory Committee by the CG Govt. was for the purpose of giving directives for proper utilization of the Fund and the allocation from the fund for various purposes as per Section 5 and also to perform prescribed functions. It is further submitted that the provisions of CMDFA governs the terms of sanction/allotment of fund from MDF to the appellant and further, regulates the utilisation of funds disbursed from MDF. Section3(1) of CMDFA stipulates the constitution of Chhattisgarh Mineral Development Fund which will be formed by earmarking five percent of revenue collected during the preceding financial year. Section 4 of CMDFA stipulates assignment of funds to the Min....
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....s trade or business nor there was any element of profit nor involvement of any revenue/profit motive in such Grant received by the appellant hence, the Grant would certainly beclassified as a Capital Receipt not chargeable to tax. 7. That since the aforesaid Tara Coal Block is still in a very nascent/initial pre-operative stage with only the proceedings for land acquisition of mine area, obtaining forest clearance in respect of forest land etc. going on, with excavation of coal (what to say of commercial production) still not started and possibility of such commercial production very far-off hence, there was no revenue generation nor there were chances of such generation or commercial production for a considerably long period from the aforesaid Tara Coal Block. 8. That as is evident from the minutes of meetings of Advisory Committee, the Financial Assistance granted to the appellant was explicitly stipulated to be returned/contributed to MDF in due course of time (subject to when the Project starts generating revenue/profits) and hence, could never have constituted/formed the income of the appellant corporation since, the same had never been given with an intentio....
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....thers Pune (2018) 300 CTR 113 (Refer Page No.11S to 124 PB) propounding such receipts to be falling in the Capital Account. That the Appellant respectfully submits that in various judicial pronouncements, various Hon'ble High Courts have held that the grants given for specific purposes to be applied for capital outlays or incurment of capital expenditure would be in the nature of capital receipts not chargeable to tax and further, that grants-in-aid received for specific purposes cannot be treated as income and would constitute a capital receipt not chargeable to tax. Reliance in support is further placed upon the following judicial pronouncements: a) CIT Vs. Gujarat Water Resources Development Corporation Ltd in Tax Appeal No.530 of 2010 (GujHC)(Pg.No.125 to 128 PB) b) CIT Vs. M/s.Inland Waterways Authority of India in ITA No.I04 of 2007 (All.HC) (Pg.No.129 to 130 PB) c) CIT Vs. Tamil Nadu Tourism Development Corporation Ltd (2016) 288 CTR 444 (MadHC) (Pg. No.131 to 134 PB) d) CIT Vs.India Telephone Industries Ltd (2014) 268 CTR 348 (Del.HC) (Pg. No. 135 to 137 PB) e) CIT Vs.M/s.Chouhan Education Society ITA No.188/2009 (MP HC) (Pg.....
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.... for Development of Tara Coal Block ought be held as "Capital Receipt" not chargeable to tax. In support, the copies of assessment orders passed under section 143(3) of the I.T.Act in respect of the Assessment Years 2006-07,2007-08,2009 -10,2012-13 & 2013-14 are enclosed (Refer Pg.No.96 to 106 of PB). Reliance in support is further placed uponthe following judicial pronouncements: a) Radhasoami Satsang Vs. CIT (1992) 193 ITR 32 (SC) ( Page No.169 to 174 PB) b) CIT Vs. Excel Industries Ltd. (2013) 358 ITR 295 (SC) ( Pg No. 161 to 168 PB) c) Godrej & Boyce Manufacturing Company Limited Vs. DCIT (2017) 394 ITR 449 (SC) ( pg No. 175 to 177 PB) In view of the above, the addition of Rs. 82,30,00,000/-made by the Ld. AO and that sustained by the Ld.CIT(A), being Financial Assistance received from MDF towards Development of Tara Coal Block, treating the same as Revenue Receipt is highly unjustified, unwarranted, based on incorrect assumption of facts and not in accordance with the provisions of law and it is requested that the same may please be deleted holding the said amount as a "Capital Receipt" not chargeable to tax." 4. We have perused the case ....
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.... the earlier assessment year. Before parting with this issue, it is necessary to deal with the 'Rule of Consistency" pleased by the Ld. AR of the assessee. It is well laid down through catena of the decisions rendered by the Hon'ble Supreme Court of India and High Court. The Hon'ble Supreme Court of India in the case of Radhasoami Satsang Vs. Commissioner of Income Tax, reported as 193 ITR 321 (SC) has held that res-judicata does not apply to the income tax proceedings. Again each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasoning in the absence of any material change justifying the Revenue to take a different view of the matter and if there was not change it was in support of the assessee. The Hon'ble Delhi High Court in the case of CIT Vs. Neo Poly Pack ( P.) Ltd. reported as 245 ITR 492 ( Del.) has held tha....