TaxTMI 
TaxTMI 
2019 (7) TMI 878
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....ower Intensive Industries Scheme, 2005 as capital receipt and not revenue receipt in relevant assessment year 2010-11 and not to include the aforesaid receipts in Book Profit under Section 115 JB of the Income Tax Act, 1961 ?. ii. Whether on the facts and in the circumstances of the case the learned Tribunal erre0d in law in accepting the claim of deduction by the assessee towards 'Interest subsidy' and 'Power subsidy' under the aforesaid schemes by filing revised computation instead of revised return before the assessing officer for exclusion of the aforesaid receipts from the book profit under Section 115 JB on the ground that the said subsidies do not constitute income under Section 2(24) of the Income Tax Act, 1961 ?. The relevant facts as emerge on perusal of record, in brief for, the purpose of adjudication on the issues involved in the instant appeal are hereunder. The assessee company is a Public Limited Company registered under the Companies Act, 1956. It is engaged in the manufacturing of Sponge Iron; Ingots & Billets, Steel Items and Ferro Alloys. It also has a captive power generating plant. For the Asst Year 2010-11, the assessee company filed its Return....
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....ing up industry in 'Bankura', which falls under 'Group C' i.e. backward area. The aforesaid subsidies were not in the nature of general assistance to the assessee to carry on his business or trade more profitable but were for industrial development which clearly falls under the category of fixed capital incentive. The assessee received an eligibility Certificate from the Government of West Bengal wherein it received approval for Interest Subsidy. The object of the West Bengal Incentive Scheme, 2000 would be apparent from the following extracts:- "West Bengal Incentive Scheme 1999 Scheme had an attractive provision of Sales Tax related by way of "remission" of "deferment". But in pursuance of the National Policy, the State Govt. had to discontinue the Sales Tax related Incentives from 1st January, 2000. However, as there is a strong need for fiscal support for the promotion of industry in the State, the State Government decided to introduce the West Bengal incentive Scheme, 2000, with different and new features, quite attractive for industries in large medium, small scale and tourism sectors." "4. APPLICABILITY OF THE 2000- SCHEME: The 2000 Scheme shall generally b....
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....n this issue, has relied upon the decision in the case of Sahney Steel and Press Works Ltd. Vs. Commissioner of Income Tax, 228 ITR 253 (SC). Secondly, Mr. Bhowmick contended that since the aforesaid subsidies received by the assessee from the West Bengal Government are revenue receipts these receipts should be included while computing 'Book Profit' under Section 115JB of the Income Tax Act, 1961 and he supported the order and reasoning of the Assessing Officer and in support of his contention he relied upon the decision in the case of Appollo Tyres Ltd. Vs. C.I.T- 255 ITR 273 (SC). Thirdly, Mr. Bhowmik contended that the learned Tribunal should not have allowed the aforesaid claim of deduction on account of incentive subsidies in question by way of revised computation instead of filing a revised return under Section 139(5) of the Income Tax Act, 1961 and in support of his contention he has relied upon the decision in the case of Goetze (India) Ltd. Vs. CIT- 284 ITR 323 (SC). Mr. Khaitan learned Senior Advocate, appearing for the respondent assessee supported the order of the learned Tribunal on the aforesaid issues and in reply to the submission of Mr. Bhowmick contended as ....
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....d, subsidy received on capital account was not 'income' within the meaning of the Act at least till the assessment year 2015-16. He submits that the revenue has not challenged before this Hon'ble Court the finding of the Tribunal that the interest and power subsidies are capital receipts and are not income liable for tax under the normal computation provisions. Once it is accepted that the said subsidies are not income within the meaning of section 2(24) of the Act, the same cannot also form part of the total income or be subjected to tax under section 115JB of the Act. He submits that the subject matter of taxation under the Act is "income". The charging section 4 of the Act provides for levy of tax in respect of "Total income". "Total income" is defined in section 2(45) of the Act to mean "the total amount of income referred to in section 5, computed in the manner laid down in this Act". The material portion of section 5 reads as under:- "5. (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes, all income from whatever source derived which-" Thus, the "total income" in the relevant assessment yea....
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....s issue. The following paragraph of the judgment delivered by the Hon'ble Supreme Court in Ponni Sugars and Chemicals Limited case [2008] 306 ITR 392 reads thus (page 400): "The importance of the judgment of this court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the scheme with which we are concerned in this case is that the incentive must be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. It the object of the subsidy scheme was to enable the assessee to run the business more profitable then the receipt is on revenue account. On the other hand, if the obj....
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....nment under the West Bengal Incentive Scheme, 2000, and 'West Bengal Incentive to Power Intensive Industries Scheme, 2005', had actually granted the subsidy with the sole intention of setting up new industry and attracting private investment in the state of West Bengal in the specified areas in the present case Bankura which is industrially backward hence the same was of the nature of non-taxable Capital receipt. Thus according to the 'purpose test' laid out by the Hon'ble Supreme Court, various and High Courts including our Court the aforesaid subsidy should be treated as capital receipt in spite of the fact that computation of 'Power subsidy' is based on the power consumed by the assessee. It is well established from submission of the assessee as enunciated above that once the purpose of a subsidy is established; the mode of computation is not relevant as held in the decisions of the Hon'ble Supreme Court in the case of Sahney Steel and Press Works Ltd. Vs. Commissioner of Income tax [1997] 228 IRT 253(SC); CIT Vs. Ponni sugars and Chemicals Ltd. [2008] 306ITR 392 (SC) and the decision of our High Court in case of CIT Vs. Rasoi Ltd. 335 ITR 438 (Cal.) against which SLP has been d....
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....ion 115 JB of the Income Tax Act, 1961. The third issue involve in the instant appeal which requires adjudication is whether the action of Tribunal entertaining / allowing the claim which was made by the assessee before the Assessing Officer by filing a revised computation instead of filing a revised return since the time to file the revised return was lapsed, for claiming to treat the incentive subsidies in question as capital receipts instead of revenue receipts as claimed in original return. The Assessing Officer had denied this claim. Revenue has attacked the order of the tribunal by relying on the decision in the case of Goetze (India) Ltd. Vs. CIT reported in 284 ITR 323 (SC). This case does not help the revenue/appellant. In this case Supreme Court has made it clear that its decision was restricted to the power of the Assessing authority to entertain a claim for deduction otherwise than by a revised return, and did not impinge on the power of the Appellate Tribunal under Section 254 of the Income Tax Act, 1961. The Hon'ble Supreme Court in the said decision held as follows: "..........In the circumstances of the case, we dismiss the Civil Appeal. However, we m....