TaxTMI 
TaxTMI 
2019 (3) TMI 1833
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....ived by the Assessing Officer from DDIT (I&CI), Kolkata, the assessee during the year under consideration had made transactions with National Multi Commodity Exchange, Ahmedabad and had booked a profit of Rs. 8,85,36,587/- on such transactions made through Broker Dhairya Commodities Pvt. Limited. As found by the Assessing Officer during the course of assessment proceedings, a profit only Rs. 8,55,82,593/- was declared by the assessee-company in its return of income. When the assessee was called upon by the Assessing Officer to explain the difference of Rs. 29,53,995/-, a copy of ledger account showing the transactions with Dhairya Commodities Pvt. Limited was submitted by the assessee to show that the Net Profit of Rs. 8,55,82,593/- only as shown was earned by it. This explanation of the assessee was not found acceptable by the Assessing Officer and relying on the information received by him from DDIT (I&CI), Kolkata, he added the difference amount of Rs. 29,53,995/- to the total income of the assessee by treating the same as the undisclosed profit of the assessee. 4. The addition of Rs. 29,53,995/- made by the Assessing Officer on account of the alleged undisclosed profit receive....
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....ot added the entire figure on the basis of the allegation; he has merely added back the impugned difference of the figures. I find that this has been done rather mechanically and the appellant's submissions during the appeal proceedings have not been specifically commented upon by the Ld.AO. On the other hand, the appellant has been able to document and support its transactions for the amounts stated, and the same have not been disputed by the Ld. AO. As such, in a situation where the Ld. AO has made any addition, the reasons for such addition [based on a mere difference of figures as supplied to him by the Ld. DDIT were to be evidenced on records, and mere dependence on the figure of the DDIT would not be adequate in my considered opinion, to warrant any addition, especially in a situation where the entire transactions has been found acceptable. The Ld. A.O's addition in assessment stage and submissions in remand are not supported by any of the surrounding and relevant factors and considerations or the principles of evidence and law. Quite on the contrary, I find that as the details of transactions as disclosed by the appellant-company are supported by sufficient direct ev....
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....ng. He contended that the assessee is not aware as to how the figure of Rs. 885.36 lakhs was arrived at either by the Assessing Officer or by the Investigation Wing. He contended that the relevant details of the said figure were never given to the assessee and no enquiry whatsoever was made by the Assessing Officer from Dhairya Commodities Pvt. Limited to find out the exact amount of profit. He contended that the addition made by the Assessing Officer on this issue was thus not well founded and the ld. CIT(Appeals) was fully justified in deleting the same. 7. We have considered the rival submissions and also perused the relevant material available on record. It is observed that certain information was received by the Assessing Officer from the Investigation Wing relating to the alleged tax evasion by the assessee on the profits booked on the transactions with National Multi Commodity Exchange. The amount of such profit was reported at Rs. 8,85,36,588/-. The Assessing Officer during the course of assessment proceedings, however, found that the profit on the relevant transactions was duly declared by the assessee in the return of income at Rs. 8,55,82,593/-. There was thus a differe....
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....of the Act. Even during the course of assessment proceedings, no such claim was made by the assessee for the exclusion of incentive amount being capital receipt. After realising this inadvertent and bonafide mistake, a claim was made by the assesese for the first time before the ld. CIT(Appeals) that the incentive in the form of sales tax assistance received as Industrial Promotional Assistance was for expansion of existing Industrial Undertaking involving huge capital outlays and the same being capital receipt was liable to be excluded while computing the total income under the normal provisions of the Act as well as the book profit under section 115JB of the Act. It was contended on behalf of the assessee before the ld. CIT(Appeals) that it was permissible to make such fresh claim for the first time during the course of appellate proceedings before the ld. CIT(Appeals) and in support of this contention, reliance was place on behalf of the assesese on the following judicial pronouncements:- "2.1. In Jute Corporation of India Ltd. - vs. - CIT (1991) 187 ITR 688 (SC)- three judge bench of the Apex Court relied upon the earlier three judge bench decision in the case of CIT -vs.- Ka....
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....er a question of law arising from the facts, which are on records, there is no reason why such question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of the assessee. 2.4 The latest decision of the Apex Court in the case of Goetze India) Ltd. -VS.- CIT (2006) 284 ITR 323 (sC). the Apex Court dealt with the power of the A O. to entertain a claim made before the A.O., otherwise than through revised return filed on time and held that such claim cannot be entertained by AO. However, while concluding, the Apex Court made It abundantly clear that the said decision doesn't affect the power of the Tribunal to admit additional ground. Same is the case as regards appeal before Commissioner Appeals. 2.5. Appellate Commissioner has power wider that those of an appellate court under the code of civil procedure - Bipln Lal Kuthiala -vs,- CIT (1957) 32 ITR 361 (Pune). His competence is not restricted to dealing with subject matter of appeal. 2.6. Power of Appellate Assistant Commissioner is wider than that of Tribunal. The powers of the Tribunal are confined to the subject matter of appeal. However, the p....
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....15. The submissions of the appellant were duly considered and found to be acceptable. The various judicial pronouncements referred to by the appellant / Ld. A.R in my considered opinion are directly applicable to its case. Moreover, I find that the decision of the Hon'ble Bombay High Court in the case of Pruthvi Brokers & Shareholders Ltd in ITA No. 3908 of 2010 is also relevant, wherein it was held that the taxpayer is entitled to claim the deduction before the Appellate Authorities which was not claimed in the original or revised income-tax return. The aforesaid decision was rendered after considering the Apex Court's decision in the case of Goetze India. The Hon'ble Court observed that Apex Court had made it clear that issue in the case was limited to the power of the assessing authority and the judgment does not impinge on the power of the appellate authorities to entertain and allow additional claim. The appellant is entitled to make a fresh claim which has not been made in the return of income or filed before Assessing Officer as appellate commissioner has the power to modify the assessment order or admit an additional ground even if not raised before the Income T....
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....s.- Rasoi Limited [335 ITR 438], wherein it was held that the incentive granted to enable the specified industry to set up new units, expand their capacities, modernise their business, etc. was a capital receipt and merely because incentive was paid by way of refund of sales tax, it did not amount to revenue receipt. Various other case laws were also cited on behalf of the assessee in support of its contention that for determining the nature of subsidy in the hands of the assessee, the purpose and objective of the Scheme under which the subsidy was given is of fundamental importance and it is alone the ultimate deciding factor. It was contended that since the incentive in question in the form of sales tax subsidy was granted for expansion of capacities in backward areas of the State, the same was capital in nature not chargeable to tax. 13. As regards the treatment to be given to the sales tax subsidy while computing the book profit under section 115JB of the Act, it was contended on behalf of the assessee that the sales tax subsidy being a pure capital receipt not having any element of "income" or "profit" embedded therein was not chargeable to tax under the Income Tax Act, 1961 ....
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....e subsidy received as income by the assessee itself debars it from claiming the same as a capital receipt in the computation of income". 15. When the remand report submitted by the Assessing Officer was confronted by the ld. CIT(Appeals) to the assessee, a rejoinder was filed by the assessee and after taking into consideration the entire material available on record as well as the submissions made by the assessee as well as the Assessing Officer, the ld. CIT(Appeals) allowed the claim of the assessee that the incentive received in the form of sales tax subsidy was a capital receipt not chargeable to tax for the following reasons given in paragraph no. 5 of his impugned order:- "5. All the facts and submission of the appellant as well as findings of the Ld. AO in the remand report have been carefully considered. The appellant obtained incentive in the form of Sales Tax assistance of Rs. 24,94,66,520/- in A.Y. 2011-12 as Industrial Promotional Assistance (IPA) under "The West Bengal Incentive Scheme (WBIS) 2004". The above incentive was set off against sales tax liability payable to Government. On perusal of the scheme it is seen that the object of the scheme was to promote the ne....
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....me, the same, in my considered view cannot be regarded as income even for the purpose of book profits u/s.115JB of the Act though credited in the profit and loss account and have to be excluded for arriving at the book profits u/s.115JB of the Act. The decision of Hon'ble Apex Court in case of Padmaraje R. Kadambande (supra) also supports the view that capital receipts are not income within the definition of sec 2(24) of the Act and are not at all chargeable under the Income Tax Act, 1961. Thus, in view of the above discussion, and by placing reliance on the decision of ACIT -vs.- Shree Cement Ltd (supra). jurisdictional Hon'ble Tribunal in case of Krishj Rasayan Exports (supra). Sicpa India Private Limited (supra), in my considered view of the matter the sales tax subsidy not having any character of income cannot be regarded as income even for the purpose of book profits u/s.115JB of the Act though credited in the profit and loss account, and the same have to be excluded for arriving at the book profits u/s.115lB of the Act. The appellant is accordingly eligible for relief in the matter, and this ground of appeal stands allowed". 17. The ld. D.R. submitted that the amou....
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....s Limited [33 taxmann.com 628], wherein it was held that where subsidy was granted for production and not for setting up of industry, the same should be treated as a revenue receipt. He also relied on the decision of the Hon'ble Allahabad High Court in the case of K.M. Sugar Mills Limited -vs.- CIT [47 taxmann.com 367], wherein it was held that the subsidy given to compensate the assessee in running his business was revenue in nature. He contended that even the decision of the Hon'ble Supreme Court in the case of Sahney Steel Works Limited (supra) relied upon by the assessee in support of its case before the ld. CIT(Appeals) is actually in favour of the assessee, wherein it was held that production incentive in the form of refund of sales tax being available to the assessee only after the commencement of production, the same was a revenue receipt. 19. As regards the treatment to be given to the incentive received by the assessee in the form of sales tax subsidy for computing book profit under section 115JB, the ld. D.R. contended that the amount of subsidy was credited by the assessee-company itself to the Profit & Loss Account. Relying on the decision of the Hon'ble Supreme Court....
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....lcutta High Court that it was a capital receipt and merely because the amount of subsidy was equivalent to 90% of the sales tax paid by the beneficiary did not imply with the same was in the form of refund of sales tax paid. 22. The ld. Counsel for the assessee invited our attention to the West Bengal Incentive Scheme, 2004 as published in the Official Gazette to point out that the object of the said Scheme was to extend incentive for promotion of the industry in the State. He also pointed out that the said Scheme was applicable to all large/small scale projects and tourism units in large/small sector to be set up and also expansion project of existing Units on or after 1st April, 2004. He contended that even the earlier Incentive Scheme of 2000 of the West Bengal Government was having the same object of promoting industries and the incentive received under the said Scheme in the form of sales tax subsidy was held to be capital receipt not chargeable to tax in the various cases decided by the Tribunal. He cited one of such decisions rendered by the Tribunal in the case of DCIT - vs.- Shyam Steel Industries Limited vide order dated 03.02.2017 passed in ITA No. 602/KOL/2014. 23. Th....
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....'s case, he submitted that the operation of the said decision has already been stayed by the Hon'ble Supreme Court as per the Interim Order passed on 20.11.2017 in SLP No. 30728 to 30732/ 2017. 25. As regards the treatment to be given to the subsidy in question while computing the book profit of the assessee-company under section 115JB of the Act, the ld. Counsel for the assessee contended that even though the said amount was credited by the assessee-company to its Profit & Loss Account, the same being capital in nature not chargeable to tax under the Income Tax Act, 1961 cannot be included while computing the book profit under section 115JB of the Act. He has contended that this issue is squarely covered in favour of the assessee by the various decisions of the Tribunal and the ld. CIT(Appeals) is fully justified in deciding this issue in favour of the assessee by following the various decisions of the Tribunal. He contended that various Benches of the Tribunal including the Kolkata Benches have taken a consistent view in favour of the assessee on this issue and cited some more decisions of the Tribunal, which have been rendered recently after passing of the impugned order by the....
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....Indian Oil Petronas Pvt. Limited rendered vide its order dated 31.05.2018 in ITA No. 157/KOL/2017, wherein it was held by the Tribunal by relying on the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Limited -vs.- CIT (229 ITR 383) as well as the decision of the Hon'ble Calcutta High Court in the case of Maynak Poddar (HUF) -vs.- WTO (262 ITR 633) that his jurisdiction was rightly exercised by the ld. CIT(Appeals) in entertaining the additional ground raised by the assessee claiming exclusion of capital subsidy received by way of sales tax remission under the West Bengal Incentive Scheme. We, therefore, find the objection raised on behalf of the revenue in this regard to be unsustainable and overruling the same, we now proceed to decide the issue on merit. 28. During the year under consideration, the assessee had received incentive of Rs. 24,94,66,520/- under the West Bengal Incentive Scheme, 2004 in the form of refund of sales tax paid and the question that has arisen is regarding the taxability of the said amount under the Income Tax Act, 1961, which depends on the determination of the character of the amount, whether it is capital receipt or rev....
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.... assessee to acquire new plants and machinery for further expansion of its manufacturing capacities in backward areas, the entire subsidy must be held to be a capital receipt in the hands of the assessee. After taking note of both these decisions of the Hon'ble Supreme Court in the case of Sahany Steel & Press Works Limited (supra) and Ponny Sugar & Chemicals Limited (supra), Hon'ble Calcutta High Court has held in the case of Rasoi Limited (supra) that the subsidy received by the assessee from the Government of West Bengal under the Scheme of Industrial Promotion for expansion of capacities, modernisation and improving its marketing capabilities was a capital receipt not chargeable to tax. 30. In the case of K.M. Sugar Mills Limited (supra) cited by the ld. D.R., subsidy was given to the assessee by the Central Government to compensate burden on account of interest, storage and insurance etc. for holding buffer stock of sugar and the object thus being to compensate the assessee in running his business, it was held by the Hon'ble Allahabad High Court that the subsidy given was clearly revenue in nature. In the case of Keracol Chlorides Limited (supra) cited by the ld. D.R., subsid....
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....tte, it was meant to extend incentive for promotion of industries in the State of West Bengal and the same was applicable to all Large/Small Scale Projects and Tourism Units in Large/Small Scale Sector to be set up and also expansion project of existing Units on or after 1st April, 2004. The object of the said Scheme thus was to promote setting up and expansion of industries and the subsidy was made available to the existing industries for undertaking substantial expansion. Under the said Scheme, "Mega Projects" were not eligible for the interest subsidy and in lieu thereof IPA was made available to them @ 75% of the sales tax, which incentive was not to exceed 100% of the fixed capital investment. The subsidy thus was linked to the fixed capital investment made by the industry and it was in the form of refund of sales tax paid. In line with this Scheme, the assessee-company made expansion of its existing Haldia Manufacturing Unit situated in Midnapore District in the State of West Bengal involving huge capital outlay of Rs. 168 crores and was entitled to IPA of 75% of sales tax paid for a period of 15 years subject to a maximum amount to the extent of 100% of the fixed capital inv....
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....e to promote setting up and expansion of projects/industry and keeping in view the said object and the ratio laid down by the Hon'ble Supreme Court in the case of CIT -vs.- Ponny Sugar & Chemicals Limited (supra) as well as in the case of CIT -vs.- Chaphalker Brothers (supra), it was held by the Tribunal that the subsidy received by the assessee under the West Bengal Incentive Scheme of 2004 was capital in nature and the same could not be taxed as revenue receipt. 34. Having regard to all the relevant facts of the case and keeping in view the legal position emanating from the various judicial pronouncements discussed above, we are of the view that the subsidy in question received by the assessee in the form of refund of sales tax under the West Bengal Incentive Scheme, 2004 was capital in nature as the purpose of the same was for the expansion of the existing industry of the assessee. We also hold that merely because the said subsidy was to be received by the assessee only after the commencement of production would not change its character, which otherwise was capital in nature. We accordingly uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this ....