TaxTMI 
TaxTMI 
2023 (4) TMI 380
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.... which is itself apparent from the portal. But the second notice of hearing dt. 17.12.2021, fixed for hearing dt. 29.12.2021, the adjournment petition dt. 28.12.2021 was uploaded in portal on 29.12.2021 to sought time to prepare written submission. The said adjournment sought for till 13.01.2022 as seen in portal but Ld. CIT(A) ignored the adjournment petition filed by assessee as well as date till adjournment sought for i.e. 13.01.2022 and passed the order u/s 250 on 10.01.2021. Thus, passing the ex-parte order ignoring the adjournment petition is complete denial of Natural Justice. 2. That the Ld. CIT(A) erred in confirming adhoc disallowance of Rs. 2,15,597/- being 10% of the credit card expenses of the directors 8i managerial persons alleging that the personal expenses incurred in name of sales promotion by family members and the spouses of the Directors. The said expenses were incurred for furtherance of the business by the Directors only and are allowable expenses. Hence, the adhoc disallowance confirmed by Ld. CIT(A) merely based upon assumption and presumption and totally relied upon Ld. AO findings is completely wrong and needs to be deleted. 3. That the ....
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....ht time to prepare written submission. The said adjournment sought for till 13.01.2022 as seen in portal but Ld. C1T(A) ignored the adjournment petition filed by assessee as well as date till adjournment sought for i.e. 13.01.2022 and passed the order u/s 250 on 10.01.2021. Thus, passing the ex-parte order ignoring the adjournment petition is complete denial of Natural Justice. 2. That the Ld. CIT(A) erred in confirming adhoc disallowance of Rs. 2,98,975/- being 10% of the credit card expenses of the directors & managerial persons alleging that the personal expenses incurred in name of sales promotion by family members and the spouses of the Directors. The said expenses were incurred for Hence, the adhoc disallowance confirmed by Ld. CTT(A) merely based upon assumption and presumption and totally relied upon Ld. AO findings is completely wrong and needs to be deleted. 3. That the Ld. CIT(A) erred in confirming adhoc disallowance of Rs. 4,97,356/- being 10% of Foreign Travel Expenses alleging that the same was incurred by the spouses of the Directors. The said expenses were incurred only by the directors for business promotion company and are allowable expenses. He....
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....djournment petition is complete denial of Natural Justice. 2. That the Ld. CIT(A) erred in confirming adhoc disallowance of Rs. 3,13,096/- being 10% of the credit card expenses of the directors 8i managerial persons alleging that the personal expenses incurred in name of sales promotion by family members and the spouses of the Directors. The said expenses were incurred for furtherance of the business by the Directors only and are allowable expenses. Hence, the adhoc disallowance confirmed by Ld. CTT(A) merely based upon assumption and presumption and totally relied upon Ld. AO findings is completely wrong and needs to be deleted. 3. That the Ld. CIT(A) erred in confirming adhoc disallowance of Rs. 1,41,520/- being 10% of Foreign Travel Expenses alleging that the same was incurred by the spouses of the Directors. The said expenses were incurred only by the directors for business promotion company and are allowable expenses. Hence, the adhoc disallowance confirmed by Ld. CIT(A) merely based upon assumption and presumption and totally relied upon Ld. AO findings is completely wrong and needs to be deleted. 4. That the Ld. CIT(A) erred in confirming disallowa....
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....s at Rs. 2,15,597/-, Rs. 2,98,975/- & Rs. 3,13,096/- for AY 2012-13, AY 2013-14 & AY 2014-15 respectively. The facts in brief are that the assessee company is engaged in manufacturing and trading in hosiery goods, electricity generation and other sources. Income of Rs. 55,15,90,040/- declared in the return for AY 2012-13 filed on 29.09.2012. Search and seizure operation was carried out on the assessee u/s 132 of the Act as well as survey operation u/s 133A of the Act on 07.11.2013. Assessment proceedings were carried out by issuance of notice u/s 153A of the Act followed by serving of notices u/s 143(2) & 142(1) of the Act. Ld. AO on examining the expenses made through credit card made an ad-hoc disallowance of Rs. 2,15,597/- applying the rate of 10%. Similar type of disallowances were made for AY 2013-14 & AY 2014-15 also. The assessee failed to get any relief before ld. CIT(A). Before us ld. Counsel for the assessee has contended that the alleged additions made by ld. AO are merely on suspicion and no defect has been pointed out in the details of the expenditure given by the assessee. On the strength of the judgment of Hon'ble Supreme Court of India in the case of Dhirajlal G....
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....d disallowance has been made by ld. AO in the similar fashion as was made for ad-hoc disallowance on credit card expenses. The submissions made by both the sides remain the same. Therefore, taking a consistent view and observing that the alleged disallowance for foreign travel expenses is merely ad-hoc in nature, we delete the said disallowance of Rs. 3,73,483/-, Rs. 4,97,356/- & Rs. 1,41,520/- for AY 2012-13, AY 2013-14 & AY 2014-15. The common ground no. 3 raised by the assessee is allowed. 10. The next issue for our consideration is disallowance of brokerage at Rs. 8,78,771/- made in the assessment order for AY 2014-15 and the assessee has challenged the same by raising ground no. 4 for AY 2014-15. Ld. AO made said disallowance observing that the brokerage expenses pertain to earlier years and was not paid for a long time and this being the expenses for earlier years has been booked for this year, therefore, cannot be allowed. The assessee did not get any relief before ld. CIT(A). Before us, ld. Counsel for the assessee has stated that the assessee company followed mercantile system of accounting. The brokerage was received and settled during the year and tax at source has be....
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....IT (1991) 187 UR 688 (SC), [Refer Page 1-6 of Case Law Paper Book ('CLPB')] three judge bench of the Apex Court relied upon the earlier three judge bench decision in the case of CIT -vs.- Kanpur Coal Syndicate (1964) 53 ITR 225 (SC) (in the context of Section 3l(3)(a) of the 1922 Act which corresponds to Sec. 251(1)(a) of the 1961 Act), where it has been held that the appellate commissioner has plenary power in disposing off an appeal. In this regard it is to be noted that Apex Court relied on the following findings in the decision of Kanpur Coal Syndicate (supra): "The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is co-terminus with that of the Income Tax Officer. He can do what the Income Tax Officer can do and also direct him to do what he has failed to do." The Apex Court in Jute Corporation (Supra), based on the above, further held, in the context of section 251(1)(a) of the 1961 Act, that there is no reason as to why the appellate commissioner cannot modify the assessment order or admit an additional ground even if not raised before the Income Tax Officer. According to the Apex Cour....
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....cope of his powers is coterminous with that of the ITO. He can do what the ITO can do and also direct him to do what he has failed to do. The CIT(A) can modify the assessment order on an additional ground even if not raised before the ITO. The Act does not place ant restriction or limitation on exercise of appellate power It has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any prescribed by the statutory provisions." [Emphasis Added] Similar view has also been expressed in the case of JCIT -vs.- Hero Honda Finlease Ltd. (2008) 115 TTJ 752 (Del). 2.7 On the basis of the aforesaid decisions, it can be said that the powers exercised by CIT(Appeals) are vast than Assessing Officer. The CIT(Appeals) can do what the Assessing Officer can do and direct him to do what the Assessing Officer had failed to do in order to impart justice to the assessee as per the provisions of the Act. 2.8 In this connection it is further submitted that under Article 265 of the Constitution, the State is entitled to recover or realize only that tax which is imposed in accordance with la....
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..... Ltd. [in IT(SS)A No. 27 to 32/Kol/2019 dated 20-03-2020] [Refer Page 21-36 of CLPB] wherein the Hon'ble HAT while dealing with similar facts held as follows: 8. Coming to the former three assessment year(s) (2009-10, 2010-11 and 2011-12) as well, we see no substance in Revenue's above stated technical argument since the CIT(A)'s detailed discussion not only takes note of various judicial precedents (supra) but also the corresponding expression used in the statute i.e. "total income"u/s. 153A(l)(b) of the Act This tribunal's following co-ordinate benches have already adjudicated the very issue in assessee's favour:- i) Dorf Ketal Chemicals (I) Pvt. Ltd. vs. DOT ITA No.3736.Mum/2012 ii) M/s Narendra Vegetable Products Pvt. Ltd. Vs. ACITITA No. 118/Nag/2013 iii) Faisal Abbas vs. DCIT ITA Nos. 3485/Hyd/2015 & 946/Hyd/2015 iv) A Snnivasa Rama Raju vs. DCIT ITA No. 975/Hyd/2015 v) ACIT vs. N.N. Devadoss ITA No. 1219/Mad/2012 AH these co-ordinate benches are of the view that nothing comes in the way of the concerned assessee in seeking original claim of deduction in proceedings involving search assessment....
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....ustrial Promotion (Assistant to Industrial Unit) scheme 1994 ['Scheme 1994'] superseded by West Bengal Industrial Promotion (Assistance to Industrial Units) Scheme, 2010 ['Scheme 2010'] (collectively referred as "IPA Scheme"), against payment of Value Added Tax under the West Bengal Value Added Tax Act, 2003 and Central Sales Tax Act, 1956. 14.3. Section 3 of the Scheme 1994 describes entitlement to the industrial promotion assistance and provides that where a registered dealer manufactures specified goods in his SSI unit and sells such goods in the State-intra-State or in the course of inter-State trade or commerce within the meaning of section 3 of the Central Sales Tax Act, 1956 (Act No. 74 of 1956), from any place in the State, such dealer shall be entitled to a payment of a sum equal to ninety per centum of the amount of sales tax paid by him, for any quarter under the Sales Tax Act in respect of sales of such goods, as industrial promotion assistance. The above Scheme is the earlier version of the present scheme floated by the Government of West Bengal in 2010 under which the appellant received the incentive, i.e., Scheme 2010. The above fact is clearly evident....
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....The main eligibility condition as per the Scheme was to setup a new unit or carry out substantial expansion of an existing unit in a backward area. Thus, in the instant case, where the sales tax Incentive is received by the appellant for setting up industry in the backward region of the State of West Bengal, it would constitute capital receipt in the hands of the appellant, as it has been granted for carrying out capital investments in backward areas of the State and hence not taxable under normal provision of the Act. 2.3 In this regard, it will be imperative to refer to the object of the grant of subsidy by the State of West Bengal as reflected from the original resolution as well as the subsequent resolution which was amended with retrospective effect from 27-5-1994 those are quoted below: "No. 1460-F-TCalcutta, the 27-5-1994 Resolution Whereas certain industries in the State have been passing through an acute financial crisis and it had been considered necessary to extend financial assistance to tide over such crisis for promotion of such industries, it has been decided in the public interest to formulate a scheme to allow financial assistanc....
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...., Scheme 2010. The Scheme 1994 was superseded by Scheme 2010 and the said fact is clearly evident from the Circular No.2 dated 29-04-2010 issued by the Directorate of Commercial Tax, West Bengal [Refer Page 17-18 of 'PB']." 16. Ld. Counsel for the assessee had relied on the following decisions: i) CIT vs. Rasoi Ltd. [2011] 11 taxmann.com 220 (Calcutta) ii) ACIT vs. Shantinath Detergents Pvt. Ltd. [in IT(SS)A No. 27 to 32/Kol/2019 dated 20-03-2020] iii) ACIT vs. Budge Budge Refineries Ltd. 2016 (10) TMI 1307 - ITAT Kolkata iv) DCIT vs. Birla Corporation Ltd. 2021 (1) TMI 154 - ITAT Kolkata v) CIT vs. Ponni Sugars & Chemicals Ltd. (2008) 306 INCOME TAX RETURN 392 (SC) vi) DCIT vs. Reliance Industries Ltd. (2004) 88 ITD 273 (Mum)(SB) 17. On the other hand, ld. D/R stated that the assessee has not raised this issue in the proceedings below and has itself claimed it as a Revenue income in the profit and loss account. However, ld. D/R failed to rebut the ratios laid down by the Hon'ble Courts before this Tribunal by placing any other binding precedence. 18. We have heard rival contentions and perused the records p....
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....the case before us, the object of the subsidy is for expansion of their capacities, modernization, and improving their marketing capabilities and, thus, those are for the assistance on capital account. Similarly, merely because the amount of subsidy was equivalent to 90 per cent of the sales tax paid by the beneficiary does not imply that the same was in the form of refund of sale tax paid. As pointed out by the Supreme Court in the case of Senairam Doongarmall v. CIT AIR 1961 SC 1579, it is the quality of the payment that is decisive of the character of the payment and not the method of the payment or its measure, and makes it fall within capital or revenue. Thus, in the case before us, the amount paid as subsidy was really capital in nature. 17. In the case of CIT v. Abhishek Industries Ltd. [2006] 156 Taxman 257 relied upon by Mr. Nizamuddin, a Division Bench of the Punjab and Haryana High Court was dealing with a case of subsidy granted in the form of sale tax exemption and thus, the Division Bench held that in the absence of any document or policy of the State Government to show the kind of subsidy it had granted it should be treated as a revenue receipt. In the case ....
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....f sales tax paid is a capital receipt not chargeable to tax. Relying upon the decision in case of Budge Budge Refineries (supra), keeping in view the objects of the West Bengal Incentive Scheme 2000 and various judicial precedents, the Hon'ble ITAT held that the subsidy is to be treated as capital receipt not chargeable to tax in the hands of the assessee. It observed that sole purpose behind the grant of assistance is to tide over the financial crisis and promotion of industries and that both these activities are related to capital field and cannot be linked up with day-to-day operations of the appellant in any manner. 20.4. In the case of DCIT -vs.- Emami Biotech Limited 2019 (3) TMI 1833 - ITAT Kolkata, the sales tax incentives was held to be treated as a capital receipt. Relevant extract of the order of the jurisdictional ITAT is reproduced below: "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....
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....ortance 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. If the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt was on capital account. Therefore, it is the ob....
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....39;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] 228IRT 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 dismissed. The mode of computation/form of subsidy is irrelevant. The mode of giving incentive is reimbursement of energy charges. The nature of subsidy depends on the purpose for which it is given. Hence the assessee draws support from the decisions already discussed earlier as the same principle will apply here. Thus, the entire reason behind receiving the subsidy is setting up of plant in the backward region of W....
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....raised in the additional ground is that whether the sales tax incentive received by the assessee during AY 2012-13 to AY 2014-15 is to be excluded for the purpose of computing book profit u/s 115JB of the Act. We notice that this issue is no longer res-integra and is squarely covered in favour of the assessee by plethora of judgments including that of the Hon'ble Jurisdictional High Court in the case of Ankit Metals & Power Ltd. (supra) and M/s. Krishi Rasayan Exports Pvt. Ltd. (supra). 24.1. Recently in the-recent Jurisdictional Hon'ble Calcutta High Court in the case of PCIT -vs.- M/s. Krishi Rasayan Exports Pvt. Ltd. (in ITA No. 18/2021 dated 14-09-2022) while dealing the question of inclusion of interest subsidy and excise refund for computation of book profits has held that where a receipt is not in the nature of income at all, it cannot be included in the book profit for the purpose of computation under section 115JB of the Act. It has been ruled that the 'interest subsidy' being a capital receipt does not fall within the meaning of income as defined in Section 2(24) of the Act and thus the same cannot be included in the computation of book profit. 24.2.....
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....d in relevant assessment year 2010-11 on the basis of discussion made above and further taking into consideration the definition of Income under Section 2(24) of the Income Tax Act, 1961, where sub- clause (xviii) has been inserted including 'subsidy' for the first time by Finance Act, 2015 w.e.f. April, 2016 i.e. assessment year 2016-17. The amendment has prospective effect and had no effect on the law on the subject discussed above applicable to the subject assessment years." 24.3. In the case of Sunrise Biscuit Co. Pvt. Ltd. -vs.- Income Tax Officer, Ward-1 (5), Guwahati I.T.A. No. 92/Gau/2019 the Hon'ble Guwahati Tribunal was dealing with the issue of whether subsidy received by the Assessee was capital in nature and therefore not eligible to income-tax, both under normal computational provisions as well as book profit u/s 115JB of the Act. This Tribunal relied upon of the judgement of the Hon'ble Supreme Court in the cases of Sahney Steel & Press Works (supra) & Ponni Sugar & Chemicals Ltd. (supra) and had held that the object or purpose for which the subsidy was given was relevant. It was held that the source of subsidy is immaterial, form of subsidy is equ....
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....e jurisdictional Hon'ble Calcutta High Court in the case of Pr. CIT Vs Ankit Metal and Power Ltd (416 ITR 591) held that subsidies received for setting up new industry is not in the nature of income and therefore cannot be deemed as income for the purposes of computing book profit u/s 115JB of the Act. In the decided case the assessee had received interest subsidy under the WB Incentive Scheme, 2000 and power subsidy under the Power Intensive Industries Scheme, 2005 for setting up Sponge Iron Plant in Bankura. Before this Tribunal, the assessee claimed that receipt of such subsidies in form of remission of interest and power / electricity duty payments etc. was capita! receipt not liable to tax both under the normal computational provisions as well as book profit u/s 115JB of the Act. The Tribunal answered the issue in favour of the assessee. On appeal by the Revenue, the Hon'ble High Court upheld the order of this Tribunal by observing as under: "26. Now the second issue which requires adjudication is as to whether the aforesaid incentive subsidies received by the assessee from the Government of West Bengal under the schemes in question are to be included for the ....