TaxTMI 
TaxTMI 
2024 (9) TMI 735
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....e same in computation of income under the MAT provisions considering it is a capital receipt. 2. On facts and circumstances of the appellants case and in Law the learned Assessing Officer erred in not allowing the cess paid of Rs. 35,02,834 as deduction in the assessment order. 3. The Appellant craves leaves to alter, amend, withdraw or substitute any ground or grounds or to add any new ground or grounds of appeal on or before the hearing. Any other grounds which shall be prayed at the time of hearing." 3. The issue arising out of Ground no.1, relates to receipt of Sales Tax Subsidy of Rs. 11,99,56,135 by the assessee which was not reduced by the Assessing Officer and the same was computed as book profit under the MAT provisions since the same was credited in Profit & Loss Account considering it as revenue grant as per its accounting policy. 4. Facts in Brief:- The assessee company is in the business of manufacture of Detonators/Filled shells, Aluminium & Copper Tubes, Fuse Head. The industry is set up at Sawange Village in Nagpur, which is a notified by Government of Maharashtra under Mega Project 2007. The assessee electronically filed its return of income....
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.... placed on record at Page-41 to 62 of the Paper Book. As is evident, the said Government grant is forming part of revenue from operations and the said grant is recognized as revenue. In this regard, the learned A.R. invited the attention of the Bench to Note 2.2.j. of the "Significant Accounting Policies" which is placed on record at Page-26 of the Paper Book. 8. In the return of income, the assessee claimed the Sales Tax Subsidy as capital receipt and deducted the same while computing the income under the head 'Profit and Gains of Business or Profession' under the normal provisions of the Act. However, while computing the book profit under the MAT provisions of the Act, the assessee did not correspondingly reduce the book profit. 9. The Assessing Officer while computing the book profit has not made any downward adjustments to the book profit on account of sales tax subsidy relying upon the decision of the Hon'ble Supreme Court in Apollo Tyres Ltd. v/s CIT, [2002] 255 ITR 273 (SC), whereby the Assessing Officer concluded that the adjustment, as claimed by the assessee is outside the scope of the Items (i) to (viii) specified under Explanation 1 to sub-section (2) of s....
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....r George Lowndes in CIT V/s. Shaw Wallace (6 ITC 178), gave the definition of "Income" as under: "Income.... in this Act connotes a periodical monetary return 'coming in' with some sort of regularity, or expected regularity, from definite sources. The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return, excluding anything in the nature of a mere windfall. Thus income has been likened pictorially to the fruit of a tree, or the crop of a field. It is essentially the produce of something which is often loosely spoken of as 'capital'. But capital, though possibly the source in the case of income from securities, is in most cases hardly more than an element in the process of production." (underlined and bold for emphasis) Similar view is taken by the courts in the following decisions: Sassoon v CIT (26 ITR 27 at 49) (SC); CIT v Chunilal (6 ITR 521 at 529) (PC); and CIT v Jaora Oil (129 ITR 423 at 425) (MP). This above definition was followed in Gopal Saran Narain Singh v CIT (3 ITR 237 at 242) by Lord Russell of ....
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....eived by the assessee under the Huzur order dated April 8, 1947 which was ratified subsequently post-merger of the territories vide Bombay Merged Territories Miscellaneous Alienations Abolition Act, 1955 held that the capital receipt is not income within the meaning of section 4 of the Act and hence not at all chargeable under the Act. The receipt which is neither "Profit" nor "Income" and which does not have any element thereof embedded therein, cannot be the part of the profit as per the profit and loss account prepared in terms of Part II of Schedule VI to the Companies Act. In the present case, the Appellant has received the sales tax subsidy which is a pure and simple capital receipt since the incentives has been granted to the Appellant to accelerate industrial development and generate employment opportunities in the specified backward area as held by the Apex Court in various decisions, thus, it does not have any "income" or "profit" element embedded in it. Therefore, it is humbly submitted that the impugned subsidy is not income and as such is outside the scope of the charging section, both, under the normal provisions of the Act, as also under the MAT provisions o....
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.... sales tax on raw materials, machinery and finished goods, levied by the State Government be treated as capital or revenue in nature held as under: "Held, dismissing the appeal, that under the notification in question the payments were made to assist the new industries at the commencement of business to carry on their business. The payments were nothing but supplementary trade receipts. It was true that the assessee could not use this money for distribution as dividend to shareholders. But the assessee was free to use the money in its business entirely as it like and was not obliged to spend the money for a particular purpose. The subsidies had not been granted for production of, bringing into existence and the new asset. The subsidies were granted year after year, only after the setting up of the new industry and commencement of production. Such a subsidy could only be treated as assistance given for the purpose of carrying on the business of the assessee. The subsidies were of revenue nature and would have to be taxed accordingly." (Underlined and bold for emphasis) Very recently, the Hon'ble Supreme Court in CIT Vs. Ponni Sugars and Chemicals Ltd (306 ITR 392) ....
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.... 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 of the subsidy was on capital account." (Underlined and bold for emphasis) The Calcutta High Court in CIT v. Shyam Century Ferrous Ltd. (386 ITR 477) while dealing with the question as to whether sales tax subsidy shall be treated as part of book profit or not held that since the reserve was not created by debiting the profit and loss account, the assessing officer had no power to go behind the accounts and, therefore, the assessing officer erred in adding amount of excise duty refund subsidy while computing book profit under section 115JB. The Gujarat High Court in CIT v. Narmada Clean Tech Ltd. (446 ITR 366) while dealing with a question as to whether sales tax subsidy shall be treated as part of book profit or not held that no error of law is committed by the ITAT as well as the CIT(A), while deleting the addition of an amount of Rs. 3.87 crore by treating the same under the capital subsidy. Moreover, it is submitted that the issue of subsidy recei....
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....f a plant in the backward region. Therefore, the incentive subsidies of interest subsidy and power subsidy received by the assessee were "capital receipts" and not "income" liable to be taxed in the assessment year 2010-11. The amendment to the definition of income under section 2(24) wherein sub-clause (xviii) has been inserted including "subsidy" for the first time by the Finance Act, 2015 with effect from April, 2016, i.e., assessment year 2016-17 has prospective effect and has no effect on the law on the subject applicable to the assessment years in question." (underlined, bold and italics for emphasis) The Mumbai Tribunal, being jurisdictional Tribunal in ACIT Vs. JSW Steel Ltd. (180 ITD 505), while dealing with the question as to whether when a particular receipt is exempt from tax under the Act then the same cannot be considered for the purposes of computation of book profit under section 115JB of the Act held that such receipt shall be excluded while computing the book profit. The facts of this case were as under: The brief facts of the issue in question in cross objection filed by the assessee were that the assessee had received a sales tax subsi....
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....e Tribunal held as under: "26. The admitted factual and legal position in the present case is that subsidies in question are not in the nature of income. Therefore, they cannot be regarded as income even for the purpose of book profit under s. 115JB of the Act though credited in the P&L a/c and have to be excluded for arriving at the book profit under s. 115JB of the Act. We hold accordingly and confirm the order of the CIT(A) in this regard. In light of the aforesaid discussion, we are of the view that the subsidies in question should be excluded for the purpose of determination of book profits under s. 115JB of the Act. We hold accordingly and dismiss ground No. 2 raised by the Revenue." Finally the Tribunal concluded as under: "Conclusion: Incentive received by the assessee-company by way of excise duty exemption on setting up a new unit in the notified area of Sikkim is a capital receipt not chargeable to tax and therefore, it cannot be regarded as income even for the purpose of book profit under s. 115JB though credited in the P & L a/c and has to be excluded for arriving at the book profits." (underlined, bold and italics for emphasis) ....
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....cal scheme, it has been held that the same is capital in nature and needs to be reduced from book profits. Relevant decision para at 22 of the said decision. The Kolkata Tribunal in DCIT Vs. Century Plyboards (India) Ltd. (187 ITD 35), while dealing with the question as to whether incentives/subsidies received by the assessee from the West Bengal State Government for setting up a new industrial undertaking in the said State by way of reimbursement of sales tax was in the nature of capital receipt and as such though credited in the profit and loss account shall be excluded and/or reduced while computing tax on the book profit under section 115JB of the Act held that the subsidy received by the assessee by way of refund of VAT and Excise duty for setting up new industries in States of Assam and West Bengal for development of industries and generation of employment opportunities in these States could not be regarded as income for the purpose of book profit even though the same was credited to the books of account. The Calcutta Special Bench of the Tribunal in Sutlej Cotton Mills Ltd. v/s. ACIT (199 ITR 164), while dealing with the computation of book profit under sec....
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....h a construction as will promote the general legislative purpose underlying the provision." (underlined and bold for emphasis) Submissions as to object of section 115JB of the Act: The Hon'ble Supreme Court in its subsequent decision rendered in Indo Rama Synthetics (1) Ltd. v. CIT (330 ITR 363) held that, the object of MAT provisions is to bring out the true working result of the companies. Based on the various decisions quoted in the preceding paragraphs it can be seen that the courts, including the Apex Court, have held that, the subsidies received by the assessees were capital in nature and therefore not liable to tax. In the circumstances, therefore, inclusion of such capital receipt in the computation of book profit u/s 115JB would defeat two fundamental principles. Firstly, it would levy tax on receipt which is not in the nature of income at all and, secondly, it would not result in arriving at real working results of the company. The Supreme Court further find merit in the assessee's claim that the subsidies being capital in nature, deserves to be excluded from the computation of book profit u/s 115JB of the Act. The specific finding of the Apex Co....
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....pecific finding of the Tribunal reads as under: "45. Now coming to the issue relating to treatment of these subsidies while computing book profit u/s 115JB, we note that the Hon'ble Apex Court in the case of Apollo Tyres Ltd. v. CIT. [2002] 122 Taxman 562/255 ITR 273 held that the AO has the power to rework the book profit if the profits are computed not in accordance with Part II and Part III of Schedule VI to the Companies Act, 1956. The Hon'ble Supreme Court in their subsequent decision rendered in the case of Indo Rama Synthetics (1) Ltd. v. CIT [2011] 9 taxmann.com 25/196 Taxman 539/330 ITR 363 further held that, the object of MAT provisions is to bring out the true working result of the companies. As held in the preceding paras, the subsidies received by the assessee were capital in nature and therefore not liable to tax. In the circumstances therefore, inclusion of such capital receipt in the computation of book profit u/s 115JB would defeat two fundamental principles. Firstly, it would levy tax on receipt which is not in the nature of income at all and secondly it would not result in arriving at real working results of the company. We thus find merit in the....
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....pecifically provided for. Clause (ii) of Expln. 1 to s. 115JB specifically provides that the amount of income to which any of the provisions of s. 10 (other than the provisions contained in cl. (38) thereof) is to be reduced from the net profit, if they are credited to the P&L a/c. The logic of these provisions, in our view, is that an item of receipt which falls under the definition of income', are excluded for the purpose of computing book profit, since the said receipts are exempted under s. 10 of the Act while computing total Income. Thus, it is seen that the legislature seeks to maintain parity between the computation of total income and book profit, in respect of exempted category of income. If the said logic is extended further, an item of receipt which does not fall under the definition of 'Income' at all and hence falls outside the purview of the computation provisions of IT Act, cannot also be included in book profit under s. 115JB of the Act. Hence, we find merit in the submissions made by the assessee on this legal point." Similar view is taken by Kolkata Tribunal in DCIT v. Emami Biotech Ltd. (ITA No. 1915/KOL/2017 dated 29-3-2019). The Ko....
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....ot chargeable to tax and hence, not in the nature of income were held not included in the book profits. A question arises as to what is the nature of "sales tax subsidy" in the present case: The Appellant invites Your Honour"s kind attention to the Preamble of the Scheme which is enclosed at page no. 129 of the PB (Please see internal page no. 2 of the Scheme). It can be seen from fifth line in the third paragraph under the heading Preamble that the object of the Scheme is the regional development i.e., development of the backward area and generation of employment. The said objective is reproduced hereunder: "The State has declared the new Industrial, Investment, Infrastructure Policy 2006 to ensure sustained industrial growth through innovative initiatives for development of key potential sectors and further improving the conducive industrial climate in the State, for providing the global competitive edge to the State's industry. The policy envisages grant of fiscal incentives to achieve higher and sustainable economic growth with emphasis on balanced Regional Development and Employment Generation through Greater Private and Public Investment in indu....
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....rought to tax as part of the book profit under the Explanation to section 115J." (underlined, bold and italics for emphasis) From the above finding of the Special Bench, it can be seen that the non- obstante will have overriding effect over the other section which imposes tax on the book profit alone hence, are to be ignored and not that the capital receipt which is not income at all shall be considered as income for the purposes of the book profit. It is the real profit which is subject to tax for the purposes of MAT provisions: The Mumbai Tribunal, being the Jurisdictional Tribunal, in Hitkari Fibres Pvt. Ltd v/s. DCIT (90 ITD 654) while dealing with the question as to whether the amount written back (ie. Credited to profit and loss account) can be reduced from the book profit, held that MAT is levied on the real book profit which have been earned by the assessee and not on artificial income, which have not accrued to the assessee but has been credited to profit and loss account as per the accounting principles. The specific finding of the High Court reads as under: "The intention of the legislature is to charge minimum alternate tax o....
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....igation and controversy in this matter, the definition of income under clause (24) of section 2 of the Income-tax Act has been amended so as to provide that the income shall include assistance in the form of a subsidy or grant or cash incentive on duty drawback or waiver or concessions or reimbursement (by whatever name called) by the Central Government or a State Government or any authority or body or agency in cash or kind to the assessee other than the subsidy or grant or reimbursement which is taken into account of determination of the actual cost of the asset in accordance with the provisions of explanation 10 to clause (1) of section 43 of the Income -tax Act. ............. Applicability: - This amendment takes effect from April 1, 2016 and would accordingly apply to assessment year 2016-17 and subsequent assessment years." (underlined, bold and italics for emphasis) From the aforesaid Circular of the CBDT has very clarified that the subsidy, etc., covered by the Explanation 10 of sub-section (1) of section 43 of the Act is outside the scope of sub-clause (xviii) of clause (24) of section 2 of the Act. In other words, subsidies which are su....
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.... prospectively from Assessment Year 2016-17 and onwards. Based on the facts and circumstances of our case, the objects or intent of the statutory provisions of the Act and settled legal position referred to above and the preceding paragraphs, the impugned sales tax subsidy is capital in nature and this fact has been accepted by both the lower authorities, and, therefore, the Appellant humbly submits that the lower authorities be directed to follow the above Circular of the CBDT and apply the same to the Appellant"s case and drop the proposal of treating the subsidy as the Appellant"s income for the purposes of computing "book profit" under section 115JB of the Act. Submissions as to entries in the books of accounts are not relevant for determining the tax consequences: The Supreme Court in the case Kedarnath Jute Mfg. Ltd v. CIT (82 ITR 363) held that entries in the books of accounts are cannot determine the tax consequences. The facts of this case were as under: The assessee-company, which followed the mercantile system of accounting incurred a liability of Rs. 1,49,776 on account of sales tax determined to be payable by the sales tax authoritie....
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....e treated as revenue expenditure in the year in which it is incurred irrespective treatment in the books of account. The facts of this case were as under: During the accounting year ending March 31, 1996, the company claimed the voluntary retirement scheme expenses amounting to Rs. 10,02,23,735 incurred at Borvile plant. As per the annual report, the voluntary retirement scheme expenses were to be written off within a period of 60 months. In the past, the company had incurred the voluntary retirement scheme expenses for other plants and under the books of the company, such expenses were written off over a period of 36 months. Therefore, when for the accounting year ending March 31, 1996, the voluntary retirement scheme expenses amounting to Rs. 10,02,23,735 incurred for Borvile plant came to be written off within 60 months, the officer dis- allowed the said expenses to the tune of Rs. 9,68,82,917. In other words, the Assessing Officer amortised the said expenses over a period of five years and allowed deduction only to the tune of Rs. 33,40,818 for the accounting year ending March 31, 1996, and the Assessing Officer disallowed the claim for the balance amount. Consequently....
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....ndustries Ltd. (264 ITR 180) (Bom); CIT v Fenner (India) Ltd. (292 ITR 605); CIT v Saravana Spinning Mills (P) Ltd. (292 ITR 655)(Mad); and CIT v Darius Pandole (330 ITR 485) (Bom). From the ratio laid down by the courts in the aforesaid decisions it is very clear that entries in the books of account would not be a decisive factor for determining the tax implications under the Act. Based on the above submissions, the facts and the circumstances of the Appellant's case, the settled legal position referred to above, the objects and intent of the statutory provisions of the Act, merely because the sales tax subsidy is credited to in the books of accounts based on the Ind AS 20 as also based on the opinion of EAC of the ICAI the same under no circumstances be treated as revenue in nature for the purposes of the Income-tax Act and the character of the subsidy shall continue to be regarded as capital in nature and, therefore, the action of the lower authorities of treating the impugned subsidy as part of the book profit is not justified and such an action ought to be deleted. Submissions based on Income Computation and Disclosure ....
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....e the Government grant is of such a nature that it cannot be directly relatable to the asset acquired, so much of the amount which bears to the total Government grant, the same proportion as such asset bears to all the assets in respect of or with reference to which the Government grant is so received, shall be deducted from the actual cost of the asset or shall be reduced from the written down value of block of assets to which the asset or assets belonged to." The said paragraph specifically provides that when the grant is not related to any particular assets then, in that case, the proportionate amount of grant shall be reduced from the value of the respective asset. This itself justifies that grants which are capital in nature are not required to be routed through profit and loss account but by virtue of specific provisions under Ind AS vis-a-vis opinion of the EAC of the ICAI, the same were credited to profit and loss account. In the present case, the Appellant has followed paragraph 7 as the sales tax subsidy received by it does not related to any of the asset, depreciable / non depreciable but is granted for the purpose of setting up industries in b....
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....f the Act, 1961. In the case of Apollo Tyres Ltd. (supra) the income in question was taxable but was exempt under a specific provision of the Act as such it was to be included as a part of the book profit. But 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 Income-tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be excluded while computing book profit under section 115JB of the Income-tax Act, 1961." Thus, the Calcutta High Court in Ankit Metal and Power Ltd. (supra) has categorically distinguished the decision of the Supreme Court in Apollo Tyres' Case (supra) and held that when subsidy is not income within the meaning of section 2(24) of the Act, the question of treating the same as income either under the normal provisions of the Act or under MAT provisions of the Act would be contrary to the objects and intent of the statutory provisions of the Act. The position would be the same even after insertion of sub-clause (xviii) to clause (24) of section 2 of the Act as the said amended def....
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....bunal under section 254 of the Act. Further, the Calcutta High Court in CIT v/s. Britannia Industries Ltd. (396 ITR 677), wherein it was held that the Tribunal has power to entertain the claim for deduction not claimed before the assessing officer by filing a revised return of income. Decisions relied on by the CIT(A): The CIT(A) vide its order relied on the decision of the Bombay High Court in CIT Vs. Veekaylal Investment Co. Pvt. Ltd. (249 ITR 597), wherein the Bombay High Court held that if the profit is not computed in accordance with Part II and Part III of the Schedule VI of the Companies Act, 1956, the assessing officer has power to re-compute such book profit. Thus, it can be said that if the assessing officer can amend the book profit, if it is not in accordance with Part II and Part III of Schedule VI, likewise even the assessee can re-compute the book profit for the purposes of section 115JB of the Act. The aforesaid proposition is supported by the following decisions: DCIT Vs. Bombay Diamond Co. Ltd.; Syndicate Bank Vs. ACIT (179 ITD 178) (Bang. Trib.); and SICPA India (P) Ltd. vs. DCIT (supra). In view of the abo....
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....lue, it is no longer an income under section 2(24)(xviii) of the Act in the lines as enunciated supra and is a capital receipt. At this juncture, we deem it expedient to reproduce Para-45 to 51 of the Co-ordinate Bench decision of the Tribunal rendered in the matter of DCIT v/s Century Plyboards Pvt. Ltd., [2021] 187 ITD 35 (Kol. Trib.) decided on 04/11/2020. "45 Now coming to the issue relating to treatment of these subsidies while computing book profit u/s 115JB. website that the Hon'ble Apex Court in the case of Apollo Tyres Ltd. v. CIT [2002] 122 Taxman 562/255 ITR 273 held that the AO has the power to rework the book profit if the profits are computed not in accordance with Part II and Part III of Schedule VI to the Companies Act, 1956. The Hon'ble Supreme Court in their subsequent decision rendered in the case of Indo Rama Synthetics (1) Ltd. v. CIT [20111 9 taxmann.com 25/196 Taxman 539-330 ITR 363 further held that, the object of MAT provisions is to bring out the true working result of the companies. As held in the preceding paras, the subsidies received by the assessee were capital in nature and therefore not liable to tax. In the circumstances therefore,....
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....pt under a specific provision of the Act as such it was to be included as a part of the book profit. But where a receipt is not in the nature of income at all it cannot be included in book profit for the purpose of computation under section 115JB of the Income-tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be excluded while computing book profit under section 115 JB of the Income-tax Act, 1961. 47. We also rely on the decision of the coordinate bench of this Tribunal in the case of Sicpa India (P.) Ltd. (supra) wherein it has been held that the subsidy received by the assessee in form of excise duty exemption me for setting up new industry in the North Eastern State viz., Sikkim was in the capital field and therefore not eliable to tax under the provisions of section 115JB of the Act. The relevant findings of this Tribunal are as follows: "21. The main issue that arises for consideration on the basis of the grievance projected by the Revenue in the aforesaid ground No. 2 is as to whether the excise duty refund which were held by the CIT(A) to be capital receipts not chargeable to tax....
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....rofit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by certain items debited in the profit and loss account in arriving at the net profit and as reduced by- certain items that are credited in the profit and loss account. In other words, all that one has to do, while computing book profits is to take the profit as per profit and loss account prepared in accordance with Companies Act, 1956 and make additions or subtraction as is given in the explanation to sec. 115JB(2) of the Act. 23. We have already seen that the issue whether subsidies in question can be regarded as income at all is no longer res integra and has been concluded by the Hon'ble Jammu & Kashmir High Court in the case of Balaji Alloys (supra). In the aforesaid decision the Hon'ble J & K High Court on identical facts held that excise duty subsidy and interest subsidy were capital receipts not chargeable to tax. In view of the aforesaid decision of the Hon'ble High Court rendered on identical facts as that of the Assessee's case, there can be no doubt that subsidies in question does not have any character of income. 24....
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.... u/s 115JB of the Act and thereafter, AO had to make adjustments for additions/deletions contemplated in Explanation to section 115JB of the Act. 25. The Tribunal in the aforesaid decision made a reference to the decision of the Special Bench of the ITAT in the case of Rain Commodities (supra) which in turn was based on the ratio laid down in the decision of the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) as a case in which the income in question was taxable but was exempt under a specific provision of the Act and but for the exemption, the income would be chargeable to tax and such items of income should also be included as part of the book profits. But where a receipt is not in the nature of income at all it cannot be included in book profits though it is credited in the profit and loss account. The Bench followed the decision of the Lucknow Bench in the case of L.H. Sugar Factory Ltd. (supra), where receipts on account of carbon credits which were capital receipts not chargeable to tax and hence not in the nature of income were held not included in the book profits. The Bench also referred to the decision of the Mumbai Bench of the ITAT in the cas....
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....Therefore they cannot be regarded as income even for the purpose of book profits us.1151B 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. We hold accordingly and confirm the order of the CIT(A) in this regard. In light of the aforesaid discussion, we are of the view that the subsidies in question should be excluded for the purpose of determination of book profits u/s.115JB of the Act. We hold accordingly and dismiss Gr.No.2 raised by the Revenue. 48. For the reasons set out above and respectfully following the binding decision of the Hon'ble Calcutta High as Court as well as this Tribunal, we hold that the subsidies received by the assessee for setting up new Industries, by way of refund of VAT and excise duty of Rs. 2,36,75,501/-and Rs. 18.82,79.547/- respectively are liable to be excluded from the computation of book profit u/s 115JB of the Act. 15. We also deem it fit to reproduce below Para-14.7 to 19.13 of the order dated 08/04/2024, passed by the Co-ordinate Bench of the Tribunal, Mumbai Bench, in IPCA Laboratories Ltd. v/s DCIT, [2024] 161 taxmann.com 511 (Mum.). ....
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....dy under the schemes in question would have to be excluded while computing book profit under section 115 JB of the Income-tax Act, 1961." 14.8 We also rely on the decision of the coordinate bench of this Tribunal in the case of Sicpa India (P.) Ltd. v. DCIT 80 taxmann.com 87 involving identical facts and circumstances as found in the present case before us. In the decided case, it has been held that the subsidy received by the assessee in form of excise duty exemption for setting up new industry in the North Eastern State viz., Sikkim was in the capital field and therefore not liable to tax under the provisions of section 115JB of the Act. The relevant findings of this Tribunal are as follows: "21. The main issue that arises for consideration on the basis of the grievance projected by the Revenue in the aforesaid ground No. 2 is as to whether the excise duty refund which were held by the CIT(A) to be capital receipts not chargeable to tax can still be considered as part of the book profits w/s.115JB of the Act, even though these sums have been credited in the profit and loss account and treated as income and even though the exclusion of these sums for the purpose ....
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....certain items that are credited in the profit and loss account. In other words, all that one has to do, while computing book profits is to take the profit as per profit and loss account prepared in accordance with Companies Act, 1956 and make additions or subtraction as is given in the explanation to sec. 115JB(2) of the Act. 23. We have already seen that the issue whether subsidies in question can be regarded as income at all is no longer res integra and has been concluded by the Hon'ble Jammu & Kashmir High Court in the case of Balaji Alloys (supra). In the aforesaid decision the Hon'ble J & K High Court on identical facts held that excise duty subsidy and interest subsidy were capital receipts not chargeable to tax. In view of the aforesaid decision of the Hon'ble High Court rendered on identical facts as that of the Assessee's case, there can be no doubt that subsidies in question does not have any character of income. 24. When a receipt is not in the character of income, can it form part of the book profits for the purpose of sec.115JB of the Act, is the question that arises for consideration. The ITAT Kolkata Bench in the case of Dy. CIT v. B....
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....said decision made a reference to the decision of the Special Bench of the ITAT in the case of Rain Commodities (supra) which in turn was based on the ratio laid down in the decision of the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) as a case in which the income in question was taxable but was exempt under a specific provision of the Act and but for the exemption, the income would be chargeable to tax and such items of income should also be included as part of the book profits. But where a receipt is not in the nature of income at all it cannot be included in book profits though it is credited in the profit and loss account. The Bench followed the decision of the Lucknow Bench in the case of L.H. Sugar Factory Ltd. (supra), where receipts on account of carbon credits which were capital receipts not chargeable to tax and hence not in the nature of income were held not included in the book profits. The Bench also referred to the decision of the Mumbai Bench of the ITAT in the case of Shivalik Venture (P.) Ltd. (supra) which was a case where the question was whether profits arising on transfer of a capital asset by a company to its wholly owned subsidiary compa....
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....or arriving at the book profits u/s.115JB of the Act. We hold accordingly and confirm the order of the CIT(A) in this regard. In light of the aforesaid discussion, we are of the view that the subsidies in question should be excluded for the purpose of determination of book profits u/s.115JB of the Act. We hold accordingly and dismiss Gr.No.2 raised by the Revenue. 14.9 For the reasons set out above and respectfully following the decisions (supra), we uphold the order of Ld. CIT(A) excluding the subsidy received by the assessee for setting up new industry, by way of refund of excise duty from the computation of book profit u/s 115JB of the Act. 14.10 As far as the ld. CIT DR"s contention regarding admission of fresh claim is concerned, we note that the had raised the claim in the abated AYs 2012-13 & 2014-15. It is noted that the Hon'ble Bombay High Losevin the decisions rendered in the cases of Pr. CIT v. JSW Steel Limited 270 Taxman 201 and CIT V. B. G. Shirke Construction Technology (P.) Ltd. 395 ITR 371 has held that, it is open for an assessee to lodge a new claim in a proceeding under section 153A which was not claimed in his regular return of income, pro....
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....inal 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. (supra). 29. 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 make it clear that the issue in this case is limited to the power of the Assessing Authority and does not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income-tax Act, 1961." 29.1 This judgment was followed by our Court in the case of Britannia Industries Ltd. (supra) holding that Tribunal has the power to entertain the claim of deduction not claimed before the Assessing Officer by filing revised return. Respectfully following the aforesaid decisi....
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.... vi) Reduction from written down value leads to abatement of depreciation which in turn leads to higher taxable income. Again taxing the subsidy will lead to indirect double taxation which cannot be countenanced; vii) Distinct lines of reasoning should be eschewed while computing total income under normal provisions and book profit under section 115JB. 18. Accordingly, ground no.1, is allowed. 19. Insofar as Ground no.2, is concerned, the assessee's authorised representative did not wish to press this ground, hence, the same is dismissed as "not pressed". 20. Ground no.3, being general in nature, hence, no separate adjudication is required. 21. In the result, appeal for the assessment year 2017-18 filed by the assessee is partly allowed. ITA no.242/Nag./2023 Assessee's Appeal - A.Y. 2018-19 22. The assessee has raised following grounds:- "1. On the facts and circumstances of the case and in law, Ld. CIT(A) erred in rejecting the additional legal claim of reduction of capital subsidy while computing the income u/s 115JB of the Act, for the reasons mentioned in the impugned order or otherwise. 2. On the facts and circumstan....