TaxTMI 
TaxTMI 
2025 (6) TMI 390
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....to sensitized goods. There was a search on the assessee on 14.11.2011. The common issue raised in the present appeals relate to the claim of non-taxability of sales tax subsidy/incentive from the purview of taxable income. 3.1 The above nine appeals may be categorized into three groups i.e., AY 2006-07, 2007-08 and 2008-09 in 1st group; AY 2009-10, 2010- 11 and 2011-12 in 2nd group and 2012-13, 2013-14 and 2014-15 in the 3rd group. We will address each group of appeals one by one. 3.2 The 1st category is of cases of completed/unabated assessment years. For these years, the assessee has not made the claim for exclusion of sales tax subsidy from taxable income, in either original or in revised ROI. The assessee also did not claim the sales tax subsidy as non-taxable in the return filed u/s 153A. The claim for exclusion of sales tax subsidy from taxable income is made by way of revised computation of income during the proceedings u/s 153A. 3.3 The 2nd category is of cases of abated assessment years. For these years, the assessee has not made the claim for exclusion of sales tax subsidy from taxable income, in either original or in revised ROI. The assessee also did not claim ....
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....figures mentioned. For the sake of brevity, grounds for AY 2009-10 are read as under: "1. That the CIT(A) erred on facts and in law in not holding that the action of the assessing officer in not entertaining the appellant's claim for exclusion of sales tax subsidy/ incentives amounting to Rs. 18,23,49,384/- received in respect of sales made in the Union Territory of Dadra & Nagar Haveli, from the taxable income, as the same constituted capital receipt not liable to tax under the provisions of the Income Tax Act, 1961 ('the Act'), was bad in law. 1.1 That the CIT(A) erred on facts and in law in holding that the above claim was not legally admissible on the ground that: a) the claim was made in proceedings initiated under section 153A pursuant to search carried out under section 132, which is for the benefit of the Revenue; b) there was no incriminating material found during the search and hence closed assessment cannot be disturbed by initiating the proceedings under section 153A; and c) revised return under section 139(5) of the Act was not filed for making the claim. 1.2. Without prejudice, the CIT(A) erred on facts....
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....ce of notice u/s 143(2) expired. Reopened u/s 148 Notice dt. 18.01.2010 NA NA Assessment u/s 143(3)/147 Rs. 26,01,59,915 NA NA After appeal to HC Rs. 15,62,29,979 NA NA Search and seizure operation u/s 132 of the Act in case of appellant 14.11.2011 [Return filed u/s 153A on 20.12.2012] ROI filed u/s 153A Rs. 15,38,38,581 on 20.12.2012 Rs. 23,31,26,599 on 20.12.2012 Rs. 29,54,61,385 on 20.12.2012 Asst. u/s 153A Rs. 15,62,29,979 dt 28.03.2014 Rs. 23,51,08,517 on 27.03.2014 Rs. 29,82,03,317 on 27.03.2014 Revised total income declared in computation of income filed before AO vide letter dtd 23.07.2013, claiming exclusion of sales tax subsidy/incentive Rs. 6,08,51,188 Rs. 10,16,74,128 Rs. 16,91,24,741 Amount of sales tax incentive claimed as exclusion Rs. 17,91,14,076 Rs. 19,59,81,455 Rs. 20,40,99,735 8. For the 2nd category of cases, the relevant facts for assessment year(s) 2009-10 to 2011-12 is tabulated as under: Particulars AY 2009-10 AY 2010-11 AY 2011-12 Original Return of income (ROI) filed Rs. 22,36,03,487 [ROI filed on 25.09.2009] Rs. 16,30,95,797 [ROI filed on ....
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..../s 153A. It was only by way of revised computation of income, during the proceedings u/s 153A, the assessee claimed the sales tax subsidy as non-taxable. It is an undisputed fact that the above three AYs were completed/unabated assessment years. 12. The 2^nd category involving AY 2009-10 to 2011-12, are also cases where the assessee in its original returns declared the sales tax subsidy as income. The assessee, for these three years did not file any revised return to claim the sales tax subsidy as non-taxable. The assessee also did not claim the sales tax subsidy as non-taxable in the return filed u/s 153A. It was only by way of revised computation of income, during the proceedings u/s 153A, the assessee claimed the sales tax subsidy as non-taxable. The above three years were pending assessment and therefore stood abated. 13. In impugned order(s) dated 28.03.2014 u/s 153A in category 1^st and 2^nd the aforesaid claim not made in original/revised ROI, was rejected by AO applying the ratio of Goetze (India) Ltd. vs. CIT reported in 284 ITR 323(SC). The AO further held that fresh claim cannot be entertained in 153A proceedings. On appeal, the CIT(A), vide consolidated order date....
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.... in the P&L account. The ld CIT(A) held that the assessee has not received any subsidy from the sales tax department and therefore, claim of the assessee is not only imaginary/notional but false also. The Ld.CIT(A) also followed his predecessor's decision in earlier assessment years, where it was held that the nature of sales tax subsidy qualified as revenue receipt and hence taxable relying on Sahney Steel & Press Works Ltd vs. CIT reported in 228 ITR 253 (SC). The ld CIT(A) however held that the nature of receipt is academic as the assessee has not included any sales tax in the gross sales and the income has not been increased on account of claim of such alleged notional subsidy. 15.1. Aggrieved, the assessee is in appeal before us. 16. Before us, the ld AR of the assessee, with regard to 1st category of cases, submitted that the action of the Assessing Officer is not based on judicious appreciation of facts and position of law. The ld AR however, without conceding, stated that in the 1st category of cases pertaining to the AYs 2006-07, 2007-08 and 2008-09 are cases of completed/unabated assessment and in view of the decision of Supreme Court in the case of PCIT vs. Abh....
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....: 1. CIT vs. Mahindra Mills: 243 ITR 56 (SC) 2. Wipro Finance Ltd. vs. CIT: 443 ITR 250 (SC) 3. National Thermal Power Limited vs. CIT: 229 ITR 383(SC) 4. CIT vs. Jai Parabolic Springs Ltd: 306 ITR 42 (Del) 5. CIT vs. Aspentech India 6. CIT vs. Simon Carves Ltd.: 105 ITR 212 (SC) 7. CIT vs. Mahalaxmi Sugar Mills Co. Lad: 160 ITR 920 (SC) 8. Anchor Pressings (P) Ltd. vs. CIT and Ors 161 ITR 159 (SC) 9. National Thermal Power Limited vs. CIT: 229 ITR 383(SC) 10. CIT vs. Bharat General Reinsurance: 81 ITR 303 (Del) 11. CIT vs. Hiranand: 148 Taxman 281 (Raj)P. Ltd.: ITA No. 1233 (Del) 20. The ld. counsel for the assessee relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Mahindra Mills: 243 ITR 56, which approved the aforesaid Circular. Further reliance was placed on the following decisions: a) CIT vs. Geo Industries and Insecticides (1) Pvt Ltd: 234 ITR 541 (Mad) b) Wipro Ltd vs. DCIT: 96 TTJ 211 (Bang) ITO vs. Sadha Ram & Co: 153 Taxman 55 (Am) c) Chicago Pneumatic India Ltd. vs. DCIT 15 50T 252 (2007) (Del) 21. The ld AR su....
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....n 23-12-2002, which was beyond the due date prescribed in section 10B(8). 25. In the background facts, the apex Court held that in order to opt out of section 10B, the assessee is required to fulfil the twin conditions, namely, (i) furnishing a declaration to the assessing officer in writing that the provisions of section 10B(8) may not be made applicable to him, and (ii) the said declaration to be furnished before the due date of filing the return of income under sub-section (1) of section 139 of the IT Act. Therefore, since the said mandatory statutory conditions are not complied with, the Court held that the assessee cannot opt out of section 10B(8) and cannot claim benefit of carry forward of loss. 26. The ld AR submitted that in coming to the aforesaid conclusion, the Supreme Court, in fact, distinguished its decision in the case of CIT V. G.M. Knitting Industries (P) Ltd: [2015] 376 ITR 456 (SC) wherein the Court held that deduction under section 32 and deduction under section 80IA can be claimed even though Form 10CCB was not filed with the return of income but was filed during the course of assessment. 27. To summarize, the ld AR stated that the aforesaid judgement....
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....ITR 383(SC), CIT vs. Bharat General Reinsurance: 81 ITR 303 (Del) Chokshi Metal Refinery vs. CIT: 107 ITR 63 (Guj)]; 30. Regarding the issue of fresh claim being made during proceedings u/s 153A initiated pursuant to search, it was submitted that even under the provisions of section 153A of the Act, where assessment is made pursuant to the search proceedings, there is no bar for an assessee to make a legitimate claim. It was submitted that it is now well settled proposition of law that the restrictions on the power of the Revenue in the course of proceedings under section 153A of the Act, in respect of non-abated/concluded assessments, is in respect of addition/disallowance, which cannot be made de hors any incriminating material found/unearthed during the course of search, however there is no restriction against the assessee making a claim legitimately allowable under the provisions of the Act, merely on the ground that the proceedings in question are search assessment and not regular assessment proceedings. In fact, once the proceedings under section 153A is initiated, pursuant to search under section 132 of the Act, the assessing officer/CIT(A) is bound to consider the additi....
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.... sales tax exemption (@ page 42 of main PB for AY 2009-10) * Sales Tax Act was implemented, and the Industrial Units were eligible for sales tax exemption for a period of 15 years (@ page 44-45 of main PB for AY 2009-10) 34. The ld AR argued that where grant of subsidy is for meeting capital expenditure, for achieving a national objective/purpose inpublic interest, the same would be in the nature of capital receipt not liable to tax and relied on the following decisions: * CIT V. Ponni Sugar and Chemicals Limited: 306 ITR 392 * CIT vs. Chaphalkar Brothers: 351 ITR 309 (Bom HC) affirmed by SC vide order dated 07.12.2017 in 400 ITR 279 (SC) * Shree Balaji Alloys vs. CIT: 333 ITR 335 (J&K) - SLP dismissed * DCIT vs. Reliance Industries Limited: 88 ITD 273 (Mum SB) 35. The ld AR emphasized that in the context of the very same units which were subsequently demerged to Jindal Poly Films Ltd, AO in AY 2016-17 vide order dated 30.10.2023, accepted that the incentive/subsidy is capital in nature. 36. The ld AR concluded his argument by stating that the finding of AO/CIT(A) are erroneous in view of following: (a) Nature of subsid....
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....yderabad (Special Bench) dated 07.10.2024 and Charchit Agarwal vs. Assistant Commissioner of Income-tax, Central Circle 12, New Delhi [2009] 34 SOT 348 (ITAT Delhi B Bench) [28-08-2009]. 40. In the rejoinder to the ld AR efforts to distinguish the case of Wipro Ltd (supra), the ld DR submitted that the Hon'ble Apex Court in the Wipro Ltd. (supra) case has categorically held that statutory timelines are mandatorily required to be followed especially while claiming exemptions from taxability. The time limits for filing of return u/s 139(1) or filing of revised return u/s 139(5) are both mandatory and specific statutory time limits and, hence, any claim for exemption from taxability not made in either of these returns is liable to be rejected as per the unambiguous ratio of the judgment in Wipro Ltd. case. Therefore, the contention of the Ld. Counsel that the judgment in the Wipro Ltd is not applicable to the present case is not tenable and, hence, liable to be rejected. 41. With regard to the ld AR reliance upon the judgment of the Hon'ble Supreme court in the case of Wipro Finance Ltd Vs. CIT[2022] 443 ITR 250 (SC) in support of its argument that the decision of the Ho....
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....#39;ble Supreme Court in view of the specific facts & circumstances of that case. Same was the situation in Wipro Finance case too. Whereas in the Goetze case, the claim was made before the AO itself during the course of assessment proceedings, unlike in NTPC case, and the disallowance of the claim by the AO was upheld by the Tribunal also. It is very important to note that in the Goetze case, Hon'ble Supreme Court upheld the disallowance of fresh claim by the AO and did not direct the Tribunal to admit the claim despite the assessee raising NTPC plea. It shows the Hon'ble Apex Court has not accepted the argument that NTPC ratio is to mean that in each & every case, the Tribunal has unfettered powers to admit fresh claims. The relevant facts of the present case at hand are identical to the facts in the Goetze case and not to the facts of the NTPC case or Wipro Finance case as in the present case also the claim was made by the assessee before the AO itself, by way of a letter during assessment proceedings, and was not made for the first time before the Tribunal. The contention of the assessee that though the AO cannot accept the fresh claim, ITAT can very well do it, goes di....
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....Goetze ratio, the AO, undisputedly, did not have any power to admit the fresh claim of the sale tax incentive being a capital receipt made by the assessee for the first time during the course of assessment proceedings u/s 153A and, thus, applying the ratio of the decision in Jute Corporation (supra), even the Tribunal does not have any power to admit this claim in appeal before it because it is a settled position of law that what cannot be done directly cannot be allowed to be done indirectly too because otherwise it would defeat the very purpose of the restriction placed on admissibility of claims made other than by way of a valid return or revised return by the Goetze ratio and would render the judgment in Goetze case to nullity. 46. The ld DR finally concluded by stating that : (i) In the present case, as elaborately discussed supra, in so far as AYs 2006-07 to 2008-09 are concerned, the fresh claim made before the assessing officer in the assessment proceedings u/s 153A is liable to be rejected at the threshold itself, being unabated assessment. (ii) For the AY 2009-10 to 2011-12, following the above discussions, it is reiterated that unlike in NTPC case an....
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....JS, MHA, Govt of India, New Delhi, the concept of industrialization and employment opportunities for the local population was introduced. Moreover, this letter can not be considered as Public Scheme under which the sales tax subsidy was envisaged. This letter mentioning industrialization and employment opportunities for the local population was only in the context of seeking extension of Subsidy scheme for a further period of 15 years. The ld DR submitted that it can not change the fact that the sales tax subsidy commenced from the date of first sale and was for the purpose of assistance given to the assessee for carrying on the business of the assessee. 49. The ld DR further relied on CIT vs. Meghalaya Steels Ltd. [2016] 67 taxmann.com 158 (Supreme Court) [09-03-2016] where Hon'ble Supreme Court held that the subsidy/incentive on transport, power, insurance has direct nexus with profits of assessee's business and are in the nature of Revenue Receipt and thus, to be included in taxable income. The ld DR relied on CIT vs. Bhushan Steels & Strips Ltd. [2017] 83 taxmann.com 204 (Delhi High Court) [13-07-2017] where sales tax subsidy was held as revenue in nature. The same w....
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....admissibility of the claim of non-taxability of sales tax subsidy for assessment years 2008-09 to 2011-12, in the 2nd category of cases, we find that for the above three years, on the date of search 14.11.2011, the assessment was pending and therefore they were considered as abated assessment years. The undisputed fact is the assessee, in these three assessment years, had declared the sales tax subsidy as income in the original returns filed u/s 139(1). Though time was available for filing revised return, the assessee, for these three years, did not file any revised return to claim the sales tax subsidy as non-taxable. Subsequent to the search under section 132 on 14.11.2011, the assessee was issued notices under section 153A in response to which the assessee filed returns declaring the sales tax subsidy as its income. It was only during the assessment proceedings under section 153A that the assessee claimed the sales tax subsidy as non-taxable by way of revised computation of income. In such a situation we are called upon to decide whether the assessee can make a fresh claim other than by way of filing Revised return u/s 139(5) and whether an additional claim/deduction be made in ....
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.... time there was no provision to consider the claim made by the assessee. The hon'ble Supreme Court also noted that the case of NTPC was one where the Department gave no objection for enabling the assessee to setup a fresh claim which makes the instant case distinguishable on facts as in the instant case, the Revenue has raised objection to the claim at every stage, be it the AO, CIT(A) or the Departmental Representative before the ITAT. We are of the opinion that when there is no provision in the Act where the assessee can claim expenses/deduction outside the Return filed u/s 153A, the same has to be rejected. Our conclusions are duly supported by the decision of the Hon'ble Supreme Court in the case of Commissioner of Customs (Imports), Mumbai Vs. Dilip Kumar and Company (AIR 2018 Supreme Court 3606) that the provisions for exemption/deduction has to strictly construed and any perceived ambiguity would necessarily accrue to the benefit of the Revenue. 55. With regard to the issue of merger of original regular assessment with 153A proceedings in abated /incomplete assessment, there is no dispute. It is no longer res-integra that in respect of abated/incomplete assessment....
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....f the Act and the fresh claim made by an assessee for the first time in the return filed u/s 153A of the Act and after considering the relevant facts and also by analyzing various case laws, including the decision of Hon'ble Delhi High Court in the case of CIT Vs. Anil Kumar Bhatia reported in (2012) 211 Taxmann.com 453 (supra), which is in favour of the revenue held that it is not open for the assessee to seek deductions or claim expenses which have not been claimed in the original return for which assessment has already been completed only because assessment u/s 153A in pursuance of search or requisition is required to be made. Even otherwise, if we go by plain reading of provisions of Section 153A, it is analogous to erstwhile provisions of Section 158B(1) of the Act. From the above provisions, it is undisputedly clear that the purpose of assessment in relation to search cases is to assess undisclosed income, if any, on the basis of incriminating material found as a result of the search, but not to disturb the completed/unabated assessment. Further, if we go by the argument of the counsel for the assessee, in light of the provisions of Section 153A(1)(a) of the Act, once ret....
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....the search, the Hon'ble Apex Court has in fact approved the ratio laid down by the Hon'ble High Court of Rajasthan in the case of Jai Steel (India) Vs. ACIT, which directly addresses the issue of a fresh claim made by the assessee for the first time in the return of income filed in response to the notice issued under Section 153A of the Act. From the observation of the Hon'ble Supreme Court in Para 8, it is clear that it has approved the ratio laid down by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of PCIT Vs. Saumya Constructions reported in (2016) 387 ITR 529 (Guj) and the Hon'ble High Court of Rajasthan has followed or considered the ratio of these two cases while deciding the issue in the case of Jai Steel (India) Vs. ACIT (supra)". 59. The Special Bench, on the issue of nature of assessment u/s 153A, referring to the CIT V D.G. Shirke Construction Technology Pvt Ltd (2017) 79 taxmann.com 306(Bom) and Karnataka High Court in G.M.R. Infrastructure Ltd V DCIT in ITA 1036/2017 dated 06.07.2021 held that: 29 ........ in the case of Jai Steel (India), Jodhpur Vs. ACIT (supra) has held that the assessmen....
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....oing by the scheme of assessment under Section 153A, there is no doubt that said provisions are only for the purpose of detection of undisclosed money, bullion, jewellery, or any other article or thing and said provisions are also for the benefit of revenue, and the assessee cannot take to its advantage. Therefore, the reliance placed by the revenue on the decision of the Hon'ble Supreme Court in the case of CIT Vs. Sun Engineering Works (P) Ltd (supra) is justified. Thus, we reject the arguments taken by the learned counsel for the assessee." 61. Thus, the gist of the decision in the case of Sew Infrastructure Limited, Hyderabad is that the assessment/reassessment u/s 153A is not a de-novo assessment and as the assessment emanates from the provisions relating to search u/s 132, it essentially has be related to disclosed and undisclosed income and should have nexus or relevance with seized material as held by the Hon'ble Delhi High Court in the case of Kabul Chawla. We are further of the considered view that the provisions of section 153A is for the benefit of Revenue and it does not envisage a de-novo assessment. Though the assessee may claim any deduction u/s 153A in a....
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....the various decisions relied upon by the rival sides. 63. In Ponni Sugar (supra), the Hon'ble Supreme Court elaborating the judgment in the case of Sahney Steels(supra)laid down the law in regard to the "purpose test" for determining the nature of incentive being capital or revenue in nature as follows: 14. In our view, the controversy in hand can be resolved if we apply the test laid down in the judgment of this Court in the case of Sahney Steel and Press Works Ltd. (supra). In that case, on behalf of the assessee, it was contended that the subsidy given was up to 10% of the capital investment calculated on the basis of the quantum of investment in capital and, therefore, receipt of such subsidy was on capital account and not on revenue account. It was also urged in that case that subsidy granted on the basis of refund of sales tax on raw materials, machinery and finished goods were also of capital nature as the object of granting refund of sales tax was that the assessee could set up new business or expand his existing business. The contention of the assessee in that case was dismissed by the Tribunal and, therefore, the assessee had come to this Court by way of a spe....
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....anism through which the subsidy is given is irrelevant. Emphasis applied 64. With law on the subject delineated as above, we now come to the facts of the instant case. We find, on facts,that the assessee has largely relied on the Notification dtd. 04.01.1984 granting exemption from payment of sales tax in "public interest" in the context of "purpose test" as delineated by the Supreme Court in the case of Sahney Steel (supra) and Ponni Sugar. The assessee further relied on the Letter dtd. 30.11.2013 of Administrator of UT of Dadra & Nagar Haveli which states that Sales Tax Exemption was introduced in 1984 with a view to encourage industrialization and provide employment opportunities for the local population. The assessee also relied on the State Industrial Profile of Dadra & Nagar Haveli for FY 2015-16 explaining the industrial scenario in detail. 65. We find that the said notification was followed by another similar notification dated 31st December 1999. The assessee, under this notification, obtained Certificate of exemption from payment of sales tax dated 08.03.2002 for PPD Unit for manufacture/process/assembled in the Union Territory of Dadra & Nagar Haveli. The ....
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....heme was primarily for the purpose of establishment and construction of industrial units. We are inclined to agree with the CIT(A) that the 'public interest' referred to in the said notification of 1984 and 1999, do not mean exemption to be a 'capital receipt' as all incentives whether revenue or capital are given by the government for public interest only. The mere term 'public interest' is not sufficient to determine the 'purpose test' as enumerated in the case of Sahney Steel and Ponni Sugars (supra). 67. Coming to the fact of incentive Scheme as per the notification of 1984 and 1999, we do not find that the Scheme, as such, anywhere mentions the term industrialization or improvement in infrastructure facility or creation of employment etc or any purpose of incentive being used towards loan payment or creation of any asset. The Scheme simply provides that the industry/Units will be exempted from payment of sales tax levied under the Sales Tax Act on sale of goods manufactured, processed or assembled for a period of 15 years from the date of First sale or from the date of 1st consignment branch/transfer. We therefore are of the considered view that the Scheme is applicable onl....
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.... units, also supports the same view. 69. The decision of the Special Bench Mumbai in the case of DCIT V Reliance, relied upon by the assessee, is of no assistance to the assessee as in that case the assessee became entitled to the sales tax incentive even before the commencement of production. So is the case of CIT Vs Rasoi Ltd relied upon by the assessee, where Calcutta High Court held that the subsidy was for expansion of assessee capacities, modernization, and improving marketing capabilities and thus was on capital account. Similarly, in Shree Balaji Alloys case decided by the J&K High Court, it was held that the subsidy given was for setting up new unit in J & K. The case of CIT V Chaphalkars Brothers, where the Bombay High Court held that development of multiplex theatre complexes which are capital intensive in nature and hence the amount of entertainment tax collected and retained, was held as capital in nature, is also of no help to the assessee. 70. On the other hand, the case of Meghalaya Steels relied upon by the revenue are squarely applicable where the Hon'ble Supreme Court held that where subsidies were reimbursed to assessee for elements of cost relating to man....
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.... No.- 6021/Del/2012) dt.09.11.2017, ITAT Delhi I Bench, it was held that where any subsidy given to the assessee post accomplishment of the project or expansion there, without any obligation to utilize the subsidy only for repayment of term loans undertaken by the assessee for setting up new units/expansion of existing business, or to liquidate the cost incurred in creating the capital asset or its expansion, is only in the nature of the revenue receipt and is liable to be brought to tax. 72. In view of the discussion as above, we are of the considered view that the sales tax subsidy received by the assessee is in the nature of revenue receipt and the AO has correctly considered the same as revenue receipt. Considering the same, the ground of appeal of the assessee number 1 and 2 in the 2nd category of cases is dismissed. 73. As far as the 3rd category of cases are concerned for assessment year 2012-13 to AY 2014-15, the assessee has claimed the exemption of sales tax subsidy from its taxable income, have been claimed in the revised return for AY 2012-13 and in original return for AY 2013-14 and 2014-15. The above claim filed are in accordance with the provisions of law. The ....