TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 1918
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....(A) is contrary to the provisions of law i.e., the amount credited in its profit and loss account is non-taxable. 2. Ground No. 2&3 relate to interest income unreconciled with 26AS statement and initiation of penalty under section 270A of the Act are not pressed by Ld. AR of the appellant company during the hearing before the ITAT and hence not adjudicated. The same was mentioned in their written submissions filed before the ITAT. 3. Coming back to the core issue of taxability of amount credited to profit and loss account, which was claimed exempt, the Ld. AR of the appellant's main arguments are summarised as follows :- 3.1 The Ld. AO invoked section 2(24)(xviii) of the Act and held that the differential value between the amount of sales tax retained by appellant company and the amount paid to State Government in this year as "income" of this year because of amended provisions. It was argued by Ld. AR of the appellant that the same is wrong because the appellant company has repaid the Net Present Value of liability/amount payable to the State Government as determined by them and hence there is no "benefit" or "assistance" to them to come within the purview of section 2(24)(xvii....
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.... "For the sake of clarity section 2(24)(xviii) of the Act after amendment inserted by the Finance Act, 2015 w.e.f. 1.4.2016 is reproduced as follows :- 2(24)(xviii) : "assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession 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,- (a) the subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the asset in accordance with the provisions of Explanation 10 to clause (1) of section 43; or (b) the subsidy or grant by the Central Government for the purpose of the corpus of a trust or institution established by the Central Government or a State Government, as the case may be". 6.1 On perusal of the above sub-section, it can be seen that the Government intends to tax all types of subsidies, grants, cash incentives, duty drawback, waivers, concessions or reimbursement by whatever name called by the Central or State Government (emphasis supplied). Prior to the amendment, there was lot of litigation which went up to Supreme Court, ....
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.... rules or in any part of the Package Scheme of Incentives the Eligible Unit to whom an Entitlement Certificate has been granted for availing of the incentives by way of deferment of sale tax or purchase tax, as case may be, may, in respect of any of the periods during which the said certificate is valid, at its option, prematurely pay in place of the amount of tax deferred by it, an amount equal to the net present value of the deferred tax, as may be prescribed, and on making such payment, the deferred tax shall be deemed in the public interest to have been paid. As this is an incentive, the same is covered by the amendment and hence treated as "income". 6.2 The appellant opted to repay its sales tax liability of Rs. 1,83,60,000/- during the year under consideration at its NPV of Rs. 93,57,509/- and this NPV was arrived at scientifically by State Government. Thus, the appellant has collected and kept sales tax of Rs. 1,83,60,000/- for 10 years and repaid (prepaid) only Rs. 93,37,509/- as final payment in this year i.e., no further payment is to be done by appellant. Thus, the appellant has got benefit of Rs. 90,22,491/- and hence Ld. AO/Ld. CIT(A) considered it as "income" in thi....
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....e., if appellant prepays in a particular year, the appellant company had pay a certain reduced value, it is arithmetically computed by Government and accordingly eligibility certificates showing reduced value were issued by State Government. This differential amount of Rs. 90,22,491/- i.e. the reduced amount paid by appellant was correctly treated by Revenue as 'income' as per ICDS-7. 6.6 From the order of Ld. CIT(A), paragraph 8.5, it could be seen that this first appellate authority has placed reliance on the decision of Serum Institute of India (P) Ltd. Vs. Union of India, where Hon'ble Jurisdictional High Court examined the scope of section 2(24)(xviii) of the Act post-amendment. The relevant paragraph 8.5 of Ld. CIT(A) order is reproduced for clarity :- "8.5 The Finance Act, 2015, significantly altered the landscape by introducing sub-clause (xviii) to section 2(24). The amendment defined any assistance in the form of subsidy, grant, cash incentive, duty drawback, waiver, concession, or reimbursement provided by the Central or State Government as income, hence taxable, unless used to determine the actual cost of an asset. This amendment sought to end disputes by making ....
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.... be helped, for individual interests must yield to the largea interests of the community or the country as indeed every noble cause claims its martyr. ................ ................ ............... 41. Matters of economic policy should be best left to the wisdom of the legislature. In the context of a changed economic scenario the expertise of the people dealing with the subject should not be lightly interfered with. While dealing with economic legislation, this court would interfere only in those few cases where the view reflected in the legislation is not possible to be taken at all. The case of petitioner certainly does not fall within this exception. We also do not find that by inserting the impugned sub clause there is any perversity or gross disparity resulting in clear or hostile discrimination. 42. As noted earlier it is trite that the legislature is the best forum to weigh different problems in the fiscal domain and form policies to address the same including to create a new liability, exempt an existing liability, create a deduction or subject an existing deduction to new regulatory measures. In the very nature of taxing statutes, legislature holds the power ....
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....ness more profitably, then the receipt is on the revenue account. In the present facts, it is an undisputed fact that in the present case, the incentive in the form of reduced NPV given to appellant is to run its business set up in backward area in a more profitable way and not to acquire any asset. Hence, the same is not a capital receipt and to be treated as revenue receipt only. 6.8 The word "income" under section 2(24) of the Act is defined as an 'inclusive' way and not 'exhaustive' which means, unless the receipt is excluded or classified as 'exempt', the same has to be treated as 'income' only and liable to tax. Such view has been expressed by Hon'ble Supreme Court in various cases, such as :- a) "Income" is a word of wide import - the Hon'ble Supreme Court in Dooars Tea Company Ltd. Vs. CIT 1962 SCR(3) 157, has held that the word "income" is of the widest amplitude and it must be given its natural and grammatical meaning - The definition of the term "income" starts with the word "includes" and list is inclusive and not exhaustive. b) The Supreme Court in the case of CIT Vs. Karthikeyan 201 ITR 866 (SC) has held that the purpose of the inclusive definition is not....
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.... Act. 6.10. In the present case, there is a 'benefit' because the appellant company is paying the reduced amount to the Government as compared to the actual sales tax collected from its customers over a period of 10 years. Thus the waiver amount of Rs. 90,22,491/- comes within the ambit of section 28(iv) of the Act, to be brought under the head 'profits and gains of business or profession' which says that the value of benefit/perquisite/whether convertible into money or not, arising from business. 6.11 The Ld. AR of appellant argued the case on the basis of Income computation and Disclosure Standards (ICDS) and submitted that the amount retained by them does not come within the ambit of "income". It is noted that, even by those accounting standards, the objective of Indian Accounting Standard-20, Government assistance is an action by Government designed to provide an economic benefit. In this impugned case, the appellant got benefit of more than Rs. 90 lakhs as mentioned above. In order to align the provisions of ICDS, with taxation of grants of Government, this amendment was brought in and it is pertinent to go through the explanatory notes to the Finance Act 2015, wherein the p....
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....apply to the LPG subsidy or any other welfare subsidy received by an individual in his personal capacity and not in connection with the business or profession carried on by him.". 5.3 Applicability:- This amendment takes effect from 1 April, 2016 and would accordingly apply to assessment year 2016-17 and subsequent assessment years." From the above, it is quite clear that all government grants in the nature of subsidy, cash, assistance etc. by whatever name called are intended to be recognised as income. The purpose of this amendment is to align provisions relating to taxation of Government grants with the Income Computation and Discloser Standards (ICDS) provisions and to avoid any further controversy and litigation in the matter." Hence, the argument of Ld. AR relating to following ICDS standards will not hold water. 6.12 The appellant's argument is that they are not getting any benefit by prepaying the amount is incorrect. From the profit and loss account of this year, it is observed that the appellant company has taken huge loans and paid term loan interest of Rs. 1,84,83,089/- and interest to others to the extent of Rs. 14,45,891/- on the loans taken. If only the appella....