ASSISTANT COMMISSIONER OF INCOME TAX,CIRCLE-1, JAMNAGAR, JAMNAGAR V. MEENA AGENCY LIMITED, JAMNAGAR

ITA 398/RJT/2024

AI Insights

The case revolves around the classification of 'Kutch Incentive Income' received by Meena Agency Limited under the Kutch Incentive Scheme, which was credited directly to the balance sheet under 'Reserves & Surplus' as capital receipts. The Assessing Officer (AO) treated this income as revenue receipts based on the Supreme Court's decision in Sahney Steel & Press Ltd Vs. CIT, leading to an addition of Rs. 2,51,69,181 to the assessee's income for A.Y. 2014-15. The CIT(A) reversed this decision, treating the receipts as capital receipts, which was contested by the Revenue in the Tribunal. The Tribunal, referencing its previous decisions in the assessee's own cases, upheld the CIT(A)'s decision.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 473097 (ITAT-RAJKOT)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 10-10-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 31-05-2024
• Other Referred Cases: Sahney Steel & Press Ltd Vs. CIT (228 ITR 253)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIMANYU SINGH YADAV
• Assessee Lawyers: CHETAN AGARWAL; BRIJESH PAREKH
• Keywords: Set aside; Capital asset; Depreciation; Capital receipt
• Section: 143(3)

Judgement Text

" Page | 1 ITA No. 398/RJT/2024 – A.Y. – 2014-15 ACIT vs. Meena Agency Limited IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकर अपील सं./ITA No.398/RJT/2024 (Ǔनधा[रण वष[ / Assessment Year: (2014-15) (Hybrid Hearing) Assistant Commissioner of Income-tax Circle -1, Jamnagar Vs. Meena Agency Limited Khushbuwadi, Near Gurudwara, Jamnagar, Gujarat 361008 èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AABCM4325Q (Assessee) (Respondent) Assessee by : Shri Chetan Agarwal & Shri Brijesh Parekh, A.Rs. Revenue by : Shri Abhimanyu Singh Yadav, Sr.DR Date of Hearing : 10/10/2024 Date of Pronouncement : 18 /11/2024 आदेश / O R D E R PER DR. A. L. SAINI, AM: The captioned appeal filed by the Revenue, pertaining to assessment year 2014-15, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short “the ld. CIT(A)/NFAC”] dated 18.04.2024, which, in turn, arises out of an assessment order passed by the Assessing Officer u/s143(3) of the Income Tax Act, 1961 (in short the ‘Act’) dated 27.12.2016. 2. The grounds of appeal raised by the Revenue are as follows: Page | 2 ITA No. 398/RJT/2024 – A.Y. – 2014-15 ACIT vs. Meena Agency Limited “1. The Ld. CIT(A) has erred on facts and in law in deleting the disallowance of Rs.2,51,69,181/-. 2. The Ld. CIT(A) has erred on facts and in law in treating the receipts of Rs.2,51,69,181/- as capital receipts. 3. The Ld. CIT(A) has erred in law and on facts in not appreciating the fact that though the assessee claims the receipts of Rs.2,51,69,181/- as capital receipts, it has not reduced the cost of any capital assets and has consequently not reduced the claim of depreciation. 4. The Ld. CIT(A) has erred on facts and in law in not appreciating the fact that the AO has applied the ratio of the decisions of Apex Court in the case of Sahney Steel & Press Ltd Vs. CIT (228 ITR 253) and as such, he should have upheld the order of the AO. 5. On the basis of the facts and circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. 6. That the revenue craves leaves to add, amend, alter or withdraw any ground of appeal. 7. It is therefore prayed that the order of the CIT(A) may kindly be set aside and that of Assessing Officer be restored.” 3. The brief facts of the case are that assessee filed its return of income on 01.12.2014 declaring total income at Rs. 1,24,66,090/-. The case of the assessee for A.Y. 2014-15 was selected for scrutiny through CASS. Assessment was finalized u/s 143(3) of the Act on 27.12.2016 assessing income at Rs. 3,76,35,271/-. During the course of assessment proceedings it was observed by the AO that the assessee has credited amount of Rs. 2,51,69,181/- under the head 'Central Excise & VAT/Sales Tax Incentive Income (Kutch Incentive Scheme) directly in to balance sheet (Reserves & Surplus i.e. Capital Reserve). The assessee has credited the incentive amount treating the same as capital receipts. However, the Ld. AO did not accept the contention of the assessee. The AO relied on the decision of Hon'ble Supreme Court in the case of Sahney Steel & Press Ltd. Page | 3 ITA No. 398/RJT/2024 – A.Y. – 2014-15 ACIT vs. Meena Agency Limited Vs CIT 228 ITR 253 in which it was held by the Apex Court that VAT incentive on sales, excise duty incentive, VAT Incentive on purchase which being disbursed with a specific purpose every year on regular basis towards meeting its running expenses and operational needs is revenue receipts in nature. Accordingly, the Assessing Officer held that incentive received by the assessee is revenue in nature and added the amount of Rs. 2,51,69,181/- to the total income. 4. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A) who has deleted the addition by following the decision of Co-ordinate Bench in assessee’s own case for A.Y. 2010-11, 2011-12 & 2012-13. 5. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us. 6. The Ld. DR for the Revenue relied upon the findings of the assessing officer. 7. When this appeal was called out for hearing, learned Counsel for the assessee invited our attention to the order dated 10.11.2017, passed by the Division Bench of this Tribunal in the assessee’s own case in ITA Nos.240 & 155/Rjt/2014 for the Assessment Year 2010-11, wherein the incentive received in respect of Central Excise, VAT/Sales Tax (Kutch Incentive Scheme), on the identical issue has been adjudicated in favour of the assessee treating the incentive as capital receipt. Learned Counsel for the assessee submitted that the present appeal is squarely covered by the Page | 4 ITA No. 398/RJT/2024 – A.Y. – 2014-15 ACIT vs. Meena Agency Limited aforesaid order of the Tribunal, a copy of which was also placed before the Bench. 8. We see no reasons to take any other view of the matter than the view so taken by the Division Bench of this Tribunal in assessee’s own case vide order dated 10.11.2017. In this order, the Tribunal has inter alia observed as follows: “6.1 The only issue involved in this case is addition of Kutch Incentive income of Rs. 2,51,69, 181/- considering the same as revenue receipt. I find that this issue has been decided in favour of appellant in A.Y. 2010-11, 2011-12, 2012-13 vide order No. CIT(A)-IV/107R/CC-2/12-13 dated 13.01.2014 CIT/A)/Jam/18/14-15/552 dated 10.09.2014. Relevant portion of that appellate order are reproduced as under: 5.3 I have carefully considered the submissions made by the Appellant as well as the varlous Courts' decisions relied upon by the Appellant. It is evident from the Scheme itself that the excise & VAT incentives on sales/ purchases were given to the appellant for promoting Investment of capital for industrial development and to generate employment in the Kutch District which was affected by devastating earthquake. Incentives were not given for carrying out the day-to-day business operations. The object of such incentives was to encourage large scale investment for industrial development in the notified area of Kutch District. The Schemes framed by the Government was limited to such Industrial Units which were set up in the Kutch District before the specified date as per the scheme of incentive. The ITAT, Rajkot in the case of M/s. Ajanta Manufacturing Limited, Morbi (AY 2006- 07), vide order dated 23/09/2010, has decided to treat such incentives as Capital receipts. Para Nos.16 and 17 of the said order are reproduced as under:- \"16. We also find from in the said district. 17. The Hon'ble Supreme Court ... actually supports the case of the assessee.\" 5.4 Further the findings given by the Hon'ble ITAT as discussed In paras 21 and 22 of the said order are reproduced as under:- \"21. We find that would also not arise .\" 22 On careful capital in nature.\" 5.5 It is evident from the aforesaid findings that the jurisdictional Hon'ble Rajkot Tribunal has considered each aspect of the Issues involved after analyzing the relevant Court's decisions. Respectfully following the Hon'ble ITAT's decision and appeal orders in appellant's own case for A.Ys. 2006-07, 07-08, 08-09 and 09-10, Page | 5 ITA No. 398/RJT/2024 – A.Y. – 2014-15 ACIT vs. Meena Agency Limited the 'Kutch Inventive Income' received by the appellant for this year of Rs.9,81,77,050/- is treated as \"Capital Receipts\" and not chargeable to tax. The addition made on this account is therefore, deleted. This ground is accordingly allowed.\" 6.2 Further, it is also noticed from the Order of Ld. CIT(A) that the issue has been decided in favour of appellant in appellant's own case for A.Y. 2006-07, 2007- 08,2008-09 & 2009-10. The relevant portion of the order is reproduced here as under: 5.5 It is evident from the aforesaid findings that the jurisdictional Hon'ble Rajkot Tribunal has considered each aspect of the issues involved after analyzing the relevant Court's decisions. Respectfully following the Hon'ble ITAT's decision and appeal orders in appellant's own case for A.Ys. 2006-07,07-08,08-09 and 09-10, the 'Kutch Incentive Income' received by the appellant for this year of Rs.9,81,77,050/- is treated as \"Capital Receipts\" and not chargeable to tax. The addition made on this account is therefore, deleted. This ground is accordingly allowed. 6.3 Further, Hon'ble ITAT, Rajkot Bench has also followed the consistency in their order for A.Y. 2010-11 & 2011-12& Confirmed the order of CIT(A) for the said years on the basis of relief given by tribunal's Co-ordinate bench's decision in appellant's case itself in earlier A.Ys right from 2006-07 onwards upto 2009-10. Further, for A.Y. 2012-13 also, the addition made by AQ on the same issue has been deleted by the appellate authorities. 6.4 In view of the above legal positions, the addition made in this year too is deleted and ground No.1 of the appeal is allowed.” 9. As the issue is squarely covered in favour of the assessee by the decision of the Coordinate Bench, in assessee’s own case for A.Y. 2010-11 and 2011-12 and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the Coordinate Bench (supra). The Ld. CIT(A) followed the decision of coordinate Bench of ITAT, Rajkot and allowed the claim of assessee treating ‘kutch Incentives Income’ as capital receipts. Therefore, we do not find any infirmity in the order of Ld. CIT(A). Hence, Revenue’s appeal is dismissed. Page | 6 ITA No. 398/RJT/2024 – A.Y. – 2014-15 ACIT vs. Meena Agency Limited 10. In the result, appeal filed by the Revenue is dismissed. Order is pronounced in the open court on 18/11/2024 Sd/- Sd/- (DINESH MOHAN SINHA) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot Ǒदनांक/ Date: 18 /11/2024 Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File By order Assistant Registrar/Sr. PS/PS ITAT, Rajkot 1. Draft dictated on (dictation sheet is enclosed with main file.) 10.10.2024 2. Draft placed before author 10.10.2024 3. Draft proposed & placed before the second member 4. Draft discussed/approved by Second Member. 5. Approved Draft comes to the Sr.PS/PS 6. Kept for pronouncement on 7. After Pronouncement fair order comes to the Sr.PS/PS on 8. File sent to the Bench Clerk 9. Date on which file goes to the AR 10. Date on which file goes to the Head Clerk. 11. Date of dispatch of Order. 12. Draft dictation sheets are attached "