Indian Acrylics Ltd. V. Commissioner of Income Tax and another

ITA/406/2008

AI Insights

M/s Indian Acrylics Ltd. appealed against the order of the Income Tax Appellate Tribunal, which classified a sales tax subsidy as a revenue receipt for the assessment year 2003-04. The appellant argued that the subsidy should be considered a capital receipt, referencing the Supreme Court's decision in K.C.P. Ltd. v. CIT. The High Court, referencing a similar case (M/s Vardhman Acrylics Ltd. v. Commissioner of Income Tax, Ludhiana), found that the matter required re-examination by the Tribunal to determine the nature and purpose of the subsidy.

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 807661 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 06-01-2015
• Assessment Year: misc
• Other Referred Cases: K.C.P. Ltd. v. CIT, M/s Vardhman Acrylics Ltd. v. Commissioner of Income Tax, Ludhiana and another
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: RAJESH KATOCH
• Assessee Lawyers: ALOK MITTAL
• Keywords: Capital receipt; Income tax appellate tribunal; Revenue receipt; Sale tax subsidy
• Section: 245 ITR 421

Judgement Text

"Income Tax Appeal No.406 of 2008 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income Tax Appeal No.406 of 2008 Date of Order: 06.01.2015 M/s Indian Acrylics Ltd. ..Appellant Versus Commissioner of Income Tax and another ..Respondents CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLA HON'BLE MR. JUSTICE B.S.WALIA Present: Mr. Alok Mittal, Advocate, for the appellant. Mr. Rajesh Katoch, Advocate, for the respondents. RAJIVE BHALLA, J (Oral) The assessee is before us, challenging order dated 29.11.2007 (Annexure A-3), passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B”. Chandigarh, for assessment year 2003-04, on the following substantial questions of law:- “(i) Whether in facts and circumstances of the case, the action of the authorities below in holding the Sale tax subsidy received by the appellant as a revenue receipt, when the same has been rightly held to fall under the capital receipt as laid down by the Hon'ble Supreme Court in K.C.P. Ltd. v. CIT(2000) 245 ITR 421(SC) is legally sustainable in the eyes NARESH KUMAR 2015.01.12 15:11 I attest to the accuracy and authenticity of this document Chandigarh Income Tax Appeal No.406 of 2008 -2- of law? (ii) Whether in the facts and circumstances of the case, the authorities below were correct in holding that merely because the subsidy was granted after the commencement of production became a revenue receipt is legally sustainable in the eyes of law? (iii) Whether in fact and circumstances of the case, the action of the authorities below in acting on its own presumption without any legal basis and ignoring the various judicial precedents as laid down by the company is legally sustainable in the eyes of law? (iv) Whether in fact and circumstances of the case, the action of the authorities below, the impugned orders Annexure A-1 and A-3 are legally sustainable in the eyes of law?” Counsel for the parties are ad-idem that in view of order dated 18.12.2014, passed in Income Tax Appeal No.146 of 2014 (M/s Vardhman Acrylics Ltd. v. Commissioner of Income Tax, Ludhiana and another), the matter has to be remitted to the Tribunal. We have heard counsel for the parties, considered the substantial questions of law, the judgement dated 18.12.2014 in M/s Vardhman Acrylics Ltd.,(supra) and as we are satisfied that controversy in the present appeal, namely, the nature of sales tax subsidy i.e., whether it is a revenue or capital receipt is to be adjudged on the basis of the nature and purpose of the subsidy, has NARESH KUMAR 2015.01.12 15:11 I attest to the accuracy and authenticity of this document Chandigarh Income Tax Appeal No.406 of 2008 -3- been remitted to the Tribunal in M/s Vardhman Acrylics Ltd., (supra), allowed the appeal, set aside the impugned order dated 29.11.2007 and remit the matter to the Tribunal, for adjudication afresh and in accordance with law. Parties are directed to appear before the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh, on 20.01.2015. (RAJIVE BHALLA) JUDGE January 06, 2015 (B.S.WALIA) nt JUDGE NARESH KUMAR 2015.01.12 15:11 I attest to the accuracy and authenticity of this document Chandigarh "