DCIT, CC-II, Chandigarh V. M/s Steel Strips Wheels Limited, Chandigarh

ITA 1234/CHANDI/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9724 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-07-2019
• Assessment Year: 2015-2016
• Appeal Filed On: 28-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G.S. PHANI KISHORE
• Keywords: Capital asset; Capital receipt; Revenue expenditure; Capital expenditure
• Section: 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BEN CH B, CHANDIGARH .., ! '# #$ %, & '( BEFORE: SHRI. N.K.SAINI, VP & SHRI , SANJAY GARG, JM ITA NO. 1234 /CHD/ 2018 ASSESSMENT YEAR : 2015-16 THE DCIT CENTRAL CIRCLE-II CHANDIGARH M/S STEEL STRIPS WHEELS LTD. SCO 49-50, SECTOR-26 MADHYA MARG PAN NO: AACCS3003L APPELLANT RESPONDENT ITA NO. 1288 /CHD/ 2018 ASSESSMENT YEAR : 2015-16 M/S STEEL STRIPS WHEELS LTD. SCO 49-50, SECTOR-26 MADHYA MARG THE DCIT CENTRAL CIRCLE-II CHANDIGARH PAN NO: AACCS3003L APPELLANT RESPONDENT !' ASSESSEE BY : SHRI ASHWANI KUMAR, CA #!' REVENUE BY : SHRI G.S. PHANI KISHORE, CIT DR $ %! & DATE OF HEARING : 01/07/2019 '()*! & DATE OF PRONOUNCEMENT : 01/07/2019 ')/ ORDER PER N.K. SAINI, VICE PRESIDENT THESE APPEALS BY THE REVENUE AND THE ASSESSEE HAVE BEEN FILED AGAINST THE ORDER OF THE LD. CIT(A)-3 GURGAON DT. 06/07/201 8. 2. DEPARTMENT HAS RAISED THE FOLLOWING GROUNDS IN I TA NO. 1234/CHD/2018 FOR A.Y. 2015-16: I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT (A) WAS CORRECT IN TAKING EXPENSES MADE ON ACCOUNT OF TECHNICAL KNO W-HOW AS REVENUE EXPENDITURE AND NOT CAPITAL EXPENDITURE, AS THE KNO W-HOW OBTAINED BY THE ASSESSEE IS LINKED TO SUBSTANTIAL MODERNIZATION AND EXPANSION OF THE EXISTING UNIT/EXISTING TECHNIQUE AND PROCEDURE OF PRODUCTION AND IT IS RELATED TO ENHANCEMENT OF MANUFACTURING FACILITY/CAPACITY. II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE CIT (A) WAS RIGHT IN DELETING THE ADDITION MADE ON ACCOUNT OF TECHNICAL KNOWHOW FEES AMOUNTING TO RS. 1,64,53,858/- ON THE BASIS THE DEC ISION OF THE HON'BLE ITAT DATED 26.09.2013 FOR AY 2009-10. III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN FOLLOWING THE DECISION OF THE HON'BLE ITAT DATED 21.10.2015 FOR A Y 2008-09 IN THE CASE OF THE ASSESSEE ITSELF AND DELE TING THE ADDITION OF RS. 1,29,43,909/- HOLDING THE SALES TAX SUBSIDY AS CAPI TAL RECEIPTS IN NATURE. 2 IV) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD.CIT(A) HAS ERRED IN TREATING THE SALES TAX SUBSIDY AS CAPITAL RECEIPTS IN NATURE DESPITE THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. VARDHMAN INDUSTRIES LTD. VIDE CONSOLIDATED ORDER DATED 13.07 .2017 IN ITA NO.681/2004, 708/2004, 755/2004 & 725/2004, 398 ITR 216 WHEREIN SALES TAX SUBSIDY HAS BEEN HELD TO BE A REVENUE RECEIPT. V) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE PONNI SUGARS AND CHEMICALS LTD. (2008) 306 ITR 392 (SC) AND TREATING THE SALES TAX SUBSIDY AS CAPITAL RECEIPTS IN NATURE WAS WRONGLY FOLLOWED DESPITE THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER THAT THE FACTS OF THE PRESENT CASE ARE DISTINGUISHABLE FROM THAT OF PONNI SUGAR AND CHEMICALS LTD. VI) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE FACT THAT SALE TAX SUBSIDY WHICH IS A POST-PRODUCTION SUBSIDY , IS HELD TO BE A REVENUE RECEIPT AS IT IS AN INCENTIVE GIVEN TO THE ASSESSEE WHEN ITS BUSINESS IS RUNNING. VII) THE APPELLANT CRAVES TO ADD, AMEND, ALTER OR M ODIFY ANY GROUNDS OF APPEAL AT THE TIME OF HEARING. 2.1 ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN IT A NO. 1288/CHD/2018 FOR A.Y. 2015-16: 1. THAT THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AS WEL L AS ON FACTS IN CONFIRMING THE DISALLOWANCE OF CLAIM OF THE ASSESSEE FOR RS. 1 29.44 LACS ON ACCOUNT OF SALES TAX SUBSIDY AS DEDUCTION FROM THE BOOK PROFITS U/S 115 JB BEING IN THE NATURE OF CAPITAL RECEIPT. THE DEDUCTION OF RS. 129.44 LACS M AY KINDLY BE ALLOWED FROM THE BOOK PROFITS U/S 115JB. THE ASSESSEE CRAVES LEAVE TO ADD, ALTER AND AMEND T HE ABOVE GROUND OF APPEAL BEFORE THE SAME ARE HEARD OR DISPOSED OF. 3. FIRSTLY WE SHALL DEAL WITH THE DEPARTMENTAL APPE AL IN ITA NO. 1234/CHD/2018 FOR THE ASSESSMENT YEAR 2015-16 WHERE IN VIDE GROUND NO. (I) & (II), THE GRIEVANCE OF THE ASSESSEE RELATES TO THE DELETION OF ADDITION OF RS. 1,64,53,858/- MADE BY THE A.O. ON ACCOUNT OF TECHNI CAL KNOWHOW FEES. 4. AS REGARDS TO THIS ISSUE THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT IT IS COVERED IN ASSESSEES FAVOUR VIDE ORDER DT. 27/05/2019 IN ASSESSEES OWN CASE IN CROSS APPEAL NO. 756/CHD/201 8 FOR THE ASSESSMENT YEAR 2011-12 FILED BY THE DEPARTMENT. REFERENCE WAS MADE TO PARA 7 TO 11 OF THE SAID ORDER. 5. IN HIS RIVAL SUBMISSIONS THE LD. CIT DR ALTHOUGH SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW BUT COULD NOT CONTROVERT THE AFOR ESAID CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS NOTICED THA T AN IDENTICAL ISSUE HAVING SIMILAR FACTS WAS A SUBJECT MATTER OF THE DEPARTMEN TAL APPEAL FOR THE A.Y. 2011- 12 IN ITA NO. 756/CHD/2018 WHEREIN THE RELEVANT FIN DINGS HAVE BEEN GIVEN BY THE ITAT VIDE ORDER DT. 27/05/2019 IN PARA 7 TO 11 WHICH READ AS UNDER: 3 7. GROUND OF APPEAL NO.V) RAISED BY THE REVENUE REA DS AS UNDER: V) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE CIT(A) WAS RIGHT IN DELETING THE ADDITION MADE ON ACCOUNT OF T ECHNICAL KNOWHOW FEES AMOUNTING TO RS.39,35,029/- ON THE BASIS THE DECISI ON OF THE HON'BLE ITAT DATED 26.09.2013 FOR AY 2009-10. 8. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE A SSESSEE HAD CLAIMED EXPENSES ON TECHNICAL KNOW-HOW, OF RS.39,35,029/- AS REVENUE EX PENDITURE IN ITS PROFIT & LOSS ACCOUNT. THE SAME HAD BEEN PAID TO M/S RING TECH. C O., JAPAN UNDER A TECHNICAL COLLABORATION AGREEMENT ENTERED INTO IN 1 997 AND EXTENDED FROM TIME TO TIME. THE A.O. ASKED THE ASSESSEE TO JUSTIFY AS TO HOW THE EXPENDITURE WAS REVENUE EXPENDITURE AND WHY IT SHOULD NOT BE TREATE D AS CAPITAL EXPENDITURE. IN RESPONSE TO THE SAME, THE ASSESSEE SUBMITTED THAT T HE MAIN OBJECTIVE OF THE AGREEMENT WAS TO INCREASE THE PRODUCTIVITY AND TO R EDUCE THE REJECTIONS FROM THE CURRENT LEVELS. THUS IT WAS POINTED OUT THAT TH E OBJECTIVE WAS TO EFFECT THE ECONOMY AND EFFICIENCY IN MANUFACTURING AND, THEREF ORE, HAD BEEN RIGHTLY CLAIMED AS REVENUE EXPENDITURE. IT WAS CONTENDED TH AT THE COMPANY HAD NOT ACQUIRED ANY CAPITAL ASSET IN THE NATURE OF EXCLUSI VE USER OF TECHNOLOGY INFORMATION. THE ASSESSEE FURTHER SUBMITTED THAT ID ENTICAL ISSUE HAD BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE I.T.A.T. IN EARLIE R YEARS. THE A.O. DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE. REFERRING TO THE CO LLABORATION AGREEMENT, THE A.O. HELD THAT THE ASSESSEE HAD PURCHASED/ACQUIRED TECHNICAL KNOW-HOW TO COMPLETELY OVERHAUL ITS DESIGN, PLANT AND MANUFACTU RING SYSTEMS THUS GETTING ENDURING BENEFIT OF PERMANENCE AND DURABILITY. THE A.O. HELD THAT TECHNICAL KNOW-HOW OBTAINED BY THE ASSESSEE WAS LINKED TO SUB STANTIAL MODERNIZATION AND EXPANSION OF EXISTING UNIT/TECHNIQUE AND PROCEDURE OF PRODUCTION AND, THEREFORE, WAS IN THE NATURE OF INTANGIBLE ASSET AN D OF ENDURING NATURE. HE FURTHER STATED THAT THE DEPARTMENT HAD CHALLENGED THE ORDER OF THE I.T.A.T. BEFORE THE HON'BLE HIGH COURT IN EARLIER YEARS. ACCORDINGLY, T HE A.O. TREATED THE TECHNICAL KNOW-HOW EXPENSES INCURRED AND CLAIMED BY THE ASSES SEE AS CAPITAL IN NATURE AND DISALLOWED THE SAME. 9. THE LD.CIT(A) ALLOWED THE ASSESSEES APPEAL ON F INDING THAT IDENTICAL ISSUE HAD BEEN ADJUDICATED BY THE CIT(A) IN EARLIER YEARS IN FAVOUR OF THE ASSESSEE AND APPEAL OF THE REVENUE AGAINST THE ORDER OF THE CIT( A) HAD BEEN DISMISSED BY THE I.T.A.T. VIDE ITS ORDER DATED 26.9.2013 FOR ASSESSM ENT YEAR 2009-10. 10. BEFORE US, THE LD. DR HEAVILY RELIED UPON THE O RDER OF THE A.O. THOUGH FAIRLY CONCEDED THAT IDENTICAL ISSUE HAD BEEN DECIDED IN F AVOUR OF THE ASSESSEE IN ASSESSMENT YEAR 2009-10 BY THE CIT(A), WHOSE ORDER HAD BEEN UPHELD BY THE I.T.A.T. ALSO. 11. IN VIEW OF THE FINDINGS OF THE CIT(A) THAT IDEN TICAL ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSMENT YEAR 2009-10 B Y THE I.T.A.T., WHICH HAS BEEN ADMITTED TO BY THE REVENUE ALSO AND NO DISTINGUISHI NG FACTS HAVING BEEN BROUGHT TO OUR NOTICE BY THE LD. DR, THE LD.CIT(A), WE HOLD, HAS RIGHTLY ALLOWED THE ASSESSEES APPEAL FOLLOWING THE ORDER OF THE I. T.A.T. IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10. WE THEREFORE FIND NO REASO N TO INTERFERE IN THE ORDER OF THE LD.CIT(A) HOLDING THE TECHNICAL KNOWHOW EXPENSE S OF RS.39,35,029/- AS REVENUE IN NATURE. THE GROUND OF APPEAL NO.V) RAISED BY THE REVENUE IS THEREFORE, DISMISSED. SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER, WE DO NOT SEE ANY MERIT IN THESE GROUNDS OF THE DEPARTMENTAL APPE AL. 7. VIDE GROUND NO. (III) TO (VI) THE GRIEVANCE OF T HE DEPARTMENT RELATES TO THE DELETION OF ADDITION OF RS. 1,29,43,909/- MADE BY T HE A.O. ON ACCOUNT OF SALES TAX SUBSIDY. 4 8. AS REGARDS TO THIS ISSUE THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS ALSO COVERED IN FAVOUR OF THE ASSESSEE VIDE AFORESA ID REFERRED TO ORDER DT. 27/05/2019 IN ASSESSEES OWN CASE IN ITA NO. 756/CH D/2018, THE REFERENCE WAS MADE TO PARA 2 TO 6 OF THE SAID ORDER. 9. IN HIS RIVAL SUBMISSIONS THE LD. CIT DR ALTHOUGH SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW BUT COULD NOT CONTROVERT THE AFOR ESAID CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. 10. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS NOTICED THA T AN IDENTICAL ISSUE HAVING SIMILAR FACTS WAS A SUBJECT MATTER OF THE DEPARTMEN TAL APPEAL FOR THE A.Y. 2011- 12 IN ITA NO. 756/CHD/2018 WHEREIN THE RELEVANT FIN DINGS HAVE BEEN GIVEN BY THE ITAT VIDE ORDER DT. 27/05/2019 IN PARA 2 TO 6 W HICH READ AS UNDER: 2. GROUND NOS. I) TO IV), IT WAS CONTENDED, RELATED TO THE SAME ISSUE OF TREATMENT OF SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE, WHET HER CAPITAL OR REVENUE IN NATURE AND THE SAME READ AS UNDER: I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(A) HAS ERRED IN FOLLOWING THE DECISION OF THE HON'BLE ITAT DATED 21.10.2015 FOR AYS 2003- 04, 2004-05 & 2008-09 IN THE CASE OF THE ASSESSEE I TSELF AND DELETING THE ADDITION OF RS. 1,84,45,151/- HOLDING THE SALES TAX SUBSIDY AS CAPITAL RECEIPT IN NATURE. II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE PONNI SUGAR AND C HEMICALS LTD. AND TREATING THE SALES TAX SUBSIDY AS CAPITAL RECEIPTS IN NATURE WAS WRONGLY FOLLOWED DESPITE THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER T HAT THE FACTS OF THE PRESENT CASE ARE DISTINGUISHABLE FROM THAT OF PONNI SUGAR A ND CHEMICALS LTD. III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE FACT THAT SALE TAX SUBSIDY WAS GIVEN TO EXISTING UNIT AND NOT FOR SETTING UP NEW UNIT OR EXPANSION OF THE SAME WAS NOT CONSIDERED. IV) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE FACT THAT THE SUBSIDY RECEIPT AFTER THE COMMENCEMENT OF PRODUCTIO N BY THE UNIT WAS NOT REQUIRED TO BE TREATED AS CAPITAL IN NATURE WAS NOT CONSIDERED. 3. THE FACTS RELATING TO THE CASE ARE THAT FROM THE NOTES ON ACCOUNTS OF THE ASSESSEE COMPANY, THE A.O. NOTED THAT IT HAD BEEN G RANTED EXEMPTION ON SALES TAX UNDER THE PUNJAB INDUSTRIAL POLICIES, 1989 & 19 96. UNDER THIS THE ASSESSEE COMPANY WAS GIVEN SALES TAX EXEMPTION ON ACCOUNT OF ENHANCING MODERNIZATION OF UNITS AND FURTHERING INDUSTRIAL GR OWTH IN THE STATE AND AS PER THE SCHEME THE SALES TAX WAS DEEMED TO HAVE BEEN PAID. THE A.O., HOWEVER, NOTED THAT IN THE COMPUTATION OF TAXABLE INCOME OF THE AS SESSEE, THE ASSESSEE HAD REDUCED ITS TAXABLE PROFITS BY CLAIMING A DEDUCTION OF RS.1,84,45,151/- ON ACCOUNT OF NOTIONAL SALES TAX LIABILITY ARISING OUT OF SUCH SUBSIDY, BY TREATING THE SAME AS CAPITAL RECEIPT INSTEAD OF REVENUE RECEIPT. THE ASSESSEE WAS ASKED TO JUSTIFY THE SAME. IN RESPONSE TO WHICH, THE ASSESSE E FILED A DETAILED REPLY ELABORATING THE SCHEME OF THE PUNJAB GOVERNMENT AS PER WHICH THE SUBSIDY WAS RECEIVED AND STATING THAT SINCE IT WAS GRANTED THE EXEMPTION UNDER THE INDUSTRIAL POLICY & INCENTIVE SCHEME, 1996 OF THE GOVERNMENT O F PUNJAB, WITH A VIEW TO PROMOTE GROWTH OF INDUSTRY IN THE STATE AND TO PUSH AND SUPPORT FOR CONSOLIDATION AND EXPANSION OF EXISTING INDUSTRIES, THE NATURE OF SUBSIDY WAS CAPITAL AND THUS NOT TAXABLE IN THE HANDS OF THE ASSESSEE. THE A.O. REJECTED THE CONTENTION OF THE ASSESSEE AND NOTED THAT IDENTICAL ISSUE HAD BEEN DE CIDED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. AB HISHEK INDUSTRIES LTD., 286 ITR 1, HOLDING THE SUBSIDY TO BE REVENUE IN NATURE. FOLLOW ING THE SAID DECISION AND 5 NOTING THE FACT THAT IT WAS A POST PRODUCTION SUBSI DY, THE A.O. TREATED THE SUBSIDY AS REVENUE IN NATURE AND ADDED THE SAME IN THE INCO ME OF THE ASSESSEE. 4. BEFORE THE LD.CIT(A), THE ASSESSEE CONTENDED THA T IDENTICAL ISSUE HAD ARISEN IN THE CASE OF THE ASSESSEE IN THE PRECEDING YEAR ALSO , WHEREIN THE MATTER HAD TRAVELLED UP TO THE HON'BLE HIGH COURT WHO HAD REMA NDED THE ISSUE BACK TO THE I.T.A.T. AND WHO IN TURN HAD DECIDED THE ISSUE IN F AVOUR OF THE ASSESSEE IN REMAND. THE LD.CIT(A) AFTER GOING THROUGH THE ORDER OF THE I.T.A.T. IN THE CASE OF THE ASSESSEE IN ITA NO.897/CHD/2006, ITA NO.341/CHD/200 7 AND ITA NO 756/CHD/2011 FOR ASSESSMENT YEARS 2003-04, 2004-05 AND 2008-09, FOUND THAT THE ISSUE OF SALES TAX SUBSIDY HAD BEEN DECIDED BY THE I.T.A.T. IN FAV OUR OF THE ASSESSEE HOLDING THE SAME TO BE CAPITAL IN NATURE. ACCORDINGLY, THE ADDI TION MADE BY THE A.O. WAS DELETED BY THE LD.CIT(A). RELEVANT FINDINGS OF THE CIT(A) AT PAGE 12 OF THE ORDER ARE AS UNDER: I HAVE GONE THROUGH THE HON'BLE ITAT'S ORDER IN TH E CASE OF THE APPELLANT IN ITA NO. 897/CHD/2006, ITA NO. 341/CHD/2007 & ITA NO. 75 6/CHD/2011 FOR A.Y 2003-04, A.Y 2004-05 AND 2008-09 WHEREIN THE MATTER HAS BEEN ADJUDICATED AS UNDER: 'IN THESE CASES, THE ASSESSEE HAVE RECEIVED SALES T AX SUBSIDY FROM PUNJAB GOVT. UNDER THE SCHEME NAMED 'INDUSTRIAL POLICY & INVESTM ENT CODE, 1996'. WE HAVE GONE THROUGH THE SAID POLICY AND FOUND THAT THE SCH EME THOUGH NOT VERBATIM AS THAT OF WEST BENGAL OR GUJARAT SCHEME, BUT THE SUM AND SUBSTANCE OF ALL THESE SCHEMES ARE THE SAME, THEREFORE, RELYING ON OUR FIN DING GIVES IN ITA NO. 773/CHD/2012, WE HOLD THAT THE SALES TAX SUBSIDY RE CEIVED BY THE ASSESSEE IS CAPITAL IN NATURE.' AS THE ADDITION MADE BY THE AO IS COVERED BY THE OR DER OF THE HON'BLE ITAT IN FAVOUR OF THE APPELLANT, THE ADDITION MADE ON THIS ACCOUNT IS DELETED. 5. BEFORE US, THE LD. DR VEHEMENTLY SUPPORTED THE O RDER OF THE A.O. THOUGH HE FAIRLY CONCEDED THAT THIS ISSUE HAD BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE I.T.A.T. IN THE CASE OF THE ASSESSEE ITSELF IN EARL IER YEARS. 6. IN VIEW OF THE SAME, SINCE THE ISSUE OF SALES TA X SUBSIDY RECEIVED BY THE ASSESSEE BY VIRTUE OF SCHEME OF PUNJAB GOVERNMENT H AS ALREADY BEEN DECIDED BY THE I.T.A.T. IN THE CASE OF THE ASSESSEE ITSELF IN THE PRECEDING YEARS, HOLDING THE SAME TO BE CAPITAL IN NATURE AND WITH NO DISTINGUIS HING FACTS HAVING BEEN BROUGHT TO OUR NOTICE BY THE LD. DR, WE SEE NO REAS ON TO INTERFERE IN THE ORDER OF THE LD.CIT(A) ALLOWING THE ASSESSEES APPEAL FOLLOW ING WITH ORDER OF THE I.T.A.T. IN VIEW OF THE ABOVE, GROUND OF APPEAL NOS. I) TO I V) RAISED BY THE REVENUE ARE DISMISSED. SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER, WE DO NOT SEE ANY MERIT IN THESE GROUNDS OF THE DEPARTMENTAL APPE AL. 11. NOW WE WILL DEAL WITH ASSESSEES APPEAL IN ITA NO. 1288/CHD/2018 FOR THE ASSESSMENT YEAR 2015-16. 12. THE ONLY ISSUE RAISED IN THIS APPEAL RELATES TO THE CONFIRMATION OF THE DISALLOWANCE OF CLAIM OF THE ASSESSEE FOR DEDUCTION OF THE SALES TAX SUBSIDY FROM THE BOOK PROFIT UNDER SECTION 115JB OF THE INCOME T AX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT). 13. AS REGARDS TO THIS ISSUE THE LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT IT IS ALSO COVERED IN FAVOUR OF THE ASSESSEE VIDE ORDER D T. 27/05/2019 IN ITA NO. 730/CHD/2018 FOR THE A.Y. 2012-13 IN ASSESSEES OWN CASE, REFERENCE WAS MADE TO PARA 27 TO 33 OF THE SAID ORDER. 6 14. IN HIS RIVAL SUBMISSIONS THE LD. CIT DR ALTHOUG H SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW BUT COULD NOT CONTROVERT THE AFOR ESAID CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. 15. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS NOTICED THA T AN IDENTICAL ISSUE HAVING SIMILAR FACTS WAS A SUBJECT MATTER OF THE ASSESSEE S APPEAL FOR THE A.Y. 2012-13 IN ITA NO. 730/CHD/2018 WHEREIN THE RELEVANT FINDINGS HAS BEEN GIVEN BY THE ITAT VIDE ORDER DT. 27/05/2019 IN PARA 27 TO 33 WHICH RE ADS AS UNDER: 27. THE SOLE GROUND RAISED IN THIS APPEAL READS AS UNDER: 1.THAT THE LD. CIT(APPEALS) HAS GROSSLY ERRED IN N OT ALLOWING THE CLAIM OF THE ASSESSE FOR DEDUCTION OF RS.8,89,51,004/- FROM THE BOOK PROFITS U/S 115JB ON ACCOUNT OF SALES TAX SUBSIDY BEING IN THE NATURE OF CAPITAL RECEIPT. THE DEDUCTION OF RS.8,89,51,004/- MAY KINDLY BE ALLOWED FROM THE BOOK PROFITS U/S 115JB. 28. BRIEFLY STATED, THE ASSESSEE HAD SUBMITTED THAT THE SALES TAX SUBSIDY RECEIVED BY IT DURING THE YEAR WAS NOT CHARGEABLE TO TAX BEI NG IN THE NATURE OF CAPITAL RECEIPT AND WOULD ALSO THEREFORE NOT BE LIABLE TO T AX U/S 115JB OF THE ACT FOR THE SAME REASON, DESPITE THE FACT THAT IT WAS CREDITED TO ITS PROFIT & LOSS ACCOUNT. THE LD.CIT(A) HELD THAT FOR THE PURPOSE OF SECTION 115J B OF THE ACT THE ASSESSEE COULD NOT GO BEYOND THE NET PROFITS SHOWN IN ITS BOOKS OF ACCOUNT. HE RELIED UPON THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF PCIT VS. J.K. SYNTHETICS (2017) 390 ITR 129 AND THE DECISION OF T HE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF B&B INFRATECH. LTD. (2016) 76 TAXMANN.COM 188. ACCORDINGLY, HE DISMISSED THIS CONTENTION OF THE ASSESSEE AND IN CLUDED THE SALES TAX SUBSIDY IN THE BOOK PROFITS OF THE ASSESSEE FOR THE PURPOSE OF PAYMENT OF MINIMUM ALTERNATE TAX (MAT) U/S 115JB OF THE ACT. 29. BEFORE US, THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT IDENTICAL ISSUE HAD BEEN DEALT WITH BY THE ITAT CHANDIGARH BENCH IN GRO UP OF CASES RELATING TO M/S H.M. STEELS LTD. VS. ADDL.CIT IN THEIR ORDER DATED 5.11.2018 AND HAD DECIDED IN FAVOUR OF THE ASSESSEE. OUR ATTENTION WAS DRAWN TO THE FINDINGS OF THE I.T.A.T. AT PARA NOS.16 TO 19 OF THE ORDER AS UNDER: 16. APART FROM THAT, THE ASSESSEE HAS TAKEN FOLLOW ING ADDITIONAL GROUND OF APPEAL:- THAT THE AMOUNT VAT DEFERMENT OF RS.16,96,924/- MAY BE EXCLUDED WHILE COMPUTING BOOK PROFITS U/S 115JB AS BEING THE CAPIT AL RECEIPT AND NOT IABLE TO TAX IN VIEW OF THE PROPOSITION LAID DOWN IN THE CAS E OF SHREE BALAJI ALLOYS & ORS. 17. THOUGH THE LD. DR HAS OBJECTED TO TAKING OF THE ADDITIONAL GROUND AT THIS STAGE, HOWEVER, CONSIDERING THE FACTS AND CIRCUMSTA NCES OF THE CASE AND ALSO CONSIDERING THE SUBSEQUENT DECISIONS OF THE HON'BLE SUPREME COURT IN RESPECT OF NATURE AND CHARACTER OF THE SUBSIDY RECEIVED ON VAT DEFERMENT AS CAPITAL RECEIPT, WE DEEM IT FIT TO ADMIT THIS ADDITIONAL G ROUND. 18. IN THE ADDITIONAL GROUND, THE ASSESSEE HAS CLAI MED THAT SINCE THE SUBSIDY ON ACCOUNT OF VAT DEFERMENT IS AS CAPITAL RECEIPT, THE SAME IS NOT LIABLE TO BE TAXED TAKING INTO CONSIDERING WHILE COMPUTING THE BOOK PR OFIT U/S 115JB OF THE ACT. HE IN THIS RESPECT HAS RELIED UPON THE DECISION OF THE LU CKNOW BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. L.H. SUGAR FACTORY LTD AND AN R IN ITA NOS. 339, 417 & 418/LKW/2013, 518 & 53/LKW/569 & CO NO. 26 & 27/LKW /2013 ORDER DATED L9.2.2016. THE RELEVANT ISSUE HAS BEEN DISCUSSED IN PARA 50 OF THE SAID ORDER, WHICH IS REPRODUCED FOR THE SAKE OF CONVENIENCE. 50. FROM THE ABOVE PARAS, WE FIND THAT THE TRIBUN AL HAS DULY CONSIDERED THE JUDGMENT OF THE HONBLE APEX COURT RENDERED IN THE CASE OF APOLLO TYRES LTD. ((SUPRA) AND THEREAFTER, IT WAS NOTED BY THE TRIBUN AL IN THIS CASE THAT AS PER THE 7 DECISION OF SPECIAL BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF RAIN COMMODITIES LTD. VS. DCIT, 41 DTR 449, IF PROFIT AN D LOSS ACCOUNT IS NOT IN ACCORDANCE WITH PART II & PART III OF SCHEDULE VI T O THE COMPANIES ACT, 1956 BECAUSE IT IS PREREQUISITE FOR SECTION 115JB OF THE ACT. THE TRIBUNAL IN THIS CASE ALSO CONSIDERED TWO ANOTHER TRIBUNALS ORDERS RENDERED I N THE CASE OF DCIT VS. BOMBAY DIAMOND COMPANY LTD. 33 DTR 59 AND SYNDICATE BANK VS. ACIT, 7 SOT 51 BANGALORE WHERE IT WAS HELD BY THE TRIBUNAL AFTE R CONSIDERING THE DECISION OF HONBLE APEX COURT RENDERED IN THE CASE OF APOLLO T YRES LTD. (SUPRA), AND AFTER 28 EXPLAINING THE SAME THAT ADJUSTMENT TO PROFIT AN D LOSS ACCOUNT IS POSSIBLE TO MAKE IT COMPLIANT WITH SCHEDULE VI PART II AND PART III OF THE COMPANIES ACT, 1956 WHICH IS PREREQUISITE OF SECTION 115JB OF THE ACT. ON THIS BASIS, THE TRIBUNAL IN THE CASE OF SHREE CEMENT LTD. (SUPRA) DECIDED THIS ISSU E IN FAVOUR OF THE ASSESSEE AND IT WAS HELD THAT CAPITAL RECEIPT IN THE FORM OF SALES TAX SUBSIDY NEEDS TO BE EXCLUDED FROM PROFIT AS PER P&L ACCOUNT FOR THE PUR POSE OF COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. BY RESPECTFULLY FOLLOW ING THESE TRIBUNALS ORDERS, WE HOLD THAT IN THE PRESENT CASE ALSO, THE RECEIPT ON ACCOUNT OF TRANSFER OF CARBON CREDIT WHICH IS HELD TO BE A CAPITAL RECEIPT NEEDS TO BE EXCLUDED FROM PROFIT AS PER P&L ACCOUNT FOR THE PRESENT YEAR WHILE COMPUTIN G THE BOOK PROFIT U/S 115JB OF THE ACT. THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY GROUND NOS.1 TO 5 ARE ALLOWED. THE ASSESSEE GETS RELIEF OF RS.27,70,880/- AND CONSEQUENT INTEREST BEING 10% OF AMOUNT RECEIVED BY THE ASSESS EE ON SALE OF CARBON CREDIT OF RS.277,08,800/-. 19. SINCE IN THE LIGHT OF THE VARIOUS DECISIONS OF THE HON'BLE SUPREME COURT IT HAS ALREADY BEEN HELD THAT THE SUBSIDY ON ACCOUNT OF VA T DEFERMENT IS A CAPITAL RECEIPT, HENCE, IN THE LIGHT OF THE ABOVE DECISION OF THE TRIBUNAL, THE SAME NEED TO BE EXCLUDED FROM THE PROFITS AS PER THE PROFIT A ND LOSS ACCOUNT OF THE PRESENT YEAR WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF T HE ACT. THIS ADDITIONAL GROUND OF THE ASSESSEE, IS THEREFORE, ALLOWED. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. 30. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE CIT(A). 31. WE HAVE HEARD THE RIVAL CONTENTIONS. THE ISSUE TO BE ADJUDICATED IS WHETHER SALES TAX SUBSIDY IS TO BE REDUCED WHILE COMPUTING THE BOOK PROFITS FOR THE PURPOSES OF LEVYING MINIMUM ALTERNATE TAX (MAT) AS PER THE PROVISIONS OF SECTION 115JB OF THE ACT. 32. WE HAVE GONE THROUGH THE ORDER OF THE ITAT IN T HE CASE OF H.M STEELS, CITED BY THE LD.COUNSEL FOR THE ASSESSEE BEFORE US. WE FIND THAT IDENTICAL ISSUE HAS BEEN DEALT WITH BY THE ITAT IN THE SAID CASE HOLDING THE VAT SUBSIDY ,BEING CAPITAL IN NATURE, AS NOT INCLUDIBLE IN THE BOOK PROFITS U/S 1 15JB OF THE ACT. THE ITAT ,WHILE HOLDING SO HAS TAKEN NOTE OF THE DECISION OF THE HO NBLE APEX COURT IN THE CASE OF APOLLO TYRES (SUPRA) AS PER WHICH ANY ADJUSTMENT TO THE PROFIT AND LOSS ACCOUNT PREPARED BY THE ASSESSEE WAS RULED OUT FOR THE PURPOSES OF CALCULATING THE BOOK PROFIT AMENABLE TO TAX. THE ITAT HELD AS P ER SECTION 115JB THE PROFIT AND LOSS ACCOUNT PREPARED SHOULD BE IN ACCORDANCE WITH PART II & III OF SCHEDULE VI TO THE COMPANIES ACT,1956 AND THEREFORE ADJUSTMENTS TO THE SAME CAN BE MADE TO MAKE IT COMPLIANT WITH THE SCHEDULE. THE ITAT ACCOR DINGLY HELD THAT SALES TAX/VAT SUBSIDY BEING CAPITAL IN NATURE WOULD HAVE TO BE REDUCED FROM THE PROFITS. 33. THE FACT IN THE CASE BEFORE US, WE FIND IS IDEN TICAL TO THAT IN H.M STEELS ,WITH THE SALES TAX SUBSIDY HAVING BEEN HELD TO BE CAPITA L IN NATURE. IN VIEW OF THE SAME ,THE ISSUE WE HOLD IS SQUARELY COVERED BY THE DECISION OF THE ITAT IN THE CASE OF H.M STEELS, FOLLOWING WHICH WE HOLD THAT TH E SALES TAX SUBSIDY IS TO BE REDUCED FROM THE BOOK PROFITS FOR THE PURPOSES OF P AYING TAX U/S 115JB OF THE ACT. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS ACCO RDINGLY ALLOWED. IN EFFECT THE APPEAL OF THE ASSESSEE IS ALLOWED. SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER, THE GROUND RAISED IN THE ASSESSEES CROSS APPEAL IS ALLOWED. 8 16. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED AND THAT OF THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 01.07.2019 ). SD/- SD/- #$ % .., (SANJAY GARG ) ( N.K. SAI NI) & '(/ JUDICIAL MEMBER ! / VICE PRESIDENT AG DATE: 01/07/2019 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE (+ $ BY ORDER, ; # ASSISTANT REGISTRAR