Assistant Commissioner of Income-tax, V. M/s. Abhay Cotex Pvt. Ltd., Jalna

ITA 1423/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5360 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-06-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 04-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Capital asset; Depreciation; Tax effect; Capital receipt; Revised return
• Section: 115JB; 32; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AW ASTHY, JM . / ITA NO. 1423/PUN/2016 / ASSESSMENT YEAR : 2011-12 THE ASSISTANT COMMISSIONER OF INCOME TAX, JALNA CIRCLE, JALNA. ....... / APPELLANT / V/S. M/S. ABHAY COTEX PVT. LTD. NEW GUR MARKET, MONDHA, JALNA-431 203. PAN : AAHCA0503A / RESPONDENT REVENUE BY : SHRI MUKESH JHA ASSESSEE BY : SHRI RAHUL KAUL & SHRI ANAND PARTANI / DATE OF HEARING : 26.06.2018 / DATE OF PRONOUNCEMENT : 18.07.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)- 1, AURANGABAD DATED 28-04-2016 FOR THE A.Y.2011-12. 2. GROUNDS RAISED BY THE REVENUE ARE EXTRACTED AS UNDER : I. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), AURANGABAD IS JUSTIFIED IN DELETING THE DEP RECIATION OF RS.1,39,908/- ON MOTOR CAR WHICH IS REGISTERED IN T HE NAME OF DIRECTOR OF COMPANY. II. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A),AURANGABAD IS JUSTIFIED IN DELETING THE EXCE SS CLAIMED DEPRECIATION OF RS.34,21,554/- ON ACCOUNT OF SUBSIDY RECEIVED TO THAT EXTENT. III. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A),AURANGABAD IS JUSTIFIED IN REDUCING THE CAPI TAL SUBSIDY RECEIVED FROM THE PROFITS FOR COMPUTATION OF BOOK PROFITS U/ S. 115JB OF THE IT ACT. 2 ITA NO. 1423/PUN/2016 M/S. ABHAY CORTEX PVT. LTD. IV. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE ORDER OF THE AO BE RESTORED AND THAT OF THE CIT(A)-1 BE VACATED. V. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ALL OR ANY OF THE GROUNDS OF APPEAL. 3. GROUND NO.1 RELATES TO ALLOWABILITY OF DEPRECIATION ON CAR WHICH IS PURCHASED THROUGH THE FUNDS OF THE COMPANY, HOWEVER, IN THE NAME OF THE DIRECTOR. 4. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A COMPANY AND ENGAGED IN THE BUSINESS OF MULTIPURPOSE OIL E XTRACTION PLANT AND REFINERY. ASSESSEE FILED THE RETURN OF INCOME ON 26-09-2011 DECLARING TOTAL INCOME OF RS.1,10,97,906/- AFTER CLAIMING SET OFF OF BROUGHT FORWARD LOSS AT RS.3,74,58,857/-. ON VERIFICATION OF TH E SCHEDULE OF FIXED ASSETS DURING THE ASSESSMENT PROCEEDIN GS, AO NOTICED THAT ASSESSEE CLAIMED DEPRECIATION FOR THE YEAR AT RS.4,27 ,44,763/- WHICH IS INCLUSIVE OF DEPRECIATION ON VEHICLES (5 IN NUMBER) AT RS.8,35,981/-. AO CALLED FOR THE DETAILS TO VERIFY THE GENUIN ENESS OF THE CLAIM TOWARDS DEPRECIATION ON CARS. ON SCRUTINY, AO NOTICE D THAT THE CARS ARE REGISTERED IN THE NAMES OF DIRECTORS OF THE AS SESSEE, I.E., SHRI ASHISH O. MANTRI, SHRI PRADEEP B. TOTLA AND SUNIL WAKHARKAR. THE SAID CARS WERE USED BY THE DIRECTORS AND THE DEPRECIATION W AS CLAIMED IN THE HANDS OF THE COMPANY. AO, RELYING ON VARIOUS DECISIONS, CO NCLUDED THAT THE COMPANY CANNOT BE SAID TO BE THE OWNER OF THE CAR S. SINCE, THE DIRECTORS USED THE CARS, THE ASSESSEE COMPANY CANNOT EXERCISE ITS DOMAIN OVER THE SAID CARS. EVENTUALLY, THE AO DISALLOWED T HE DEPRECIATION CLAIMED BY THE ASSESSEE COMPANY AT RS.1,39,90 8/-. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) DELETED THE ADDITION MADE BY THE AO. 3 ITA NO. 1423/PUN/2016 M/S. ABHAY CORTEX PVT. LTD. 5. AGGRIEVED WITH THE ORDER OF CIT(A) THE REVENUE IS IN A PPEAL BEFORE THE TRIBUNAL. 6. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE WHILE NARR ATING THE ABOVE FACTS SUBMITTED THAT ARE THAT THE ASSESSEE COMP ANY PURCHASED MOTOR CARS IN THE NAME OF DIRECTOR OF THE COMPANY. THE SAID CARS WERE REFLECTED IN THE BALANCE SHEET OF THE COMPANY UNDER THE HEAD ASSETS. THE EXPENSES INCURRED ON REPAIRS AND MAINTENANCE WERE BORNE BY THE COMPANY. LD. COUNSEL RELIED ON THE DECISION OF AHMEDABAD B ENCH OF THE TRIBUNAL IN THE CASE OF STUDIO-3 ARCHITECT PVT. LTD. VS . ITO, DATED 21-01-2011. 7. AFTER HEARING BOTH THE SIDES ON THIS ISSUE AND ON PER USAL OF THE ORDERS OF THE REVENUE AUTHORITIES, WE FIND IT RELEVANT TO E XTRACT THE DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF S TUDIO-3 ARCHITECT PVT. LTD. VS. ITO IN ITA NO.1841/AHD/2009, DATED 21-01-2011 WHEREIN IT WAS OBSERVED AS UNDER : 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. THE RELEVANT PROVISIONS OF SECTION 32 OF THE ACT STIPULATE DEPRECIATION IN RESPECT OF BUILDING, MACHINERY, PLA NT OR FURNITURE 'OWNED BY THE ASSESSEE' AND 'USED' FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. INDISPUTABLY, THE INNOVA CAR WAS PURCHA SED WITH THE FUNDS OF THE COMPANY AND USED BY THE ASSESSEE FOR THE PURPOS ES OF ITS BUSINESS. THE CONTROVERSY IS IN REGARD TO OWNERSHIP OF THE CA R. THE CONTENTION OF THE ASSESSEE IS THAT CAR BEING NOT REGISTERED UNDER THE MOTOR VEHICLES ACT IN THE NAME OF THE COMPANY, BY ITSELF IS NOT SUFFICIEN T TO HOLD THE CONTRARY. THE FACTUAL POSITION AS STATED BY THE ASSESSEE IS N OT DISPUTED BY THE REVENUE. THE CONTENTION OF THE REVENUE IS THAT UNLESS THE CAR IS REGISTERED IN THE NAME OF THE ASSESSEE UNDER THE MO TOR VEHICLES ACT, THE ASSESSEE WOULD NOT BE ENTITLED TO DEDUCTION OF DEPR ECIATION ALLOWANCE IN RESPECT THEREOF. WE ARE OF THE OPINION THAT THE ASS ESSEE, WHO HAD PURCHASED THE CAR FOR VALUABLE CONSIDERATION AND US ED THE SAME FOR ITS BUSINESS, CANNOT BE DENIED THE BENEFIT OF DEPRECIAT ION ON THE GROUND THAT THE TRANSFER WAS NOT RECORDED UNDER THE MOTOR VEHIC LES ACT OR THAT THE VEHICLE STOOD IN THE NAME OF A DIRECTOR OF THE ASSE SSEE COMPANY IN THE RECORDS OF THE AUTHORITIES UNDER THE MOTOR VEHICLES ACT. 5.1 THE AFORESAID VIEW IS SUPPORTED BY THE DECISION IN THE CASE OF CIT VS. NAVDURGA TRANSPORT CO., 235 ITR 150 (ALL), WHEREIN THE ISSUE WAS AS TO WHETHER FIRM WAS ENTITLED TO DEPRECIATION ON CARS, BROUGHT IN TO THE FIRM FOR USE OF BUSINESS OF THE FIRM, EVEN THOUGH CARS C ONTINUED TO BE REGISTERED IN THE NAME PARTNERS. HON'BLE ALLAHABAD HIGH COURT HELD THAT 4 ITA NO. 1423/PUN/2016 M/S. ABHAY CORTEX PVT. LTD. THE TRIBUNAL RIGHTLY REACHED THE CONCLUSION THAT TH E ASSESSEE OWNED AND USED THE THREE VEHICLES WITHIN THE MEANING OF S. 32 OF THE ACT. SIMILAR VIEW WAS TAKEN IN THE CASE OF CIT VS, MOHD. BUX SHO KAT ALI(NO.2), 256 ITR357(RAJ), CIT VS FAZILKA DABWALI TPT CO. LTD. (2 004) 270 ITR 398 (P&H), CIT V. SALKIA TRANSPORT ASSOCIATES [1983] 14 3 ITR 39/13 TAXMAN 191 (CAL.), CIT V. NIDISH TRANSPORT CORPN. [1910] 1 85 ITR 669/[1989] 44 TAXMAN 351(KER.), CIT V. DILIP SINGH BAGGA [1993] 2 01ITR 995/[1994] 77 TAXMAN 66(BOM.), CIT V. NAVDURGA TRANSPORT CO. [ 1999] 235 ITR 158 (ALL.) AND CIT V. BASTI SUGAR MILLS CO. LTD. [2002] 257 ITR 88/123 TAXMAN 693 (DELHI)AS ALSO BY THE ITAT IN THEIR DECI SION IN THE CASE OF THE CURIOUS HOUSE (P) LTD. V ITO (1980) 9 TTJ 348(INDOR E) AND ITO VS. MODI AGENCY, ITA NO. 198/GAU/1977-78(GAUHATI). 5.2 IN THE LIGHT OF VIEW TAKEN IN THE AFORESAID DEC ISIONS, MERE NON- REGISTRATION OF A VEHICLE IN THE NAME OF THE COMPAN Y UNDER THE MOTOR VEHICLES ACT, CANNOT DISENTITLE IT IN REG ARD TO ITS CLAIM OF DEPRECIATION, WHEN THE FACTS ON RECORD ARE UNDISPUTED THAT THE ASSESSEE COMPANY HAS, IN FACT, MADE THE INVESTMENT IN PURCHASE OF THE VEHICLE AND SUCH VEHICLE IS BEING USED FOR I TS BUSINESS. THE REQUIREMENT OF SECTION 32 IS THAT THE VEHICLE MUST BE OWNED BY THE ASSESSEE AND NOT THAT THE ASSESSEE MUST BE A 'REGIS TERED OWNER' OF THE SAME UNDER THE MOTOR VEHICLES ACT. THEREFORE, WE H AVE NO HESITATION IN UPHOLDING THE FINDINGS OF THE LD. CIT(A).CONSEQUENT LY, GROUND NO. 1 RELATING TO DISALLOWANCE OF DEPRECIATION ON MOTOR C AR IS DISMISSED. 8. CONSIDERING THE DECISION OF THE TRIBUNAL ABOVE, WE ARE O F THE OPINION THAT THE FACTS OF THE PRESENT CASE ARE CLOSELY C OMPARABLE WITH THAT THE DECISION OF TRIBUNAL (SUPRA). UNDISPUTEDLY, THE IN VESTMENT WAS MADE BY THE ASSESSEE IN THE CARS AND CARS WERE USED FOR BUSINESS PURPOSES OF THE COMPANY. THEREFORE, WE CONCUR WITH THE FINDING GIVEN BY THE CIT(A) ON THIS ISSUE AS THE SAME IS FAIR AND REASO NABLE. ACCORDINGLY, GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 9. THE FACTS RELATING TO EXCESS DEPRECIATION QUA THE SUB SIDY SEGMENT RAISED BY THE REVENUE VIDE GROUND NO.2 INCLUDE T HAT ASSESSEE FILED THE REVISED RETURN OF INCOME ON 25-03-2014, WHEREIN A SSESSEE REPORTED ITS CLAIM OF SUBSIDY TO THE TUNE OF RS.2,29,41,974/ - AND CLAIMED DEPRECIATION ON THE SAID SUBSIDY TOO. INITIALLY, THE ASSESSEE CREDITED THE SAME TO THE PROFIT AND LOSS ACCOUNT. AO AS KED THE ASSESSEE TO SUBSTANTIATE THE CLAIM. ASSESSEE CONTENDED THAT T HE SAID SUBSIDY IS RECEIVED UNDER THE MEGA PROJECT SCHEME OF MAHARASHTRA GOVERNMENT. 5 ITA NO. 1423/PUN/2016 M/S. ABHAY CORTEX PVT. LTD. THE SAME CONSTITUTES ELIGIBLE CAPITAL INVESTMENT AND NOT REVENUE IN NATURE. AO OPINED THAT IF ANY ASSESSEE RECEIVED ANY CAP ITAL SUBSIDY AGAINST CAPITAL ASSET, THE CONSEQUENTIAL EFFECT IS TO REDUCE THE SAME FOR WORKING OUT THE ALLOWABLE DEPRECIATION OF THAT CAPITAL ASSE TS FOR THAT PARTICULAR ASSESSMENT YEAR FROM OPENING WDV. REJECTING T HE SAME, THE AO CALCULATED THE EXCESS DEPRECIATION AT RS.34,21,554/- RE LATABLE TO THE SUBSIDY SEGMENT AND DISALLOWED THE SAME (PARA NO.6 OF THE ASSESSMENT ORDER). 10. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A), RELYING ON HIS OWN DECISION IN THE ASSESSEES OWN CASE FOR THE A.Y. 2012-13, DELETED THE DISALLOWANCE OF EXCESS DEPRECIATION HOLDING THAT THE SUBSI DY AMOUNT COULD NOT BE REDUCED FROM THE ACTUAL COST OF CAPITAL ASSE T AS PER THE PROVISIONS OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT. E VENTUALLY, THE CIT(A) ALLOWED THE GROUND RAISED BY THE ASSESSEE. 11. AGGRIEVED WITH THE ORDER OF CIT(A), THE REVENUE IS IN A PPEAL BEFORE THE TRIBUNAL. 12. AFTER HEARING BOTH THE SIDES ON THIS ISSUE, WE FIND IT R ELEVANT TO EXTRACT THE FINDING GIVEN BY THE CIT(A) AND THE SAME READS AS UNDER : 5. I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE A PPELLANT. THE ISSUE UNDER CONSIDERATION IN THE FAVOUR OF THE ASSE SSEE COMPANY BY THE APPELLATE ORDER OF THE UNDERSIGNED IN APPEAL NO.ABD /CIT(A)/268/2014- 15 DATED 17.11.2015 FOR A.Y. 2012-13 WHEREIN ELABOR ATE DISCUSSION WAS MADE AS TO WHY THE MEGA PROJECT INCENTIVE, I.E. SUB SIDY WAS NOT LIABLE TO BE REDUCED FROM THE COST OF ASSETS. THERE IS NO CH ANGE IN THE FACTS AND CIRCUMSTANCES IN THE CURRENT YEAR AS COMPARED TO TH AT IN A.Y.2012-13. WHILE RENDERING THE DECISION ON THIS ISSUE, THE UND ERSIGNED HAD ALSO PLACED RELIANCE ON THE DECISION OF SUPREME COURT IN THE CASE OF CIT VS. PONNI SUGARS & CHEMICALS (306 ITR) 392, SASISRI EXT RACTION LTD. VS. ACIT (307 ITR AT.127), SHREE CEMENT LTD. VS. ADDL.CIT (0 31 ITR TRIB. 513), CIT VS. RELIANCE INDUSTRIES LTD. (339 ITR 632), CIT VS. RASOI LTD. (335 ITR 438), INDO RAMA SYNTHETIC LTD. VS. ACIT IN ITA NO.2 002/DEL/2008 FOR AY 2003-04 AND INVENTAA CHEMICAL LTD. VS. ACIT (42 SOT 249). THE SCHEME WAS INTENDED TO ACCELERATE INDUSTRIAL DEVELOPMENT O F THE STATE AND THE INCENTIVE WAS GIVEN FOR SETTING UP OF INDUSTRIES IN MAHARASHTRA. THE AMOUNT OF SUBSIDY TO BE GIVEN WAS DETERMINED BY TAK ING THE COST 6 ITA NO. 1423/PUN/2016 M/S. ABHAY CORTEX PVT. LTD. OF ELIGIBLE INVESTMENT AS THE BASIS. THE INCENTIVE IN THE FORM OF SUBSIDY COULD NOT BE CONSIDERED AS A PAYMENT DIRECT LY OR INDIRECTLY TO MEET ANY PORTION OF THE ACTUAL LOST A ND THUS IT FELL OUTSIDE THE KEN OF EXPLANATION 10 TO SECTION 43(1) OF THE INCOME TAX ACT, 1961. ACCORDINGLY IT WAS HELD THAT THE SU BSIDY AMOUNT COULD NOT BE REDUCED FROM THE ACTUAL COST OF THE CA PITAL ASSET. FOLLOWING THE SAME, I DIRECT THE AO TO DELETE THE A DDITION OF RS.34,21,554/- ON ACCOUNT OF DISALLOWANCE OF DEPREC IATION. THIS GROUND OF APPEAL IS ALLOWED. THERE IS NO DISPUTE ON THE FACT THAT THE REVENUE DID NO T FILE APPEAL FOR THE A.Y. 2012-13 AGAINST THE RELIEF GRANTED BY THE CIT(A). 13. LD. DR FOR THE REVENUE RELIED ON THE ORDER OF AO DUTIFULLY. 14. DURING THE PROCEEDINGS BEFORE US, LD. COUNSEL FOR THE ASSESSEE FILED THE WRITTEN SUBMISSIONS ON THIS AND SUBMITTED FOR CONFIR MING THE ORDER OF CIT(A). THE SAID WRITTEN SUBMISSIONS ARE EXTRACTE D HERE AS UNDER : 1. THE APPELLANT COMPANY DURING THE YEAR UNDER CON SIDERATION HAS RECEIVED INDUSTRIAL PROMOTION SUBSIDY (IPS) AGAINST THE MEGA PROJECT SCHEME BY THE STATE GOVERNMENT TOWARDS THE ELIGIBLE INVESTMENTS. WE HERBY SUBMIT A BRIEF OF SCHEME FOR YOUR REFERENCE. INDUSTRIAL PROMOTION SUBSIDY (IPS) IN RESPECT OF MEGA PROJECTS UNDER PSI 2001 & 2007 MEANS AN AMOUNT EQUIVALENT TO THE PERCE NTAGE OF ELIGIBLE INVESTMENTS WHICH HAS BEEN AGREED TO AS A PART OF THE CUSTOMIZED PACKAGE, OF THE AMOUNT OF TAX PAYABLE UNDER MAHARASHTRA VALUE ADDED TAX ACT (MVAT) 2002 AND CENTRAL SALES TAX (CST) ACT , 1956 BY THE ELIGIBLE MEGA PROJECTS IN RESPECT OF SALE OF FINISH ED PRODUCTS ELIGIBLE FOR INCENTIVES B EFORE ADJUSTMENT OF SET OFF OR OTHER CREDIT AVAILAB LE FOR SUCH PERIOD AS MAY BE SANCTIONED BY THE STATE GOVERNMENT , LESS THE AMOUNT OF BENEFITS BY WAY OF ELECTRICITY DUTY EXEMPTION , EXEMPTION FROM PAYMENT OF STAMP DUTY, REFUND OF ROYALTY AND ANY OTHER BENEFIT S(AS MAY BE SPECIFIED BY THE GOVERNMENT) AVAILED BY THE ELIGIBLE MEGA PRO JECTS UNDER PSI 2001 / 2007 , WHICHEVER IS LOWER . 2. THE PURPOSE OF SUBSIDY OF MEGA PROJECT WAS TO EN COURAGE THE DISPERSAL OF INDUSTRIES TO THE UNDER DEVELOPED AREA S OF THE STATE GOVERNMENT . THE SUBSIDY WAS GRANTED AS AN I NITIATIVE FOR ACCELERATING INDUSTRIAL DEVELOPMENT IN THE STATE AND BACKWARD . 3. THE APPELLANT COMPANY IS LOCATED IN JALNA DISTR I CT OF MAHARASHTRA WHICH I S A BACKWARD AREA AND IS CONSIDERED UNDER LOW HUMAN DENSITY INDEX (LHDI). THE APPE L LANT APTLY TREATED THE SUBSIDY RECEIVED UNDER MEGA PROJECT AS CAPITAL RECEIPT AND CONTENDED THAT THE SUBS I DY WAS GIVEN TO THE UNIT BECAUSE OF THE FACT THAT IT HAS E STABLISHED AN ELIGIBLE INDUSTRIAL UNIT IN THE NOTIFIED AREA AND THUS THE R ECEIPT WAS CAPITAL IN NATURE AND NOT TAXABLE . 4. THERE ARE VARIOUS CITATIONS WERE IN IT WAS DECID ED THAT SUBSIDY OF MEGA PROJECT RECEIVED IN THE NATURE EXCISE DUTY REF UND, INTEREST SUBSIDY 7 ITA NO. 1423/PUN/2016 M/S. ABHAY CORTEX PVT. LTD. AND INSURANCE SUBSIDY WILL BE HELD TO BE CAPITAL RE CEIPTS AND NOT REVENUE RECEIPTS AND FURTHER IS NOT LIABLE TO BE DEDUCTED F ROM COST OF ASSETS. 14.1 LD. COUNSEL FOR THE ASSESSEE RELIED ON THE FOLLOWING CAS E LAWS FOR THE PROPOSITION THAT WHERE THE PURPOSE OF SUBSIDY WAS T O ACCELERATE INVESTMENT IN BACKWARD AREAS THEN THE AMOUNT RECEIVED IS TO BE TREATED AS CAPITAL RECEIPT AND NOT TO BE DEDUCTED FROM COST OF ASSET. 1. INNOVENTIVE INDUSTRIES LIMITED VS. DCIT ITA NO.60 1/PN/2013 2. SUNVIJAY ROLLING AND ENGINEERING VS. ACIT ITA NO. 224/NAG/2015 3. SHRI BALAJI ALLOYS VS. ITO ITA NO.163/ASR/2010 4. CIT VS. CHAPHALKAR BROTHERS ITA NO.(2018) 161 DTR 41 (SC) 15. CONSIDERING THE SAME, WE FIND THE ORDER OF CIT(A) IS FAIR AND REASONABLE AND DOES NOT CALL FOR ANY INTERFERENCE. ACCORD INGLY, THE GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 16. GROUND NO.3 RAISED BY THE REVENUE RELATES TO ADDITIO N OF SAID CAPITAL SUBSIDY WHILE QUANTIFYING THE BOOK PROFITS OF THE ASS ESSEE FOR THE PURPOSE OF TAXATION UNDER THE SPECIAL PROVISIONS OF SECTION 115JB OF THE ACT. RELEVANT FACTS ARE DISCUSSED IN PARA NO.10 AND 11 OF THE ORDER OF CIT(A). 17. LD. DR FOR THE REVENUE RELIED ON THE ORDER OF AO. 18. BEFORE US, LD. COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT MAKING ADDITION OF THE CAPITAL SUBSIDY FOR THE PURPOSE OF ENHANCI NG THE BOOK PROFITS IS NOT CORRECT WHEN THE SAME IS NEVER CONSIDERED AS INCOME UNDER THE PROVISIONS OF THE ACT. AS SUCH, THIS ITEM IS OUT SIDE THE SCOPE OF PROVISIONS OF SECTION 115JB OF THE ACT. CONSIDERING THE S AME AND RELYING ON THE JUDGMENT OF APEX COURT IN THE CASE OF PA DMARAJE R. KADAMBANDE VS. CIT REPORTED IN 1992-TMI-5368-SC, LD. COUNSEL SUBMITTED THAT THE SAID SUBSIDY DOES NOT CONSTITUTE INCO ME AT ALL WITHIN THE MEANING OF SECTION 2(24) OF THE ACT. ACCORDINGLY, THE CIT(A) DIRECTED 8 ITA NO. 1423/PUN/2016 M/S. ABHAY CORTEX PVT. LTD. THE AO TO EXCLUDE THE SAME FOR THE PURPOSE OF BOOK PRO FITS U/S.115JB OF THE ACT. THEREFORE, LD. COUNSEL PRAYED FOR CONFIRMING THE ORDER OF CIT (A) ON THIS ISSUE TOO. 19. ON HEARING BOTH THE PARTIES AND ON PERUSING THE OR DER OF CIT(A) IN GENERAL AND CONTENTS OF PARA NOS.10 AND 11, WE FIND IT RELE VANT EXTRACT THE SAID FINDING GIVEN BY THE CIT(A). THE SAID FINDING GIVEN BY THE CIT(A) READS AS UNDER : 10. IN THE FOURTH GROUND OF APPEAL, THE APPELLANT HAS CHALLENGED THE ACTION OF THE AO IN NOT CALCULATING THE BOOK PROFIT U/S.115JB CORRECTLY AS HE DID NOT REDUCE THE CAPITAL RECEIPTS FROM THE BOO K PROFITS. BEFORE ME, THE COUNSEL OF THE APPELLANT HAS ARGUED THAT THE AO FAILED TO DEDUCT THE CAPITAL RECEIPT, I.E. SUBSIDY AMOUNT OF RS.2,29,41, 974/- FROM BOOK PROFITS WHILE CALCULATING BOOK PROFIT U/S.115JB OF THE INCO ME TAX ACT, 1961. THE SAID ACT OF THE AO WAS NOT JUSTIFIABLE AS CAPITAL R ECEIPTS WERE NOT A PART OF PROFIT AND LOSS ACCOUNT AND IT WAS NOT INCOME U/S.2 (24) OF THE ACT. IT WAS STATED THAT THE HONBLE APEX COURT IN THE CASE OF P ADMARAJE R. KADAMBANDE VS. CIT (1992-TMI-5368-SC), HAS HELD THA T CAPITAL RECEIPTS WERE NOT INCOME WITHIN THE DEFINITION OF SECTION 2( 24) OF THE ACT AND HENCE WERE NOT AT ALL CHARGEABLE UNDER THE INCOME TAX ACT . A RECEIPT WHICH WAS NEITHER PROFIT NOR 'INCOME' AND WHICH DID NOT HAV E ANY ELEMENT THEREOF EMBEDDED THERE IN, COULD NOT BE PART OF 'PROFIT' AS PER PROFIT & LOSS ACCOUNT PREPARED IN TERMS OF PART II OF SCHEDULE VI TO COMPANIES ACT. THE DELHI ITAT IN THE CASE OF INDO RAMA SYNTHETICS (I) LTD VS. CIT HELD THAT INCLUSION OF CAPITAL RECEIPT IN THE COMPUTATION OF MAT WOULD DEFEAT TWO FUNDAMENTAL PRINCIPLES. IN VIEW OF DECISION IN THE CASE OF APOLLO TYRES (2002- TMI-6081-SC), TO FULFILL REQUIREMENT OF SCHE DULE VI, IT NEEDED TO BE EXCLUDED WHILE COMPUTING BOOK PROFIT V/S 115JB. CAP ITAL RECEIPTS IN THE FORM OF SALES TAX INCENTIVES NEEDED TO BE EXCLUDED FROM PROFIT AS PER P&L ACCOUNT FOR THE YEAR IN COMPUTING BOOK PROFIT V/S 1 15JB OF THE ACT. THE ITAT, JAIPUR IN THE CASE OF SHREE CEMENT LTD., AJME R VS. ACIT, HELD THAT CAPITAL RECEIPTS THOUGH CREDITED TO PROFIT AND LOSS ACCOUNT DID NOT REPRESENT PROFIT/INCOME PERTAINING TO A PARTICULAR Y EAR. ITS CREDIT TO P&L ACCOUNT DID NOT REFLECT THE RESULT OF THE WORKING O F THE COMPANY DURING THE PERIOD COVERED BY THE ACCOUNT AS PER THE REQUIREMEN T OF PART II OF SCHEDULE HENCE IT NEEDED TO BE EXCLUDED WHILE COMPU TING BOOK PROFIT V/S 115JB TO FULFILL THE REQUIREMENT OF PART II OF SCHE DULE VI OF COMPANIES ACT. ACCORDINGLY IT WAS REQUESTED TO DIRECT THE AO TO EX CLUDE THE CAPITAL RECEIPTS SUCH AS SUBSIDY OF RS.2,29,41,974/- FROM T HE BOOK PROFITS V/S 115JB OF THE INCOME TAX ACT. 11. I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE A PPELLANT. THE ISSUE UNDER CONSIDERATION IS COVERED IN THE FAVOUR OF THE ASSESSEE COMPANY BY THE APPELLATE ORDER OF THE UNDERSIGNED IN APPEAL NO.ABD/CIT(A)/268/2014-2015 DATED 17.11.2015 FOR AY 2012-13 WHEREIN ELABORATE DISCUSSION WAS MADE AS TO WHY CAP ITAL RECEIPT I.E. SUBSIDY HAS TO BE REDUCED FROM BOOK PROFIT FOR THE PURPOSE OF COMPUTING THE MAT PROFIT UNDER SECTION 115JB OF THE ACT. IT W AS HELD THAT THE HON'BLE SUPREME COURT IN THE CASE OF APOLLO TYRES L TD. (255 ITR 273) HAD NOT OVERLOOKED THE BASIC LEGISLATIVE INTENTION REGA RDING THE NATURE OF ITEMS TO BE EXCLUDED IN COMPUTING, THE BOOK PROFITS FOR T HE PURPOSE OF SECTION 115JA. WHILE RENDERING THE DECISION ON THIS ISSUE, THE UNDERSIGNED HAD 9 ITA NO. 1423/PUN/2016 M/S. ABHAY CORTEX PVT. LTD. ALSO PLACED RELIANCE ON THE DECISION IN THE CASE OF BALRAMPUR CHINI MILLS LTD (238 ITR 445), PRATAPPUR SUGAR & INDUSTRIES LTD VIDE ORDER DATED 03.09.2004 IN ITA NO.2619/KOL/02 FOR AY 1999-2000, CIT VS. ESSOROPE MILLS LTD (139 TAXMAN 180), ACIT VS. NILGIRI TEA ES TATE LTD. (65 SOT 14), CIT VS. GITANJALI MILLS LTD. (136 TAXMAN 21) AND IT AT, MUMBAI E BENCH IN THE CASE OF PAL SYNTHETICS LTD. VS. JT. CIT (IT APPEAL NO.1310 (MUM,) OF 2003, DATED 6-2-2007). THERE IS NO CHANGE IN THE F ACTS & CIRCUMSTANCES IN THE CURRENT YEAR AS COMPARED TO THAT IN AY 2012- 13. ACCORDINGLY I DIRECT THE AO TO REDUCE THE CAPITAL RECEIPT OF RS.2 ,29,41,974/- FROM THE PROFITS FOR COMPUTATION OF BOOK PROFITS U/S.115JB O F THE INCOME TAX ACT. THIS GROUND OF APPEAL IS ALLOWED. 20. CONSIDERING THE ABOVE DECISION OF CIT(A), WE FIND THE SA ME IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NO.3 RAISED BY THE REVENUE IS DISMISSED. FURTHER, WE FIND IT IS A CASE OF APPEAL OF THE REVENUE H AVING TAX EFFECT BELOW RS.20 LAKHS. THEREFORE, THE SAME IS NOT MAINTA INABLE IN VIEW OF CBDT CIRCULAR NO.3/2018, DATED 11-07-2018. 21. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 18 TH DAY OF JULY, 2018. SD/- SD/- ( /VIKAS AWASTHY) ( . / D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 18 TH JULY, 2018. SATISH # # # # / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS)-1, AURANGABAD 4. THE PR. CIT-1, AURANGABAD. 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, //TRUE COPY // /SENIOR PRIVATE SECRETARY , / ITAT, PUNE